CEBS Executive Compensation & Nonqualified Plans 3

Question 1

Clawback provisions in executive compensation plans are designed to:

Accepted Answer

Allow the company to recover previously paid incentive compensation in specified circumstances

Answer

Clawback provisions give companies the right to recoup previously paid bonuses or equity awards, most commonly after a financial restatement or executive misconduct, as required under Dodd-Frank.

Question 2

Under SEC 'say-on-pay' rules enacted by the Dodd-Frank Act, public company shareholders:

Accepted Answer

Vote on executive compensation at least every three years, with a nonbinding advisory vote

Answer

Dodd-Frank requires public companies to hold a nonbinding shareholder advisory vote on executive compensation at least every three years, known as 'say-on-pay.'

Question 3

A 'golden handcuff' arrangement in executive compensation is primarily intended to:

Accepted Answer

Retain executives by providing valuable benefits that are forfeited if they leave prematurely

Answer

Golden handcuffs are retention incentives—such as unvested equity, deferred compensation, or supplemental pensions—that create a financial cost to the executive if they leave before a specified date.

Question 4

A 'Death Benefit Only' (DBO) plan for executives is structured so that:

Accepted Answer

No benefit is paid to the executive during their lifetime; only a post-death benefit is paid to beneficiaries

Answer

A DBO plan provides a death benefit to the executive's survivors with no living benefit to the executive, which avoids constructive receipt and current income taxation while the executive is alive.

Question 5

Section 457(f) of the Internal Revenue Code applies to nonqualified deferred compensation plans maintained by:

Accepted Answer

State and local governments and tax-exempt organizations

Answer

Section 457(f) governs nonqualified deferred compensation plans of tax-exempt organizations and governmental employers, requiring that amounts vest—and become taxable—upon a substantial risk of forfeiture lapsing.

CEBS - Certified Employee Benefits Specialist Practice Test

CEBS - Certified Employee Benefits Specialist Practice Test

CEBS Executive Compensation & Nonqualified Plans 3