- Treasury Issues Interim Final Rule on Executive Compensation Limits for TARP Recipients
- July 1, 2009 | Authors: Timothy M. Sullivan; Mark F. Palma; Michael D. Morehead
- Law Firms: Hinshaw & Culbertson LLP - Chicago Office; Hinshaw & Culbertson LLP - Minneapolis Office; Hinshaw & Culbertson LLP - Chicago Office; Hinshaw & Culbertson LLP - Springfield Office
In February 2009, President Obama signed the American Recovery and Reinvestment Act of 2009 (ARRA), which limits executive compensation for financial institutions receiving assistance under the Troubled Asset Relief Program (TARP) enacted in the Emergency Economic Stabilization Act of 2008 (EESA). ARRA amended Section 111 of EESA by modifying the TARP executive compensation rules included in Section 111 and adopting certain aspects of the rules set out in the U.S. Department of the Treasury (DOT) rules implementing Section 111 (which were issued on October 14, 2008 and January 16, 2009). ARRA directed the DOT to establish standards for executive compensation and corporate governance for TARP recipients.
On June 10, 2009, the DOT released an Interim Final Rule setting forth these standards. The Interim Final Rule supersedes all prior rules and guidance under the rules previously adopted by the DOT.
The Interim Final Rule became effective on June 15, 2009, except for those sections of ARRA which were by their terms effective on February 17, 2009.
Scope of Rules
The executive compensation and corporate governance requirements under the Interim Final Rule apply to any entity that has received or will receive financial assistance provided under TARP.
These rules apply only during the time the TARP recipient has outstanding obligations to the federal government arising from its financial assistance (TARP Period). They do not apply if the DOT is only holding warrants to purchase common stock.
The Interim Final Rule defines financial assistance to include direct financial transactions between the DOT and private sector participants in programs under TARP. Entities that do not engage in financial transactions with the DOT as a counterparty generally will not be deemed to be receiving “financial assistance.”
Financial institutions that sold (or will sell) preferred stock to the DOT through the Capital Purchase Program are deemed to have received now (or will be deemed to have received at the time of a future sale) financial assistance. As a consequence, they are subject to the provisions of the Interim Final Rule.
These rules apply to senior executive officers (SEOs) and certain most highly compensated employees. SEOs are to be determined pursuant to the executive compensation rules contained in Item 402 of Regulation S-K under the federal securities laws, which apply to the principal executive officer (PEO), the principal financial officer (PFO), and the three most highly compensated executive officers (other than the PEO and the PFO). The determination of the three most highly compensated executive officers and the most highly compensated employees for a particular year is to be based on their annual compensation for the last completed fiscal year (as it is determined pursuant to Item 402(a) of Regulation S-K).
An employee who is not an executive officer may be a most highly compensated employee. A former employee who is not employed by the TARP recipient on the first day of the fiscal year for which the determination is being made is not a highly compensated employee for that fiscal year, unless he or she is reasonably anticipated to return to employment with the TARP recipient during the fiscal year.
A TARP recipient that does not have securities registered with the Securities and Exchange Commission (SEC) must use the same rules when identifying its SEOs and its most highly compensated employees.
Limitation on a TARP Recipient’s Compensation Tax Deduction
Section 111(b)(1)(B) of EESA provides that a TARP recipient will be subject to the provisions of Section 162(m)(5) of the Internal Revenue Code of 1986, as amended; this provision limits the deduction for compensation paid to SEOs to $500,000 (including performance-based compensation). This rule was implemented as part of EESA in October 2008 and was not impacted by the ARRA amendments.
Section 111(c) of EESA, as amended by ARRA, requires that TARP recipients have a compensation committee that:
- is comprised entirely of independent directors; and
- meets at least semi-annually to discuss and evaluate employee compensation plans in light of any assessment risk posed to the TARP recipient by such plans.
If a recipient (including a private company) does not have a compensation committee, it must establish one before the later of 90 days after the closing date of the financial assistance agreement between the DOT and the TARP recipient, or September 13, 2009.
TARP recipients that do not have securities registered with the SEC and have received less than $25 million in financial assistance may either establish a compensation committee of independent directors or delegate to the board of directors the duties of the compensation committee.
The Interim Final Rule imposes several requirements on the compensation committee.
The compensation committee must review at least every six months with senior risk officers SEO compensation plans and all employee compensation plans and the risks these plans pose to the TARP recipient. In this review, the committee must identify and limit: (1) the features in the SEO compensation plans so they do not encourage SEOs to take unnecessary and excessive risks that could threaten the value of the TARP recipient; and (2) any features in employee compensation plans that pose risks to the TARP recipient to ensure that it is not unnecessarily exposed to risks, including any features in these SEO compensation plans or employee compensation plans that would encourage behavior focused on short-term results rather than long-term value creation.
The compensation committee must also review at least every six months the terms of each employee compensation plan in order to eliminate the features in a plan that could encourage the manipulation of reported earnings of the TARP recipient to enhance the compensation of employees.
The compensation committee must annually prepare a narrative description of how: (1) SEO compensation plans do not encourage SEOs to take unnecessary and excessive risks that could threaten the value of the TARP recipient, including how these SEO compensation plans do not encourage behavior focused on short-term results rather than long-term value creation; (2) the risk posed by employee compensation plans were limited to ensure that the TARP recipient is not unnecessarily exposed to risks, including how these employee compensation plans do not encourage behavior focused on short-term results rather than long-term value creation; and (3) the TARP recipient has ensured that employee compensation plans do not encourage the manipulation of reported earnings of the TARP recipient to enhance the compensation of employees.
The compensation committee must certify annually that the committee has reviewed:
- with senior risk officers the SEO compensation plans and has made all reasonable efforts to ensure that these plans do not encourage SEOs to take unnecessary and excessive risks that threaten the value of the TARP recipient;
- with senior risk officers the employee compensation plans and has made all reasonable efforts to limit any unnecessary risks these plans pose to the TARP recipient; and
- the employee compensation plans to eliminate any features of these plans that would encourage the manipulation of reported earnings of the TARP recipient to enhance the compensation of any employee.
Reporting of Narrative and Certification
Most SEC registered TARP recipients must provide the narrative disclosure and the certification in their annual compensation committee report.
TARP recipients that are smaller reporting companies (as defined in the SEC rules) or that do not have securities registered with the SEC must provide the disclosures and certifications annually to their primary regulatory agency and to the DOT.
As required by Section 111(b)(3)(B) of EESA, as amended by ARRA, the Interim Final Rule provides that a TARP recipient must recover any bonus, retention award or incentive compensation paid to (or accrued for) SEOs and the next 20 most highly compensated employees if the payments or accruals were based on materially inaccurate financial statements or any other materially inaccurate performance metric criteria (Clawback). A TARP recipient must exercise its Clawback rights unless it determines that it is unreasonable to do so (e.g., the costs of recovery exceed the amount involved).
Bonuses, retention awards, and incentive compensation are deemed paid or accrued when the covered person obtains a legally binding right to that payment during the TARP Period.
The EESA Clawback provision:
- applies to the PEO and the PFO and the three most highly compensated executive officers and the next 20 most highly compensated employees in the PFO;
- applies to public and private TARP recipients;
- applies to retention awards;
- is not exclusively triggered by a requirement to prepare an accounting restatement due to material noncompliance of the issuer as a result of misconduct;
- does not limit the recovery period; and
- covers not only material inaccuracies relating to financial reporting but also material inaccuracies relating to other performance metrics used to calculate bonus payments.
This Clawback provision differs from the Sarbanes-Oxley clawback provision, which requires the forfeiture by a public company’s chief executive officer or the chief financial officer of any bonus, incentive-based or equity-based compensation received during the 12-month period following a materially non-compliant financial report and any profits from sales of the company’s securities during that period.
The Interim Final Rule (as directed by Section 111(b)(3)(C) of EESA, as amended by ARRA) prohibits TARP recipients from making golden parachute payments (defined in Section 111(a)(2) of EESA as any payment for “departure from a company for any reason, except for payments for services performed or benefits accrued”) to a SEO or any of the next five most highly compensated employees.
A golden parachute payment includes a payment for departure from a TARP recipient for any reason, other than a payment for services performed or benefits accrued, including an amount due upon a change in control of the TARP recipient.
The acceleration of vesting due to a termination or a change in control is also a golden parachute payment.
There is no longer any exception for any amount of a golden parachute payment as was allowed under the EESA rules adopted previously by the DOT in October 2008.
Furthermore, a golden parachute payment is treated as paid at the time of the employee’s departure, regardless of when the amounts are actually paid (and includes the present value of the payment if vesting was accelerated).
TARP recipients and employees may not avoid the restriction by deferring payment of the golden parachute payment past the end of the TARP Period.
Exceptions to Severance Prohibition
The rules do not prohibit payments from qualified retirement plans, or payments due to an employee’s death or disability, as well as severance payments required by state statute or foreign law. A payment will be treated as a payment for services rendered or benefits accrued if the payment would be made regardless of whether the employee departs or a change in control occurs.
A payment from a benefit plan or a deferred compensation plan is treated as a payment for services performed or benefits accrued. It therefore, will not be deemed a golden parachute payment if the following conditions are met:
- the plan was in effect at least one year prior to the employee’s departure;
- the payment is made pursuant to the plan and in accordance with the terms of the plan as in effect no later than one year before the departure and in accordance with any amendments to the plan during this one-year period that do not increase the benefits payable thereunder;
- the employee has a vested right, as defined under the applicable plan document, at the time of the departure or the change in control event (but not due to the departure or the change in control event) to the payments under the plan;
- benefits under the plan are accrued each period only for current or prior service rendered to the TARP recipient;
- any payment made pursuant to the plan is not based on any discretionary acceleration of vesting or accrual of benefits which occurs at any time later than one year before the departure or the change in control event; and
- with respect to payments under a deferred compensation plan, the TARP recipient has previously recognized compensation expense and accrued a liability for the benefit payments according to GAAP or segregated or otherwise set aside assets in a trust which may only be used to pay plan benefits, except that the assets of this trust may be available to satisfy claims of the TARP recipient’s creditors in the case of insolvency and payments pursuant to the plan are not in excess of the accrued liability computed in accordance with GAAP.
Limits on Bonuses, Retention Awards and Incentive Compensation
The Interim Final Rule prohibits TARP recipients from paying or accruing any bonus, retention award or incentive compensation to certain highly compensated employees or SEOs. The rule has two exceptions: (1) TARP recipients can pay or accrue such amounts if the amounts are payable as long-term restricted stock, provided that the stock does not fully vest until the repayment of TARP assistance and has a value that is no greater than one-third of the total annual compensation; and (2) TARP recipients can make bonus payments required to be paid under written employment contracts executed on or before February 11, 2009.
The determination of which executives or employees will be subject to these limitations depends on the amount of funds received by the TARP recipient as indicated in the following table. Note that these restrictions are not limited to officers.
TARP Financial Assistance Covered Executives
Most highly compensated employee only
Five most highly compensated employees
SEOs and 10 next most highly compensated employees
$500,000,000 or more
SEOs and 20 next most highly compensated employees
Definition of Bonus
Under the Interim Final Rule, a bonus means any payment in addition to any amount payable to an employee for services performed by the employee at a regular hourly, daily, weekly, monthly or similar periodic rate. Generally, a bonus does not include a contribution to a qualified plan, benefits under a broad-based benefit plan, bona fide overtime pay, and bona fide and routine expense reimbursements. The rules also provide guidance as to when a bonus will be deemed to have accrued or to have been paid.
The rules are designed to prohibit the payment of a bonus that was not permitted to accrue during the year an employee was covered by the bonus limitation but is paid to the employee in a subsequent year when the employee is not covered by the bonus limitation. To avoid the bonus payment restrictions, the payment may be disguised as some other form of payment, such as a salary increase or a stock option grant. In such a case, the payment in the subsequent year may be recharacterized as a bonus payment that was not permitted to accrue in the previous year.
Exclusion of Commission Compensation
Commission compensation for sales to, and investment management services for, unrelated parties are not deemed to be bonuses. This exclusion is designed to address payments to persons working for broker-dealers, investment advisory firms and insurance companies. These individuals (registered representatives, investment advisors and agents) typically receive commissions based on the amount of sales of financial products or the value of assets under management. These commission payments are viewed as a component of the employee’s base salary rather than bonus compensation. Consequently, they are not deemed to be a bonus.
However, fees earned from sales to entities within the affiliated group, or resulting from investment banking or proprietary trading are not considered commission compensation. These fees are included in the definition of a bonus or incentive compensation.
Definition of Incentive Compensation Plan
An incentive compensation plan is defined by reference to the federal securities regulations and includes stock options and stock plans.
This inclusion does not prohibit a TARP recipient from paying salary or other permissible payments in the form of stock (or a stock unit such as phantom stock) or other property, even if the stock (or stock unit) is issued pursuant to a stock plan. The payment may be made in stock (or a stock unit) that is subject to holding periods or transferability restrictions, including restrictions not permitting the stock to be transferred for a specified number of years, until a specified event occurs (such as the employee’s retirement, or a specified number of years after an employee’s retirement or other termination of employment), or until certain TARP fund repayment hurdles have been met. The payment, however, must represent the payment of salary or another permissible amount and not be a disguised bonus.
Because the stock (or stock unit) or other property is salary, it cannot be subject to a substantial risk of forfeiture or any requirement of future services.
Definition of Retention Award
A retention award is defined as any payment to an employee that is: (1) not payable periodically for services performed at a regular hourly, daily, weekly, monthly or similar periodic rate; (2) contingent upon the completion of a period of future service with the TARP recipient or the completion of a specific project or other activity of the TARP recipient; and (3) not based on the performance of the employee (other than a requirement that the employee not be separated from employment for cause) or the business activities or value of the TARP recipient.
This definition does not include: (1) a contribution to or payment made from a qualified plan, or a payment from a benefit plan, overtime pay or reasonable expense reimbursement; and (2) amounts accrued under a nonqualified deferred compensation plan, to the extent that the amounts are accrued in the normal course of the employee’s service at the TARP recipient, and are not accrued by reason of a material enhancement of such benefits.
Awards granted to new hires, including awards as part of a “make-whole” agreement intended to provide a newly hired employee a continuation of benefits accruing at a prior employer, are deemed to be retention awards.
A deferred compensation plan that is subject to a service vesting period may be a retention award. If an employee continues to accrue, or becomes eligible to accrue, a benefit under a plan the benefits under which have not been materially enhanced for a significant period of time prior to the employee becoming a covered employee (including through expansion of the eligibility for such plan), the benefits accrued will not be a retention award. If the plan is amended to materially enhance the benefits provided or to make such covered employee eligible to participate in such plan, and such benefits are subject to a requirement of a continued period of service, such an amendment will be a retention award.
Long-Term Restricted Stock
The Interim Final Rule states that the value of the long-term restricted stock can be no greater than one-third of the employee’s total annual compensation. For purposes of determining annual compensation, each equity-based compensation (including the long-term restricted stock grant) will be included in this calculation in the year in which it is granted at its total fair market value on the grant date.
Long-term restricted stock may include both restricted stock and restricted stock units, which can be settled in stock or cash, and which may be designed to track a specific unit or division within a TARP recipient.
Except as described below, the long-term restricted stock cannot fully vest until the repayment of all financial assistance by the TARP recipient.
Furthermore, an employee must provide services to the TARP recipient for at least two years after the grant date of the long-term restricted stock (or stock unit) in order to vest in this stock (or stock unit). However, the award may vest prior to this two-year period (but after the TARP Period) due to the death, disability or a change in control.
The Interim Final Rule does not prohibit vesting based on longer service periods or additional performance-based requirements.
Restricted stock may become transferable (or in the case of a restricted stock unit, payable) earlier. For each 25 percent of the TARP financial assistance which is repaid, 25 percent of the total long-term restricted stock may become transferable (or 25 percent of the restricted stock unit may be payable).
In the case of restricted stock (but not a restricted stock unit), the fair market value of the stock may be subject to inclusion in income for income tax purposes before the stock becomes transferable. As a consequence, if this occurs, the rule permits sales to the extent necessary to pay the applicable taxes.
Grandfathered Written Employment Agreements
Excluded from the bonus payment prohibition are amounts to be paid under a valid written employment contract executed on or before February 11, 2009, if the employee has a legally binding right under the contract to this payment.
Any amendment to the contract to increase the amount payable, accelerate any vesting conditions, or otherwise materially enhance the benefit available will result in the payment being treated as not made under the employment contract executed on or before February 11, 2009.
The waiver by the employee of any benefits available to him or her under the terms of the contract (such as accepting a reduced bonus or extended holding periods) will not result in the payment of other benefits under the contract being treated as made other than under the employment contract executed on or before February 11, 2009.
Anti-Abuse Rule for Bonuses, Retention Awards and Incentive Compensation
To avoid circumvention, the rules prohibit delaying bonus payments until after the employee is no longer subject to the prohibition, or granting retroactive service credits after the employee is no longer subject to the prohibition. If the employee is no longer a covered employee and he or she is paid an amount, or provided a legally binding right to the payment of an amount, based upon services performed or compensation received during the period he or she was covered by the rule, the employee will be treated as having accrued the amount during the period the employee was a SEO or most highly compensated employee. As a consequence, such amounts cannot be paid.
Certain bonus, retention award or incentive compensation may relate to a multiyear service period, during some portion of which the employee is subject to the prohibition and during some portion of which the employee is not subject to the prohibition. The employee may not accrue a prohibited payment during the portion of the service period the employee was subject to the limitation. The payment must be reduced to reflect at least the portion of the service period that the employee was subject to the prohibition.
Furthermore, a bonus, a retention award or incentive compensation that an employee accrues while the employee is not subject to this prohibition and is payable at a time when the employee has become subject to the prohibition, may not be paid until the employee is no longer subject to the prohibition.
Limits on Luxury Expenditures
As required by Section 111(d) of EESA, as amended, the Interim Final Rule directs the board of directors of a TARP recipient to adopt an excessive or luxury expenditures policy, to file this policy with the DOT and the recipient’s primary regulator, and to post the text of this policy on its website, if the TARP recipient maintains a company website, before the later of 90 days after the closing date of the agreement between the DOT and the TARP recipient, or by September 13, 2009.
The policy must cover, among other things: (1) entertainment or events; (2) office and facility renovations; (3) aviation or other transportation services; and (4) other similar items, activities or events.
The policy (1) must identify the types and categories of expenses prohibited or requiring prior approval; (2) include approval procedures for those expenses requiring prior approval; (3) mandate PEO and PFO certification of the prior approval of any expenditures requiring the prior approval of any SEO, other similar executive officers, or the board of directors; (4) mandate prompt internal reporting of any violation of this policy; and (5) require accountability for adherence to this policy.
The board of directors must determine what are excessive and luxury expenditures and establish a set of requirements specific to the TARP recipient under this policy.
If a material amendment is made to the policy it must be provided to the DOT and the company's primary regulator and it must be posted on the company’s website (if it has one) within 90 days.
Shareholder Non-Binding “Say on Pay”
Section 111(e) of EESA, as amended by ARRA, provides that each TARP recipient must allow its shareholders the opportunity to participate annually in a non-binding vote on senior executive compensation. For a public company, this can be accomplished through a non-binding resolution to approve the compensation of executives as disclosed pursuant to the SEC rules which would be voted on by the company’s shareholders. Non-public companies must also comply with the SEC rules.
The shareholder vote will not be construed as overruling a decision by the board of directors. Nor does it create or imply any additional fiduciary duty by the board. Furthermore, it does not restrict or limit the ability of shareholders to make other proposals related to executive compensation.
Section 111(e)(3) directs the SEC to issue any final rules and regulations necessary to implement this requirement not later than February 17, 2010.
As permitted by Sections 111(h) and 111(b)(2) of EESA, as amended by ARRA, the DOT established four additional executive compensation and corporate governance standards.
TARP Recipients Receiving Exceptional Assistance
TARP recipients receiving exceptional financial assistance must submit the compensation payments and compensation structures of the SEO and most highly compensated employees subject to the bonus payment limitation, and the compensation structures of all other executive officers and the 100 most highly compensated employees, to the newly created office of Special Master for approval. The compensation structure for employees not subject to the bonus limits does not have to be submitted if a TARP recipient limits the annual compensation for any executive who is not subject to the bonus limitation provision to $500,000, with any additional compensation in long-term restricted stock.
A TARP recipient must disclose annually to the DOT and the recipient’s primary federal regulator any perquisites (as defined in Item 402(c)(2) of Regulation S-K) whose total value exceeds $25,000 provided to the SEOs and the next 20 most highly compensated employees. The filing must include the amount and nature of the perquisite and a justification for offering the perquisite (including a justification for all perquisites offered) and must be made within 120 days of the end of the fiscal year.
A TARP recipient will have to disclose annually to the DOT and to the recipient’s primary federal regulator whether the TARP recipient, its board or its compensation committee has engaged a compensation consultant. This disclosure must include all of the types of services the compensation consultant has provided during the past three years, including any “benchmarking” or comparisons employed to identify certain percentile levels of compensation (for example, other peer group companies used for benchmarking and a justification for using these companies, and the lowest percentile level of other companies’ employee compensation considered for compensation proposals) and must be made within 120 days of the end of the fiscal year.
TARP recipients are prohibited from providing tax gross-ups or other reimbursements for the payment of taxes to any of the SEOs and next 20 most highly compensated employees relating to any form of compensation, including severance payments and perquisites.
If a TARP recipient is acquired by an entity that is not a TARP recipient, the acquirer will not be subject to Section 111 of EESA, as amended by ARRA, as a result of the acquisition. In addition, the employees of the target who are subject to Section 111 immediately prior to the acquisition who continue employment with the acquirer will no longer be subject to Section 111 after the acquisition.
Section 111(b)(4) directs a TARP recipient’s PEO and PFO (or their equivalents) to provide a written certification of compliance with the provisions of Section 111 of EESA, as amended by ARRA. There are two model forms included in the Final Interim Rule. One must be filed within 90 days of the end of the first annual fiscal year of the TARP recipient during the TARP Period. The second is to be filed within 90 days of the end of any subsequent fiscal year in the TARP Period.
SEC registered TARP recipients must include these certifications on Exhibit 99.1 in their annual report on Form 10-K and to the DOT.
All other TARP recipients must provide these certifications to their primary regulatory agency and to the DOT.
The TARP recipient must preserve appropriate documentation and records to substantiate each certification for no less than six years after the date of the certification, and furnish promptly any documentation and records requested by the DOT.
The Interim Final Rule requires that the TARP recipient’s PEO and PFO provide the following certifications within 90 days of the completion of each fiscal year any part of which is a TARP Period. These certifications must indicate, among other things, that: (1) the compensation committee has complied with all of its duties; (2) the TARP recipient has complied with the “clawback” rules and with the rules regarding bonuses, retention awards and incentive compensation; (4) for an SEC registered TARP recipient, it will permit a non-binding shareholder resolution on the SEO compensation disclosures; (5) the TARP recipient has adopted and maintains an excessive luxury expenditures policy; it will disclose the amount, nature, and justification for the offering of any perquisites whose total value exceeds $25,000 for each of the covered employees; and the TARP recipient, the board or the compensation committee has engaged a compensation consultant, and the services the compensation consultant or any affiliate provided; (6) the TARP recipient has prohibited any tax gross-ups on compensation to the covered employees; (7) the TARP recipient has substantially complied with any compensation requirements set forth in the agreement between the TARP recipient and the DOT, as may have been amended; (8) the names of the SEOs and most highly compensated employees are set forth in the certification; and (9) the officer certifying understands that a knowing and willful false or fraudulent statement made in connection with the certification may be punished by fine, imprisonment, or both (See, for example 18 U.S.C. Section 1001).
The PEO and the PFO of a TARP recipient receiving exceptional financial assistance must provide additional certifications.
For those TARP recipients receiving exceptional assistance, the new compensation structures and compensation payments for SEOs and the most highly paid employees are subject to review and approval by the Special Master.
TARP recipients may seek guidance from the Special Master as to how the rules apply to their particular circumstances, or confirmation that their modified compensation arrangements are compliant. The Special Master will also review bonuses, retention awards and other compensation paid before February 17, 2009 to SEOs and the next 20 most highly compensated employees, determine whether any such payments were inconsistent with the purposes Section 111 of EESA, as amended by ARRA, or the TARP, or were otherwise contrary to the public interest and negotiate with the TARP recipient and the employee for appropriate reimbursements to the federal government with respect to compensation or bonuses. The principles that the Special Master is required to follow in conducting these reviews are set out in the Final Interim Rule.
The Interim Final Rule became effective June 15, 2009, except with respect to certain sections of the ARRA amendments that were effective immediately upon enactment of the statute (for example, Section 111(d) requiring a non-binding shareholder vote on executive compensation).
The bonus payment limitations under the Interim Final Rule will not apply to bonuses, retention awards and incentive compensation paid or accrued by TARP recipients or their employees prior to June 15, 2009, and the enhanced golden parachute prohibition will not apply to amounts paid prior to June 15, 2009. Furthermore, the bonus payment limitations under the Interim Final Rule will not apply to bonuses, retention awards and incentive compensation required to be paid pursuant to a written employment contract executed on or before February 11, 2009, that is paid on or after June 15, 2009.
The Special Master may: (i) provide an advisory opinion on either or both of these categories of payments; (ii) determine whether such payments are consistent with ARRA or EESA, or are otherwise contrary to the public interest; and (iii) seek reimbursement of such payments where appropriate.
The Special Master is instructed to consider any payment made prior to June 15, 2009, or any payment made or that may be made pursuant to a grandfathered arrangement, as part of (i) the Special Master’s review of the compensation payments and structures required to be approved by the Special Master for certain employees of TARP recipients receiving exceptional assistance, and (ii) for any advisory opinion the Special Master may issue with respect to a compensation structure for, or compensation payment to, a TARP recipient employee.
For the period before June 15, 2009, the provisions of the earlier EESA Rules, remain in effect and subject to ARRA and this Interim Final Rule, all contractual provisions to which a TARP recipient agreed prior to the enactment of ARRA or the publication of this Interim Final Rule will continue in effect.