Nonqualified plans


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Milliman's experienced consultants translate complex and ambiguous regulations on nonqualified plans into meaningful compensation strategy.

Insight for 409A compliance

The addition of Section 409A to the Internal Revenue Code in 2004 has broadened the definition of nonqualified deferred compensation and tightened the rules that apply to these plans, pushing once compliant firms into legal limbo. Companies and nonprofits turn to Milliman for insight on how best to adapt to recent legislation that has drastically altered the rules governing certain stock options, severance pay, elective salary deferral, supplemental executive retirement plans, and other benefits. Even the Internal Revenue Service has contacted Milliman for permission to use one of our consultant’s white papers on 409A compliance as a training tool for the IRS agents who will be charged with the task of conducting 409A audits.

Our consultants:

  • Work closely with clients to review compensation plans for compliance
  • Identify all benefits subject to the 409A rules
  • Assist clients to clearly communicate these complex rules to affected employees
  • Analyze the impact of legislation on overall compensation strategy
  • Educate clients as to the importance of conducting 409A self-audits and, if needed, aid them in properly utilizing the 409A correction programs now offered by the IRS

Unbiased advice

Because Milliman does not sell financial products, we can provide a completely objective, independent diagnosis of your plans and strategy without predetermined recommendations. Instead, we listen to your concerns, ask in-depth questions, and provide advice based on your objectives, risk tolerance, and industry perspective.

Consulting beyond the apparent need

While reviewing a community service organization's compensation plans for compliance, Milliman consultants assisted the not-for-profit employer in formulating an action plan for amending its existing 457(f) plan to comply with the new 409A rules. We also pointed out that the employer had not been taking advantage of a 2002 change to the tax code. The change expanded the annual limits for 457(b) contributions by eliminating the requirement that such limits be reduced dollar for dollar by any deferrals the participants make to a 401(k) plan or a 403(b) for the plan year of reference.

A rearrangement of the retirement benefits into a two-tiered plan incorporating 457(b) contributions with the pre-existing 457(f) plan provided employees with a much more flexible benefits program that would enable them to minimize their current tax burden. By considering plan details in relation to the whole picture of compensation strategy, our experts were able to correct a critical weakness in the organization's strategy and increase the value of its employee benefits at very little cost.

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