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DISCLAIMER: This blog is published for general information only - it is not intended to constitute legal advice and cannot be relied upon by any person as legal advice.  U.S. Treasury Regulations require us to notify you that any tax-related material in this blog (including links and attachments) is not intended or written to be used, and cannot be used, for the purpose of avoiding tax penalties, and may not be referred to in any marketing or promotional materials.  While we welcome you to contact our authors, the submission of a comment or question does not create an attorney-client relationship between the Firm and you. 

Entries in Executive Compensation (14)

Monday
Apr152019

Handling Missing Participants under Code Section 409A

Deferred compensation payments are due to one of your former executives, but the former executive is nowhere to be found. You know that the IRS has strict timing rules for payments subject to Code Section 409A (but maybe not as strict as you think). The end of the tax year is approaching fast. What to do?

Missing participants can be a problem for benefit plan sponsors in a variety of contexts. Sponsors of qualified plans can turn to IRS and DOL guidance on what do to when a missing participant is owed required minimum distributions or the plan is being terminated and assets must be distributed.

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Tuesday
Mar262019

IRS Guidance Regarding the Section 4960 Excise Tax Is (Somewhat) Helpful

IRS Notice 2019-09 provides guidance intended to help “applicable tax-exempt employers” determine whether compensation paid to their most highly compensated employees will be subject to the 21 percent excise tax imposed under Code Section 4960.  Notice 2019-09 is indeed helpful to those of us who have to interpret the provisions of Code Section 4960.  But tax-exempt employers subject to Code Section 4960 have serious work to do in order to comply with these relatively new rules, and some tax-exempt employers will be disappointed in the results.  (In general, compensation paid by a Section 501(c)(3) organization will be subject to the requirements of Code Section 4960, so we will simply reference tax-exempt employers for these purposes.)

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Wednesday
Jan102018

How can a tax-exempt employer manage the new excise tax on executive compensation? 

The executive compensation provisions of the Tax Cut and Jobs Act have been widely reported, and public companies and tax-exempt employers are now thinking about how to adjust to the new statutory changes.  Tax-exempt employers face the startling new reality of a 21% excise tax on “remuneration” exceeding $1,000,000 paid to a “covered employee” in a tax year and on severance pay in excess of certain limits paid to a covered employee in connection with a separation from service.  We are all just beginning to fully process the new changes and, thus far, there has been no administrative guidance from the Treasury Department.  But based on preliminary analysis, tax-exempt employers may be able to mitigate (or at least manage) the sting of the new excise tax through a combination of traditional supplemental executive retirement plans and long-term incentive plans, and (where possible) well-designed non-competes that comply with the proposed regulations under Code Section 457(f) published last year.  In ideal circumstances, a tax-exempt employer may even be able to avoid the excise tax entirely. 

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Tuesday
Jan022018

Tax Reform: A Brief Overview of the Final Legislation

Congress passed the Tax Cuts and Jobs Act on December 20, 2017 and President Trump signed the bill into law on December 22nd. As everyone knows by now, the new law makes sweeping changes affecting most areas of income taxation. And while the final legislation contained fewer provisions affecting employee benefit plans and executive compensation than the original House Bill, employers will still be faced with a number of significant changes in law - most of which can fairly be characterized as revenue raisers - that will require careful review of their current arrangements. 

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Tuesday
Nov072017

House Tax Bill Targets Deferred Compensation Earned After January 1, 2018 (Really)

It’s early days yet for the Tax Cuts and Jobs Act released last week by the House Ways and Means Committee, but one thing is clear:  Congressional tax writers are scouring the landscape to find a combination of more revenue and accelerated revenue from various sources in order to pay for the substantial cuts in income taxes promised by the House Bill.  House Republicans wisely decided against the “Rothification” of 401(k) plans, which would have generated revenue by reducing or limiting opportunities for pre-tax deferrals under the most prevalent retirement savings vehicle maintained by employers and would also have generated consternation from most industry and employee groups.  But a variety of other tax-favored benefit programs and benefit plan features are being scrutinized for curtailment, including deferred compensation arrangements.  In fact, the proposals contained in the House Bill regarding deferred compensation and executive compensation are nothing short of earthshaking.   Specifically, the House Bill would sweep away the elaborate framework of rules that currently govern various types of deferred compensation arrangements and would also make significant changes to the rules relating to the deduction of executive compensation by public companies. 

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