Hidden Taxation Risks: Employer Liability for Faulty FICA Taxation under ERISA
In Davidson v. Henkel, July 2013, the U.S. District Court held an employer liable under ERISA for failing to correctly apply a special timing rule for FICA taxation of deferred compensation. Payroll taxes for a retired employee were collected too late and thus came under the 'general timing rule' with 'pay as you go' submission of taxes.
The application of FICA taxes with a non-qualified arrangement is more complex than most tax specialists realize. Hence, employers should be aware of this case because the district court's decision highlights a previously obscure obligation that requires administering the plan in a manner that produces the most beneficial taxation. Employers should review the tax terms of their deferred compensation plans and any operational compliance requirements.
In this two-hour LIVE Webcast, The Knowledge Group has assembled a panel of key thought leaders and practitioners to discuss the Davidson v. Henkel ERISA case and to explain the Hidden Taxation Risks when Employer Liability for Faulty FICA Taxation under ERISA results in significant adverse tax consequences for employer and employee The panel of speakers also will provide best practices and sound compliance advise to mitigate the most common risks and pitfalls.
Some of the major topics that will be covered in this course are:
- Federal Insurance Contributions Act: An Overview
- Non-qualified Deferred Compensation
- ERISA: Recent Cases and Issues
- Identifying Retirement Plan Errors
- Identifying Significant and In-significant Failure
- Corrections of Retirement Plan Errors
- Compliance and Litigation Risks
- Best Practices
Sharon S. Almonrode, Partner
The Miller Law Firm, P.C.
Davidson v Henkel- How the defendant ran afoul of taxation on non-qualified retirement benefits. We will walk through the litigation, particularly focusing on these issues:
- The significance of the IRC special timing rule and the impact on FICA
- Top hat plans do not have the fiduciary protection of ERISA so how can you hold the
- employer liable for an error in managing the plan?
- How can an error in taxation of employee benefits create liability under ERISA's civil enforcement provisions?
- Is there a viable claim under ERISA's civil enforcement provisions for a reduction in net benefits due to the plan sponsor's error in applying taxes to retirement benefits?
- What equitable remedies are available under ERISA?
- Can a surcharge remedy apply to avoid ERISA's no monetary damages prohibition for non-fiduciary breaches that are not subject to ERISA § 409?
- Does estoppel apply?
- Is a tax gross-up an available equitable remedy to compensate for any tax consequences on a judgment?
Jonathan Zimmerman, Partner
Ivins, Phillips & Barker
- Background on the special timing rule for FICA taxation of nonqualified deferred compensation
- A discussion of the tax aspects of the Henkel case
- Potential implications of the case for liabilities arising under Code Section 409A
Who Should Attend:
- Retirement Benefits Lawyers
- Employment and Labor Lawyers
- Retirement Plan Sponsors
- In-House Counsel
- HR Personnel
- Other Related/Interested Professionals and Organizations
Sharon S. Almonrode is a senior litigation attorney and a partner at The Miller Law Firm. She has a complex litigation practice with an emphasis on prosecuting large, high-risk, significant damage exposure cases on behalf of public and private institutional funds and participants. Her practice includes ERISA and pension fund litigation and class action law. She has successfully represented clients in multi-million dollar cases, including the successful resolution of an actuarial claim on behalf of an ERISA pension plan for $110 million dollars. She was lead counsel on the Davidson v Henkel, C.A. 4:12-cv-14103 (E.D. Michigan) the pivotal class action case which led to this seminar. The Judge found that Defendant violated ERISA when it failed to properly assess FICA on the class’s non-qualified retirement benefits at the time of retirement. The case was settled with full recovery to the class.
Sharon S. Almonrode is a senior litigation attorney and a partner at The Miller Law Firm. She has a complex …
Jonathan Zimmerman is a partner in Ivins, Phillips & Barker’s Employee Benefits practice. His practice specializes in the development and maintenance of qualified and nonqualified plans, Code and ERISA compliance for retirement and health and welfare plans, and executive compensation, including Code section 409A. He works with large and small clients to develop benefit programs which suit their particular needs and routinely handles day-to-day administrative questions for all types of benefit plans. He has extensive experience drafting plan documents, amendments, employment agreements, summary plan descriptions and other participant communications.
Mr. Zimmerman is known for his ability to respond quickly and efficiently to client inquires with a focus on the client’s practical concerns. He constantly monitors new developments in employee benefits law and proactively alerts clients to new requirements and planning opportunities.
Jonathan Zimmerman is a partner in Ivins, Phillips & Barker’s Employee Benefits practice. His practice specializes in the development and …
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About The Miller Law Firm, P.C.
The Miller Law Firm, P.C. is one of the premier litigation law firms in Michigan and it is Michigan’s leading securities fraud law firm. The firm provides litigation services to ERISA and municipal pension and health and welfare funds for claims involving complex pension and benefit fund issues including breach of fiduciary duty and negligence. The firm has a national reputation and serves as co-lead counsel in major cases in courts throughout the country.
The Miller Law Firm is ranked Tier 1 in Detroit for Commercial Litigation by U.S. News, Best Lawyers.
It is the premier class action firm in Michigan and the firm has successfully obtained almost $2 Billion in settlements and/or verdicts on behalf of clients.
About Ivins, Phillips & Barker
Ivins, Phillips & Barker, founded by two of the original judges on the United States Tax Court in 1935, is the leading law firm in the United States exclusively engaged in the practice of federal income tax, employee benefits and estate and gift tax law. The firm’s lawyers are nationally recognized to be among the best and brightest in the country. Our decades of focus on the intricacies of the Internal Revenue Code have led numerous Fortune 500 companies, as well as smaller companies, tax exempt organizations, and high net worth individuals to rely on the firm for answers to the most complicated and sophisticated tax planning problems as well as for complex tax litigation.
We provide expert counsel in all major areas of tax law, and we offer prompt and efficient attention, whether with respect to the most detailed and intricate of issues or for rapid responses to emergency situations. The firm does not pretend to offer low billing rates. What we do offer is the combination of extreme efficiency with outstanding intellect and practicality. Totally absent is the costly overstaffing and layer upon layer of review that turns seemingly lower hourly rates into significantly larger final bills.
Our clients are not subjected to sales pitches and untoward tax shelter offerings. We view our exclusive responsibility as providing the highest quality, timely responses to clients’ needs. We also recognize an obligation to be proactive and bring potentially beneficial tax planning ideas to the attention of clients.