Regional Vice President of Sales The Retirement Plan Company
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AimPoint Pension
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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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Compass
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Bates & Company, Inc.
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Text of IRS Publication 5528: Nonqualified Deferred Compensation Audit Technique Guide (PDF)
Internal Revenue Service [IRS] [Official Guidance] Mar. 22, 2024 23 pages, rev. Mar. 20, 2024. " Issues that arise when examining NQDC include the timing of income inclusion for the employee or service provider, the timing of the deduction for the employer or service recipient, and when deferred amounts are subject to employment taxes." Tags: Nonqualified Plans • Plan Audits by Government Agencies |
Recommend a Nonqualified Plan for Clients with 401(k) Plan Testing Issues
Ascensus Feb. 15, 2024 "Requiring HCEs to defer only to the NQDC plan makes it possible for the 401(k) plan to meet its testing requirements while preserving HCEs' ability to defer salary and receive a matching contribution. If HCEs are allowed to defer to both the 401(k) plan and the NQDC plan, deferrals into the NQDC plan can help offset income taxes attributable to any required refunds from the 401(k) plan. Employers can implement NQDC plans without the financial burden of having to make additional contributions to a 401(k) plan." Tags: 401(k) Plans • Nonqualified Plans • Retirement Plan Design |
NQDC Plans Are Key Recruitment Tools
Plan Sponsor Council of America [PSCA] Feb. 7, 2024 "[W]hile retaining employees remains a top goal of the NQDC plan by more than half of respondents, 'helping employees accumulate assets' jumped to the second most common plan goal, cited by 61.2 percent of respondents and up from 43.5 percent the year before. This goal shift is coupled with an increased percentage of companies [providing] NQDC plan specific education and an increased percentage of companies including that education as part of a comprehensive financial wellness program." Tags: Nonqualified Plans |
Deferred Compensation Arrangements for Non-Profits
Holland & Hart LLP Feb. 6, 2024 "While there are a number of differences between a Section 457(f) plan and a for-profit deferred compensation plan, the biggest is the timing of the taxation of the deferred compensation. A for-profit deferred compensation plan can be designed so that once the right to deferred compensation vests, it can be taxed (for income tax purposes) on the date that it is paid, which can be many years in the future. With a Section 457(f) plan, once the deferred compensation vests, it becomes immediately taxable, even if the plan provides for payment of the deferred compensation in a future year." Tags: 457 Plans • Executive comp • Nonqualified Plans |
California's New Non-Compete Laws: Effect on Benefit Plans
Boutwell Fay LLP Feb. 2, 2024 "For employee benefit plans governed by ERISA, there is case law precedent for the proposition that ERISA preempts California law prohibiting enforcement of non-competes in an ERISA covered plan.... [F]or so called 'top hat' plans, non-compete provisions are not rare and in the past have at least arguably been enforceable.... [B]ecause the new law is based on the same statute as before, there is at least an argument that the same analysis will apply." Tags: Local Regulation • Nonqualified Plans |
District Court Finds Morgan Stanley's Deferred Compensation Program for Advisors Is Subject to ERISA
MSN News Jan. 9, 2024 "[A] federal judge granted Morgan Stanley's request to force a group of former Morgan Stanley advisors suing the company over deferred compensation to take their claims to private arbitration. However, in that same order, the judge found that Morgan Stanley's deferred compensation programs are governed by ERISA ... Morgan Stanley [has asked] the judge to reconsider his ruling." [Shafer v. Morgan Stanley, No. 20-11047 (S.D.N.Y. Nov. 21, 2023)] Tags: Nonqualified Plans |
Reminder to Perform Annual ISO/ESPP Reporting in January 2024
SheppardMullin [Guidance Overview] Jan. 9, 2024 "If in 2023 an employee exercised an ISO, the Employer must provide the employee with a written information statement by January 31, 2024. Form 3921 should be used for this purpose ... If in 2023 legal title to stock purchased under an ESPP was transferred from the employee to a third party, and such transfer was the first transfer of such shares, the employer must provide the employee with a written information statement by January 31, 2024." Tags: Nonqualified Plans • Stock Plans |
Deferred Compensation Tax Facts for Advisors
ThinkAdvisor Dec. 29, 2023 "While they are potentially powerful savings vehicles for highly compensated clients, deferred compensation arrangements are also complex from an operational and tax management perspective.... Getting the job right requires a lot of learning for advisors looking to expand their services in this arena ... These insights can help advisors as their clients either set up or benefit from nonqualified deferred compensation plan arrangements." Tags: Nonqualified Plans |
Nonqualified Deferred Compensation Rules for Tax-Indifferent Entities
Venable LLP, via LexisNexis Practical Guidance [Guidance Overview] Dec. 28, 2023 "This practice note explains the application of Internal Revenue Code Section 457A, which restricts the ability of certain tax-indifferent entities (so-called nonqualified entities) to defer compensation for services provided by their service providers. It provides guidance on practical steps for attorneys advising such entities on nonqualified deferred compensation plans." Tags: 457 Plans • Nonqualified Plans |
Executive Compensation Arrangements for Tax-Exempt Organizations
Venable LLP, via LexisNexis Practical Guidance [Guidance Overview] Dec. 27, 2023 20 pages. "This practice note sets out important legal and tax considerations when developing executive compensation arrangements for tax-exempt organizations, including new excise tax rules enacted under 2017 tax reform legislation. It provides guidance on practical steps for attorneys advising their tax-exempt clients on various aspects of executive total compensation packages, including deferred compensation, incentive compensation, severance, vacation, and fringe benefits." Tags: Executive comp • Nonqualified Plans |
Substantial Risk of Forfeiture Under the Internal Revenue Code
Venable LLP, via LexisNexis Practical Guidance [Guidance Overview] Dec. 27, 2023 11 pages. "This practice note discusses the concept of substantial risk of forfeiture (SRF) under sections 83, 409A, 457(f), 457A, 3121(v)(2), and 4960 of the Internal Revenue Code and the different consequences of the failure to achieve a SRF under each such section. SRF is the standard that the [Code] and Treasury Regulations apply to determine when an employee's or an independent contractor's deferred compensation vests, and therefore may be includable in income for the individual (or deductible for the employer or other controlled group member granting the compensation)." Tags: 409A Plans • 457 Plans • Executive comp • Nonqualified Plans |
Action Required: Reporting Share Transfers Pursuant to ISO Exercises and ESPP Purchases
Wilson Sonsini Goodrich & Rosati Dec. 22, 2023 "Although generally excluded from Form W-2 reporting, the U.S. Internal Revenue Code requires that separate information returns be furnished to most U.S. taxpayers who exercised ISOs during 2023 (an 'optionee') or who transferred shares during 2023 that were acquired under an ESPP (a 'transferor').... The deadline for furnishing Forms 3921 and 3922 to optionees and transferors is January 31, 2024. The deadline for filing Forms 3921 and 3922 with the IRS is February 28, 2024," Tags: Nonqualified Plans • Stock Options |
Year-End Compliance Reminders: Deferred Compensation
Varnum Dec. 22, 2023 "Follow your plan documents ... Avoid accelerating payment ... Carefully consider new deferred compensation ... Value the awards properly." Tags: Nonqualified Plans |
Fifth Circuit: Collection of Contractually Predetermined Fixed Fee Does Not Constitute a Fiduciary Act Under ERISA
Roberts Disability Law Dec. 18, 2023 "The Fifth Circuit affirmed the district court's decision, holding that [1] the collection of a contractually predetermined fixed fee does not constitute a fiduciary act under ERISA; [2] VALIC was not a 'party in interest' when it entered into the Plan's annuity contract; [and] [3] VALIC's collection of the contract's surrender fee does not constitute a separate transaction[.]" [D.L. Markham DDS, MSD, Inc. 401(K) Plan v. Variable Annuity Life Ins. Co., No. 22-20540 (5th Cir. Dec. 14, 2023)] Tags: Fiduciary Duties • Nonqualified Plans |
2023 Year-End Planning for Stock Compensation and NQDC
myStockOptions.com Dec. 11, 2023 "[This checklist] summarizes what you need for comprehensive year-end and year-start planning with stock compensation and company stock holdings." Tags: Nonqualified Plans |
Nonqualified Compensation Accounts Back Online After Infosys Breach
planadviser Dec. 11, 2023 "A cybersecurity breach affecting the U.S.-based division of ... Infosys BPM Ltd., shut down some national providers of nonqualified compensation plans and insurance providers starting November 2. At least some of those accounts are fixed and back online now[.]" Tags: Nonqualified Plans |
Publicly Traded Companies: Don't Forget to Register Plan Interests in Deferred Compensation Plans
Morgan Lewis [Guidance Overview] Dec. 7, 2023 "Publicly traded companies generally file registration statements on Form S-8 to register the offering of the company’s stock pursuant to the company’s equity incentive plans under the Securities Act of 1933 ... This same filing requirement applies under certain circumstances to a company’s nonqualified deferred compensation plans. .... Companies may also consider whether an exemption from Securities Act registration is available ... [S]uch analysis will be highly fact-specific and the exemption could be lost if the eligible group changes over time." Tags: Nonqualified Plans • Stock Plans |
Infosys Ransomware Breach Resolving, But Accounts Still Down
PLANSPONSOR; free registration may be required Nov. 22, 2023 "A cybersecurity breach affecting thousands of nonqualified compensation accounts is being resolved, but participant accounts remain days away from updates and coming back online." Tags: Nonqualified Plans |
Ascensus, Newport Nonqualified Platforms Hit by Infosys Cybersecurity Issue
planadviser Nov. 16, 2023 "Ascensus and its subsidiary, Newport Group Inc., have had their nonqualified retirement plan services affected by a cyberattack on business processes firm Infosys McCamish Systems LLC. The platform that Ascensus and Newport use has not been able to update nonqualified user accounts since November 2." Tags: Nonqualified Plans |
SEC's Final 'Clawback' Rule May Pose Section 409A Issues for Nonqualified Plan Sponsors
Groom Law Group [Guidance Overview] Nov. 15, 2023 "At first glance, an executive's nonqualified plan benefit may seem like a tempting source of funds to satisfy his or her clawback obligation.... [C]ompanies should proceed with caution before attempting to satisfy a clawback obligation by deducting the amount from an executive's nonqualified plan benefit (or any other amount subject to Code section 409A). However, there are situations where such a clawback is permissible." Tags: 409A Plans • Nonqualified Plans |
Reviewing Executive Compensation as Due Diligence in Acquiring a U.S. Company
Hall Benefits Law Nov. 7, 2023 "In carrying out due diligence as to executive compensation, the priority is to understand the executive compensation program and any individual compensation programs of the target company. This process allows the reviewing company to identify tax, security, or other legal compliance issues that could affect the purchase price or other transaction terms. It also permits the company to assess retention issues, determine incentives, and assist in integrating one company's compensation scheme with the other." Tags: Executive comp • Nonqualified Plans |
2024 IRS Limits on 401(k) Plans Affect Nonqualified Plans
Forbes; subscription may be required [Guidance Overview] Nov. 3, 2023 "November and December are when [most NQDC participants] choose how much of next year's salary to defer beyond the 401(k) limits. Factors in that decision about nonqualified plans include the newly released IRS limits that apply to qualified retirement plans.... The IRS changes in limits for 2024 are much smaller than the increases for 2023[.]" Tags: Nonqualified Plans |
Split Dollar Helps Attract and Keep High-Value Employees
InsuranceNewsNet.com Oct. 2, 2023 "Split-dollar arrangements are a type of nonqualified agreement between two parties to allocate the rights and responsibilities of a life insurance policy. Although no single strategy fits all situations, this nonqualified type of plan is particularly effective at providing valuable life insurance protection for key employees while securing cost recovery for a business." Tags: Nonqualified Plans |
NQDC Plans: An Opportunity for Improving Retention, But Underutilized by Participants
PLANSPONSOR; free registration may be required Aug. 29, 2023 "A key factor in retaining top executive talent is offering a nonqualified deferred compensation plan, according to 92% of employers who participated in [a recent study]. However, [the study] found that while NQDCPs are appealing to companies of all sizes, they appear to be underutilized, with eligibility rates outpacing population and few companies planning to make near-term changes." Tags: Nonqualified Plans |
Nonqualified Retirement Sponsors Focus on Employee Experience and Mitigating Risk
Willis Towers Watson Aug. 24, 2023 Infographic. "55% of sponsors have changed or plan to make changes to their NQDB plan.... 75% of sponsors have changed or plan to make changes to their NQDC plan.... 60% of NQDC and 47% of NQDB plan sponsors informally fund their plans." Tags: Nonqualified Plans |