TCWalker

Well, ... what I've seen is the future payment is promised, subject to forfeiture or clawback if the executive competes. It's a negative, restrictive covenant, not a contingent payment. I think all deferred payment employment and post-employment clauses are going to have to scrutinized under AJCA's rules.

To be clear, there aren't regs. just the language of AJCA until futher guidance. Last time I took a poll there was a split of opinion by Benefits, Esqs. on whether they are advising the adoption of new plans now, or to wait.

To the original question, I think the Rabbi Trust would require authorization unless previously delegated to an admin committee. The other side of the SPD/Plan/Outline agrument is more documents foster more inconsistencies. A "one page" summary w/the enrollment form revised annually seems appropriate to me vs the SPD approach.

OK, we've got Oct 6th amendments and a new Conference Report for HR 4520 published on Oct. 7th. A few surprises, like a performance based deferred comp 6 month grace period on the deferral election...., but generally, includes most the restrictive provisions of 4520 & 1637. Effective for taxable years after 12/31/04, but deferrals are subject to a retroactive application if there is are certain material modifications after Oct 3, 2004. See: http://waysandmeans.house.gov/Links.asp?section=1559 To quote the site again: The next step is for both the House and Senate to hold an up or down vote on the Conference Report, H.R. 4520, the American Jobs Creation Act of 2004. Once approved by both chambers, President Bush can sign the measure into law.

Announcement today, Oct. 6th. "Jobs Bill Moves Forward: Ends Sanctions on American Products, Provides Tax Relief for U.S. Job Creators Conference Report Approved by Conferees – Floor Vote Expected This Week" I can only assume the Conferees approved the 10/04 mark-up. See Mark's link above.

To spin on a prior post, I recall that in July 2003 The IRS release Temporary and Proposed Regulations 1.409(p)-1T under IRC §409(p), which seems to require looking at both stock and non-stock calculated deferred compensation plans of a Sub-S Corp. in the light of the synthetic equity and disqualified person rules of 409(p). I haven't seen much news on this subject in the last year, but unless the proposed regs. are modified, I suspect this is something of a show stopper in the Sub-S environment. If I recall correctly, distributions of deferred comp in Sub-S plans were required to occur in July 2004 for avoid the 409(p) rules. Anyone dealt with this lately?

New beneficiary designations were rejected by a TPA as missing critical information, family law attorney sends the third corrected that OK. But, no confirmation was given that it was received. Participant dies, of course, now TPA says they never received the third and final corrected copy. Attorney didn't send by registered mail, just has the 3rd copy in her files. New beneficiary wants to avoid court battle. Anyone dealt with similar facts, have cites or white paper on the issue to suggest? Thanks.

? Vizcaino v. Microsoft Corp, I, II, and III

Not a sale of goods, capable of being performed within one year.

As to Lori's post, the courts will look to the NQ/TH document to determine if it qualifies as an unfunded "top-hat" plan vs. a disqualified QPlan, funded NQPlan, or other. Additionally, a "top-hat" plan is subject to Parts 1 & 5 of ERISA Title I, so you have to take into account the special one-time filing exception of DOL Reg 2520.104-23, or think about filing 5500s back to the inception year, or seek VC relief. As I recall, the DOL also reminds you that they have the right to request copies of the top-hat plan documents, [though I recall the regs. say, "if any".] So from a practical standpoint, not having a plan document is risking much.

Wells, sounds like oral contract & implied covenant of good faith and fair dealing but it's a facts dependent, contract issue as you've said. Just what were the promises? As far as the plan, the no writing, no formal adoption may create other problems. I would try for a fresh start.

You know, I think there's another layer of analysis due here under both the labor and business/professions codes of this employee's State. Whomever is advising this employer/CEO should evaluate the risks inherent is this "clawback" design.

Well, I think Q2 requires the deferral election to be made in the tax year prior to (preceding) the tax year in which services are performed that give rise to compensation earned. I think the actual pay date of the bonus is irrelevant, (subject to later clarification in regulations).

If I understand your hypo, this allows an HCE - on quarterly deferral elections for example - to electively increase (k) deferrals and indirectly make a current year service period deferral of income into the NQ Plan by intentionally blasting through a projected testing limitation in the (k) plan. Hence, current service-comp period NQ deferral.

That's it. Generally referred to as IRS General Information Letter, 3/17/2004

Hi Kirk: I guess anyone prognosticating on the passage of NQDC legis during the last three years has been made to look pretty foolish. That said, I'm not seeing what barriers are still in the way, as ibell says they ducked the Section 132 issue and made peace with the AALU. A so-called "anti-outsourcing" international bill compliance bill sounds good in an election year, which may be how this is wrapped for public consumption. mbozek: I read it as applying to both 457(f) plans and tax-exempts' 457(b) plans, but not govts. 457(b) - which are specifically excluding by reference to 457(e)(1)(A) as "qualified plans".

You're welcome. Well, the big answer for me is what's amended into s. 1637 is remarkably similar to what was in the latest House version, but for the "investment options" language that was in the NESTEG proposal (if I recall correctly). I think this event is notable because it seemingly represents the Senate adopting the House's approach to deferred comp legislation as first it appeared in H.R. 2896. This is to say, ...is there much left to argue about? And, is the insurance lobby off their collective backs by avoiding any legis provisions directly relating to COLI?

mbozek: A1: Looking at page 57 of the amended Bill © Effective Date, it seems clear to me that the proposed amendments apply to deferrals, and earnings thereon, made in taxable years after 12/31/04 - so, I read it as grandfathering both pre-05 deferral and their accumulating earnings. So, this might suggest class year accounting or bifurcated plans would be a good idea. A2: "Taxable Years" - I don't see it specifically defined, though I read the thrust of the section to be the taxable years with reference to the participant. However, in other places I could draw the conclusion it refers to the taxable years of the employer. A3: I recall the amendment saying the "Secretary" (Treasury) would address the "comparable" investment options when they are non-existent in the Er environment. The reference is to DC Plans under 401(a). A4: Applies to any "arrangement" to defer compensation. bobeck: I read the amended bill to "codify" the existing IRS position that elections need to be made in the partiicpant's taxable year before the taxable year in which services are first performed, "or other time as provided by regulations". As you likely know, the IRS has not been successful in enforcing their position. Obviously, if you apply the IRS position to bonus elections for fiscal year employers you can get some oppressive lead-time plan election rules, like elections 18 months prior to the bonus being first payable. And, it does prevent you from offering mid-year elections as you propose. To address your question, in my experience there are plans that allow mid-year modifications up to a payroll date, and they rely on written opinion and E&O insurance of their outside legal counsel. Got opinion? [nitpicking welcome] Tom

Much was swept into s. 1637 Tuesday, except any provisions directly impacting COLI. My highlights or lowlights of the proposed JOBS Act added provisions pertaining to deferred comp plans include the following: [nitpicking welcome] -- Deferred compensation elections must be made in the year before services are first performed, though the proposed bill retains the 30 day grace period provided for new plan participants & their subsequent service. -- If "financial health of the employer" triggers are utilized in the rabbi trust a 10% penalty will be applied to those assets not fully subject to creditor risk as a result of the trigger. -- Investment options in the deferred compensation plan must be "comparable" to those offered in the employer's qualified plan with the fewest number of investment options. -- Accelerated payments are only allowable for reasons of severe financial hardship or change of control. One "second election" by a partiicpant is allowed to change a scheduled distribution date if made 12 months prior to the original payment date and the distribution is postponed for an additional five years -- Change in control payments to corporate insiders are delayed for one year, and are treated as "excess parachute payments" subject to the limitations of Code Section 280G. -- Current taxation is imposed on any exchange of options or other forms of compensation based in employer securities for the right to receive deferred compensation. -- Generally, these new rules will be effective for deferrals made in taxable years after December 31, 2004. -- Deferrals made prior to 1/01/2005 (and earnings thereon) would be eligible for grandfathering under the current DCP rules. Tom

PO Boxes from Mail Etc. may cost $25 a month. From our friendly. local USPS they are surprisingly cheap and available - at least in this part of world. Don't let the word out....

As Moderator, I'll simply point out that the poster asked, "...is there any way to avoid taxation.." which we should expect to broaden the scope of the replies. This is a lively thread, I suspect readers have benefited by the different interpretations of what's in question here and whether you should view the facts as presenting NQDC issues, LI issues, or potentially both. Good replies all.

Also consider where the deferred compensation is deemed earned and where the tax deduction will be taken at time of distribution.

Anecdotally, I have industry friends who are getting job offers and multiple interviews now - not the case during most of 2003. Something's changed, even if it's less competition for the jobs that are out there. Be careful your not applying a 2002-3 analysis to current conditions.

Could have been bought to prop up an employer desktop computer monitor, a prohibited transaction if plan assets are involved.

I'm agreeing with mbozek, but if you're doing this research read ERISA Section 4, Title I before you get to Part 1. This is where ERISA covered plans are discussed, and I'm not sure you'll find the reference in the Panel Answer Book. Also, the preemption discussion is in Part 5, Section 514 if I'll recall correctly. Happy reading.