Understanding Employee Benefits

All Businesses, even if not Subject to 162(m), Should Consider Gathering Data to Support Future Deduction of Deferred Compensation under the Grandfather Rule

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As mentioned in a previous blog, the IRS has issued its initial guidance on Code Section 162(m), as modified by the Tax Cuts and Jobs Act.  One important aspect of the guidance is its discussion of preserving deductibility under the transition rule, also known as the 162(m) “grandfather” rule. Under... Read More

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

Participants in Top Hat Plans Must Exhaust Administrative Remedies

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So-called “Top Hat” plans are nonqualified deferred compensation plans for a select group of management or highly compensated employees. These executive compensation arrangements are exempt from many ERISA provisions, but are not exempt from ERISA’s claims procedure requirements. Therefore, top hat plans must provide a reasonable claims procedure. ERISA compliant... Read More

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

Are Top Hat Plans Entitled to a Discretionary Standard of Review?

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Many years ago the Supreme Court decided that qualified retirement plans that gave their fiduciaries discretion to determine plan benefits were entitled to have their decisions, reviewed by a court under a generous “abuse of discretion” standard. Although that standard may be limited in situations in which the plan administrator... Read More

Topics: Deferred Compensation and 409A, Executive Compensation

When is a LLC Profits Interest not a Profits Interest? U.S. Tax Court: “When it is a Capital Interest”*

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On December 2, 2013, the United States Tax Court issued its opinion in Crescent Holdings, LLC et al vs. Commissioner, 141 T.C. No. 15 (12/2/13) wherein it examined the tax rules applicable to transfers of partnership interests as compensation. Crescent Holdings, LLC (“Holdings”) was a limited liability company and the... Read More

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

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