Compensation and Benefits Consulting Insight

Tax qualified retirement plans are required to hold employer and employee contributions in an irrevocable trust, which is separate from the employer’s funds.  ERISA, which governs these programs, creates various types of legal liability for a plan’s fiduciaries.   Department of Labor penalties and litigation from plan participants can arise, and can be brought against an individual fiduciary.  The issue of who is or is not a fiduciary is not determined solely by a person’s title.  

ERISA’s...

Not-for-profit organizations face many challenges in attracting and retaining executive talent. Compensation programs (types and amount) that can be offered to these executives are much more limited than those which are offered to private sector executives.  Many organizations do not have in-house capabilities to analyze and propose programs that provide competitive compensation. Donors may perceive that executives are overpaid, and are therefore the organization is providing fewer services....

The issue of whether a worker should be treated as an employee or an independent contractor has been an area of significant IRS interest for decades. The IRS has the ability to assess significant employer penalties for failure to withhold employment and income taxes on a worker who should have been treated as an employee.

If an employer is faced with this issue upon an IRS examination, the IRS will typically offer to settle the penalties at a discounted rate under Internal Revenue Code (IRC)...

As the Internal Revenue Service continues to move into the electronic age, it has adopted the EFAST-2 filing system to electronically file tax returns related to employee benefit programs.  For the 2010 tax year, the IRS provides a choice of filing mediums for tax-qualified retirement programs that cover ‘one-participant’ plans—the paper Form 5500-EZ or the electronically filed Form 5500-SF.  Let’s briefly go over the filing rules:

1. What is a “one participant plan?”  A ‘one-participant plan’ is a...

On March 29, 2011, the government agencies who are enforcing the Dodd-Frank Act’s provisions relating to financial institutions (including but not limited to the SEC, OCC, FDIC, OTS and NCUA) issued a further proposed rule relating to incentive compensation programs offered to employees of financial institutions with over $1 billion in assets. While echoing many parts of their February 4, 2011 proposal (click here for more information), the gist of these proposals is that incentive compensation...

Although employers who maintain tax-qualified retirement plans are well aware of the requirement to file an annual information return (Internal Revenue Service (IRS) Form 5500), many employers appear unaware of their responsibility to file a similar return for other employee benefit programs.  If the IRS discovers that required filings have not been made, penalties are severe.  This article will discuss what types of plans need to file, potential penalties and a program that can minimize the...

On February 4, 2011, a group of government agencies who are charged with enforcing laws relating to financial institutions (including the Securities and Exchange Commission, the Office of the Comptroller of the Currency, the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision and the National Credit Union Administration) issued a proposed rule relating to the enforcement of the Dodd-Frank Act, which directed the agencies to rein in executive pay as...

When we consider the impact of “reasonable compensation,” it is often in relation to wages paid to executives of not-for-profit entities or publicly traded companies. For these entities, if wages are not deemed reasonable compensation because they are too high, the employer can lose a deduction or incur an excise tax.  A recent court case underscores a different side of “reasonable compensation” — paying an S-corporation shareholder employee too little in an attempt to avoid employment taxes.

In...

Many taxpayers, fearing an eventual increase in income tax rates, have taken the step of converting their individual retirement accounts to Roth IRAs, thereby paying taxes at current rates for the benefit of obtaining future tax free earnings.  A recent change in the law allows 401(k) plans to permit their participants to, in effect, re-characterize their 401(k) plan balances, within the plan, to Roth IRAs. 

What happens when a participant takes a distribution from a qualified plan? 

He or she...

This month's Special Delivery E-Newsletter includes the following articles:

• Skoda Minotti Expands its Compensation and Benefits Advisory Services Group
• Own Rental Property? New Law May Affect You
• Capital Gain Exclusion on Small Business Stock
• One Last Chance to Repair Deferred Compensation Plan Issues
• Common Benefits of a Business Plan
• Home-office Deductions: Terms of Tax Endearment
• Cutting the "Kiddie Tax" Down to Size
• Aurum Capital Markets Summary
• Skoda Minotti Only Company Recognized at Inc....

One Last Chance to Repair Deferred Compensation Plan Issues

December 31, 2010 marks the closing of a window offered by the IRS to self-correct non-qualified deferred compensation programs (NQDC) for failure to comply with Internal Revenue Code Section 409A (409A).  Although many employers have reviewed their programs for 409A compliance, some have not and should do so.  Let's briefly look at the issue and what should be done before year end.

Click here to read more about section 409A and the...

We are pleased to provide you with a copy of “The BDO 600, a 2010-2011 Survey of Board Compensation Practices of 600 Mid-Market Public Companies.”  This survey reviewed the SEC filings of 600 companies in eight industries with revenues of between $25 million and $1 billion to see how the companies’ board compensation programs were designed, and what changes had occurred since 2009.  The survey found that:

• Overall, total board compensation (both cash and equity) increased 2% over 2009 levels;...

December 31, 2010 marks the closing of a window offered by the IRS to self-correct non-qualified deferred compensation programs (NQDC) for failure to comply with Internal Revenue Code Section 409A (409A).  Although many employers have reviewed their programs for 409A compliance, some have not and should do so.  Let’s briefly look at the issue and what should be done before year end.

NQDC include (but are not nearly limited to) traditional deferral arrangements (such as supplemental retirement...