In this video, Tom Hegna discusses what an Income Annuity is. How it acts likes Social Security or a Defined Benefit Pension. And why you must have this in your portfolio as part of your “assets’ in retirement, regardless of how much you have.
At Schiff Benefits Group, we help business owners and their key employees create streams of income in retirement that can’t be found by just using your IRA to draw income. At the same time, we protect against a downturn in the market, a long term care event, and a death of your spouse in retirement. Send us an email or call us to learn more.
Ever wanted the “perfect” executive benefits plan where the company gets a current deduction when the money is paid into the plan, the cash grows tax deferred, and then the participant get the money “tax free”? Well look no further.
It’s called a Restricted Executive Bonus plan and combines to different benefits in one. It has to be done carefully to meet IRS guidelines, but is 100% legal. Nice thing is, it’s not carrier or product specific, and has the flexibility as to what type of asset you want in the plan.
To learn more, give us a call or check out our Executive Bonus material. We’d be happy to design a sample for you so that you keep your best people.
What would happen if your business partner died suddenly? You’d be in business with his/her widow. Do you really want to do that?
No. Instead, you want to buy the “cheapest” insurance you can buy at the lowest cost. But many times, you need insurance for 20 or 30 years. In addition, when you pay that premium, it’s gone.
What if you could have the same cash flow for a permanent policy as a term insurance policy, have the bank pay your premium, and then in the future, create a stream of income that potential buyout you or your partner in retirement? Wouldn’t that be the best of all words? Well you can. You just have to be able to qualify.
Everyone should have long term care insurance. For individuals over 45, this is the one benefit that you have a 70% chance of using during your lifetime. And the most important benefit is the Coordinated Care Provider that comes with it.
Have you lost a key employee because they didn’t have “ownership” in the company? You can design a benefit for your “key” employees, makes your best people feel like they are an owner so that they never want to leave.
IRS Notice 2019-09 provides guidance intended to help “applicable tax-exempt employers” determine whether compensation paid to their most highly compensated employees will be subject to the 21 percent excise tax imposed under Code Section 4960. Notice 2019-09 is indeed helpful to those of us who have to interpret the provisions of Code Section 4960. But tax-exempt employers subject to Code Section 4960 have serious work to do in order to comply with these relatively new rules, and some tax-exempt employers will be disappointed in the results. (In general, compensation paid by a Section 501(c)(3) organization will be subject to the requirements of Code Section 4960, so we will simply reference tax-exempt employers for these purposes.)
Excise Tax Under Code Section 4960
Enacted as part of the 2017 Tax Cuts and Jobs Act, Code Section 4960 imposes a 21 percent excise tax on: (1) compensation paid by a tax-exempt employer to a “covered employee” in excess of $1 million in any year; and (2) “excess parachute payments” paid by a tax-exempt employer to a covered employee. A Section 4960 excess parachute payment is a payment made contingent upon a termination of employment, if the payment amount equals or exceeds the terminating employee’s average annual taxable compensation over the preceding five years. The tax on an excess parachute payment is due on the portion of the payment that exceeds the covered employee’s average annual compensation (not just the portion in excess of $1 million).
Covered Employees and Related Organizations
The identification of covered employees is a major topic addressed by Notice 2019-09. In general, a covered employee is an individual who is one of the five highest paid employees of the exempt organization in any taxable year beginning after December 31, 2016. There is no minimum compensation threshold that applies in determining covered employee status. And, perhaps most important, once an individual is identified as a covered employee she will remain a covered employee – forever. This means that a tax-exempt employer must identify its covered employees every year and keep track of them on an ongoing basis.
A tax-exempt employer must identify its covered employees based not only on remuneration paid by that employer, but also taking into account remuneration for services performed by the individual as an employee of any “related organization” of the employer. Under Notice 2019-09, a related organization is any entity that is under common control with a tax-exempt employer using a more-than-50 percent control test. This approach may create headaches for many tax-exempt employers, who are used to the 80 percent control test that generally applies in determining the members of a controlled group of exempt organizations. So a tax-exempt employer within an integrated health system, for example, must determine the extent to which remuneration must be imputed to an employee for services from a related organization that may only be 50 percent owned by the employer in determining covered employee status. Moreover, an individual can be deemed to be an employee of more than one tax-exempt employer. Therefore, it is possible that a single employee could be a covered employee with respect to more than one tax-exempt employer within a system. Finally, given the “forever” status of covered employees, the recordkeeping headaches will multiply when, for example, two health systems merge.
Compensation Is Considered Paid When Vested and on a Calendar Year Basis
Code Section 4960 states that compensation will count toward the $1,000,000 threshold when it ceases to be subject to a substantial risk of forfeiture (i.e., when it vests), rather than when it is paid. But Notice 2019-09 includes a helpful grandfathering rule. Specifically, amounts that were earned and vested prior to the employer’s taxable year beginning in 2018 do not count toward the threshold.
Notice 2019-09 also clarifies that the excise tax is determined on a calendar year basis, not based on the taxable year of the employer. This should reduce the administrative burden that might otherwise arise if employers were required to allocate compensation paid during a single calendar year to multiple fiscal years.
Severance Pay Below $1 million Can Be Subject to the Excise Tax
Excess parachute payments paid to a covered employee can be subject to the 21 percent excise tax even if those payments amount to less than $1 million. While conceptually similar to the “golden parachute” concept under Code Section 280G, which applies where a payment is made in connection with a change in control of a for-profit company, Notice 2019-09 takes an expansive view as to what is an excess parachute payment under Section 4960. Subject to only a few exceptions, most types of compensation triggered by an involuntary separation can potentially be considered a parachute payment. For example, payments made contingent upon complying with a non-compete are included, as is the value of benefits where vesting is accelerated, even if no actual payment is made. An involuntary separation from service for this purpose generally includes an employee’s termination of employment without cause, an employee’s failure to renew a contract, and a termination of employment by an employee for good reason. There are also special provisions defining separation from service broadly to include certain changes to the service relationship, even if an employee is still employed by the tax-exempt employer. The total payments in the nature of compensation that are contingent upon an involuntary separation from service will only be parachute payments if they are three or more times the employee’s base amount (which is the measure of taxable compensation applied under Code Section 280G). Excess parachute payments equal the portion of the parachute payments that exceeds the base amount.
Multiple Employers Within a Tax-Exempt Controlled Group Can Each Be Subject to Tax
Notice 2019-09 confirms that separate tax-exempt members of a controlled group can each be subject to the excise tax. (Think of a health system made up of multiple hospitals and other institutional health care providers.) This means that each tax-exempt employer must separately determine which of its employees are covered employees rather than determining the five highest paid employees across the entire integrated health system. So a controlled group of tax-exempt employers could potentially have several employers with dozens of employees earning compensation that triggers the excise tax. Consistent with this idea, the Notice includes rules for allocating the excise tax among a tax-exempt employer and related organizations. A careful application of these rules will be particularly important in a health system with covered employees who provide services to, and receive compensation from, more than one related organization.
The Good News?
The IRS expects to issue further guidance regarding the application of Code Section 4960. In the meantime, tax-exempt employers may determine the applicability of the excise tax based on a “good faith, reasonable interpretation” of Code Section 4960, informed by Notice 2019-09. Accordingly, tax-exempt employers who are subject to Code Section 4960 should adopt consistent and reasonable approaches to the application of the excise tax based on all of the facts and circumstances. For tax-exempt employers that are part of a large group, we suggest a coordinated strategy starting at the parent entity and working down from there.
BRYN MAWR, Pa., Dec. 3, 2018 /PRNewswire/ — The American College of Financial Services today announced a set of newly elected officers to its Alumni Board of Advisors, who will take their positions on January 1, 2019. The Alumni Association preserves and promotes The American College’s traditions, purposes and growth by strengthening The College’s relationship with alumni and friends.
The new Alumni Board of Advisors officers are:
President – Kevin Baldwin, CLU®, ChFC®, CAP®
Kevin Baldwin is the co-founder of B & L Financial Architects and has over 30 years of experience in the financial services industry. He has successfully built a career general agency for Penn Mutual, created a brokerage distribution channel for Aetna and Lincoln Financial Group, and established the National Life Academies and the Regional Rising Leaders Prospecting agent training schools. Most recently, Kevin oversaw MassMutual’s Department of Field Training and Development. Kevin earned his bachelor’s degree in history and political science from the University of Connecticut and has served on the Alumni Board for a decade.
Vice President – Lucas J. Quaccia, CLU®, CLF®, ChFC®
Luke Quaccia is a Managing Partner at New York Life, where he has worked since joining the organization in 2000 as an agent. After qualifying for Executive Council three times, Luke transitioned into his role as Partner in 2003, earned Senior Partner in 2008 and was promoted to Managing Partner of the Chicago North Shore General Office in 2009. In May 2015, he moved into his current role leading the Central California General Office. He earned his bachelor’s degree in economics from Stanford University and has served on the Alumni Board for five years.
2nd Vice President – Lynnette Muleady, MSM, CLU®
Lynnette is the Director of the Agent Development Center at State Farm and has over 17 years of financial services industry experience. Lynnette was appointed to her current role in March 2018, where she oversees a team that provides training and leadership development for future independent contract agents and interns. She earned her bachelor’s degree in international studies from Michigan State University and her master’s degree in management and leadership from the American College of Financial Services. She has served on the Alumni Board for three years.
Secretary – Matthew E. Schiff, CLU®, ChFC®
Matthew Schiff is the President of Schiff Benefits Group, LLC, where he specializes in the design, implementation, financing and ongoing administrative support of supplemental executive benefits programs. Matthew has nearly 30 years of experience in the financial services industry, and previously served as a Managing Director with NYLEX Benefits, a subsidiary and the executive benefits consulting arm of New York Life. Matthew earned his bachelor’s degree in economics from Tulane University and has served on the board for two years.
“We are excited to welcome this new leadership group for our Alumni Board of Advisors,” said George Nichols III, President and Chief Executive Officer of the American College of Financial Services. “Their expertise as forward-thinking leaders in the financial services industry will enable them to continue to fortify our alumni bonds and enhance our programs for the next generation of advisors and graduates.”
ABOUT THE AMERICAN COLLEGE OF FINANCIAL SERVICES The American College of Financial Services was founded in 1927 and is the nation’s largest nonprofit educational institution devoted to financial services. Holding the highest level of academic accreditation, The College has educated one in five financial advisors across the United States and offers two master’s degrees in management and financial services and prestigious financial planning designations such as the Retirement Income Certified Professional® (RICP®), Chartered Life Underwriter® (CLU®), Chartered Financial Consultant® (ChFC®) Wealth Management Certified Professional® (WMCP®) and education leading to the Certified Financial Planner™ (CFP®) certification. The College’s faculty represents some of the foremost thought leaders of the financial services profession. For more information, visit TheAmericanCollege.edu.