September 25, 2007

At the AARP debate the other day, the populist presidential candidate is said to have delivered himself of the following sentiment: "We oughtta have a law that every CEO's pension, golden parachute, and everything else will be treated the exact same way as the lowest-paid worker's pension." Tom Veal, who actually knows something about pension law, has this to say:

If the law treated every CEO’s nonqualified deferred compensation “the exact same way as the lowest-paid worker’s pension”:

• The CEO's benefits would be insured by the PBGC.


• Benefits would have to be funded by his employer in a trust beyond the reach of the employer’s bankruptcy creditors and in accordance with the recently tightened minimum funding standards.


• Benefits would also be protected from the CEO’s own creditors.


• Benefits would be taxed only when actually received, without regard for the doctrine of constructive receipt.


• Benefits would become fully vested after no more than six years of service.


• Section 409A, which subjects nonqualified plans to a set of hyper-technical, trap-laden rules, whose violation is punished by a 20 percent penalty tax, would be repealed.

Most of these, of course, would be very bad ideas. Does Edwards agree?