Great overview by Eric Altholz about 4960 and the excise tax for not for profit companies.
Newly elected officers are financial services industry leaders who will continue to strengthen The College's nationwide alumni network You just read:
The American College of Financial Services Announces New Leadership for Alumni Board of Advisors
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.
SOURCE The American College
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The American College of Financial Services Announces New Leadership for Alumni Board of Advisors
I had the honor of speaking at the annual meeting of the Million Dollar Round Table in June of 2017. Below, please find an audio copy of my presentation and what we do for our clients.....
https://soundcloud.com/mdrtpresents/creating-unique-benefits-for-business-owners-and-their-employees
Matthew speaking in front of a packed room at the 2:00pm breakout session on Executive Benefits.
Sharing Knowledge after the session
Seeing old friends, Joe Jordan,
Jim Silbernagel, and Drew Shumski
Phantom Stock Plans
Phantom stock plans are written contractual arrangements between the company and the key employee which are designed to mimic actual stock ownership. These plans generally involve the granting of a stated number of stock units which are credited to the key employee’s account. Each unit has the equivalent value of an outstanding share of the employer’s common stock. The benefit provided to the key employee under the simplest form of phantom stock plan equals the appreciation in the value of the “phantom” stock between the date the employee is credited with the phantom shares and the date the benefit is paid.
Instead of merely paying a benefit equal to the appreciation in value of the “phantom” stock between the date the “phantom” shares are granted and the payment date, it is possible to structure the benefit so that it equals the entire value of the “phantom” shares as of the payment date. In addition, if the intent is to closely mimic actual stock ownership, the key employee’s “phantom” stock account could be credited with all cash, stock dividends, and stock splits which are attributable to the “phantom” shares.
Payment of the benefit generally occurs upon termination of employment as a result of retirement, death or disability, or at a specified future date, depending upon the company’s preference. The benefit can be paid out in installments (either in cash or common stock of the company) over a period of years. Generally, the benefits are paid in cash because the company does not want the key employee to actually have direct stock ownership.
Consequences of Phantom Stock Plan
A. Key Employee – No tax is payable by the key employee at the time the “phantom” stock is credited to the employee’s account. The employee is taxed when the benefit is actually paid and there is no further substantial risk of forfeiture.
If the plan is designed to make annual payments to the phantom plan participants to replicate the cash and stock distributions made to the company’s actual stockholders, the payments are taxable to the phantom plan participant as ordinary income and deductible to the company when paid.
B. Company – There is no deduction available to the company upon the initial crediting of the “phantom” stock to the employee’s account under the phantom stock plan. When the employee is paid the benefit, the company is entitled to a compensation deduction for the same amount as the employee includes in income.
C. Compliance with Employee Retirement Income Security Act of 1974 (ERISA) – Phantom stock plans are generally designed as “top hat” plans which are unfunded and maintained by the company for a select group of management or highly compensated employees. This exempts the plan from most of ERISA’s provisions. In order to comply with the ERISA reporting requirements for “top hat” plans, there is a one-time filing with the United States Department of Labor.
D. Informal Funding – While the payment of the plan benefits cannot be “secured”, it is possible to informally fund the benefit payments by having the company accumulate cash, or other asset, or purchase a life insurance policy on key employees’ lives. However, the policy cash value, as well as the death benefit, must be subject to the general creditor claims of the company in order to avoid the arrangement being treated as a “funded” arrangement.
E. Accounting – The company must charge its earnings with compensation expense over the period during which the phantom stock is outstanding in an amount equal to the fair market value of the value accrued to the employee under the plan.
F. Compliance with Section 409A – Section 409A of the Internal Revenue Code was enacted as part of the American Jobs Creation Act of 2004 and sets forth various requirements relating to deferred compensation plans. A phantom stock plan is a form of deferred compensation and will need to be carefully structured to avoid any adverse tax consequences to the key employee under Section 409A. If the plan fails to satisfy the requirements of that section, the key employee would be taxed on the unpaid amount deferred under the plan and would be subject to penalties. Correctly structured the plan should qualify under Section 409A so that there will not be a problem of the key employee having income before the benefit is actually paid.
Issues to Consider
For companies that want to offer their key employees the opportunity to share in the company’s success without giving up an actual equity stake in the company, phantom stock plans provide a great deal of flexibility. Because these plans are written contractual relationships, the company is not subject to the legal requirements which would normally apply if the key employee received actual stock. The plan may be creatively structured with measuring criteria and vesting schedules that act as “golden handcuffs” to retain valued employees and to align the key employees’ interests with those of the company.
In determining whether to implement a phantom stock plan, some of the considerations are as follows:
1. Which key employees will participate? In order to obtain exemption from most of ERISA provisions, the plan must be designed to benefit a select group of management or highly compensated employees.
2. When will the “phantom” shares be granted and when will they vest?
3. What will be the cutoff or triggering events requiring payment (i.e., death, disability, retirement, termination of employment or a specific date)?
4. How is the payment of the benefit to be made? Generally it will be made in cash as opposed to the company stock. Will the company have sufficient cash to pay the benefit?
5. Should the obligation of the company be informally funded through the acquisition of life insurance policies on the lives of those individuals covered by the phantom stock plan or with other investments?
6. Will the compensation liabilities shown on the company’s books as a result of the phantom stock plan have any adverse effects on the company’s ability to obtain financing?
7. Will the payment of the benefit be in one lump sum or spread over a period of time?
8. How many “phantom” shares will be initially granted? Will there be any crediting for the equivalent of any cash dividends, stock dividends, or stock splits which would be attributable to the phantom shares? Keep in mind that the “phantom” shares while not direct equity interests in the company, dilute the existing equity of the company’s shareholders by reducing assets by the value of the new obligations.
9. How will the valuation of the company be conducted in order to determine the value of the shares? The associated costs of the valuation need to be incorporated into the decision to implement a phantom stock plan.
Examples of plan designs:
- Employer will create a performance metric equal to a fixed dollar amount or percentage of profits, each year the value of the funds put aside will grow based upon the growth of the business or fixed rate of return
- Employer may assign a number of shares to the key person based upon a percentage of salary, which may or may not tie into the performance of the company.
- Employer might create a straight non-qualified “profit share” equal to a percentage of earnings and each year those funds could increase in value but not vest until retirement, change of control or death of the primary shareholder – thus creating a true golden handcuff.
An Employee Stock Ownership Plan, or ESOP, is one option if you are a looking to sell your business. Check out more about Employee Stock Ownership Plans with Dan Zugell of Business Transition Associates as it pertains to some options that closely held business owners have in today's economic environment.
https://www.businesstransitionadvisors.com/services/employee-stock-ownership-plans/
As a business owner, one of the best ways of maximizing the sale of your largest assets, is by exploring what an Employee Stock Ownership Plan (ESOP) can do for you.
When selling your company to an ESOP, you can sell part of your shares or all of your shares, are even schedule when the stock will be sold. When combined with the tax efficiency of the ESOP plan, and the ability to still control the operations of the company, the owner has the opportunity to have his cake and eat it too.
That said, ESOPs are not for everyone. And the discussion on this video will walk you through the high level benefits and pitfalls. If you are interested in learning more, then dive into the second and third video about the topic.
We look forward to hearing from you, and helping in a customized plan design that fits your needs.
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Check out the latest trends in Executive Benefits and the percentage of companies that are implementing them.
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There are three things that never seem to change here in America: no one lives forever, relationships rule and taxes aren’t going away. Death, taxes and relationships are here to stay, and they all play a role in the past, present and future of life insurance.
Yesterday, I called one of my widow clients. Her husband of 45 years passed away in a freak car accident, and now she’s trying to make it one day at a time. When our clients die, we walk in with cash to help when they need it the most. The loss of a loved one leaves a huge hole in our clients’ hearts. Life insurance can help them carry on when depression is knocking at the door.
Taxes are here to stay. The first federal income tax was enacted by President Abraham Lincoln in 1861 to assist in the Civil War effort and was meant to go away five years later. However, federal income taxes never went away. Today, with the national debt registering nearly $17 trillion of debt and $115 trillion of debt plus unfunded liabilities, we are beyond the point of no return.
In his best-selling book “Aftershock,” Bob Wiedemer writes, “Well, as everyone knows, there is no repayment plan.” He says there are still two bubbles that will burst in our economy in the next several years. First, the U.S. dollar will collapse, and second, U.S. government bonds will default. This means we will have to raise taxes to cover our obligations, period.
So what can you do about these severe economic problems? Relationships will open doors to help you serve your clients with additional security in uncertain times. You have the solution of bringing in tax-preferred cash into desperate situations when everyone else is asking clients to pay their bills. For pennies on the dollar, you can bring guarantees into your clients’ unstable financial worlds.
We are here on a mission to bring security and assistance to those who need it most. Life insurance is not bought; it is sold. Those sales happen through relationships between you and your best clients. You need to help clients buy life insurance so that you will walk in with tax-free cash when their loved one walks out.
Matthew Schiff, CEO of Schiff Benefits Group in Horsham, PA (contact Matthew), is one of the friendliest guys I’ve ever met. He’s a sanguine extravert who is, at his core, a quick-start entrepreneur. Matthew reminisced about his earliest recollection of working with his father in the life insurance business: “I remember when I was 13 years old, I was doing data entry on qualified plans. I would go in to work in the morning with my father, then take the train to the yacht club and sail through the afternoon, and my mother would pick me up.
“My father had a qualified-plan business because he had grown up in the qualified plans division of a major life insurance company. Dad’s first major non-qualified plan was written in 1973 with a Fortune 500 company.”
The world is changing all around us. Qualified plans have changed. Our clients’ income has changed. “What works for us today are our marketing campaigns to our centers of influence,” Schiff says. “We’re showing clients how to create executive benefit plans for their key employees. We set it up on a tax-efficient basis, and if they want to, they can fully recover their costs.
“If I look at what ties the past, present and future together, here’s what I see. In the 1970s, it was all about defined benefit income. Pre-1974 ERISA, it was all about creating plans to benefit the owners and key employees of companies. We had a long time-horizon. We looked out 10 years with a 7% interest rate. We got into the ’80s and ’90s, it was fast money.
Today, we are getting back to the defined benefit income; that’s what’s working today for us. Everybody wants the same thing today as they did in the 1970s — benefits for key employees. Today, we use non-qualified plans to fulfill what the owner and the key employees want to accomplish.”
Share your competence with those who can use it most. Help others solve their problems with tax-efficient, investment-grade life insurance.
by Brent Welch
Published in Life Insurance Selling Magazine, September, 2011
http://www.lifeinsuranceselling.com/Issues/2011/September-2011/Pages/Death-taxes-relationships.aspx?page=1