Employee benefits

EXECUTIVE SUMMARY IN AN EFFORT TO CONTROL COSTS AND MEET the needs of a changing workforce, some companies have converted their defined benefit pension plans to a cash balance formula. This has raised concern in Congress, the IRS and other government agencies that the conversions might discriminate against older workers,

EXECUTIVE SUMMARY CASH BALANCE PLAN CONVERSIONS ATTRACTED public attention—and headlines—in 1999, when employee resistance forced IBM to modify its original proposal. Despite this, many companies have undergone successful conversions without negative publicity. COMPANIES THAT MADE A SMOOTH TRANSITION to cash balance plans achieved that outcome by addressing two critical issues:

EXECUTIVE SUMMARY A BUSINESS THAT WANTS TO CONTINUE PAYING WAGES to a key employee in the event of sickness or disability can do so only under an IRC section 105 qualified sick-pay plan (QSPP). If a business doesn’t have such a plan in place, wage payments are not tax deductible

EXECUTIVE SUMMARY EFFECTIVE IN 1999, The Small Business Job Protection Act of 1996 introduced safe-harbor formulas for 401(k) plans that eliminate the need for companies to perform annual nondiscrimination testing. These changes should allow small employers to contribute higher amounts on behalf of highly compensated employees (HCEs). NONDISCRIMINATION TESTS effectively

EXECUTIVE SUMMARY A VEBA MAY BE A GOOD WAY FOR CERTAIN BUSINESSES to cut taxes, provide benefits for employees—including owner-employees—and protect assets from personal and business creditors. VEBAs also can provide other benefits, including the opportunity for substantial estate tax savings. A VEBA TRUST CAN PROVIDE A VARIETY OF BENEFITS,

EXECUTIVE SUMMARY CHECK THE BALANCE SHEET. CPAs should evaluate the solvency of health care plans they are considering for their company, a client or themselves. Price and quality of care are important, but financial stability over time may be even more so because instability can cause prices to go up