Loan & Distribution Specialist AimPoint Pension
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Defined Benefit Combo Cash Balance Compliance Consultant Loren D. Stark Company (LDSCO)
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Regional Vice President of Sales The Retirement Plan Company
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Alternatives for Severance Payments After Supreme Court Nixes FICA Tax Break for Downsizing Firms (PDF)
Steptoe & Johnson LLP Apr. 13, 2014
"A company with a defined benefit pension plan may be able to amend the plan to increase the benefits of laid-off workers, then give them the option of receiving the increase as a lump sum or in installments over a relatively short period. Distributions from qualified plans are exempted from FICA wages by section 3121(a)(5). The need for care arises from a variety of obstacles, including nondiscrimination requirements, restrictions on lump sum and installment payments by underfunded pension plans and penalty taxes on participants who receive distributions before age 55. The possible savings for both companies and workers may nonetheless make this alternative attractive where it is feasible."
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