Headlines about "Severance pay"
Gathered from the web by the editors at BenefitsLink.com.
[Guidance Overview] Worker Misclassification Investigations Gain Momentum
Excerpt: "Undoubtedly, some industries are both more prone to misclassify workers and more vulnerable to challenge due to the nature of the work involved. Construction, transportation and even the medical profession have proven at risk on the issue." (Attorney Roy F Harmon III in the Health Plan Law blog)
[Guidance Overview] Unambiguous Terms Trump Grant Of Discretion In Dispute Over Exclusionary Clause
Excerpt: "This case attracts my attention for a several important reasons. First, it points up the potential for mischief in the give and take of trigger events and exclusions, an area that has generated considerable litigation. Second, it provides insight into interpretative canons that can neutralize the typical advantage of the plan fiduciary when a plan grants discretion to the administrator." (Attorney Roy F Harmon III in the Health Plan Law blog)
[Guidance Overview] Severance Pay Under Section 415
Excerpt: "One of the major changes in the Regulations related to the necessity to include certain post severance compensation in the definition of Code §415 Compensation. Apparently, some plan documents (not McKay Hochman's) had previously been drafted to state that any amounts paid after separation of service (termination of employment), even regular pay, would be disregarded for all plan purposes. While this language was not wrong, the IRS/Treasury became concerned that some amounts of compensation that were actually earned during the participant's period of employment would be disregarded." (McKay Hochman Co., Inc.)
[Guidance Overview] Additional Guidance Regarding Minnesota Taxation of Deferred Compensation, Severance and Stock Option Income Paid to Nonresidents
Excerpt: "The Minnesota Department of Revenue is preparing guidance addressing withholding and reporting issues raised by the new law taxing some deferred compensation, severance and stock option income paid to nonresidents. The law now taxes income earned in Minnesota but received when the taxpayer is not a state resident. The new law requires employers to withhold tax from such payments beginning April 1, 2008." (Oppenheimer Wolff & Donnelly LLP)
Court Awards Restoration of Benefits to Former Westinghouse Employees
Excerpt: "The U.S. District Court for the Western District of Pennsylvania has ordered Siemens Corp. to restore separation from employment benefits to former employees of Westinghouse Electric Corp." (PLANSPONSOR.com; free registration required)
Using Pension Funds for Buyouts
Excerpt: "Using overfunded pension money to tempt workers into retirement with lump-sum packages allows employees to defer taxes. But it can be a risky venture in today's up-and-down stock market climate." (Human Resource Executive Online)
Elkhorn, Nebraska, Retention Agreements Promise Severance Pay and Benefits to Town Workers in Case Omaha Annexes
Excerpt: "Former employees of Elkhorn are asking the state's highest court to decide whether the city of Omaha owes them thousands of dollars in severance packages. A lower court has ruled that the contracts the employees had with Elkhorn are against the law." (AP via Houston Chronicle)
Detroit Automakers Using Pension Funds for Retirement Incentive Offers
Excerpt: "Some workers, however, are balking at the arrangements, worried about their future retirements, even though the pension funds being used contain more money than they need to meet obligations. Chrysler LLC and General Motors Corp. confirmed Friday that they are using the technique, while a Ford Motor Co. representative was unsure." (Detroit Free Press)
Survey Shows Most Boards Not Renegotiating Severance Packages
Excerpt: "According to a new report from Watson Wyatt, 54 of the 70 companies studied by the consulting firm, or 77%, did not provide their exiting CEOs with any termination payments beyond what was disclosed to shareholders in their 2007 proxies." (Financial Week; free registration required)
Delta to Offer Worker Buyouts
Excerpt: "One part of the program is for employees who are already eligible for retirement or for those whose ages and years of service add up to at least 60, with 10 or more years of service. The other part of the program is an offer for front-line employees -- such as flight attendants and gate and ticket agents -- with 10 or more years of service and for administrative and management employees with one or more years of service." (AP vis The Washington Post; free registration required)
[Guidance Overview] Section 409A and Non-U.S. Retirement Arrangements - What You Should Know
Excerpt: "Are any US taxpayers participating in any of your company's non-US retirement plans? If so, you should know about Section 409A of the US Internal Revenue Code. Section 409A deals with the inclusion in gross income of deferred compensation under nonqualified deferred compensation (NQDC) plans. Failure to comply can result in harsh tax consequences for US tax-paying employees and possibly for their employers. The definition of NQDC plans is broad and includes most non-US retirement arrangements as well as other types of plans, such as nonqualified salary-deferral arrangements and severance plans." (Mercer LLC)
[Guidance Overview] Federal Circuit Rejects Blanket SUB Pay FICA Tax Exemption in CSX Corp. v. United States (PDF)
Excerpt: "The lower court had held that all severance payments satisfying the definition of supplemental unemployment benefits ('SUB'), as defined in section 3402(o) of the Internal Revenue Code (the 'Code'), are non-wages and, therefore, not subject to Federal Insurance Contribution Act ('FICA') taxes." (Miller & Chevalier Chartered)
The Role of Severance in Today's Employment Environment (PDF)
4 pages. Excerpt: "This 'InsightOut' addresses three issues related to severance benefits: Do some severance programs currently miss their mark? How can employers implement the kind of severance program that would be cost effective for them and equitable for employees? (The three options presented can be used separately or in combination.) What savings might employers achieve by implementing each of the three severance program options presented?" (Buck Consultants)
Chrysler Buyout Count Short - Automaker Had Hoped 10,000 Would Exit
Excerpt: "Chrysler LLC, which is trying to reduce its hourly workforce, is unlikely to meet its goal of cutting 10,000 workers through its latest buyout and early retirement packages, a top UAW leader said Wednesday, further illustrating challenges Detroit automakers face convincing people to leave good-paying jobs during tough times." (Detroit Free Press via Human Resource Executive Online)
[Guidance Overview] Using Alternative Coverage To Offset COBRA
Excerpt: "Why do employers offer alternative coverage independently from COBRA? Sometimes, the employer is legally required to do so, as in the case of State continuation laws affecting insured plans. Other times, as with retiree plans, coverage is provided as a reward for service to the employer. In other instances, employers effectively use alternative coverages to reduce their COBRA liability or COBRA administrative expenses. For instance, alternative coverage often is used as part of a severance package negotiated incident to an employee's involuntary termination of employment." (HRTrainingCenter.com)
Ford Workers Face Buyout Dilemma
Excerpt: "Ford is offering 10 buyout and early retirement packages to thin its hourly ranks. It wants to shrink factory capacity to match its lower market share. The company also is hoping that enough people leave so it can replace them with workers who make about half the $28 per hour that Ford now pays factory workers in the United Auto Workers union. The deadline is March 18." (AP via The New York Times; free registration required)
[Guidance Overview] IRS Provides Transition Relief for 'Tainted' Performance-Based Compensation (PDF)
2 pages. Excerpt: "Now that the IRS has issued Revenue Ruling 2008-13, companies have additional time to review employment agreements, plans, and contracts to identify payment terms similar to the terms described in the ruling and to determine potential 'fixes' for future performance-based compensation. Although the transition relief is helpful, companies need to review and monitor the expiration and renewal provisions of employment agreements to determine the applicable transition period." (Holme Roberts & Owen LLP)
[Guidance Overview] Section 162(m) - IRS Confirms Previous Private Letter Ruling; Ruling Will Be Effective on a Going-Forward Basis
Excerpt: "Companies should review plans and arrangements that are intended to qualify as performance-based compensation under Section 162(m) to determine if the plans or arrangements provide that compensation will be paid without regard to whether the performance goal is attained if an individual is involuntarily terminated, terminates his or her employment for good reason, or retires." (Wilson Sonsini Goodrich & Rosati)
[Guidance Overview] IRS Delays Application of Its Holding Under Recent Section 162(m) Executive Performance Pay Ruling (PDF)
1 page. Excerpt: "Publicly traded corporations should consider the following actions during the transition period: Review any agreement providing performance-based compensation covered by Code section 162(m) (or acceleration of such compensation) to determine if it would permit payment upon the impermissible employment terminations (i.e., terminations other than death, disability and change in control) regardless of the level of performance attained; If any agreement subject to Code section 162(m) contains such language, consider amending it, as necessary, so that the performance-based compensation will be paid only if actual performance is achieved or upon death, disability or change in control; and Consider the implications for the company's proxy disclosures related to performance-based compensation." (Haynes and Boone, LLP)
[Guidance Overview] IRS Ruling on Performance-Based Pay - Permissible Payment Events (PDF)
3 pages. Excerpt: "In recent years, the IRS has begun to increasingly audit public companies on Section 162(m) issues and to take conservative positions on debatable issues under Section 162(m). Many companies' published compensation policies indicate that section 162(m) deductibility is required for the company's programs generally (although some state to the contrary). Moreover, pending legislation would substantially tighten the rules under Section 162(m). Thus, public companies should consider limiting their exposure on this and other grey areas under Section 162(m)." (Groom Law Group)
[Guidance Overview] Possible Fixes for New 162(m) Problems
Excerpt: "Every corporation with plans and agreements potentially affected by the new rule will need to consider whether to revise its plans and agreements, and if the answer is affirmative, how to revise its plans and agreements to best achieve the original purposes of the acceleration. Remember, the new ruling would deny deductibility to plans and agreements with the offending language even if the acceleration event never occurs. The . . . examples show how a corporation could accelerate vesting provisions to preserve deductibility, with the possibility of a reduced payout to a participant who retires." (Michael S. Melbinger via Winston & Strawn LLP)
[Guidance Overview] New IRS Position on Section 162(m) Performance-Based Compensation Deduction
Excerpt: "In a surprisingly swift and unexpected turn of events, the Internal Revenue Service (IRS) has reversed its long-standing position with respect to a public company's right to deduct certain 'performance-based compensation' under Section 162(m) of the Internal Revenue Code. Revenue Ruling 2008-13, issued by the IRS on February 21, 2008, provides that the performance-based compensation requirements of Section 162(m) are not met if compensation could be payable on a termination without cause or for good reason, or on a voluntary retirement, even if the applicable performance goals are met. This Ruling is directly counter to the IRS's position in prior private letter rulings issued as recently as 2006." (Kirkpatrick & Lockhart Preston Gates Ellis LLP)
[Guidance Overview] IRS Affirms Position That Right to Performance-Based Compensation on Termination of Employment Results in Loss of Deduction
Excerpt: "Companies should consider whether the IRS' new position on Section 162(m) also impacts bonuses intended to qualify as 'performance bonuses' for purposes of the special deferral rules of Section 409A (which permit deferral elections to be made up to six months before the end of the performance period). Additionally, as companies amend their compensation arrangements for Section 409A, they will need to consider whether such amendments will result in the employment contracts no longer qualifying for the Section 162(m) transition relief described above on the basis the employment contracts have been renewed or extended." (Troutman Sanders LLP)
[Guidance Overview] Corporate Communicator, March 2008, Recent Developments Concerning Small Public Companies (PDF)
6 pages. Excerpt: "In this issue we highlight recent significant developments in the reporting requirements for small public companies. We are also including a discussion about recent rulings from the Internal Revenue Service that reverse the IRS's position on the tax deductibility of certain severance payments under IRS Code Section 162(m)." (Snell & Wilmer L.L.P.)
[Guidance Overview] New IRS Ruling Affecting 162(m) Performance-Based Compensation
Excerpt: "The IRS just recently issued a revenue ruling (Rev Rul 2008-13) that may affect how some bonus arrangements and employment contracts are structured for 'covered employees' of public companies. As of 2007, the IRS is interpreting the term 'covered employee' to mean the CEO and the other three most highly compensated officers other than the CFO." (Gray, Plant, Mooty, Mooty & Bennett, P.A.)
[Guidance Overview] IRS Confirms New Position on Performance-Based Compensation, But Applies it Prospectively (PDF)
2 pages. Excerpt: "The IRS, apparently recognizing the accounting and other implications of its earlier position, has stated that it will not apply the new ruling to disallow a deduction for compensation that otherwise satisfies the rules for performance-based compensation, provided that either (i) the performance period for such compensation begins on or before January 1, 2009, or (ii) the compensation is paid pursuant to an employment agreement that was in effect (without regard to future renewals or extensions, including automatic renewals or extensions) on February 21, 2008." (Drinker Biddle & Reath LLP)
[Guidance Overview] Attorneys Up in Arms About IRS Ruling That Nixes Corporate Deductions for Executive Compensation
Excerpt: "[A private letter] ruling was met with a firestorm of criticism, even outrage, by the pillars of our nation's legal community -- in excess of 90 law firms lodged protests with the I.R.S. in which they concluded that the agency's position was unwise and, as a matter of law, incorrect. These protests fell on deaf ears: The I.R.S. has now 'upped the ante.' It has 'upgraded' the position it adopted in the letter to 'published ruling' status. Thus, with the issuance of Revenue Rule 2008-13, the I.R.S. has unequivocally signaled its intentions with respect to this issue." (CFO.com)
[Opinion] 90 Law Firms Request 162(m) Guidance (PDF)
5 pages. Excerpt: "Attached [to the target page] is a letter which was sent by 90 law firms, including Dewey & LeBoeuf LLP, to the Internal Revenue Service . . . requesting urgent guidance on this important issue. We are hopeful that the Service will issue additional guidance in the near future, although there can be no assurances that any such guidance will offer relief with respect to the issues addressed in the ruling." (Dewey & LeBoeuf LLP)
[Guidance Overview] Right to Performance-Based Compensation on Termination of Employment Results in Loss of Deduction Under Section 162(m)
Excerpt: "This is a significant departure from the IRS' prior private letter rulings on Section 162(m). Section 162(m) generally disallows any tax deduction for compensation paid to certain key executives of public companies to the extent the compensation exceeds $1 million for the taxable year." (Troutman Sanders LLP)
[Guidance Overview] IRS Ruling Requires Review of Public Company Incentive Compensation Plans and Executive Employment Agreements
Excerpt: "Section 162(m) of the Internal Revenue Code denies a tax deduction to public companies for compensation in excess of $1 million paid to certain officers, unless the compensation meets specific performance-based standards and procedures. In a reversal of position, the IRS has issued a ruling that will require all public companies to review their incentive compensation plans and executive employment agreements to maintain qualification under Section 162(m)." (Nixon Peabody LLP)
[Guidance Overview] Corporations May Need to Make Changes for 162(m) Rulings
Excerpt: "A corporation that wishes to preserve the deductibility of the compensation it pays to senior executives may need to consider changes to it plans and agreements. Among the plans and agreements that corporations should review with counsel are the following: Annual cash incentive plans,Long-term cash incentive plans, Equity incentive plans, Employment agreements, Change in control and severance agreements, Equity award agreements, particularly those for performance shares, restricted stock with performance vesting criteria and restricted stock units, and Other performance awards." (Michael S. Melbinger via Winston & Strawn LLP)
[Guidance Overview] IRS Grants Retroactive Relief From §162(m) Letter Ruling (PDF)
2 pages. Excerpt: "The IRS has announced that its controversial letter ruling holding that some common bonus arrangements do not qualify for the performance-based compensation exception to the $1,000,000 annual cap on deductible compensation will be applied prospectively only." (Seyfarth Shaw LLP)
[Guidance Overview] Six-Month Deferral Elections and Performance-Based Pay Under Section 409A (PDF)
Excerpt: "In addition to focusing on rules governing performance-based compensation under Section 409A of the tax code, this article also takes into account a recent Internal Revenue Service private letter ruling that may undermine the validity of performance-based compensation arrangements subject to Section 162(m) that are commonly found at many public companies. The authors also review Section 409A transition relief available during 2008 that allows employees to make deferral elections on a more liberal basis." (Pension & Benefits Reporter via Groom Law Group)
[Guidance Overview] Revenue Ruling 2008-13 Provides Prospective Application of New IRS Position on Performance-Based Compensation Exemption under Code Section 162(m) (PDF)
4 pages. Excerpt: "Under a new Revenue Ruling issued on February 21, 2008 (Rev. Rul. 2008-13), the Internal Revenue Service confirmed its reversal (as expressed in a January 2008 private letter ruling) of its prior position as to the effect of common severance provisions on the performance-based compensation exemption from Code Section 162(m) and, most significantly, provided a transition period for application of this new position." (Alston & Bird LLP)
Ford Is Pushing Buyouts to Workers
Excerpt: "[Ford] is pitching a buffet of buyout packages that are easily among the richest ever offered to factory workers, including one-time cash payments of $140,000 or college tuition plans for an entire family." (The New York Times; free registration required)
[Guidance Overview] IRS Issues More Section 162(m) Guidance
Excerpt: "Public companies subject to the $1 million deduction limit of Internal Revenue Code Section 162(m) should continue to monitor the fallout from IRS Revenue Ruling 2008-13 for further developments, and should give themselves plenty of lead time to implement changes to employment agreements and plan documents." (McDermott Will & Emery)
IRS Wants to Tax Golden Parachutes - Its Proposal Would Mean Rewriting Most Pay Contracts
Excerpt: "This is not the IRS's first revisiting of Section 162(m), which was created in 1993 with the intention of reining in executive pay but has arguably had the reverse effect, ballooning compensation for top officers through dramatically expanded use of stock options, stock grants, non-cash compensation and other tools of the exec-comp trade over the past 15 years." (Financial Week; free registration required)
[Guidance Overview] IRS Adopts Controversial Letter Ruling Position on Deductibility of Certain Executive Bonuses
Excerpt: "The revenue ruling formally adopts a controversial position taken in a recent private letter ruling (IRS Letter Ruling 200804004, TAXDAY, 2008/01/28, L. 1). The ruling apparently responds to a letter signed by 90 of the country's largest law firms, which requested clarification of the letter ruling . . . ." (CCH Incorporated)
[Opinion] IRS Affirms New 162(m) Position, But with Some Relief
Excerpt: "Yesterday the IRS released Revenue Ruling 2008-13, clarifying its new position under Section 162(m) for provisions that accelerate performance-based compensation upon an employee's termination for Cause, Good Reason or Retirement. This was not worth the wait." (Michael S. Melbinger via Winston & Strawn LLP)
[Official Guidance] Text of IRS Rev. Rul. 2008-13: Identifying Performance-Based Compensation for Purposes of Sec. 162(m) (PDF)
5 pages. Excerpt: "The ruling holds that compensation paid to an executive is not qualified performance-based compensation for purposes of § 162(m), even if the compensation is paid upon the attainment of the performance goal, if the plan agreement or contract provides for payment of compensation to an executive upon the attainment of a performance goal or for (1) termination without 'cause' or for 'good reason' or (2) voluntary retirement." (Internal Revenue Service)
Yahoo Inc. Implements Generous Severance Pay Benefits to Discourage Microsoft Takeover Attempt
Excerpt: "Yahoo Inc., owner of the most-visited U.S. website, adopted severance plans for employees that would pay as much as two years of salary to fend off a $44.6-billion bid from Microsoft Corp. . . . Yahoo's plans also entitle departing employees to health insurance, accelerated vesting of options and job-search assistance." (Bloomberg via Los Angeles Times)
[Guidance Overview] IRS Takes Adverse Position in Ruling on Code Section 162(m) (PDF)
2 pages. Excerpt: "[An IRS agent told us that the IRS] hopes to publish guidance by the end of February [and that] companies [should not] engage in drastic measures at this time simply because of the ruling, but instead, to wait until the guidance is issued." (DrinkerBiddle)
[Guidance Overview] Some Relief Likely for 162(m) Reversal
Excerpt: "Kenneth Griffin, author of the IRS' recent, surprising and controversial private letter ruling, clarified the IRS' position on the implications of a possible acceleration of performance-based incentive awards." (Executive Compensation Blog published by Winston & Strawn LLP)
[Guidance Overview] IRS Provides Adverse Ruling on $1 Million Pay Cap
Excerpt: "We review the private letter ruling (PLR) the IRS published on January 25, 2008, that relates to the $1 million pay cap under Internal Revenue Code (Code) Section 162(m)." (JPMorgan)
IRS Official to Discuss Recent 162(m) Ruling
Excerpt: "Because nothing says 'Happy Valentines Day' like guidance on Code Section 162(m), we will be having a webcast on the topic this Thursday. Kenneth Griffin, the author of the IRS' recent, surprising private letter ruling, will lead off the webcast . . . ." (Executive Compensation Blog published by Winston & Strawn LLP)
[Guidance Overview] Golden Handcuffs or Bronze Boot? Severance Pay Promises Under ERISA
Excerpt: "The trump card of the written plan requirement over oral or 'informal' written promises has so often provided the means of victory to the plan fiduciary. The Egan case develops this defense in its several aspects." (Health Plan Law Blog by Attorney Roy F. Harmon III)
[Guidance Overview] IRS Ruling Creates Uncertainty Regarding What Constitutes Performance-Based Compensation Under Internal Revenue Code Section 162(m)
Excerpt: "It is believed that the Ruling is incorrect. The mere presence of the involuntary and good reason termination provisions should not be treated as sufficient to indicate that the employee would absolutely receive the compensation in each year regardless of whether the performance goal is attained and regardless of whether a termination occurs. . . . It is recommended that companies give serious consideration to modifying their plans and/or agreements to comply with the Ruling on a going-forward basis." (McDermott Will & Emery)
[Guidance Overview] IRS Changes Position on Key Section 162(m) Issue
Excerpt: "We believe that the new IRS position is misguided. . . . This issue is of critical importance to many public companies. The amount of deductions at stake is substantial in some cases. Moreover, in the case of all public companies, the SEC requires a statement in the proxy of the company's policy with respect to Section 162(m)." (Jones Day)
IRS Opinion on Deductibility of Incentive Plans May Change How Severance Is Structured
Excerpt: "A new IRS interpretation may result in a significant rethinking of severance practices for senior executives. The ruling addresses incentive plans that allow accelerated vesting of awards for retired or terminated executives under section 162(m) of the tax code. That section governs the corporate deductibility of incentive plan awards." (HR Policy Association)
[Guidance Overview] Entitlement to Incentive Compensation on Termination of Employment May Result in Loss of Treatment as Performance-Based Compensation under Section 162(m) (PDF)
Excerpt: "In what may be a substantive reversal of previous guidance, the IRS recently issued a private letter ruling (PLR 200804004) that concluded that all compensation payable to an executive under an incentive plan will not be treated as 'performance-based compensation' under Section 162(m) of the Internal Revenue Code if it is payable in the event of certain severance scenarios, regardless of actual performance." (Frederic W. Cook & Co., Inc.)
[Guidance Overview] Ex-Mellon Employee Eligible for Displacement Benefits
Excerpt: "An employee of an HR consulting firm fired as part of a corporate merger won a legal battle when a federal judge ruled that he was due benefits under a displacement program. U.S. District Judge Faith S. Hochberg of the U.S. District Court for the District of New Jersey ruled that plaintiff Robert Howley was never given a bona fide job offer at the acquiring company because a decision had been made before the sale that Howley was to be part of a planned reduction in force." (PLANSPONSOR.com; free registration required)
Countrywide CEO Forfeits $37.5 Million in Severance Pay
Excerpt: "[The CEO,] however, will retain retirement benefits and deferred compensation that he has already earned, Countrywide said . . . . In addition to cash severance payments, Mozilo also walked away from $400,000 per year he was to be paid under an agreement to serve as a consultant to the company following his retirement, and perks including the use of a private airplane . . . ." (AP via Washington Post)
Ford To Offer Employees Buyouts and Early Retirement Packages
Excerpt: "Ford Motor [this past] Thursday announced it will offer buyout and early retirement packages to its hourly workers as part of a restructuring plan to bring in new workers that will receive lower pay and benefits, the AP/Richmond Times-Dispatch reports. The new wage system was established during last year's contract negotiations with United Auto Workers . . . ." (Kaiser Family Foundation)
[Guidance Overview] Third Circuit Weighs in on FICA Status of Severance Payments to Tenured Faculty
Excerpt: "The Third Circuit has determined that certain severance payments to tenured faculty and administrators constitute 'wages' for purposes of §3121, which governs employer and employee contributions under the Federal Insurance Contributions Act (FICA). In University of Pittsburgh v. U.S., No. 06-1276 (3d Cir. 11/2/07), the Third Circuit held that the relinquishment of tenure rights did not alter the payments' character as compensation for services subject to FICA taxes." (The Bureau of National Affairs, Inc.)
GM / UAW Negotiating More Buyouts
Excerpt: "General Motors Corp. is close to an agreement with the United Auto Workers on another round of buyout and early retirement offers to cut the number of workers in jobs banks and clear openings for workers hired at lower-tier wages, a top company official said . . . ." (AP via The New York Times; free registration required)
G.M. to Start Another Round of Buyouts and Seek Cheaper Labor
Excerpt: "G.M. said it would not reveal the dollar amounts or other terms of the buyouts until union locals hold informational meetings for eligible workers early in 2008, but it said the deals were similar to what it offered all 113,000 hourly workers in 2006." (The New York Times; free registration required)
New Rules Require Employers to Re-Think Treatment of Post-Severance Compensation in Tax-Qualified Retirement Plans
Excerpt: "Under the new rules, a qualified plan generally must exclude post-termination compensation. However, special rules apply to certain amounts paid within 2½ months after the participant's termination or, if later, by the end of the plan's limitation year in which the termination occurs . . . ." (Poyner Spruill LLP)
Overview of Section 409A Corrections Program per IRS Notice 2007-100
Excerpt: "Corrections relief is provided to plans that make unintentional errors, such as mistakenly paying out deferred compensation earlier than required by a plan. Plans that correct under this guidance within the service recipient's tax year can avoid adverse tax consequences. Plans that do not qualify for such relief, but nevertheless correct before January 1, 2010, can avoid some of the adverse consequences of plan failure." (CCH Tax Newsletter)
Text of IRS Notice Allowing Correction of Certain 409A Operational Failures, and Proposed Ongoing Corrections Program (PDF)
Excerpt: "This transition relief and additional guidance includes: (1) Methods for correcting certain operational failures during the taxable year of the service provider in which the failure occurs to avoid income inclusion under § 409A(a). (2) Transition relief limiting the amount includible in income under § 409A(a) for certain operational failures occurring in a service provider's taxable year beginning before January 1, 2010, that involve only limited amounts. (3) An outline of, and request for comments on, a potential corrections program that would permit service recipients and service providers to limit the amounts required to be included in income under § 409A(a) due to certain operational failures." (Internal Revenue Service)
Overview: Severance Arrangements Under Internal Revenue Code Section 409A
4 pages. Excerpt: "It is critical that employers continue to identify plans subject to Code section 409A and take steps to bring those plans into compliance. Employers must be aware that Code section 409A applies to many arrangements not traditionally considered 'deferred compensation.' This article reviews Code section 409A issues as they arise in severance arrangements." (von Briesen & Roper, s.c.)
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