Even in the current economic and business disruptions caused by COVID-19, we are still seeing key executive hiring go forward. Executive employment agreements contain many tax terms, and while some are largely boilerplate (proper and helpful nevertheless), some tax provisions can have a major impact on how the executive is compensated under the agreement. One such tax provision that often goes “under the radar” relates to the “golden parachute” tax under Code Section 280G.
Many employers are venturing into uncharted waters as significant numbers of employees are being rehired or returning from extended leaves of absence (e.g., furloughed employees). In this environment, it can be easy to overlook the employee benefit plan implications of this workforce shift. Below are some best practices for employers faced with employees returning to work.
Ensure that retirement plans are crediting service for returning employees correctly. In most cases, employers will not be able to treat a rehired employee as a new employee for retirement plan purposes. This means that the employer will have to consider the employee’s prior service for purposes of determining proper eligibility and vesting credit. This is a good time for employers to check and confirm that any systems that track service (e.g., payroll systems and the retirement plan administrator’s systems) are configured correctly to credit prior service.
Job mobility is a fact. Employees are more mobile than ever – changing jobs multiple times in a career. When an employee transitions between jobs and incurs job search and moving expenses, are those expenses deductible? If the employer pays for them, is it taxable income? Here are a few tips.
Job search expenses like travel for interviews, printing resumes and the like used to be deductible by the employee, at least to some extent. Unfortunately, the 2017 TJCA removed the 2% miscellaneous itemized deduction starting in 2018, so employees can’t deduct these expenses anymore.
https://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.png00adminhttps://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.pngadmin2020-06-11 09:47:542020-06-11 09:47:56Moves Like Jagger … But Is It Deductible? Taxation of Job Search and Moving Expenses
In response to the global novel coronavirus pandemic, the Internal Revenue Service released welcome guidance in Notice 2020-42 granting temporary relief from the physical presence requirement for participant elections (including spousal consent) that must be witnessed by a notary public or plan representative. Social distancing recommendations and stay at home orders have resulted in a dire need for this relief, which is intended to facilitate the payment of coronavirus-related distributions and plan loans to qualified individuals. For the period January 1, 2020 through December 31, 2020, under certain conditions, qualified plans may permit remote electronic approval by a notary public or plan representative for participant elections and spousal consent.
With calendar year-end Form 5500s due on July 31, or October 15 with an extension (and still no COVID-19 filing relief as of the date this blog was published), it’s that time of year where plan sponsors begin thinking about their annual retirement plan independent audits. However, these are not the only audits companies should be thinking about.
Both the Internal Revenue Service (IRS) and the Department of Labor (DOL) routinely select qualified retirement plans for examination. In the event of an audit by either agency, a plan’s records, procedures and processes will be examined. If errors or deficiencies are found, at a minimum, corrections will be required, and in some instances, fines or sanctions will be levied.
https://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.png00adminhttps://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.pngadmin2020-05-19 12:00:592020-05-19 14:56:38Might as Well Face It… Your Annual Retirement Plan Audit is Not a Clean Bill of Health
In response to the global novel coronavirus pandemic, the Internal Revenue Service released guidance to allow temporary changes to section 125 cafeteria plans. These changes provide increased flexibility to employees to make mid-year election changes and take advantage of grace period extensions. It also increases the amount of carry-over allowed for health flexible spending arrangements (FSAs). Plan sponsors may elect to implement some or all of these optional changes which would apply to all employees, not only those who are directly impacted by the pandemic.
https://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.png00adminhttps://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.pngadmin2020-05-12 15:41:212023-04-11 15:23:59I Will Be Here When You Are Ready, To Roll With The Changes . . . IRS Releases Section 125 Cafeteria Plan Tax Relief
The US Department of Labor and Internal Revenue Service published temporary rules that extend certain deadlines under ERISA and the Internal Revenue Code applicable to retirement plans, group health plans, and other welfare plans during the COVID-19 national emergency period. We focus here on the group health plan deadlines including those related to COBRA, Special Enrollment and ERISA claims procedures. This guidance which became effective May 4, 2020 may be reviewed here.
The temporary rule requires all self-funded and insured ERISA group health plans to disregard what is defined as the “Outbreak Period” in measuring notice and election deadlines. The “Outbreak Period” is the period from March 1, 2020, until 60 days after the announced end of the COVID-19 national emergency under the Stafford Act (or such other date announced in a future notice). Governmental group health plans are encouraged, but not required, to adopt the temporary rule.
https://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.png00adminhttps://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.pngadmin2020-05-06 12:30:372020-05-06 12:30:40Deadlines and Commitments: DOL and IRS Temporary Rule for COVID
In Our Shangri-La – Terms for Code Section 280G Golden Parachute Taxes in Employment Agreements
/in Equity Compensation, Executive Compensationby John Ludlum
Even in the current economic and business disruptions caused by COVID-19, we are still seeing key executive hiring go forward. Executive employment agreements contain many tax terms, and while some are largely boilerplate (proper and helpful nevertheless), some tax provisions can have a major impact on how the executive is compensated under the agreement. One such tax provision that often goes “under the radar” relates to the “golden parachute” tax under Code Section 280G.
Read moreInto the Mystic . . . Employee Benefit Considerations for Returning Workers
/in 401(k) Plans, Cafeteria Plans, Defined Benefit Plans, DOL, ERISA, Health & Welfare Plans, IRS, Legislation, Retirement Plansby Kevin Selzer
Many employers are venturing into uncharted waters as significant numbers of employees are being rehired or returning from extended leaves of absence (e.g., furloughed employees). In this environment, it can be easy to overlook the employee benefit plan implications of this workforce shift. Below are some best practices for employers faced with employees returning to work.
Ensure that retirement plans are crediting service for returning employees correctly. In most cases, employers will not be able to treat a rehired employee as a new employee for retirement plan purposes. This means that the employer will have to consider the employee’s prior service for purposes of determining proper eligibility and vesting credit. This is a good time for employers to check and confirm that any systems that track service (e.g., payroll systems and the retirement plan administrator’s systems) are configured correctly to credit prior service.
Read moreMoves Like Jagger … But Is It Deductible? Taxation of Job Search and Moving Expenses
/in Executive Compensation, Fringe Benefits, IRSby Beth Nedrow
Job mobility is a fact. Employees are more mobile than ever – changing jobs multiple times in a career. When an employee transitions between jobs and incurs job search and moving expenses, are those expenses deductible? If the employer pays for them, is it taxable income? Here are a few tips.
Job search expenses like travel for interviews, printing resumes and the like used to be deductible by the employee, at least to some extent. Unfortunately, the 2017 TJCA removed the 2% miscellaneous itemized deduction starting in 2018, so employees can’t deduct these expenses anymore.
Read moreYou Gotta Keep ’Em Separated . . . IRS Permits Remote Signatures and Notarization
/in 401(k) Plans, Defined Benefit Plans, Retirement Plansby Rebecca Hudson and Lyn Domenick
In response to the global novel coronavirus pandemic, the Internal Revenue Service released welcome guidance in Notice 2020-42 granting temporary relief from the physical presence requirement for participant elections (including spousal consent) that must be witnessed by a notary public or plan representative. Social distancing recommendations and stay at home orders have resulted in a dire need for this relief, which is intended to facilitate the payment of coronavirus-related distributions and plan loans to qualified individuals. For the period January 1, 2020 through December 31, 2020, under certain conditions, qualified plans may permit remote electronic approval by a notary public or plan representative for participant elections and spousal consent.
Read more
Might as Well Face It… Your Annual Retirement Plan Audit is Not a Clean Bill of Health
/in 401(k) Plans, Defined Benefit Plans, DOL, ERISA, Fiduciary Duties, IRS, Retirement Plansby Ben Gibbons
With calendar year-end Form 5500s due on July 31, or October 15 with an extension (and still no COVID-19 filing relief as of the date this blog was published), it’s that time of year where plan sponsors begin thinking about their annual retirement plan independent audits. However, these are not the only audits companies should be thinking about.
Both the Internal Revenue Service (IRS) and the Department of Labor (DOL) routinely select qualified retirement plans for examination. In the event of an audit by either agency, a plan’s records, procedures and processes will be examined. If errors or deficiencies are found, at a minimum, corrections will be required, and in some instances, fines or sanctions will be levied.
Read moreI Will Be Here When You Are Ready, To Roll With The Changes . . . IRS Releases Section 125 Cafeteria Plan Tax Relief
/in Cafeteria Plans, Health & Welfare Plansby Rebecca Hudson and Lyn Domenick
In response to the global novel coronavirus pandemic, the Internal Revenue Service released guidance to allow temporary changes to section 125 cafeteria plans. These changes provide increased flexibility to employees to make mid-year election changes and take advantage of grace period extensions. It also increases the amount of carry-over allowed for health flexible spending arrangements (FSAs). Plan sponsors may elect to implement some or all of these optional changes which would apply to all employees, not only those who are directly impacted by the pandemic.
Read more
Deadlines and Commitments: DOL and IRS Temporary Rule for COVID
/in Uncategorizedby Lyn Domenick and Bret Busacker
The US Department of Labor and Internal Revenue Service published temporary rules that extend certain deadlines under ERISA and the Internal Revenue Code applicable to retirement plans, group health plans, and other welfare plans during the COVID-19 national emergency period. We focus here on the group health plan deadlines including those related to COBRA, Special Enrollment and ERISA claims procedures. This guidance which became effective May 4, 2020 may be reviewed here.
The temporary rule requires all self-funded and insured ERISA group health plans to disregard what is defined as the “Outbreak Period” in measuring notice and election deadlines. The “Outbreak Period” is the period from March 1, 2020, until 60 days after the announced end of the COVID-19 national emergency under the Stafford Act (or such other date announced in a future notice). Governmental group health plans are encouraged, but not required, to adopt the temporary rule.
Read more