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<< Older News  |  January 23, 2021

News

All News > Nonqualified Plans

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Upcoming Incentive Stock Options and Employee Stock Purchase Plan Reporting and Disclosure Requirements
Sidley Austin LLP Link to more items from this source
Jan. 21, 2021

"For the exercise of the ISO or the transfer of ESPP shares that occurred in 2020, companies must provide written information statements to participants (which may include the actual Form 3921 or 3922) not later than February 1, and they must file the Form 3921 or 3922 with the IRS not later than March 1, or, if the information returns are being filed electronically, not later than March 31. Failure to provide an information statement or file an information return will result in penalties assessed by the IRS."

Tags: Nonqualified Plans  •  Stock Options

Examining Top Hat Plan Participation and Reporting (PDF)
Advisory Council on Employee Welfare and Pension Benefit Plans, Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL] Link to more items from this source
Jan. 18, 2021

64 pages. "[T]he Council recommends that the Department: [1] Require that top hat plan sponsors notify eligible participants of the risks associated with the absence of ERISA's substantive protections ... [2] Revise the alternative reporting regime for top hat plans to: Require reporting every 3 years or, if earlier, upon ceasing to cover any employees; [and] Include, at a minimum, [specified] data elements ... [3] Issue a Request for Information seeking comments from interested stakeholders on possible regulatory definitions of a 'select group of management or highly compensated employees,' including possible bright-line definitions and/or safe harbor/unsafe harbor definitions."

Tags: Nonqualified Plans

Reminder: Employers Must Report 2020 ISO and ESPP Transactions
Latham & Watkins Link to more items from this source
Jan. 13, 2021

"The deadline for furnishing Copy B of Forms 3921 and 3922 to the employee or former employee for ISO exercises or ESPP shares purchased during 2020 is January 31, 2021. The deadline for filing Copy A of Forms 3921 and 3922 with the IRS depends on whether the returns are required to be filed electronically or manually. Corporations that are filing 250 or more copies of Form 3921 or 3922 ... must file Copy A of the forms electronically through the IRS FIRE system. The deadline for electronic filings is March 31, 2021. Corporations filing fewer forms can elect to file either manually or electronically, but manual filings must be made by February 28, 2021."

Tags: Executive comp  •  Nonqualified Plans  •  Stock Options

Use It or Risk Losing It: Make Your Nonqualified Plan Deferral Elections Now
Foley & Lardner LLP Link to more items from this source
Dec. 22, 2020

"The disruptions to the normal deferral election cycle in 2020 caused by the COVID-19 pandemic serve as a reminder that companies cannot count on their bonuses remaining 'performance-based compensation,' and eligible for midyear deferral elections in any year. To avoid this type of disruption in the future, companies that want to ensure their employees have an opportunity to elect to defer their bonuses should consider requiring elections for all types of compensation, including bonuses and other incentive compensation, to be made prior to the beginning of the year."

Tags: Executive comp  •  Nonqualified Plans

Bankrupt Company’s Deferred Compensation Plan Funded by a Rabbi Trust – What Could Go Right? Hint: It’s Not 409A
Winston & Strawn LLP Link to more items from this source
Dec. 16, 2020

"The participants argued that the Plans' termination due to a change of control effectively divested the company of any legal or equitable interest in the trust assets. The participants also argued that the rabbi trust assets should have been distributed to them on or before March 1, 2020, in accordance with regulations under Sec. 409A, well before the bankruptcy petition was filed.... The bankruptcy court judge held that the company supported its contention that it was insolvent as of March 1, 2020, and was therefore not required to make the payments." [In re RTI Holding Company LLC, No. 20-12456 (Del. Bankr. Nov. 19, 2020)]

Tags: 409A Plans  •  Nonqualified Plans

Trends in Nonqualified Deferred Compensation Plans
Principal Financial Group Link to more items from this source
Dec. 11, 2020

"What employers had to say: Likely to make positive or no changes to benefits or staffing due to the pandemic.... Helping employees save for retirement is key. Providing competitive benefits is even more important. Still unlikely to make plan changes.... What key employees [said]: Pandemic impacts make them more likely to stay with their current employer.... Retirement remains a top priority.... The income bridge strategy is a popular approach in retirement. Employer match and affordability impact participation."

Tags: Nonqualified Plans

Last Chance to Review Your Nonqualified Deferred Compensation Plans
Buchanan Ingersoll & Rooney PC Link to more items from this source
[Guidance Overview]
Dec. 9, 2020

"As a result of amendments made to Section 162(m) of the Internal Revenue Code by the Tax Cuts and Jobs Act (TCJA), certain mandatory delayed payment provisions appearing in many nonqualified deferred compensation plans (NQDC) maintained by publicly traded corporations could create a costly payment trap for employers.... In order to take advantage of this relief, however, affected employers must amend their NQDC Plans by December 31, 2020 to remove the mandatory delayed payment provisions."

Tags: 409A Plans  •  Nonqualified Plans

Methods for Sheltering Nonqualified Plan Accounts in the Event of Employer Bankruptcy
Hall Benefits Law Link to more items from this source
Dec. 9, 2020

"Company executives invested in Non-Qualified (NQ) plans risk losing a substantial amount in retirement savings due to guidelines set under Section 409A. These guidelines protect NQ plan assets from a change in corporate control but not from a bankruptcy filing, since NQ plan participants are treated as unsecured creditors. [This article discusses] some methods for sheltering NQ plan accounts in the event of employer bankruptcy."

Tags: Nonqualified Plans

Public Companies May Need to Amend Nonqualified and Incentive Compensation Plans by Dec. 31, 2020
Porter Wright Morris & Arthur LLP Link to more items from this source
[Guidance Overview]
Dec. 7, 2020

"This amendment most likely is required for employers that mandated deferrals of amounts that exceeded the limit under IRC Section 162(m) but not those whose plans permitted but did not require deferrals of such amounts. Nevertheless, an employer that actually exercised such discretion with respect to non-grandfathered amounts may need to amend such arrangements as well."

Tags: 409A Plans  •  Executive comp  •  Nonqualified Plans

Section 409A Meets 162(m): Some Deferred Compensation Plans and Agreements May Need Amendments by December 31
Winston & Strawn LLP Link to more items from this source
[Guidance Overview]
Dec. 3, 2020

"The proposed regulations provide that if a plan or agreement is amended to remove the provision requiring the company to delay a payment if the company reasonably anticipates at the time of the scheduled payment that the deduction would not be permitted under Section 162(m), then the amendment will not [1] result in an impermissible acceleration of payment under Section 409A, or [2] be considered a material modification for purposes of the grandfather rule under the amended Section 162(m).... The plan amendment must be made no later than December 31, 2020."

Tags: 409A Plans  •  Nonqualified Plans

Divorce and the Nonqualified Deferred Compensation Plan
Fulcrum Partners LLC Link to more items from this source
Dec. 3, 2020

"In the same way a NQDC plan is exempt from most requirements of ERISA, requirements are also different regarding the QDRO and an NQDC plan compared to a qualified plan. Although a plan sponsor must comply with a QDRO regarding a qualified plan, in the case of most NQDC plans, the plan sponsor may actually be prohibited from complying with the court order."

Tags: Executive comp  •  Nonqualified Plans

Does Your Nonqualified Plan Need to Be Amended by December 31, 2020?
Jackson Lewis P.C. Link to more items from this source
[Guidance Overview]
Nov. 25, 2020

"[In] the Preamble to proposed Treasury Regulations under Section 162(m) of the Code, the [IRS] announced that if a plan subject to Section 409A of the Code is amended to remove any Delay Exception language, the amendment will not result in an impermissible acceleration of payment under Section 409A of the Code ... However, the plan amendment must be made no later than December 31, 2020."

Tags: Nonqualified Plans

Key Takeaways from Northrop Grumman's $74 Million Executive Pension Cost Win at the ASBCA
Miller & Chevalier Link to more items from this source
Nov. 16, 2020

"The Armed Services Board of Contract Appeals [ASBCA] recently issued a decision awarding Northrop Grumman Corporation (Northrop) $74 million under the Cost Accounting Standards (CAS) for the settlement of costs relating to the curtailment of Northrop's Officers Supplemental Executive Retirement Plan (OSERP).... There are two principal takeaways ... [1] contractors may successfully rely on a FAR 30.602(c)(1) materiality defense when there is no material cost difference due to a [cost accounting standards (CAS)] violation, and ... [2] the Board will not consider expert opinions directly on the interpretation of the CAS and will instead focus on the text of the CAS provisions and any guidance published by the CAS Board." [Northrop Grumman, No. 61775 (Armed Serv. Bd. of Contract Appeals, Oct. 7, 2020)]

Tags: Nonqualified Plans

Impact of the SECURE Act 2019 on NQDC Plans and Retirement Distribution Elections (PDF)
Fulcrum Partners LLC Link to more items from this source
Nov. 16, 2020

"Executives may find that pushing out access to NQDC plan money by five years is a more beneficial and strategic option than receiving that money as a lump sum payout at a time when the executive is in the highest tax bracket.... Strategically re-deferring money, creating multiple buckets with differing payout schedules or through the election of a different pay out schedule for each year can be a tax-favorable decision."

Tags: 409A Plans  •  Nonqualified Plans  •  Retirement Plan Design

Avoiding 409A Pitfalls While in Financial Distress
Proskauer Link to more items from this source
Nov. 5, 2020

"[E]mployers may be concerned about their employees' ability to access their deferred compensation benefits and may want to terminate their deferred compensation arrangements and accelerate payments. Companies that are financially troubled or otherwise potentially headed towards bankruptcy may want to set aside funds to ensure their employees get paid their deferred compensation. Each of these situations involves significant 409A issues that should be closely evaluated."

Tags: 409A Plans  •  Nonqualified Plans

Our D.I.V.O.R.C.E. ... Is Going to Be Tricky for My Employer to Handle
Holland & Hart LLP Link to more items from this source
Nov. 3, 2020

"If [a top hat plan's] terms do grant a plan administrator discretion to honor a DRO, Internal Revenue Code Section 409A permits accelerated payments to a non-employee former spouse ... [T]he distribution is taxable to the non-employee former spouse and excluded from the taxable income of the employee spouse.... It is the reporting and withholding on this distribution that gets a bit tricky."

Tags: Nonqualified Plans

ERISA Advisory Council to Meet December 4
Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL] Link to more items from this source
Nov. 2, 2020

"[T]he 204th open meeting of the [ERISA Advisory Council] will be held via a teleconference on Friday, December 4, 2020.... [T]he Council members will receive an update from [EBSA] and present their recommendations ... on the following issues: [1] Examining Top Hat Plan Participation and Reporting, and [2] Considerations for Recognizing and Addressing Participants with Diminished Capacity.... Instructions for public access to this teleconference meeting will be posted on the ERISA Advisory Council's web page ... prior to the meeting."

Tags: Health Plan Administration  •  Nonqualified Plans  •  Retirement Plan Administration

NQDC Participants Affected by 2021 Limits for Qualified Retirement Plans
myStockOptions.com Link to more items from this source
Oct. 29, 2020

"The contribution limits of qualified plans are the major reason for the existence of nonqualified plans ... The changes in limits from 2020 to 2021 are slight. If you've already maxed out your qualified plan contributions for 2020, you will probably do the same in 2021, so you will need NQDC plans to defer any salary and bonus increases you expect in 2021."

Tags: Executive comp  •  Nonqualified Plans

Nonqualified Deferred Compensation Plans Offer Benefits — and Risks
ORBA Link to more items from this source
Oct. 15, 2020

"From an employer's perspective, NQDC plans are attractive because they can be limited to highly compensated employees and they avoid the cost of compliance with ERISA's reporting and administrative requirements. However, unlike contributions to qualified plans, deferred compensation is not deductible by the employer until it is paid.... The biggest disadvantage of NQDC plans for participants is that deferred compensation is subject to the claims of the employer's creditors and could be lost in the event of bankruptcy or insolvency."

Tags: Nonqualified Plans

ERISA Advisory Council to Meet November 13
Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL] Link to more items from this source
Oct. 14, 2020

"[T]he 203rd open meeting of the [ERISA Advisory Council] will be held via a teleconference on Friday, November 13, 2020.... The purpose of the open meeting is for the members of the ERISA Advisory Council to discuss potential recommendations for the Secretary of Labor on the issues of: [1] Examining Top Hat Plan Participation and Reporting, and [2] Considerations for Recognizing and Addressing Participants with Diminished Capacity."

Tags: Health Plan Administration  •  Nonqualified Plans  •  Retirement Plan Administration

Nonqualified Deferred Comp Plans Must Be Amended by December 31 to Remove Mandatory Payment Delays Due to 162(m) Nondeductibility
Trucker Huss Link to more items from this source
[Guidance Overview]
Oct. 9, 2020

"The TCJA amendments to Code section 162(m) changed the definition of 'covered employee' so that once a person becomes a covered employee, the person remains a covered employee for all subsequent years. After this amendment, there is the potential that a nondeductible payment delayed under a nonqualified deferred compensation plan would never become deductible, or payable, because the employee will always be a covered employee.... [Plans that] provide for mandatory payment delays if the payment is not deductible under Code section 162(m) ... should be amended to avoid [this] potential payment trap[.]"

Tags: Nonqualified Plans

Deferred Compensation Plans: Options and Considerations
Nexsen Pruet Link to more items from this source
Oct. 9, 2020

"An executive deferred compensation plan allows an employer to supplement an executive's base salary over a longer horizon -- either after retirement or over a period of years. [This article outlines] three different options ... all of which are intended to reward executives based on productivity and results and to retain those executives by structuring a payout over time."

Tags: Nonqualified Plans

GAO Report on Top Hat Plans Calls for Stricter Oversight by IRS and DOL
King & Spalding Link to more items from this source
Oct. 1, 2020

"DOL officials reported to the GAO that they have not issued any guidance on how companies should correct eligibility errors found in executive retirement plans. Instead, the DOL directed the GAO to an amicus brief it filed where the DOL suggested that plans can be modified to exclude ineligible rank-and-file employees, awarding them the full vesting and other protections under ERISA and distributing their benefits from the plan while maintaining the plan's status as an executive retirement plan for those executives who do qualify."

Tags: Nonqualified Plans

ERISA Advisory Council to Meet October 22
Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL] Link to more items from this source
Sept. 25, 2020

"[T]he 202nd open meeting of the [ERISA Advisory Council] will be held via a teleconference on Thursday, October 22, and Friday, October 23, 2020 ... The purpose of the open meeting is for Advisory Council members to hear testimony from invited witnesses and to receive an update from [EBSA]. The Advisory Council will study the following topics: [1] Examining Top Hat Plan Participation and Reporting, and [2] Considerations for Recognizing and Addressing Participants with Diminished Capacity."

Tags: Health Plan Policy  •  Nonqualified Plans  •  Retirement Plan Policy

Editor's Pick Possible Options for Participant Relief Under Section 409A Plans in the Time of Coronavirus
Groom Law Group Link to more items from this source
Sept. 23, 2020

"In general, Code section 409A provides participants with a limited ability to access deferred compensation in the event of an unforeseeable emergency, and also offers employers (but not participants) some discretion to cancel future deferral elections (but not distribute benefits) in certain circumstances. However, it is important that employers understand the limits of these rules before taking action."

Tags: 409A Plans  •  Coronavirus (COVID-19)  •  Nonqualified Plans


<< Older News  |  January 23, 2021

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