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5500 Preparer's Manual for 2012 Plan Years
The premier resource in the field of Form 5500 preparation, 5500 Preparer's Manual will help you handle the required annual Form 5500 filings for both pension benefits and welfare benefit plans.
The issuance of final Code Sec. 409A regulations by the IRS will not result in widespread termination of nonqualified executive retirement plans, according to the benefits consulting firm Buck Consultants. In Buck’s “2007 Nonqualified Deferred Compensation Survey,” 95% of the eighty organizations surveyed indicated that they intend to retain their nonqualified defined contribution plans, and 89% intend to retain their nonqualified defined benefit plans.
The release in April 2007 of the final 409A regulations (see CCH Pension Plan Guide ¶24,508O) has prompted about 30% of the plans to split their nonqualified plans into two parts, in order to take advantage of grandfathering provisions in the new rules which permit benefits vested as of December 31, 2004 to be governed under the old deferred compensation rules.
The survey noted the trend to permit a wider range of investment choices in nonqualified defined contribution plans than in the past. Seventy-three percent of respondents offer participants investment choices in their nonqualified defined contribution plans that are identical, or nearly identical, to those offered in their 401(k) plans.
Most employers continued to pay benefits from nonqualified defined benefit plans out of current corporate assets instead of funding such plans, according to the survey. Only 33% of sponsors of such plans documented their funding policies.
Due to the increasing level of liabilities for nonqualified defined contribution plans, 62% of sponsors of such plans funded them with mutual funds at 100% of pre-tax accrued liability using “rabbi trusts,” the survey found. Fifty-two percent of sponsors had written policy statements governing the funding of the plans.
The survey found that 89% of nonqualified defined benefit plans base benefits on final average pay, including annual incentives but excluding long-term incentives. The most common service period for full benefit accrual was 30 years, and the most common required age for unreduced benefits was 65. Most plans also permitted a reduced benefit at age 55.
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