As mentioned in a previous blog, the IRS has issued its initial guidance on Code Section 162(m), as modified by the Tax Cuts and Jobs Act. One important aspect of the guidance is its discussion of preserving deductibility under the transition rule, also known as the 162(m) “grandfather” rule. Under the grandfather rule, compensation paid
Understanding Employee Benefits and key developments in the employee benefits field and items of interest to our clients. MORE
Deferred Compensation and 409A
IRS Guidance Provides Some Clarity, but Leaves Questions Unanswered under 162(m)
On August 21, 2018, the IRS issued its initial guidance on the amendments to Section 162(m) made by the Tax Cuts and Jobs Act, in the form of Notice 2018-68. The guidance is fairly limited and does not completely address some of the questions it takes on. Notably, the guidance on what compensation will…
Tax Bill Means Changes to Employee Benefits and Executive Compensation
FICA Lawsuit Settles For Over $3 Million
I have previously blogged (here and here) about a lawsuit brought by participants in a nonqualified deferred compensation plan where the employer failed to report and pay FICA (social security) taxes in the most tax advantageous way. The employer had tried to get the lawsuit dismissed on the grounds that the FICA tax …
Participants in Top Hat Plans Must Exhaust Administrative Remedies
So-called “Top Hat” plans are nonqualified deferred compensation plans for a select group of management or highly compensated employees. These executive compensation arrangements are exempt from many ERISA provisions, but are not exempt from ERISA’s claims procedure requirements. Therefore, top hat plans must provide a reasonable claims procedure.
ERISA compliant claims procedures can be written…
Are Top Hat Plans Entitled to a Discretionary Standard of Review?
Many years ago the Supreme Court decided that qualified retirement plans that gave their fiduciaries discretion to determine plan benefits were entitled to have their decisions, reviewed by a court under a generous “abuse of discretion” standard. Although that standard may be limited in situations in which the plan administrator has a conflict of interest…
Employers Can Be Responsible for FICA Withholding Errors
Back in 2013 I blogged about a class action lawsuit brought against Henkel Corporation for improper Social Security (FICA) tax withholding from nonqualified deferred compensation benefits. I am blogging now on an update to that case. To understand that case we need to review the taxation of nonqualified deferred compensation benefits. Nonqualified deferred compensation benefits…
It is Always Good to Follow the Plan’s Claims Procedure in Denying a Claim – Part 2
Some months ago I blogged about an Eighth Circuit Court of Appeals decision involving high ranking executives participating in a company’s long term incentive plan where the executives won their suit under the plan, at least in part, because the employer had not properly followed the plan’s claims procedure. By not properly following those procedures,…
New Internal Revenue Service Regulation Clarify when Property is Subject to a Substantial Risk of Forfeiture
On February 26, 2014, the Internal Revenue Service published a final regulation clarifying the meaning of “substantial risk of forfeiture” under section 83 of the Internal Revenue Code. The new guidance will help taxpayers who receive property, other than money, in exchange for services determine when they must recognize the difference between the fair market…
This Time the Employer is Responsible for the Withholding Error
I recently blogged (here and here) about a situation involving Verizon withholding US taxes from payments to former employees who never lived or worked in the U.S. The employees attempted to recover the withheld taxes from Verizon on a breach of fiduciary duty claim against the employer and also attempted to have the …