Top-heavy plans: minimizing the adverse effects under the new law and final Regs
Article Abstract:
The effect of the Final Regulations issued in 1985 relative to tax accounting for top-heavy employer-provided pension and retirement plans and the accounting and taxation rules contained within the Deficit Reduction Act that affect this area are discussed in detail. Under the rules and the law cited, top-heavy plans must use accelerated vesting schedules when determining employees' benefits, must adhere to certain special compensation limits and must provide benefits that comply with legal limitations as to amounts. Among the legal concepts defined with regard to plan accounting and vesting are: key employees, top-heavy status, minimum benefits and minimum contributions. Planning alternatives are described for plan managers with top-heavy plans.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1985
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New nondiscrimination rules require careful review of all retirement plans
Article Abstract:
The Tax Reform Act of 1986 prohibits qualified retirement plans from discriminating in favor of highly compensated employees. Annual compensation for individuals in excess of $200,000 must be excluded. Highly compensated employees are now defined under Section 414(q) of the Tax Reform Act. The nondiscrimination rules will not go into effect for many plans until 1989, but 401(k) plans and matching employer contribution plans will be subject to the new rules as of 1987.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1987
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Safe harbor provided for partnership allocations based on nonrecourse debt
Article Abstract:
Regulation No. 1.704-1(b)(iv) issued by the IRS has substantially changed individual deductions for partnership allocations of nonrecourse debt. Partnerships must amend their allocation agreements to conform to this regulation, or the IRS will reallocate the partners' nonrecourse debt deductions. The safe harbor rules, minimum gain chargeback provisions, and rules regarding nonrecourse loans are discussed.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1986
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