Profits may be back, but bonus pay is not, and that is causing some trouble in divorce proceedings.
According to Bloomberg, as restricted stock and deferred monetary rewards replace bonus payouts, the total value of bonuses is harder to decipher and chop up for exes and children. It has to be decided whether deferred compensation should be treated as an asset or income.
Another problem: the lack of cash flow is preventing some bankers from being able to pay for “private-school tuitions or maintain second homes.”
Bloomberg: Shifts in incentive compensation will affect most financial services workers who make more than $200,000, or about 50,000 people in New York, New Jersey and Connecticut, said Alan Johnson, president and founder of compensation consultant Johnson Associates Inc. in New York. About 50 per cent of pay is being awarded in restricted or deferred compensation, said Paul DeLucia, a partner at Options Group, a New York-based executive search and compensation consultant firm.
Before to the crisis, the benchmark used to calculate post-relationship payouts was the previous four years of earnings. Of course, now the past is anything but a realistic model of current or future earnings.
Losing out on bonus cash is not exactly a banker’s dream, but in divorce, it could be a good thing. Support packages usually last 15 years and with less cash money compensation right now, that means less of it will be apportioned to alimony and child support.
Better strike while the bonus is low, wanna-be-divorced bankers.
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