XTitan

Try this: http://www.sec.gov/divisions/corpfin/guida...s_nqdcplans.htm

There is a question whether such an amendment would meet the 5 year postponement rule. Suppose the employee terminates 1/1/2012. Prior to this proposed amendment, the employee would be paid in 2012. The amendment would delay the payment date to 2015. 1.409A-2(b)(1)(ii) states that the the plan requires that the payment with respect to which such election is made be deferred for a period of not less than five years from the date such payment would otherwise have been paid. Wouldn't that make the earliest payment 2017?

I don't see a way around aggregation rules either.

Sources say it appears that Henry Winkler was charged last week with running a giant Fonzi scheme. Apparently, not all securities were rated Aaaaaaay.

In today's economic environment, it is apparent that soon, the Treasury Department will run out of TARP funds. As a supplement to TARP, the Committee is introducing HR 4109, the Corporate Recovery of Assets Program, or CRAP. CRAP is not the same old stuff; this is a strong, bi-partisan CRAP. It is intended that CRAP flow from Washington to all tax payers. We think that once this gets started that corporations can't wait to be full of CRAP. Many state governors will be reluctant to take CRAP from Washington. We understand if you do not want to take any CRAP, we will not give you any CRAP. Once the economy is flush again, we will be taking the CRAP back. To our critics, we do not believe for a minute that CRAP stinks. While we aren't sure whether CRAP will unblock the economy or how much it will eventually cost, we are certain we can work it out with a pencil.

My understanding is that payments to beneficiaries would be subject to FICA in the year of death only. Payments made following the year of death would not be subject to FICA.

Does Notice 2008-113 section VII.B apply? If not, the proposed regs should give guidance on calculating the taxes due. Good luck! 409A_Income_Inclusion_Proposed_Regs.pdf

Or how about since the market tanked, the participant wants the deferrals back which conveniently exceed the account balance?

Smells like reverse split-dollar to me. See Notice 2002-59 for the bad news.

What determines the portion of the death benefit assigned back to the company? This doesn't make sense to me unless the company was bonusing the premium to the employee and then collecting it back from the death proceeds. If that's the case, I'd call it equity collateral assignment where the employee is taxed on the value of the premium and not the death benefit. I'd also raise an issue whether this is a disguised dividend to an owner.

I was in a similar situation, and the client let the deferral election run as scheduled, but solicited new deferral elections in December for the following July through December. Claim was deferral election was irrevocable so it had to continue.

I think it's overkill. Why do it if you don't have to. 416(i) must of sounded like a good idea at the time (the key employees for qualified plans are the specified employees for nonqualified plans) but the cure is worse than the disease.

Company A has a NQDCP. Company B has a NQDCP. Company A announces intent to acquire Company B. Deal set to close February 2009. Goal is to freeze Company B plan (no new deferrals, but no payout upon change of control) and allow Company B participants to defer into Company A plan. Company B does not want to roll balances into Company A plan. I can't figure out how Company B employees can get into the Company A plan until 2010 since upon closing plan aggregation rules would apply so no 30 day rule. The only possible suggestion is if participants make a timely election prior to 12/31/2008, then 2009 deferrals go into the company B plan until closing and then post-closing deferrals go into the Company A plan.

Agree that nothing can be done for salary, but what about deferring any performance-based comp earned in 2008 paid in 2009 under the transition rules for short-term deferrals?

Personally, I don't, but Treasury seems to. For now, it's ok. See Notice 2007-78 on limited cashouts.

See below http://www.socialsecurity.gov/OACT/COLA/cbbdet.html- I get the wage base to be $105,300 or $105,600 depending on how wages grew in 2007. Method for determining the base The formula for determining the OASDI contribution and benefit base is set by law. The formula states that the base for any year Y after 1994 is equal to the 1994 base of $60,600 multiplied by the ratio of the national average wage index for year (Y-2) to that for 1992, with the result rounded to the nearest multiple of $300. If the result is less than the current base, the base is not reduced. Base for 2008 Under the above formula, the base for 2008 shall be the 1994 base of $60,600 multiplied by the ratio of the national average wage index for 2006 to that for 1992, or, if larger, the 2007 base of $97,500. If the amount so determined is not a multiple of $300, it is rounded to the nearest multiple of $300. Calculation details Amounts in formula 1994 base $60,600 1992 average wage index $22,935.42 2006 average wage index $38,651.41 Computation $60,600 times $38,651.41 divided by $22,935.42 equals $102,124.81, which rounds to $102,000. Higher amount $102,000 exceeds $97,500, so the base for 2008 is $102,000

CPI numbers will be released on 10/16 (8:30 Eastern) according to the BLS web site (http://stats.bls.gov/cpi/). If history holds up, we'll get from Treasury the 2009 limits and from Social Security the new wage base also on 10/16.

Cancellation of deferrals is the same thing as acceleration of benefits, and 409A doesn't have a mechanism to stop deferrals mid-year (except hardship or disability). Loss of eligibility isn't a triggering event, either for deferral cancellation or payout. Dan Hogans commented once that there was an opportunity to play games - demote one day/promote the next - which is never good in 409A. Unfortunately, I haven't seen any other citations one way or the other - my bias is to stop deferrals only upon the next full plan year, providing counsel signs off.

I don't think this is relevant to the question at hand. These provisions eliminated the opportunity for the beneficiary to elect the form of payment upon the death of the participant. 401 - I don't believe "as soon as practicable" is 409A-compliant as it's not a specified time. For example, you'd run into problems if payment was made 2 years after death due to lack of notification to the relevant parties (may have been as soon as practicable, but it's not timely). I've seen a number of docs that were amended to say "as soon as practicable but in no event later than 90 days after the date of death".

First, I would look at what the plan says. A number of plans I've seen have language that seems to indicate that the payment would be due on the date of death absent any other timing indications. Since that makes the date of the death the designated payment date, that brings me to 1.409A-3(d): ...a payment is treated as made upon the date specified under the plan ... if the payment is made at such date or a later date within the same taxable year of the service provider or, if later, by the 15th day of the third calendar month following the date specified under the plan and the service provider is not permitted, directly or indirectly, to designate the taxable year of the payment.

Thanks - you have confirmed one of my suspicions about this. Good thing client was told to check with QP counsel before adding to NQDCP.

And since the client can't guarantee that 6% in the 401(k) will put the nonqualified plan participants over the 15,500 in the 401(k), smells like a bad idea to me (which doesn't get into the problems of linking the NQDCP to the QP which is another discussion for another message board).

If it would help to clarify that section 79 covers life insurance plans, split-dollar regs govern life insurance arrangements (including compensatory arrangements involving an owner and a non-owner of a life insurance contract), Notice 2007-34 governs the application of 409A to split-dollar life insurance arrangements, then I do so. Sometimes industry-speak glosses over important differences. You may have a corporate (private) client who enters into 3 separate arrangements with the CEO - endorsement split-dollar (economic benefit approach), collateral assignment split-dollar (loan approach) and a 162 arrangement (employer agrees to pay premiums for financing a life insurance policy). Assume all have premiums paid for life of the CEO. The endorsement split-dollar, as providing pure death benefit, is generally exempt from 409A. The collateral assignment split-dollar, being a loan arrangement, is generally exempt from 409A. The 162 arrangement is not exempt from 409A, to the extent there is a legally binding right to the post-separation compensation which the company has agreed to pay as life insurance premiums. Three different funding arrangements for life insurance result in two different treatments under 409A/Notice 2007-34.

Company wants to add a 6% salary match to their nonqualified plan, but in order to receive it, the participant would need to contribute 6% of comp to both nonqualified plan and 401(k). Am I missing something, or does this violate the contingent benefit rule?

While I agree with the conclusion, 409A doesn't limit death benefit plans to section 79. Notice 2007-34 lays out how 409A interacts with split-dollar, which does not fall under section 79. A 162 plan is covered by the split-dollar regs (1.61-22(b)(2)(ii)), but is taxed under general tax principles (1.61-22(b)(5)). Endorsement split-dollar is treated as a death benefit plan under Notice 2007-34 and is exempt from 409A unless there are additional benefits beyond the death benefit.