Executive Financial Planning Programs

[PhilB]

My understanding is that financial planning programs are not considered ERISA welfare benefit plans. Can you pre-tax contributions? If the benefit is 100% employer paid, are there any discrimination testing requirements for these plans? Any information or referral for a research source would be appreciated.

[mbozek]

I dont under stand what u mean by financial planning programs And what is pre tax contributions? I think that payment in the form of services is taxable income to an employee under IRC 61. Under the new tax law an employer can provide retirement planning as a tax free fringe benefit provided that it covers non high compensated persons.

[PhilB]

The idea is to provide an additional benefit for HCEs.....this would serve as an additional retention tool for executives in the company. I don't believe that the benefit, which would be 100% company paid, can be pre-taxed. But I am also wondering whether there are discrimination testing requirements for these type of plans.

[mbozek]

Personal financial planning / advice is routinely provided to senior executives. As long as it is not limited to retirement planning there is no nondiscrimination requirment - Only a question of taxation of the value of the services as income under IRC 61 for which employer will receive a corresponding deduction.

[PhilB]

One other caveat - the program would not be offered to all employees of a select pay range or classification. There would be some selection based on merit or other issues as deemed appropriate by the officers of the company. Does that present problems from a regulatory or nondiscrimination standpoint in offering a program of this type?

[mbozek]

there is no govt regulation of these programs.

[PhilB]

Thanks for your input mbozek. Based on your responses, I suppose it is not possible to set this up as an ERISA welfare plan so that we could avoid taxes on the value of the services.

[mbozek]

No it is not an employer provided benefit exempt from taxation. Welfare benefit plans under ERISA are not automatically exempt from income taxation unless the benefit is statutorily exempt from taxation under IRC.

[GBurns]

You do not set up ERISA plans. You set up plans which because of their nature become subject to ERISA.

ERISA does not provide relief or exemption from taxation, only the IRC does in specified cases.

In your original post you said that the program was 100% employer paid, if this is so then there is nothing to pre-tax.

As far as imputed income goes, which would create taxable income to the employees, this most likely would be a de minimis fringe benefit and thus not taxable nor reportable. If properly designed it might even be deemed as being provided for the benefit of the employer, which would also relieve the reporting and tax issue, if any.

[mbozek]

Taxable income under IRC 61 includes the providing of services by an employer with respect to services. See the Regs under IRC 61. Whether financial planning service is a de minimus fringe benefit is not clear and some programs provide extensive benefits. Because of this uncertainty Congress passed legislation last year allowing employers to provide retirement benefits planning as a tax free fring benenft. Employers will not offer such a service if the tax implications are not clear. Some employers limit the financial planning to senior executives and include it as a taxable beenfit and reimburse them for the taxes.

[GBurns]

What values have you seen or heard of regarding these services?

If as you say Congress passed legislation making it a tax free fringe benefit, then there is no issue regarding taxation even if the benefits are extensive (rather than expensive).

Do you remember and can you cite the legislation?

[mbozek]

The legislation is in any handbook or description of the 2001 tax act. However retirement planning excludes accountling, tax, legal and brokerage services which are usually provided as part of financial planning services for executives. The FP services include non retirement advice such as exercising options, estate planning and investments of personal assets. Finally retirement planning services must be offerred on a nondiscriminatory basis. The taxable value of FPservices can be in the $10,000 and up range depending on the services provided.

[mbozek]

You should also review IRS field service advisory 200137039 which held that employer provided tax preparation services to expatriate employees was not excludible as a working condition fringe benefit. The value of the benefits is the amount the employee would have been charged in an arm's length transaction.

[GBurns]

I have not been able to find any such item in any handbook or description of the 2001 Tax Act. I have also not been able to find anyone who has any knowledge of such an item. The closets thing has been the DOL advisory letter to SunAmerica which really is another issue.

FSA 200137039 relates to income tax preparation services provided by an employer, which the IRS deemed to be not excludable even as a working condition fringe benefit.

The FSA goes at length to explain the IRS position and expands into financial counseling services which it also deemed as being includable (not excludable) in the employee's gross income.

It cites Rev Ruling 73-13 which held that employer provided financial counseling services are includable in the employee's gross income.

It also points out that Rev Ruling 92-69 would also not allow exclusion.

It also cites the House conference Report explaining at length why such an item would not be excludable.

There is nothing that you have cited or that I could find that would say that the value of employer provided financial counseling or planning services would not be taxable to the employee.

[Guest pineapple]

The exclusion of employer-provided retirement advice is contained in sections 665(a) and (B) of EGTRRA, which amends Code sections 132(a)(7) and 132(m).

[GBurns]

While the exclusion of employer provided retirement planning (advice) regarding a "Qualified employer plan" is addressed at Section 665 of the Act, the question posed deals with Executive Financial Planning which is not anywhere addressed in the Act or anywhere else that I can find.

There is a big difference between the 2 items.

[mbozek]

Exec financial planning is subject to income taxation under IRC 61 See Reg 1.61-2(d)- payment in the form of services is taxable income, unless it is limited to retirement planning which is a qualified fringe benefit.

[emersongrant]

You're absolutely right to consider how executive financial planning programs fit into broader benefit strategies, especially when used to attract or retain highly compensated employees (HCEs). From what I've seen in similar corporate settings, these types of programs, especially when 100% employer-paid are generally treated as taxable fringe benefits under IRC Section 61. That means pre-tax contributions typically wouldn’t apply unless the benefit is structured to fall under a specific exclusion (like employer-provided retirement advice for non-HCEs, as mentioned earlier).

As for discrimination testing, it largely depends on how the program is designed. If it's part of a non-qualified deferred compensation arrangement or another executive-only benefit, it might be exempt from standard ERISA nondiscrimination rules but could still raise concerns under Section 409A or other regulatory frameworks. Companies often work with specialized advisors to navigate these gray areas while staying compliant.

If you're looking for detailed guidance on structuring executive-level financial wellness offerings without triggering compliance issues, Mercer Wealth Management has experience with exactly these kinds of solutions. They’re known for customizing financial planning benefits in a way that aligns with corporate goals while keeping regulatory obligations in check. You can click here to explore more or get in touch for tailored insights.

Hope this helps clarify things a bit, happy to share additional examples if you’re looking at a specific plan setup.