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Blog Tag: Executive Benefits

The importance of following the requirements of Internal Revenue Code §409A (409A) was discussed in the Fall 2015 SilverLink magazine article, “Planning by the Rules.” Since that article was published, the Internal Revenue Service (IRS) issued Internal Revenue Code §409A Proposed Regulations, clarifying and modifying the existing and final 409A regulations with regard to deferred compensation. These proposed regulations include 19 technical clarifications, most of which will not affect the core 409A regulations.

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Financial and tax planning considerations, including increases in tax rates, are creating a renewed interest in the use of nonqualified deferred compensation plans.

A properly structured nonqualified deferred compensation plan allows a participant to postpone the payment of income tax on the amount deferred until the plan payment occurs, which typically happens at a participant’s separation of service or retirement. However, the exception to tax deferral is the Federal Insurance Contributions Act tax, commonly known as FICA tax. As nonqualified deferred compensation plans grow in popularity, it is important that employers understand FICA taxes and how they might impact these plans.

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