Business Strategies

Minimize Tax Exposure of Deferred Compensation Plans

Nonprofit organizations have utilized executive Nonqualified Deferred Compensation Plans to supplement retirement benefits as a valuable mechanism to attract and retain top executives. There are a number of considerations related to plan design that are impacted by laws and regulations that, if not treated properly, could lead to costly problems. 

Back in 2003, Internal Revenue Code (IRC) 409A was added to impose requirements on overall nonqualified deferred compensation plans (initial deferral elections, limits on distribution events, constraints on an executive’s ability to accelerate or further defer payment, etc.). Now, IRC Section 457, provides guidance around similar restrictions on nonprofits and state and local government organizations. 

The intent is to restrict the use of these tax advantaged plans. IRC 457 addresses changes and exclusions impacting the ability to defer tax on compensation until the amounts are paid to the participant or beneficiary for ‘eligible’ deferred compensation plans. Specifically, the regulations include rules for determining when amounts deferred under these plans are includible in income, the amounts that are includible in income, and the types of plans that are not subject to these rules. 

The proposed regulations will affect participants, beneficiaries, sponsors, and administrators of certain plans sponsored by state or local governments or tax-exempt organizations that provide for a deferral of compensation. With this guidance comes additional complexities and potential for increased exposure. 
To capitalize on the advantage of deferred compensation plans, eligible employers and employees need to review plans and procedures to ensure their compensation arrangements meet the IRS’ stringent deferred compensation plan requirements.

Minimizing the Risks of Cloud Computing

According to CIO Magazine, cloud computing has helped many enterprises transform themselves over the last five years, but experts agree that the market is entering something of a second wave, both for public cloud and private cloud services built and hosted in corporate data centers. The cloud market will accelerate faster in 2017 as enterprises seek to gain efficiencies as they scale their computing resources to better serve customers, says Forrester Research in a new report (Fall 2016).

Please click the link below for recommendations on minimizing your risks associated with cloud computing.