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Carol V. Calhoun was quoted in a March 12, 2018 article in Tax Notes, dealing with the issue of whether the new excise taxes on excess compensation and excess severance benefits will apply to public colleges and universities. The wording of the law makes it unclear whether the law should apply to the very governmental entities most likely to have employees that would otherwise be affected by it.
A new article by Carol V. Calhoun, published by Lexis Practice Advisor, provides sample subrogation and reimbursement clauses to be used in a summary plan description. Such clauses are typically used in an instance in which an employer’s health or disability plan wants to avoid a situation in which a participant gets a double recovery for the same illness or injury. For example, an employee covered by both the employer’s health plan and a spouse’s health plan should not have the same medical expenses paid by both plans. Or an individual who is hit by a car, and recovers lost wages from the driver’s insurance company, should not also be able to receive disability benefits for the same period.
The Tax Cuts and Jobs Act of 2017 made a number of changes affecting the compensation and benefits that governmental, church, and other tax-exempt organizations can provide to their employees. Given the short time between introduction and passage of the Act, it is not surprising that many of the new provisions are unclear in their application. Moreover, some of them may produce unintended consequences for these organizations.
As part of a symposium on “Recent Developments in Benefits/Executive Compensation Affecting Tax Exempt Organizations,” Carol V. Calhoun gave a presentation on the ways in which the Tax Cuts and Jobs Act of 2017 will affect the compensation and benefits of such organizations. A copy of the PowerPoint for her speech can be found at this link.
The PowerPoint slides for the presentation entitled “Overview of the Tax Cuts and Jobs Act: What Individuals and Business Owners Need to Know,” given at the offices of Venable LLP on February 1, 2018, are now available at this link.
The recently passed tax bill imposes a 21% excise tax on excess compensation and excess severance benefits of certain executives of nonprofit and governmental employers. The provision has a substantial impact on the compensation and benefits that such organizations can provide for their executives. Moreover, the determination of which employers, and which executives, are covered includes several traps for the unwary.
The IRS maintains pre-approved plan programs (1) for retirement plans described in I.R.C. § 401(a) (qualified plans), and (2) for annuity contracts or custodial accounts described in I.R.C. § 403(b) (403(b) plans). A new chart shows what types of plans are and are not eligible to use the pre-approved plan program.
Tax-exempt organizations face special legal challenges in developing compensation packages for their executives. A new article published in the Lexis Practice Advisor provides practical guidance on developing benefits for executives of nonprofits.
A 76-page PowerPoint presentation from a live Lorman Telecom webinar, “Navigating Pension and Annuity Payments: General Rule and Taxation Guidelines,” is now available by clicking here.
The webinar covered distributions from qualified plans (pension, profit sharing, stock bonus, and 401(k), including Roth accounts), IRAs (regular and Roth), and commercial annuities. Topics covered:
- Sources of distributions (employer contributions, employee deferrals, Roths, after-tax contributions, and rollovers);
- Restrictions on how early and how late distributions can be taken;
- Penalties on early withdrawals;
- Taxation of lump sum distributions;
- Taxation of withdrawals and partial distributions;
- Taxation of annuities and other periodic payments;
- Plan withholding and reporting; and
- Participant reporting.
A download of the program and other information can be found at this link, which also contains a 50% discount code.
The Social Security Administration has now announced that the wage base (the maximum amount subject to Social Security taxes) for 2018 will be only $128,400, rather than the $128,700 it had announced in October.
On October 19, 2017, the IRS issued IRS Notice 2017-64, announcing the changes in pensions and benefits limits for 2018. The maximum limits on employee pretax contributions to 401(k), 403(b), and 457(b) plans (without catch-ups) increased to $18,500, the maximum limit on annual additions (primarily to defined contribution plans) rose from $54,000 to $55,000, and the maximum limit on benefits (when expressed as an annual benefit) under a defined benefit plan rose from $215,000 to $220,000. Limits on annual compensation taken into account also rose, but the compensation used in the definition of a key employee was unchanged.