The IRS has given plan sponsors more time to adopt some – but apparently not all – retirement plan amendments reflecting law changes in the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act), the Bipartisan Miners Act of 2019 (Miners Act), and the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). Notice 2022-23, issued August 3, 2022, generally provides that the deadline to adopt these amendments is extended to December 31, 2025. This is the deadline for qualified plans regardless of the plan year, and this deadline also applies to 403(b) plans and collectively bargained plans. Governmental plans generally have until 90 days after the third regular legislative session of the body with the authority to amend the plan that begins after December 31, 2023. Read more
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One of the most popular incentives for small business owners to establish an ESOP (employee stock ownership plan) is the ability to defer tax on the gain they will receive in the sale through the Section 1042 deferral. If certain requirements are met (most notably that the ESOP must end up owning at least 30% of the company), the selling shareholders can defer tax on their gain by investing the proceeds in certain types of “qualified replacement property.” 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.pngadmin2022-07-29 09:25:092022-07-29 09:25:09Take A Chance On Me? Could We Finally See Legislation Expanding Section 1042 Deferral to S Corp ESOPS?
The trusts maintained to hold assets of ERISA plans are separate tax entities from the employers sponsoring the plans. Therefore, each is required to have its own federal tax ID number. Knowing when and where to use whose EIN can be confusing. Here are a few tidbits of information on that topic. This information applies to single employer plans. Multi- and multiple-employer plans may have different rules. Read more
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Long term incentive plans offered by an entity that is taxed as a partnership present an additional problem compared to their corporate A-side counterparts. If an employee is given an equity interest in the partnership, the individual will generally no longer be considered an employee for tax purposes. Instead, that individual is considered a partner in a partnership, will receive a K-1 for future pay (rather than a W-2), must pay estimated taxes, becomes ineligible for certain benefits, etc. This dual status issue is generally nonexistent within corporate entities – indeed, it is commonplace for employees to also be shareholders, perhaps as a result of a traditional restricted stock or option grant. Read more
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The focus of this week’s post is on an emerging hot topic, abortion care travel reimbursement. Reimbursement for travel to obtain abortion care was already something being considered by a number of companies in response to the recent Texas fetal heartbeat law and similar laws in other states. With the recently leaked Supreme Court draft opinion that stands to overturn Roe v. Wade, both the need for such a benefit and employers’ interest in offering travel reimbursements has increased significantly. If Roe is overturned, access to abortions will be largely prohibited in the 13 states with so called “trigger laws” and could be significantly restricted in at least 13 other states. Read more
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Fidelity Investments recently announced that it will offer its 401(k) plan clients the opportunity to offer bitcoin as a 401(k) plan investment option later this year. While this may sound intriguing to some plan fiduciaries and participants, plan fiduciaries should proceed with extreme caution.
Based on the Department of Labor’s (DOL) public pronouncements, it appears the DOL has serious doubts about whether 401(k) plan fiduciaries who include cryptocurrency among their 401(k) plan’s investment options comply with their ERISA fiduciary duties. In March, the DOL issued Compliance Assistance Release No. 2022-01, in which it expressed “serious concerns” about the prudence of 401(k) plan fiduciaries including cryptocurrency as a 401(k) plan investment option and announced it plans to conduct an investigative program related to cryptocurrency investments by 401(k) plans. For more information on Compliance Assistance Release No. 2022-01, please see our prior blog post Can’t Touch This … DOL Discourages Plans From Investing in Cryptocurrency. Following Fidelity’s announcement, a DOL official expressed “grave concerns” about the offering and indicated that the DOL intends to meet with Fidelity to discuss its concerns in comments to the Wall Street Journal. Read more
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Early stage companies that are strapped for cash often turn to long-term incentive compensation plans to attract and retain key employees and service providers. Many of these companies opt to put in place arrangements that grant actual equity interests (e.g., stock options or, in partnership-taxed entity, profits interests). While these arrangements may be a good match for certain companies and situations, I find that phantom plans often fit better with early stage company/ownership goals. 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.pngadmin2022-04-29 12:49:442022-04-29 12:49:44The Music of the Night . . . Phantom Plans for Early Stage Companies
Time Is On My Side: Some Retirement Plan Amendment Deadlines Pushed Back
/in 401(k) Plans, 403(b) plans, 457(b) plans, Cafeteria Plans, Defined Benefit Plans, Governmental Plans, Health & Welfare Plans, IRS, Legislation, Retirement Plansby Brenda Berg
The IRS has given plan sponsors more time to adopt some – but apparently not all – retirement plan amendments reflecting law changes in the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act), the Bipartisan Miners Act of 2019 (Miners Act), and the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). Notice 2022-23, issued August 3, 2022, generally provides that the deadline to adopt these amendments is extended to December 31, 2025. This is the deadline for qualified plans regardless of the plan year, and this deadline also applies to 403(b) plans and collectively bargained plans. Governmental plans generally have until 90 days after the third regular legislative session of the body with the authority to amend the plan that begins after December 31, 2023. Read more
Take A Chance On Me? Could We Finally See Legislation Expanding Section 1042 Deferral to S Corp ESOPS?
/in ESOPs, IRS, Legislation, Retirement Plansby Elizabeth Nedrow
One of the most popular incentives for small business owners to establish an ESOP (employee stock ownership plan) is the ability to defer tax on the gain they will receive in the sale through the Section 1042 deferral. If certain requirements are met (most notably that the ESOP must end up owning at least 30% of the company), the selling shareholders can defer tax on their gain by investing the proceeds in certain types of “qualified replacement property.” Read more
Old MacDonald Had a Farm…EIN Confusion?
/in 401(k) Plans, Defined Benefit Plans, ERISA, ESOPs, IRS, Retirement Plansby Becky Achten
The trusts maintained to hold assets of ERISA plans are separate tax entities from the employers sponsoring the plans. Therefore, each is required to have its own federal tax ID number. Knowing when and where to use whose EIN can be confusing. Here are a few tidbits of information on that topic. This information applies to single employer plans. Multi- and multiple-employer plans may have different rules. Read more
B-Side – Dual Status Issues with Partnership LTI
/in Executive Compensation, IRSBy Kevin Selzer
Long term incentive plans offered by an entity that is taxed as a partnership present an additional problem compared to their corporate A-side counterparts. If an employee is given an equity interest in the partnership, the individual will generally no longer be considered an employee for tax purposes. Instead, that individual is considered a partner in a partnership, will receive a K-1 for future pay (rather than a W-2), must pay estimated taxes, becomes ineligible for certain benefits, etc. This dual status issue is generally nonexistent within corporate entities – indeed, it is commonplace for employees to also be shareholders, perhaps as a result of a traditional restricted stock or option grant. Read more
I’m Leaving On A Jet Plane…Is Abortion Care Travel a Covered Benefit?
/in Cafeteria Plans, Fringe Benefits, Health & Welfare Plans, Legislation, State Benefits Lawsby Benjamin Gibbons
The focus of this week’s post is on an emerging hot topic, abortion care travel reimbursement. Reimbursement for travel to obtain abortion care was already something being considered by a number of companies in response to the recent Texas fetal heartbeat law and similar laws in other states. With the recently leaked Supreme Court draft opinion that stands to overturn Roe v. Wade, both the need for such a benefit and employers’ interest in offering travel reimbursements has increased significantly. If Roe is overturned, access to abortions will be largely prohibited in the 13 states with so called “trigger laws” and could be significantly restricted in at least 13 other states. Read more
Every Little Thing … Considerations Before Adding Crypto to a 401(k) Plan
/in 401(k) Plans, Corporate Governance in Benefits, DOL, ERISA, Fiduciary Duties, Investments, Litigation, Retirement Plansby Alex Smith
Fidelity Investments recently announced that it will offer its 401(k) plan clients the opportunity to offer bitcoin as a 401(k) plan investment option later this year. While this may sound intriguing to some plan fiduciaries and participants, plan fiduciaries should proceed with extreme caution.
Based on the Department of Labor’s (DOL) public pronouncements, it appears the DOL has serious doubts about whether 401(k) plan fiduciaries who include cryptocurrency among their 401(k) plan’s investment options comply with their ERISA fiduciary duties. In March, the DOL issued Compliance Assistance Release No. 2022-01, in which it expressed “serious concerns” about the prudence of 401(k) plan fiduciaries including cryptocurrency as a 401(k) plan investment option and announced it plans to conduct an investigative program related to cryptocurrency investments by 401(k) plans. For more information on Compliance Assistance Release No. 2022-01, please see our prior blog post Can’t Touch This … DOL Discourages Plans From Investing in Cryptocurrency. Following Fidelity’s announcement, a DOL official expressed “grave concerns” about the offering and indicated that the DOL intends to meet with Fidelity to discuss its concerns in comments to the Wall Street Journal. Read more
The Music of the Night . . . Phantom Plans for Early Stage Companies
/in Equity Compensation, Executive CompensationBy Kevin Selzer
Early stage companies that are strapped for cash often turn to long-term incentive compensation plans to attract and retain key employees and service providers. Many of these companies opt to put in place arrangements that grant actual equity interests (e.g., stock options or, in partnership-taxed entity, profits interests). While these arrangements may be a good match for certain companies and situations, I find that phantom plans often fit better with early stage company/ownership goals. Read more