Understanding Employee Benefits

Too Much Discretion With Respect to Annual Bonuses May Cause Deferral of the Employer’s Deduction

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In an IRS Field Attorney Advice Memorandum (FAA 20134301F) dated September 18, 2013, the IRS Office of Chief Counsel reviewed several common bonus plan designs in connection with a request for an opinion with regard to the timing of the employer’s tax deduction with respect to the accrual and payment... Read More

Topics: Compensation Questions, Deferred Compensation and 409A, Executive Compensation

Next Stop: IRS Compliance Checks of Non-Governmental 457(b) Deferred Compensation Plans

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Recently the Employee Plans Compliance Unit (EPCU) of the Internal Revenue Service completed an informal compliance check of 401(k) plans conducted via an extensive written questionnaire sent to plan sponsors. The results of the compliance checks are being used to refine the focus of plan examination efforts. This week, the... Read More

Topics: Compensation Questions, Deferred Compensation and 409A, Executive Compensation, Retirement Plans

Nonresident Employee Avoids New York Taxes on Deferred Compensation Payment

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A taxpayer we will call John worked for a savings bank in New York that was acquired by Washington Mutual Bank. John participated in the New York bank’s supplemental executive retirement plan (SERP) and its deferred compensation plan, both of which were nonqualified deferred compensation plans. When Washington Mutual Bank... Read More

Topics: Deferred Compensation and 409A, Executive Compensation, Payroll

More on Discounted Stock Options Under Section 409A

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My colleague Jeff Cairns blogged about a recent court case confirming the IRS’s position that discounted stock options can be considered noncompliant nonqualified deferred compensation arrangements under Section 409A of the Internal Revenue Code. Unless structured to be exercised only on a fixed date or an allowable 409A event, discounted... Read More

Topics: Deferred Compensation and 409A, Executive Compensation

Section 409A Tax Assessed on Discounted Stock Options – Taxpayer Sues for Refund in Federal Court of Claims

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Code Section 409A which was effective in January 1, 2005, provides strict rules that must be applied to most deferred compensation arrangements accruing benefits after the effective date. Failure to comply with the Code and the applicable Treasury Regulations can result in a 20% surtax plus interest on the amounts... Read More

Topics: Deferred Compensation and 409A, ERISA and Other Benefits Litigation, Executive Compensation, Payroll

It is Always Good to Follow the Plan’s Claims Procedure in Denying a Claim

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A recent Eighth Circuit Court of Appeals decision involved high ranking executives who participated in a company’s long-term incentive plan. Under the plan agreements, executives who did not continue employment for a three year performance period forfeited benefits under the plan unless they qualified for a pro-rated award. A pro-rated... Read More

Topics: Compensation Questions, Deferred Compensation and 409A, ERISA and Other Benefits Litigation, Executive Compensation