Practice Test Geeks(CCP) Certified Compensation Professional Practice Test
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Executive Compensation & Benefits Flashcards

7 cards from real CCP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

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  1. Which IRC section governs the $1 million deductibility cap on executive compensation for publicly held corporations?

    Answer: Section 162(m)

    IRC Section 162(m) limits the corporate tax deduction for compensation paid to covered employees of publicly held corporations to $1 million annually.

  2. A 'golden parachute' payment triggers IRC Section 280G excise taxes when it exceeds what threshold?

    Answer: 3x the executive's average annual compensation

    Section 280G imposes a 20% excise tax on 'excess parachute payments' — those exceeding 3x the executive's average annual W-2 compensation over the prior 5 years.

  3. What is the primary purpose of a rabbi trust in executive compensation?

    Answer: To secure deferred compensation against employer insolvency with pretax deferral treatment

    A rabbi trust informally funds deferred compensation obligations and protects against employer bankruptcy, but assets remain subject to the claims of general creditors, preserving tax deferral.

  4. Under SEC rules, which proxy disclosure document must detail the compensation of Named Executive Officers (NEOs)?

    Answer: Compensation Discussion and Analysis (CD&A)

    The Compensation Discussion and Analysis (CD&A) section of the proxy statement is required by SEC rules to explain the rationale and details of NEO compensation.

  5. A nonqualified deferred compensation plan that fails to comply with IRC Section 409A requirements faces what immediate consequences for the employee?

    Answer: Immediate income inclusion, 20% additional tax, and interest penalty

    Section 409A violations cause all deferred amounts to become immediately taxable, plus a 20% penalty tax and underpayment interest on the amounts.

  6. Which performance metric is most commonly used in Long-Term Incentive (LTI) plans to align executives with shareholder interests?

    Answer: Total Shareholder Return (TSR)

    Total Shareholder Return (TSR), which combines stock price appreciation and dividends, is the most widely used LTI metric because it directly mirrors the shareholder experience.

  7. What is a 'clawback' provision in executive compensation?

    Answer: A requirement to repay previously awarded compensation under specific conditions

    A clawback provision requires executives to return previously paid compensation, typically when financial restatements or misconduct are discovered.