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Showing results for tags 'deferred comp'.
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A client (an LLC) was entering into discussions to provide a SERP to a top executive. The SERP would provide nonelective deferred compensation (no election by executive or deferred compensation agreement) payable in fixed installments over 5 years (at termination of employment, disability, death, etc.) with death benefits paid in the same form and at the same time for the surviving spouse. Sadly, the executive died before the SERP was executed. The client wants to complete and execute the SERP and provide the death benefits to the surviving spouse. I think this is possible (I have put in non-elective SERPs with effective dates retroactive to the first day of the executive's tax year), but have never come across this issue before. I am a bit concerned that Reg. Section 1.409A-1(b) defines a deferral of compensation plan as a plan where the service provider has a legally binding right during a taxable year to compensation that is payable to or on behalf of the service provider in a subsequent taxable year. Technically, the service provider didn't have a legally binding right to the SERP before death, and is no longer a service provider when the SERP is executed. Any thoughts and comments are welcome!!!
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I have a client that has a hard time keeping a certain employee type to stay with his company. He would like to have a 10 year cliff vesting schedule. This is obviously not allowed but the idea we came up with was as follows: Assuming he wants to give $5,000 per year of service to these employees. In year 5, he would make a $25,000 profit sharing contribution for these employees. Any amount in excess of the annual additions limit will be given as a bonus. None of the employees are HCE's and the plan makes each employee their own allocation group. 1. Does anyone see any issues with the above arrangement? 2. Should he be accruing the expense on the books (I think yes)? 3. Is this a deferred comp arrangement? Are there any 409a issues? Thanks
