In an effort to address shortcomings in auditing procedures and reporting raised by the DOL, in July 2019, the Auditing Standards Board of the American Institute of Certified Public Accountants issued a revised Statement on Auditing Standards No. 136 entitled, “Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA” (“SAS 136”). SAS 136 applies to plan financial statement periods ending on or after December 15, 2021. The updated audit standards imposed by SAS 136 add new audit procedures and significantly shift the burden for producing many plan-related documents to the plan sponsor. The new requirements will make it essential for plan sponsors to be able to produce quality, error-free records that demonstrate compliance in areas like compensation, deferrals, distributions, and vendors’ fees. Even before these new standards went into effect, it was often difficult for plan sponsors to produce such documentation, particularly when it… Continue Reading
The IRS recently updated its Nonqualified Deferred Compensation Audit Technique Guide (the “Updated Guide”), which replaces the previous version published in June 2015. The Updated Guide provides more detailed guidance on the legal standards applicable to deferred compensation arrangements, including the addition of specific citations to relevant regulations and revenue rulings. Notably, the Updated Guide also includes significantly expanded discussions about Code Section 409A and its application to deferred compensation arrangements. Code Section 409A, and other regulations impacting deferred compensation, are very complicated and can carry substantial penalties and taxes for noncompliance. As Congress and the Biden Administration look for additional sources of funding for their initiatives, heightened IRS audit activity may be on the horizon. The Updated Guide is a good reminder to employers that they should periodically review their nonqualified deferred compensation arrangements, not only for documentary compliance but operational compliance as well. The Updated Guide is available… Continue Reading
Pursuant to Section 274 of the COVID-related Tax Relief Act of 2020, the IRS recently issued Notice 2021-11 which extends the repayment dates for the payroll tax deferral relief provided under IRS Notice 2020-65 (discussed in our prior blog post here). Under IRS Notice 2020-65, deferred employment taxes had to be withheld and remitted to the IRS in substantially equivalent installments from wages or other compensation paid to employees between January 1, 2021 and April 30, 2021, with interest and penalties on unpaid deferred taxes beginning to accrue on May 1, 2021. Under Notice 2021-11, the timing for withholding and payment of these taxes is extended through December 31, 2021, and the date that interest and penalties begin to accrue on unpaid deferred taxes is delayed until January 1, 2022. Notice 2021-11 is available here.
The 2017 Tax Cuts and Jobs Act (the ?Ç£TCJA?Ç¥) significantly amended Section 162(m) of the Internal Revenue Code (?Ç£Code?Ç¥) by expanding the definition of a ?Ç£covered employee?Ç¥ to also include an employee who was formerly a ?Ç£covered employee?Ç¥ of the publicly traded corporation (i.e., the “once a covered employee, always a covered employee”?árule). Under this expanded rule, anyone who was a covered employee of the publicly traded corporation (or any predecessor) for any taxable year beginning on or after January 1, 2017, will continue to be a covered employee for taxable years beginning in 2018 and later, even after the employee?ÇÖs separation from service. This change potentially impacts the availability of benefit payments under certain nonqualified deferred compensation plans which provide that payments may be delayed if the company?ÇÖs deduction would not be permitted under Code Section 162(m). The application of this “once-in, always-in rule” could thus result in a… Continue Reading