Plans for Corporate Directors

[Guest JD Colville]

[This message was also posted on the Small Businesses Message Board]

On April 8, a notice was posted on the Reish & Luftman Internet site, http://www.reish.com/practice_areas/empben_frameset.html, providing a Q&A from the 1997 Enrolled Actuaries meeting concerning plans for inside directors. In the response the IRS said that the 414(o) regs. were not applicable, but that the affiliated service group (ASG) rules probably would restrict an inside director from establishing a plan for his/her director fee earned income. I have looked at the ASG rules and do not see how the A and B org rules would apply. If the Service could make the argument that the management service rules of 414(m)(5) would apply, why would the application be limited to inside directors? Has any one had the fun of dealing with this issue? Any guidance would be appreciated.

[Guest JD Colville]

I could not get it to come up directly either. However, try using http://www.reish.com/ as a link. When you get to the L&J Home Page, click on Tax Tips. The Q&A I referred to is Tip 25. I would have posted it directly, but I was told at L&J that the material was copyrighted and their permission to use did not extend beyond their use. I didn't know how much hassle it would be to get permission from the Society of Actuaries, so I chose this route. Hope it helps get you there.

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[Guest]

I cannot get the web page you cited to come up. However, while the proposed inside director regulations were withdrawn by the IRS, the leased owner proposed regs at 414(o)-1(B) have not been withdrawn. The result is the same. If an individual who performs services for a recipient company is a 5% or more owner of the company, any qualified retirement plan benefiting the leased owner is treated as maintained by the recipient company for purposes of applying the qualified plan rules. Obviously, coverage would be a problem. I hope this helps.

[Guest]

I'll take a look at it when I get a chance.