As we approach year end, employers should give some thought to reviewing their PTO policies for the coming year. One of the most common tax traps that we see is employers offering employees the right to cash out their PTO.
“It’s their PTO, and if they have accumulated a large balance, then we want to encourage them to get the large PTO accrual off the books,” is a common explanation we hear from employers.
Not so fast. Giving an employee a choice between current cash and rolling over PTO hours accelerates the taxation of the employee’s PTO hours (even if the employee never elects to cash them out). Many employers are surprised to learn that an obscure IRS rule known as “constructive receipt” generally requires an employer to treat PTO as taxable wages at the earliest time the employee is able to elect to cash out the PTO. Read more
https://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.png00adminhttps://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.pngadmin2022-11-07 13:13:002022-11-07 13:13:00You Can’t Touch That: Permitting Cashouts of PTO May Create Tax Traps for Employees and Employers
Sponsors of self-funded group health plans are required to notify enrollees about the availability of the plan’s notice of privacy practices and how enrollees can obtain a copy of such notice. This must be done at least once every three years. However, many sponsors satisfy this obligation on behalf of their group health plans by including information regarding the availability of the notice in their plan’s annual enrollment materials. Read more
https://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.png00adminhttps://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.pngadmin2022-10-27 09:34:122022-10-27 09:34:12Gimme, Gimme, Gimme, My Required Notices
The IRS has announced the 2023 cost of living adjustments to qualified plan limits. As expected, many of the limits increased substantially compared with prior years. Below are the highlights, and our full historical chart can be found here for easy reference.
2023
2022
2021
Annual Compensation
330,000
305,000
290,000
Elective Deferrals
22,500
20,500
19,500
Catch-up Contributions
7,500
6,500
6,500
Defined Contribution Limit
66,000
61,000
58,000
ESOP Distribution Limits
1,330,000
265,000
1,230,000
245,000
1,165,000
230,000
Defined Benefit Limit
265,000
245,000
230,000
HCE Threshold
150,000
135,000
130,000
Key Employee
215,000
200,000
185,000
457 Elective Deferrals
22,500
20,500
19,500
Taxable Wage Base
160,200
147,000
142,800
https://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.png00adminhttps://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.pngadmin2022-10-24 10:55:122022-10-24 10:55:12It’s All About the Benjamins…2023 IRS Limits Announced
Although businesses, schools, and the general population seem to be moving COVID-19 to the background, it’s still very much on the forefront of employer health plan administration.
Health and Human Services (HHS) recently announced another 90-day extension of the Public Health Emergency (PHE), effective October 13, 2022, extending it through January 10, 2023. HHS has indicated that it will give 60 days advance notice of the end of this particular PHE period, which has been in effect since January 27, 2020. If this is to be the final 90-day period of the PHE, then HHS should announce its forthcoming end by November 12, 2022. What does this mean for employer health plans? For one thing, group health plans must continue to cover COVID-19 diagnostic testing and related services to participants without cost sharing. Nothing has changed for now. Read more
https://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.png00adminhttps://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.pngadmin2022-10-18 09:20:002022-10-18 09:17:06It May Not Be Urgent…But It’s Still an Emergency
The IRS has picked up where it left off last month with additional retirement plan amendment deadline extensions. As you may recall from our August 5, 2022 blog post, Time Is On My Side: Some Retirement Plan Amendment Deadlines Pushed Back, the IRS recently extended certain SECURE Act, Miner’s Act, and CARES Act amendment deadlines for retirement plans but notably did not extend the deadline for coronavirus-related distributions and loan plan loan relief under the CARES Act. While it is unclear whether those omissions were intentional or an oversight, the IRS has rendered that question moot in IRS Notice 2022-45. Read more
https://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.png00adminhttps://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.pngadmin2022-09-29 11:08:452022-09-29 12:00:27The Times They Are A-Changin’…IRS Provides Further Retirement Plan Amendment Deadline Relief
Both the Department of Labor (DOL) and plaintiffs’ lawyers have taken an interest in retirement plans’ cybersecurity in recent years. Last year, the DOL issued guidance on the cybersecurity considerations plan fiduciaries should be mindful of. In addition, cyber theft in recent years has led to multiple lawsuits. A specific recordkeeper involved in many of these lawsuits is currently being investigated by the DOL with respect to cybersecurity incidents that have impacted certain of its retirement plan clients. Read more
https://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.png00adminhttps://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.pngadmin2022-09-21 10:20:252022-09-21 10:20:25Hole in the Bottle … Protecting Against 401(k) Cybersecurity Leakage
We have referenced Code Section 280G and the golden parachute rules recently on this blog, and we have also discussed LLC equity incentives. It can be fun to see how these concepts play out in a practical way in executive agreements based on some recent experiences in negotiating terms for executives in connection with private equity acquisitions.
For Code Section 280G, there are basically 3 ways that Section 280G golden parachute terms appear in employment agreements:
“Gross-ups” for 280G taxes (where the company makes the executive whole for any Code Section 280G taxes imposed),
“Best-of” provisions (where the executive receives either the total amount of payments and pays the taxes or reduces payments to a level below the threshold where Code Section 280G taxes apply, whichever results in the greatest amount of benefits being paid to the executive), and
“Haircuts” (where the total amount of Code Section 280G benefits are mandatorily reduced to a level below the threshold where Code Section 280G applies).
https://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.png00adminhttps://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.pngadmin2022-09-09 10:12:022022-09-09 10:12:02Surprise, Surprise, Come On Open Your Eyes and Check the Tax Boilerplate and Operating Agreements
You Can’t Touch That: Permitting Cashouts of PTO May Create Tax Traps for Employees and Employers
/in Executive Compensation, Fringe Benefits, IRS, State Benefits Lawsby Bret F. Busacker
As we approach year end, employers should give some thought to reviewing their PTO policies for the coming year. One of the most common tax traps that we see is employers offering employees the right to cash out their PTO.
“It’s their PTO, and if they have accumulated a large balance, then we want to encourage them to get the large PTO accrual off the books,” is a common explanation we hear from employers.
Not so fast. Giving an employee a choice between current cash and rolling over PTO hours accelerates the taxation of the employee’s PTO hours (even if the employee never elects to cash them out). Many employers are surprised to learn that an obscure IRS rule known as “constructive receipt” generally requires an employer to treat PTO as taxable wages at the earliest time the employee is able to elect to cash out the PTO. Read more
Gimme, Gimme, Gimme, My Required Notices
/in Cafeteria Plans, ERISA, Health & Welfare Plansby Leslie Thomson
Sponsors of self-funded group health plans are required to notify enrollees about the availability of the plan’s notice of privacy practices and how enrollees can obtain a copy of such notice. This must be done at least once every three years. However, many sponsors satisfy this obligation on behalf of their group health plans by including information regarding the availability of the notice in their plan’s annual enrollment materials. Read more
It’s All About the Benjamins…2023 IRS Limits Announced
/in 401(k) Plans, 403(b) plans, 457(b) plans, Defined Benefit Plans, ESOPs, IRS, Retirement Plansby Lyn Domenick
The IRS has announced the 2023 cost of living adjustments to qualified plan limits. As expected, many of the limits increased substantially compared with prior years. Below are the highlights, and our full historical chart can be found here for easy reference.
265,000
245,000
230,000
It May Not Be Urgent…But It’s Still an Emergency
/in Cafeteria Plans, DOL, Health & Welfare Plans, IRSby Lyn Domenick
Although businesses, schools, and the general population seem to be moving COVID-19 to the background, it’s still very much on the forefront of employer health plan administration.
Health and Human Services (HHS) recently announced another 90-day extension of the Public Health Emergency (PHE), effective October 13, 2022, extending it through January 10, 2023. HHS has indicated that it will give 60 days advance notice of the end of this particular PHE period, which has been in effect since January 27, 2020. If this is to be the final 90-day period of the PHE, then HHS should announce its forthcoming end by November 12, 2022. What does this mean for employer health plans? For one thing, group health plans must continue to cover COVID-19 diagnostic testing and related services to participants without cost sharing. Nothing has changed for now. Read more
The Times They Are A-Changin’…IRS Provides Further Retirement Plan Amendment Deadline Relief
/in 401(k) Plans, 403(b) plans, 457(b) plans, ERISA, IRS, Retirement Plansby Benjamin Gibbons
The IRS has picked up where it left off last month with additional retirement plan amendment deadline extensions. As you may recall from our August 5, 2022 blog post, Time Is On My Side: Some Retirement Plan Amendment Deadlines Pushed Back, the IRS recently extended certain SECURE Act, Miner’s Act, and CARES Act amendment deadlines for retirement plans but notably did not extend the deadline for coronavirus-related distributions and loan plan loan relief under the CARES Act. While it is unclear whether those omissions were intentional or an oversight, the IRS has rendered that question moot in IRS Notice 2022-45. Read more
Hole in the Bottle … Protecting Against 401(k) Cybersecurity Leakage
/in 401(k) Plans, Corporate Governance in Benefits, DOL, ERISA, Fiduciary Duties, Litigation, Retirement Plansby Alex Smith
Both the Department of Labor (DOL) and plaintiffs’ lawyers have taken an interest in retirement plans’ cybersecurity in recent years. Last year, the DOL issued guidance on the cybersecurity considerations plan fiduciaries should be mindful of. In addition, cyber theft in recent years has led to multiple lawsuits. A specific recordkeeper involved in many of these lawsuits is currently being investigated by the DOL with respect to cybersecurity incidents that have impacted certain of its retirement plan clients. Read more
Surprise, Surprise, Come On Open Your Eyes and Check the Tax Boilerplate and Operating Agreements
/in Equity Compensation, Executive Compensationby John Ludlum
We have referenced Code Section 280G and the golden parachute rules recently on this blog, and we have also discussed LLC equity incentives. It can be fun to see how these concepts play out in a practical way in executive agreements based on some recent experiences in negotiating terms for executives in connection with private equity acquisitions.
For Code Section 280G, there are basically 3 ways that Section 280G golden parachute terms appear in employment agreements:
Read more