Employers provide employees with various employee benefits for many different reasons. One reason is often tax advantages. Generally, anything of value provided by an employer to an employee as part of the employment relationship will be income to the employee when provided, unless specifically excluded under the Internal Revenue Code. Qualified retirement plans such as pension, profit sharing, and 401(k) plans have tax advantages by complying with Internal Revenue Code section 401(a). These advantages include immediate tax deductions to the employer for employer contributions, tax exempt earnings by the plan, and tax deferral for the employees until the benefits are actually received. However, these benefits come at the price of the plan having to meet many complex legal requirements in the written plan document and in operation. These include minimum coverage and participation rules, minimum vesting rules, nondiscrimination rules, limits on the amount of compensation that can be considered under the plan and limits on the overall benefits under the plan. Failing to meet the rules to be a tax “qualified” plan means the plan does not enjoy the tax advantages. The Burton Law Firm can help employer’s design, adopt, and operate appropriate tax qualified retirement plans to ensure that they obtain the advantages of tax qualification. In addition, should a plan fall out of document or operational compliance, our attorneys have the expertise to correct the plan to preserve the tax advantages under the Internal Revenue Service’s Employee Plans Compliance Resolution System (EPCRS) whether it be the self-correction program, the Voluntary Correction Program (VCP) or the Audit Closing Agreement Program (Audit CAP).
In addition, those individuals with discretion over the operation of the plan or assets of plans governed by ERISA are subject to certain fiduciary duties and are prohibited from entering into certain prohibited transactions. These include ensuring that plan contributions are timely deposited into a trust for the exclusive benefit of plan participants, not permitting the plan to pay unreasonable compensation to any service provider to the plan, and certain reporting and disclosure rules.