Employee Benefits

If you have been working a long time, you may be looking forward to retirement in the not-so-distant future. Hopefully, you will be in good health at that time and able to pursue your favorite activities.

But the “golden years” may be tarnished if you are not careful. Here are five common mistakes that can hinder your ability to retire comfortably and securely.

1. You are overburdened with debt. Owing money is not necessarily fatal to a happy retirement. But credit card debt with high interest...

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...

This spring, companies who sponsor 401(k) plans can expect their inbox to be full of new information.  The Department of Labor’s plan fee disclosure rules are set to take effect April 1, 2012.  Service providers of 401(k) plans will then be required to provide employers with figures for the direct and indirect compensation they receive to service plans.  They will now need to disclose recordkeeping fees separately from all other fee disclosures. They also must detail indirect compensation, such...

Increased transparency is the trend in the world of financial reporting, and this trend is clearly reflected in the new Accounting Standards Update (ASU) for companies that participate in multiemployer defined benefit pension plans. The Financial Accounting Standards Board (FASB) recently completed redeliberations on the standard that becomes effective for public companies later this year. The FASB’s September 2010 Exposure Draft on multiemployer defined benefit pension plans generated...

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....

What a year it has been. In 2011 we have witnessed devastation caused by a wide variety of natural disasters, ranging from tornadoes to floods to wildfires. Although it is a small consolation if your home or other property is damaged as a result, at least you may be able to deduct a casualty loss on your tax return.

Basic rules: You may qualify for a casualty loss deduction if damage is caused by an event that is “sudden, unexpected or unusual.” This not only includes natural disasters already...

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...

• Investment Reporting and Disclosure
• 403(b) Plans - How Many Are There?
• DOL and Internal Revenue Service (IRS) Annual Filings
• Required Fee Disclosures to Plan Sponsors - 408(b)(2) Interim Final Regulations
• Defined Benefit Plan Amendment Deadline Extended by the IRS
• EBSA Enforcement Actions to Protect Employee Contributions
• Do you have a "Mr. Forfeiture" in your Plan?

Recent EBP Developments

Change and transparency are...

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...