White Papers

Financial Accounting Treatment of Non-Qualified Deferred Compensation Plans

Under generally accepted accounting principles (“GAAP”), the assets and liabilities associated with a Non-Qualified Deferred Compensation arrangement are accounted for and reported independently. This memorandum discusses the general accounting treatment for both.

Cash Management Considerations for ESOP Repurchase Obligations

Funding a plan with company stock can be a great finance and employee motivational tool. But eventually, the piper must be paid. Employees will eventually terminate employment and want a cash payout from the ESOP.

Focus on Compliance: Applying Non-Qualified Plan Deferral Elections to the Final Payroll Period for

Under Code Section 409A, an annual salary deferral election generally applies to all salary earned during the calendar year. If this concept were to apply to salary earned during the last payroll period of the year that crosses into the next year, human resources would need to  identify the salary earned on or before December 31 and the salary earned after December 31, apply the appropriate deferral elections to each portion, (iii) communicate the two components of deferred compensation to the plan’s record keeper in order to assign the appropriate payment schedule to each portion and then (iv) communicate the combined deferral amount to payroll for processing.

Non-Qualified Plan Distributions: State Income Tax Sourcing Rules

Are distributions from Non-Qualified Deferred Compensation Plans subject to state income "source" tax (i.e. can the state in which the income was earned impose its state income tax on the distributions from the plan, even though the recipient resides in a different state when reeicing the distribution)? The answer is "yes" unless the distribution meets one of two requirements.

The Key Employee Six-Month Rule and its Application to Public Company Sponsors of NQDC Plans

Public companies sponsoring non-qualified deferred compensation plans are subject to a special rule that requires payments to certain employees (called "specified employees" in IRC 409A) to be delayed for six-months following a seperation from service. This summary is intended to assist sponsors in developing administrative procedures for compliance with this special rule.

Deferring Equity-Based Compensation

This whitepaper addresses the tax, ERISA, accounting and business considerations associated with deferring equity-based compensation.

FICA Taxation of Deferred Compensation

This paper is intended to summarize for plan sponsors and their financial advisers the FICA taxation of deferred compensation, including the rules for when deferrals are considered "wages" subject to tax and the principles for determining how the tax is calculated.

The Case for Active and Passive Management

Passive investment options continue to grow in popularity and now represent approximately 40% of total equity fund assets1. They are efficient at providing broad exposure to a number of asset classes at a low cost. Active investing provides the potential for higher returns, but at the risk of underperformance, particularly during extended bull markets. Active management benefits from risk oversight and may provide downside protection relative to market benchmarks. We expect the performance of active and passive managers to be complementary over a full market cycle. Retirement plan sponsors that offer a diversified menu of active and passive managers to participants may provide smoother long term returns, as well as gain exposures to asset classes that are otherwise unavailable passively.


 

Correcting a Failure to File the DOL Top Hat Exemption Letter

Top hat retirement plans (unfunded arrangement that benefit a "select group of management or highly compensated employees" and more commonly known as "Non-Qualified deferred compensation plans") are exempt from most of the requirnment of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), including the obligation to file annual information returns with the IRS on Form 5500.

Investment Manager Due Diligence Process

Newport Group believes that investment managers should be selected and monitored using a well-defined process. Our dedicated team of research analysts combines both quantitative analysis and qualitative research in order to identify investment managers we believe will provide superior long-term performance.

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Newport Group, Inc. and its affiliates provide recordkeeping, plan administration, trust and custody, consulting, fiduciary consulting, insurance and brokerage services. Fiduciary consulting services are provided through Newport Group Securities, Inc., an SEC-registered investment adviser and FINRA-registered broker-dealer, and InterServ, LLC, an SEC-registered investment adviser. Newport Group Securities, Inc. and InterServ, LLC are affiliates of Newport Group, Inc. All securities transactions are provided through Newport Group Securities, Inc., in its role as broker-dealer. All fiduciary consulting services are provided through the registered investment adviser. when offering variable insurance products, Newport Group Securities, Inc. acts solely in its capacity as a broker-dealer.
Trust and custody services provided by Newport Trust Company, a New Hampshire state chartered trust company and wholly owned subsidiary of Newport Group, Inc.