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Too Much Discretion With Respect to Annual Bonuses May Cause Deferral of the Employer's Deduction

"Many accrual basis taxpayers have operated under the belief that so long as discretionary bonus amounts are paid within 2-1/2 months following the end of the plan year, the amounts are fully deductible for the prior year. However, for bonus plans based on subjective performance criteria, the IRS may challenge the timing of the bonus deduction under the reasoning in its recent Memorandum."

Bad Faith Termination Can Be Good ERISA Interference Claim

"[T]he executive was placed on 'garden leave,' in other words, relieved of all responsibilities and told to stay home.... The court found that the executive had sufficiently alleged that the employer had manipulated the date of termination with the specific intent of depriving the employee of the severance benefits to which he would otherwise have been entitled.... The court said that there could be benign reasons why the company would pay the employee for 30 days after stripping the employee of all responsibilities but that there was also the possibility that the employer had improper motives for the timing of the employment termination given the fact that the garden leave saved the employer over $700,000 in severance pay." [Kirby v. Frontier Medex, No. ELH-13-00012 (D.C. Md. Oct. 30, 2013)]

Best to Save Plan Documents Until All Retirees and Beneficiaries are Dead

"A recent federal district court decision imposed a penalty of $4,470 on a plan administrator who delayed providing the widow of a plan participant with the plan document in effect 34 years ago.... The court did not accept the employer's plea that it should not be penalized for having failed to provide the information sooner. The court noted that there was no evidence in the record regarding the steps that the company had taken to try to locate the documents." []Hartman v. Dana Holding Co., No. 1:12-CV-445 (N.D. Ind. Oct. 21, 2013)]

You Cannot Take the Embezzler's 401(k) Plan Balance

"Participants can voluntarily direct the trustee or plan administrator to pay another person their plan benefit. However, [a recent federal district court] case makes clear that even where the participant owes the employer a lot of money and even when the money owed is the result of a crime, the employer is not allowed to keep the participant's qualified plan benefit." [Thomas v. Bostwick, No. 13-cv-02544-JCS (N.D. Calif. Sep. 19, 2013)]

No More Pre-Tax Premiums for Individual Insurance Policies?

"The IRS did not revoke the 1961 Revenue Ruling permitting pre-tax payment of employee premiums for individual market policies. Some employers are hoping that they can continue to allow employees to pay for individual market health insurance policies on a pre-tax basis through a cafeteria plan even if the employer provides no subsidy for the coverage. The recent guidance is not clear on that point. Small employers are permitted to subsidize policies on the Marketplace through the Small Business Health Option Program or SHOP that is part of the Marketplace. This will allow small employers to establish programs to subsidize coverage that employees choose, but employees will be limited to the plans available under SHOP."

Preliminary 2014 Proxy Season Checklist

"At this time, there are relatively few new items that need to be considered for the upcoming proxy and 10-K season." [Editor's note: Article includes an extensive interactive checklist of ongoing issues.]

Pay Ratio Disclosures Made Simple

"The proposed pay ratio disclosure requirements specify that the ratio must be expressed as a ratio in which the median of the annual total compensation of all employees is equal to one, or, alternatively, expressed narratively in terms of the multiple that the [principal executive officer (PEO)] total compensation amount bears to the median of the annual total compensation amount. For example, if the median of the annual total compensation of all employees of a registrant is $45,790,39 and the annual total compensation of a registrant's PEO is $12,260,000,40 then the pay ratio disclosed would be '1 to 268'[.]"

California Superior Court Dismisses Say-on-Pay Case

"The court found: None of the compensation-related information was rendered materially misleading by omission of information about the financial performance of Symantec or the other companies in the peer group. It was not substantially likely that disclosure of the comparative TSR information would have significantly altered the total mix of information available to the Symantec shareholders. The proxy adequately disclosed what the pay targets were based on, as well as the fact that compensation may be above the positioning benchmark based on consideration of factors other than performance." [Gordon v. Symantec, No. 1-12-CV-231541 (Cal. Super. Ct. for Santa Clara Cty. Aug. 2, 2013)]

Federal District Courts in Virginia Disagree on Life Insurance Coverage for Improperly Enrolled Employee

"[T]wo district courts in Virginia have reached opposite conclusions on similar facts. One difference between the cases may be that in the case where the family won, the family had made explicit requests of the employer as to whether coverage continued and were told that it had. In the case where the family lost, the employer had simply failed to inform the family that the coverage did not continue. Both cases would be heard by the Fourth Circuit Court of Appeals if appealed."

Sixth Circuit Extends Bankruptcy Protection to IRA But Leaves Room for Doubt

"IRAs are protected in bankruptcy only if the IRAs are tax exempt. IRAs are tax exempt only if they do not engage in prohibited transactions. One prohibited transaction is the direct or indirect loan between the IRA owner and a party in interest, such as the bank or other financial institution that holds the IRA assets (IRA Custodian).... Recently the DOL declared that boilerplate provisions in IRA account documents that allow the IRA Custodian to offset amounts in the IRA against debts owed to the IRA Custodian by the IRA owner constitute a prohibited loan.... The Sixth Circuit Court of Appeals ruled that the IRA would be protected. The court concluded that because the debtor had no other account with the IRA Custodian, there was no way in which the improper offset could have occurred." [Daley v. Mostoller, No. 12-6130 (6th Cir. June 17, 2013)]