Deferred Compensation News and Updates

Deferred Compensation News brings you the latest information and insights on 409A nonqualified deferred compensation; institutional COLI, BOLI, and ICOLI; tax-and cost-efficient non-COLI funding strategies; low-cost tax managed non-COLI asset/liability designs; executive benefits benchmarking; succession planning and timely issues of executive pay and benefits. 
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June 03, 2015

162 Bonus Plans – The Basics for Employers

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162 Bonus Plans – The Basics for Employers EXECUTIVE SUMMARY As the economy improves, employee talent is at a premium. Well designed executive benefit plans are important tools in both retaining and attracting top talent. One type of executive benefit plan, commonly referred to as a 162 bonus plan, is designed to provide supplemental benefits to select key employees. Generally, the plans use life insurance, funded by the employer’s bonus payments, to provide the insured employee with access to policy cash value if needed for retirement or other purposes and death benefit protection for the employee’s family. While the employee receives the bonus payments as taxable compensation income, the employer can take a corresponding deduction for the payments. From the employer’s perspective, these plans also are typically subject to less complex tax rules and ERISA regulations than other nonqualified deferred compensation plans. 162 bonus plans may make sense for employers looking to attract and retain key employees or provide carve-outs from group-term life insurance programs, particularly for younger key employees in lower tax brackets who likely have insufficient insurance coverage. Employers may appreciate the relative ease of implementing and administering these plans, while employees can benefit from access to cash
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May 21, 2015

Incentive Pay Practices at Mid-Size Companies

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Incentive Pay Practices at Mid-Size Companies In a detailed report released this month, Main Data Group, Inc., looks at incentive pay plan practices in mid-size companies. The report, INCENTIVE PLAN PRACTICES ALIGNING EXECUTIVE PAY WITH PERFORMANCE, was prepared by Steven Hall & Partners and  is based on data developed using the proprietary Snapshot Data(TM) executive compensation platform. Looking at more than 800 publicly traded companies, each with annual revenues between $1 and $5 billion, the report compared fixed vs. variable compensation paid to CEOs. The study found that 85% of CEO pay at the companies that were reviewed consisted of variable incentive compensation and that  long-term incentives comprised the majority of the variable pay. You can request a copy of the full report on the Main Data Group website, by clicking here: Incentive Pay Practices at Mid-Size Companies.  
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May 15, 2015

409A Correction: IRS Chief Counsel Memorandum clarifies that correction of Section 409A failures …

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409A Correction: IRS Chief Counsel Memorandum clarifies that correction of Section 409A failures in year of vesting will not shield income inclusion under 409A Following up on a topic we blogged about recently, (see blog post “409A Corrections Clarified,” from May 6)  is this update from Poskauer’s ERISA Practice Center Blog, titled: IRS Chief Counsel Memorandum clarifies that correction of Section 409A failures in year of vesting will not shield income inclusion under 409A. In this blog update regarding 409A correction, Partner Joshua Miller, (Tax Department, Employee Benefits, Executive Compensation & ERISA Litigation Tax) pointed out, …more interesting, however, is that the Chief Counsel Memorandum guidance does not preclude correction of noncompliant nonqualified deferred compensation in a taxable year prior to the taxable year in which the compensation vests.” Miller’s article continues, explaining, “Under the 2008 proposed income inclusion rules, Section 409A income inclusion does not appear to be required for the year that nonqualified deferred compensation ceases to be subject to a substantial risk of forfeiture (or any later years) to the extent that the applicable plan is amended to comply with Section 409A prior to the taxable year in which the compensation vests.  By not providing any indications to
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March 11, 2015

AALU Washington Report on Death Only Benefit Plans

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(March 10, 2015) Ponte Vedra Beach, Florida A new AALU Washington Report features an in-depth exploration of what Death Benefit Only plans are, which employees may be best served by this type of benefit, and how these plans are implemented. Special attention is paid to the taxation concerns for both employer and employee; these plans are typically subject to less complex tax rules and ERISA regulations than other nonqualified deferred compensation plans that provide lifetime benefits to the employee.  What is a DBO? From the report: A DBO plan provides specified death benefits to an employee’s surviving beneficiaries (likely the surviving spouse or children), if the employee was employed by the sponsoring business at death.  These plans generally do not require employee contributions and are not constrained by participation limits applicable to other types of nonqualified deferred plans.  However, DBO plans cannot provide disability, severance, retirement or any other lifetime employee benefits commonly associated with other nonqualified deferred compensation plans.  You can read the full report below or download it as a PDF from our Resource center. Fulcrum Partners LLC: AALU Death Benefits Washington Report by Fulcrum Partners LLC For more information about the topic, please contact press@fulcrumpartnersllc.com.
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February 27, 2015

What Does Participant Really Mean when it comes to Nonqualified Deferred Compensation Plan?

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From the Employee Benefits Law Report, an article by Greg Daugherty of Porter Wright Morris & Arthur LLP, looks at the scope and definition of who is a “participant” in a nonqualified deferred compensation plan. Daugherty points out that although companies have frequently considered the word participant to only include participants who are current employees, the courts may not always look at the matter in this same way. Nonqualified Deferred Compensation Plan Language Becomes Subject of Lawsuit When retired employees of Bausch & Lomb brought suit against the company claiming ERISA violations regarding payouts and termination of benefits, the company took the position that the retired employees were a actually a “subset” of participants. The court’s ruling came down to the Plan’s language, which serves as a powerful reminder of the value of thoughtful and strategic Plan design.  You can read the article, in full by clicking here: Who is “participant” in a nonqualified plan? Second Circuit case highlights importance of defined terms
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August 29, 2014

Financing the Golden Years Among Senior Retail Executives

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The August issue of The Exchange for People Strategy online magazine contains this review of the last few years in retail sector retirement planning and deferred compensation suites for senior executives. Managing Directors Tom Chisholm and David Fisher lend their expertise to outlining the challenges in compensating key team members in positions outside of rank-and-file employees, as well as ways creative businesses are steering toward solutions. You can read this article directly in PSX magazine, or in the embedded copy below. The Exchange is a monthly publication you can receive directly to your inbox. We invite you to become a subscriber (no subscription fee) to The Exchange for People Strategy by emailing steve.broadbent@fulcrumpartnersllc.com. In your email, asked to be added to our Exchange subscribers list.     Retail Executive Retirement Planning: Finance Golden Years – PSX Magazine by Fulcrum Partners LLC
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August 13, 2014

Changing Executive Compensation Plans & Performance-Based SERPs

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Online Human Resources publication “The Exchange for People Strategy”  recently published an article by Steve Broadbent and Tom Chisholm regarding the impact of changing regulations on executive compensation strategies, and how performance-based SERPs provide solid answers to maintaining a balanced and incentivizing compensation plan. The Exchange is a monthly publication you can receive directly to your inbox. We invite you to become a subscriber (no subscription fee) to The Exchange for People Strategy by emailing steve.broadbent@fulcrumpartnersllc.com. In your email, asked to be added to our Exchange subscribers list.  Performance-Based SERPs: Changing the Landscape | The Exchange for People Strategy, July 2014 Issue by Fulcrum Partners LLC
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July 11, 2014

Recent IRS Activity Focuses on Nonqualified Deferred Compensation Plans

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Sharing this insightful update: “Recent IRS Activity Focuses on Nonqualified Deferred Compensation Plans” Caplin & Drysdale, Chartered Joanne C. Youn
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June 30, 2014

Executive Benefits: If They Won’t Eat What You Are Feeding Them…

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Each month the executive benefits specialists at Fulcrum Partners authors a new article that is published in the Human Resources publication, “Exchange for People Strategy.”  The Exchange is a monthly publication you can receive directly to your inbox. We invite you to become a subscriber (no subscription fee) to The Exchange for People Strategy by emailing steve.broadbent@fulcrumpartnersllc.com. In your email, asked to be added to our Exchange subscribers list.  Here’s an excerpt from our most recent article: “What to do, what to do…? Your first instinct probably is to haul out the playbook and do what you have always done. In fact, your instinct very likely is to do what everyone has always done. You seek the latest benchmarking data because you want to be certain that salary, annual incentive and equity grants are competitive with your corporate comparator group. You can’t after all, invite people to leave your company by paying below median, can you? You are making the often-made assumption that as long as you pay what everyone else pays then the playing field is level. If only you could get the annual incentive targets right, you would solve the problem!” The June article, written by Bruce Brownell of Fulcrum Partners Ponte Vedra Beach, appears in entirety
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June 20, 2014

FICA Taxes and Nonqualified Deferred Compensation

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(June 19, 2014) Ponte Vedra Beach Florida Executive benefits consulting firm, Fulcrum Partners LLC, is pleased distribute this AALU Washington Report to its clients and friends. This continuing series of articles is intended to provide deep insight into trends, events, and issues that impact the design and operation of nonqualified executive benefit plans. To see all media updates from Fulcrum Partners, please view our Fulcrum Partner Resources page. Nonqualified Deferred Compensation Fundamental Rules & Planning Considerations for FICA Taxes AALU Washington Report: FICA Taxes & Nonqualified Deferred Compensation Plans – Fulcrum Partners, LLC  from Fulcrum Partners LLC
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