Surprise! Your Wrongful Employment Termination Settlement is Taxable

Taxation happens! Happy to have settled a wrongful termination claim, but then you learn that much of it is subject to tax? The taxability or deductibility of a big award or claim settlement can have a major effect on the financial outcome. The unwanted extra cost of an unexpected tax payment can significantly decrease the perceived value of a settlement offer and push the settling parties further apart.

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• Employee Benefits & Executive Compensation Key Legal Developments Tracker
  Stay informed on new developments.
  • ERISA. DOL published compliance assistance cautioning plan fiduciaries to exercise extreme care if considering adding a cryptocurrency option to a 401(k) plan's investment menu. DOL, Compliance Assistance Release No. 2022-01.  
  • ERISA. DOL announces proposed rule to modify the process for applying for administrative exemptions from the prohibited transaction rules under ERISA and the IRC codified at 29 C.F.R. 2570.30 et seq., which were last updated in 2011. 87 Fed. Reg. 14,722 (Mar. 15, 2022).
  • Health and Welfare Plans. Congress passes Consolidated Appropriations Act, 2022, which includes a provision to allow high deductible health plans to cover telehealth services without a deductible through 12/31/22, extending temporary period under the CARES Act. (H.R. 2471), § 307.
  • Executive, Incentive, and Equity Based Compensation. Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021 enacted, prohibiting enforcement of pre-dispute mandatory arbitration clauses and joint, class, or collective action waivers for sexual assault and sexual harassment claims. Pub. L. No. 117-90(adding 9 U.S.C. §§ 401, 402). See New Nationwide Ban Against the Enforcement of Mandatory Arbitration Agreements in Sexual Misconduct Cases.
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• The Practical Guidance Journal Spring 2022 Edition includes market trends on post-employment restrictive covenants. 
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