Employee Benefits

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July 1, 2007

Nonspouse Beneficiary Meets PPA ’06 Rollover Requirements

A is the sole primary beneficiary in E’s retirement plan, X. Prior to E’s death, the sponsors resolved to terminate X. E completed a “Termination Distribution Form,” selecting a direct rollover option to Y (his preexisting IRA), also naming A as the sole beneficiary. However, the rollover was not accomplished

July 1, 2007

IRS Issues Final Rules on Nonqualified Deferred Compensation

The Service issued final regulations on nonqualified deferred-compensation arrangements under Sec. 409A (TD 9321, 4/10/07). These rules generally follow the proposed regulations (REG-158080-04, 10/4/05), but provide additional guidance and clarify many key issues, including: Liberalizing the definition of the underlying stock for stock options and stock appreciation rights (SARs) that

July 1, 2007

Planning for Distributions of Employer Securities

Favorable tax rules apply when a lump-sum distribution (LSD), as defined in Sec. 402(e)(4)(D), is composed in whole or in part of securities of the employer corporation. Under Sec. 402(a) and (e)(4)(B), employees are not taxed on the net unrealized appreciation (NUA) when the securities are distributed; in other words,

June 1, 2007

Deducting Payroll Taxes on Deferred Compensation

Editor: Mary Van Leuven, J.D., LL.M. The IRS recently determined that Sec. 461, rather than Sec. 404, governs the timing of the deduction for payroll taxes on deferred compensation by an accrual-basis taxpayer. Background Generally under Sec. 461(a), a deduction is taken into account in the proper tax year under

June 1, 2007

Distribution Options for Defined-Contribution Plans (Part II)

Executive Summary A rollover distribution from a qualified plan may be used as a short-term loan. The PPA ’06 allows tax-free charitable contributions out of traditional IRAs of up to $100,000 in 2007. When liquidating assets, consideration should be given to the source of the funds and the order used.

April 1, 2007

Income Recognized When Stock Options Exercised

An employee’s income from employer stock options was taxable in the year the employee exercised them, not when he paid off the margin loan used to purchase the stock. Background P entered into two agreements with his employer, M, giving him options to purchase shares of M’s stock. P exercised