Opportunities are available for distributions from plans upon the participant's death

Article Abstract:

Tax law requires an employee to choose beneficiaries for qualified plan benefits and determine how and when benefits should be disbursed in the event of the employee's death. Laws encourage selection of spouses as beneficiaries, but spouses can be instructed to rollover benefits, or non-spouses or trusts can be designated. Employees can determine that benefits will be distributed in a lump sum immediately following death, or be disbursed in payments over a designated period of time during the beneficiary's life. Plan provisions applying to distribution of qualified plan benefits include: defined contribution plans, in which a predetermined amount of money is saved in a separate account; life insurance plans, which may include additional benefits if the employee dies prematurely; and defined benefit plans, which pay the beneficiary only when the participant reaches, or would have reached retirement age.

Usage, Death, Qualified benefit plans

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Payments were subject to excess parachute tax

Article Abstract:

The court ruled in 'Balch,' 100 TC No 21 that the payments received by the executives of an acquired company after a merger were excess parachute payments in accordance with Section 280G. Under Section 280G(b), parachute payments are considered to be in excess if they go beyond the portionof the 'base amount allocated to such payment.' Sections 280G(b)(3) and 280G(d)(1) provide that this base amount is the executive's yearly compensationreceived from the acquired company and which is includable in the taxpayer's gross income for the tax years in the base period. The payments did not qualifyas reasonable compensation because the change in the company's ownership was the only reason for the additional payments given to the executives. Because the payments were deemed to be excess parachute payments, their recipients weretherefore subject to the 20% excise tax imposed by Section 4999.

Golden parachutes

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Minimizing taxes on excess retirement distributions and accumulations

Article Abstract:

Excess distributions of a taxpayer's tax-deferred savings are subject to a 15% excise tax, and excess retirement accumulation is subject to an additional estate tax of 15% upon a taxpayer's death. Circumstances under which these additional taxes are imposed, along with methods by which they can be delayed or avoided, are discussed. Practitioners should be prepared to advise taxpayers facing income, excise, and estate taxes on the most favorable amounts and starting dates for taking distributions in light of their overall estate plans.

Analysis, Excise taxes, Deferred tax (Accounting), Excise tax

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