XTitan

Heck, even distributions from a nonqualified plan that violates 409A would still be considered W-2 wages.

So the website http://www.nj.gov/treasury/pensions/epbam/supplement/sactsadistr.htm says: So earnings are subject to tax upon distribution, unless rolled to an IRA. Now, if you want to convert the IRA to a Roth IRA and pay taxes upon the conversion, go for it. Nothing indicates that the plan itself is Roth, even though the contributions are after-tax.

I've been a CA resident who has SDI as well. Let me answer this way. If I had $100 of wages and $1 deducted for SDI, Box 5 would show $100. Does that help?

Miracle Max the Wizard: He's only mostly dead. If he were all dead, there's only one thing you can do. Inigo Montoya: And what's that? Miracle Max the Wizard: Go through his pockets and look for loose change.

I know it feels like losing 3-4 months interest, but you also might be losing 3-4 months of losses.

Anyone who is capable of getting themselves made President should on no account be allowed to do the job. ― Douglas Adams, The Hitchhiker's Guide to the Galaxy

How to do Math is available at an extra cost.

Assuming you want to give the select HCEs a higher not a lower match, and assuming the potential group would constitute a "top hat" group, the client may wish to consider implementing a nonqualified plan.

I was so hoping to find some humor in this thread.

I get it, but you still have to make sure any new plan that would be aggregated with the terminating plan is not implemented prior to 3 years from the date the company took steps to terminate and liquidate the plan. Worst case scenario - in 6 months the company has a value realizing event and those phantom shares are worth something.

Yes, you would be subject to the 409A voluntary termination rules.

As mentioned by everyone else, 409A effectively prohibits the extension of the option, even when there is an honest administrative oversight (thanks ENRON!). If the options had been exercised in a timely manner, what would the outcome have been? Option holders getting shares in the company? Cash bonus for the difference between FMV and the exercise price? Can a stock grant or cash bonus get the options holders to the same place as they would have been if the exercise happened?

It was supposed to be an anti-abuse provision. "I'll give you $x if you don't participant in this plan".

Or the day after...

First, what does "two vesting elections" really mean? Is it just a choice between cliff vesting or graded vesting, or is there something about the election that is tied to the distribution? When you ask whether the company can make the decision, the usual response will be, "What does the plan say?" There's nothing wrong with a plan permitting the company to make elections, but if the provision requires the participant to make the decision, that the plan is not being operated in compliance with its written terms which is always problematic. A retroactive amendment would not generally save a plan sponsor if a participant can show harm.

Expect to see the details of the conference bill soon and voted on next week. Contents have yet to be disclosed.

"Significant revenue" is definitely in the eye of the beholder. The elimination of recharacterization is expected to generate $500 million over 10 years. Not much in Washington terms. As for me, I wouldn't say no.

I gotta feeling that the participant checked the IRA fees after requesting the rollover and found them substantially higher than leaving the funds in the plan. Oh well. Not the plan's problem.

The missing piece is that the minimum of 10 years of installments also requires substantially equal periodic payments (4 USC 114(b)(1)(I)(i)), so two interpretations: (1) just those accounts that have at least 10 years of installments escape state-of-earnings income taxation (2) since the entire distribution stream is not substantially equal, all the distributions are subject to state-of-earnings income taxation I do not think I've seen an interpretation that says if at least one account is at least 10 years, then the entire distribution escapes state-of-earnings income taxation.

And I thought "self-directed conversions" was going to be about some religious experience...

I've seen the terminology "modified single trigger" in discussions about separation pay as payment upon voluntary termination post-CIC for a period of time, which sounds like what you are describing here. As long as there is no element of additional deferral, doesn't seem to be an issue.

Since you said you corrected the errors, presumably by recognizing the entire balance at the time to the additional income taxes, then prospectively the plan is fine. Now if 2017 awards are found to violate 409A, but are not corrected until 2019, then the balance in 2019 (less what has already been recognized in income) is what's subject to the 409A additional income taxes. In that sense, you can say the future awards are "aggregated".

Nope. You do not have ongoing 409A issues once the violation has been addressed.

As of this morning, neither the House nor the Senate versions of the bill contain the provision to eliminate nonqualified deferred compensation.

I would say the proposal would affect all forms of deferred compensation other than qualified plans: equity arrangements, severance agreements, excess benefit plans, voluntary deferrals, etc. For your example, I suppose taxation would depend on when the amounts are vested and I'm assuming this is a pre-2018 arrangement. I'm also assuming the individual in question turns 65 before 2020. At best, your arrangement would seems like it would vest no later than 65, and it does seem the amounts are readily ascertainable at that time, so I would think under current law you are talking about FICA at 65 and income tax at distribution, and under the proposal FICA at 65 and income tax/distribution no later than 12/31/2025 (or 2026 in the Senate version). I wouldn't expect to see installment payments under the proposal for post-2017 arrangements.