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"Many accrual basis taxpayers have operated under the belief that so long as discretionary bonus amounts are paid within 2-1/2 months following the end of the plan year, the amounts are fully deductible for the prior year. However, for bonus plans based on subjective performance criteria, the IRS may challenge the timing of the bonus deduction under the reasoning in its recent Memorandum."  MORE >>

"A recent federal district court decision imposed a penalty of $4,470 on a plan administrator who delayed providing the widow of a plan participant with the plan document in effect 34 years ago.... The court did not accept the employer's plea that it should not be penalized for having failed to provide the information sooner. The court noted that there was no evidence in the record regarding the steps that the company had taken to try to locate the documents." []Hartman v. Dana Holding Co., No. 1:12-CV-445 (N.D. Ind. Oct. 21, 2013)]  MORE >>

"[T]he executive was placed on 'garden leave,' in other words, relieved of all responsibilities and told to stay home.... The court found that the executive had sufficiently alleged that the employer had manipulated the date of termination with the specific intent of depriving the employee of the severance benefits to which he would otherwise have been entitled.... The court said that there could be benign reasons why the company would pay the employee for 30 days after stripping the employee of all responsibilities but that there was also the possibility that the employer had improper motives for the timing of the employment termination given the fact that the garden leave saved the employer over $700,000 in severance pay." [Kirby v. Frontier Medex, No. ELH-13-00012 (D.C. Md. Oct. 30, 2013)]  MORE >>

"Participants can voluntarily direct the trustee or plan administrator to pay another person their plan benefit. However, [a recent federal district court] case makes clear that even where the participant owes the employer a lot of money and even when the money owed is the result of a crime, the employer is not allowed to keep the participant's qualified plan benefit." [Thomas v. Bostwick, No. 13-cv-02544-JCS (N.D. Calif. Sep. 19, 2013)]  MORE >>

"The IRS did not revoke the 1961 Revenue Ruling permitting pre-tax payment of employee premiums for individual market policies. Some employers are hoping that they can continue to allow employees to pay for individual market health insurance policies on a pre-tax basis through a cafeteria plan even if the employer provides no subsidy for the coverage. The recent guidance is not clear on that point. Small employers are permitted to subsidize policies on the Marketplace through the Small Business Health Option Program or SHOP that is part of the Marketplace. This will allow small employers to establish programs to subsidize coverage that employees choose, but employees will be limited to the plans available under SHOP."  MORE >>

"At this time, there are relatively few new items that need to be considered for the upcoming proxy and 10-K season." [Editor's note: Article includes an extensive interactive checklist of ongoing issues.]  MORE >>

"The proposed pay ratio disclosure requirements specify that the ratio must be expressed as a ratio in which the median of the annual total compensation of all employees is equal to one, or, alternatively, expressed narratively in terms of the multiple that the [principal executive officer (PEO)] total compensation amount bears to the median of the annual total compensation amount. For example, if the median of the annual total compensation of all employees of a registrant is $45,790,39 and the annual total compensation of a registrant's PEO is $12,260,000,40 then the pay ratio disclosed would be '1 to 268'[.]"  MORE >>

"The court found: None of the compensation-related information was rendered materially misleading by omission of information about the financial performance of Symantec or the other companies in the peer group. It was not substantially likely that disclosure of the comparative TSR information would have significantly altered the total mix of information available to the Symantec shareholders. The proxy adequately disclosed what the pay targets were based on, as well as the fact that compensation may be above the positioning benchmark based on consideration of factors other than performance." [Gordon v. Symantec, No. 1-12-CV-231541 (Cal. Super. Ct. for Santa Clara Cty. Aug. 2, 2013)]  MORE >>

"[T]wo district courts in Virginia have reached opposite conclusions on similar facts. One difference between the cases may be that in the case where the family won, the family had made explicit requests of the employer as to whether coverage continued and were told that it had. In the case where the family lost, the employer had simply failed to inform the family that the coverage did not continue. Both cases would be heard by the Fourth Circuit Court of Appeals if appealed."  MORE >>

"IRAs are protected in bankruptcy only if the IRAs are tax exempt. IRAs are tax exempt only if they do not engage in prohibited transactions. One prohibited transaction is the direct or indirect loan between the IRA owner and a party in interest, such as the bank or other financial institution that holds the IRA assets (IRA Custodian).... Recently the DOL declared that boilerplate provisions in IRA account documents that allow the IRA Custodian to offset amounts in the IRA against debts owed to the IRA Custodian by the IRA owner constitute a prohibited loan.... The Sixth Circuit Court of Appeals ruled that the IRA would be protected. The court concluded that because the debtor had no other account with the IRA Custodian, there was no way in which the improper offset could have occurred." [Daley v. Mostoller, No. 12-6130 (6th Cir. June 17, 2013)]  MORE >>

"As business conditions deteriorated, the shareholder decided to pay creditors other than the multiemployer funds.... According to the court, the owner prioritized the payment of corporate expenses that were beneficial to him, such as bank loans that he had personally guaranteed or other personal loans, over payments to the multiemployer funds. That preference violated a duty of loyalty to the funds and constituted defalcation under bankruptcy rules. The obligation was therefore nondischargeable."  MORE >>

"Specific issues of focus include: (a) verifying the deferrals reported as 457(b) relate to an actual 457(b) plan; (b) verify that the employer is eligible to sponsor a 457(b) plan; (c) confirming that participation is limited to a select group of highly compensated employees, managers, directors or officers ...; (d) determining whether the plan includes features not permitted in Top Hat Plans sponsored by tax-exempts, but that are permitted for governmental 457(b) plans, including loans, age 50 catch-ups and Code Section 457(g) trusts; and (e) reviewing unforeseeable emergency distributions.... [I]dentified plans which are out-of-compliance will be subject to audit or in some cases, referral to the Voluntary Correction Programs."  MORE >>

"Courts [after Amara] are now more likely to find remedies for ... enrollment errors. A recent decision from the federal District Court in Virginia ... held that an employer breached its fiduciary duty when it allowed an employee to enroll in the company's life insurance plan, encouraging him to believe he was eligible for benefits, when the employer knew or should have known that he was not eligible to enroll in the plan.... The court did not decide damages for the employee's family.... [The] employer is now potentially liable for the amount of the insurance that the employee thought he had in place." [Lewis v. Kratos, No. :12-cv-01012 (E.D. Va. June 11, 2013)]  MORE >>

"As healthcare advances increase longevity, plan participants and plan sponsors are becoming more concerned about retirement savings and the participant's ability to sustain an income flow during their lifetime. The DOL proposal is motivated by the premise that providing plan participants with more information will motivate them to make better personal saving and investment decisions with respect to their 401(k) plan."  MORE >>

"Pfizer argued that the exchange offer would not result in inequitable treatment for those employees subject to a suspension, and hence Regulation BTR should not apply. In other words, this is not Enron. It's why Regulation BTR includes an exception for mergers etc., which should apply here, even if Rule 101(c)(9) does not specifically refer to exchange offers. The SEC granted the no-action request, subject to some conditions."  MORE >>

"The Seventh Circuit ... declared a bright-line rule that where the owner of a withdrawing business leases property to that business, the leasing activity qualifies as a trade or business. If that trade or business is owned personally by the owner of the withdrawing business, the leasing activities and the withdrawing business would be aggregated under the controlled group rules and both would be responsible for the withdrawal liability assessment. In this case, ... the business owner personally was responsible for the $3.6 million withdrawal liability." [Central States Se. and Sw. Areas Pension Fund v. Nagy, No. 11-3055 (7th Cir. Apr. 22, 2013)]  MORE >>

"New York is known as a state that aggressively pursues and taxes nonqualified deferred compensation earned by nonresidents while working in New York. This advisory opinion favors the taxpayer by not asserting New York taxation in a situation in which unforeseeable circumstances resulted in a change in the method of payment."  MORE >>

"The employer changed to a self-funded plan and purchased stop-loss that provided coverage for member claims that exceeded $75,000 up to a $1 million lifetime maximum. The employer thought that the health plan imposed a $1 million lifetime maximum on benefits.... [When the employer found itself responsible for payment of a claim that exceeded that maximum,] the employer argued that the agents had a special relationship with the employer in the design of the plan and the stop-loss coverage.... [T]he court refused to dismiss that claim. Thus, the employer will have the opportunity to show the court that there was a fiduciary relationship between the insurance agents and the employer and that the insurance agents should cover the losses not covered by the stop-loss insurance."  MORE >>

"Some commenters objected to the initial proposal on the grounds that auditors might influence the design of compensation programs or require the auditor to substantively judge the executive compensation programs. The [Public Company Accounting Oversight Board] thinks it solved these problems by emphasizing that the purpose of the procedures is to further the auditor's risk assessment of material misstatement rather than to determine the appropriateness of executive compensation."  MORE >>

"The divorce decree provided that Patricia, [Gary's] former spouse [of almost 30 years at their divorce in 1993], would be ... named as the survivor beneficiary if Gary elected a pension with a survivor benefit.... Gary remarried ... [and] made a pension benefit election, choosing a joint and 50% survivor annuity in favor of Shelly, his new wife.... [In 2005, Patricia served an order on the plan.] Gary then died [later in 2005] ... The [Minnesota Supreme Court] concluded that Shelly's right to the survivor benefit vested when Gary retired and elected a survivor benefit in her favor. Because Patricia did not provide the domestic relations order to the plan until after Gary had elected his form of retirement benefit, it was too late for Patricia to claim her share of Gary's pension, at least from the portion otherwise payable to Shelly (which after Gary's death, was the only benefit being paid)."  MORE >>