Golden parachutes are severance and other compensation agreements that protect key employees from the effects of a corporate takeover or change in control. Payments under golden parachutes are triggered by a change in ownership or control of the corporation. They provide key employees, whose employment is often terminated as a result of a takeover or change in control, with either continued compensation for a specified period following their departure, or a lump-sum payment, or some other negotiated benefit.

Although golden parachute payments are deductible by corporations if the payments are reasonable, Internal Revenue Code Section 280G provides that no deduction will be allowed to an employer for any “excess parachute payment.” In addition, IRC Section 4999 imposes a 20 percent excise tax on the recipient of any excess parachute payment.

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Posted by Michael Chapman at 1:00 PM PDT

As you near retirement age, you may be offered early retirement by your employer who may refer to the offer as a golden handshake or a golden parachute. The offer usually consists of severance payments and post-retirement medical coverage combined with already existing retirement benefits. While many early retirement offers appear attractive, it is important for you to review an offer carefully to ensure that it is indeed offering a golden opportunity.

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Posted by Michael Chapman at 6:00 AM PDT