Code 457(f) Plans and Problems ... for Tax Exempt Orgs
(see also 457(f) "vesting roll forward" rules / Interaction with 4960 parachute limits)
2020.02.27 Take Warning: Tax Exempt Orgs. This is happening too often. A valued executive gets ready to retire from a charity or other tax exempt organization, and is promised some form of severance or retirement benefit that will be paid for months or years afterward. Because the payout involves a fixed payout schedule, no one expects a tax disaster. That seems to have happened to a rabbi, who has just sued his synagogue's law firm for damages arising because, as an Illinois district court noted, "his deferred compensation plan was not tax-compliant" (Stanley E. Kroll v. Cozen O'Connor PC, case number 1:19-cv-03919, N.D.IL).
2019.01.22 457(f) Landmine Lurks for All Tax-exempt Organizations … Even the Small Ones! “Maybe not today. Maybe not tomorrow, but someday” … you are likely to have a golden parachute problem. It’s not often that Casablanca and tax law intersect, but the above warning is apropos for any tax exempt organization that has a 457(f) plan. Plans of that kind are typically structured to avoid immediate income taxation for executives by deferring benefit payments until their termination of employment. No one would think this could trigger golden parachute penalties for the organization. In the wake of IRS Notice 2019-09, however, tax-exempt organizations should think again. Continued at ... 457(f) and 4960 Parachute Risks.
2018.10.05 Statute of Limitations and 457(f) Violations. What a mess. I just spent a week exhaustively analyzing the confluence of W-2c corrective filings, the amounts includible in income when 457(f) violations span open and closed tax years, and the going forward strategies for formulating a cost-effective strategy by which to go forward. This BenefitsLink exchange is thought provoking. Just email Mark for more info.
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