For more information about FMS, click here.
New choices in the marketplace, means banks and credit unions may struggle to maintain market share for their checking accounts. One solution is to update outdated free checking accounts to a fee-based model. This fee income strategy simultaneously increases revenue and delivers these value-added services to customers. Find out more from this short Thought Leader Video from the Financial Managers Society then click here where you can join one of our upcoming Fee-based Income webinars and learn more about this strategy for change from your friends at IZALE.
For more information about FMS, click here.
The Risks and Rewards of Executive Benefit Plans
Just launched today, the experts at IZALE share in less than 4 minutes why executive benefit plans are an integral part of attracting, rewarding, and retaining top talent for financial institutions today.
by Scott Richardson, CEO & President of IZALE
The Tax Cuts and Jobs Act of 2017 (TCJA 2017) ushered in lower corporate and individual taxes for most. However, some changes are not so good and have a disproportionate impact on tax-exempt organizations like a credit union.
Some background. Deductions for compensation as a business expense are available through Section 162(m) of the code. For many years, deductions for compensation that wasn’t performance-based compensation were limited to $1 million. (No surprise – the vast majority of organizations paid nearly all compensation above $1m as performance-based compensation, thereby preserving the deduction.) TCJA 2017 eliminated the exception for performance-based compensation. So, if a for-profit employer pays $2.5 million in compensation this year to their highest paid executive, the employer would not be able to deduct $1.5 million that exceeds the limit – effectively costing the employer 21% more in federal income taxes.
New excise penalty on Credit Unions. Since credit unions generally don’t have deductions, the loss of one isn’t that concerning. In order to have “equal” treatment of for-profit and non-profit employers, TCJA 2017 imposes a 21% excise penalty on non-profit employers on any compensation they pay to an executive that exceeds $1 million. (This only applies to the top 5 executives.) If your credit union pays $2.5 million to an executive in total W-2 compensation this year, that would cost the credit union an additional $315,000.
Disparate impact on Credit Unions. The problems stems with how supplemental executive retirement plan (SERP) benefits are taxed in a tax-exempt credit union vs. a for-profit employer like a bank.
Options. SERPs in a credit union (aka 457f plans) remain a strong planning option but more attention will have to be paid to design for new plans. THERE WAS NO GRANDFATHERING UNDER TCJA 2017, so existing arrangements may be causing your credit union some pain. IZALE Financial Group has worked with multiple institutions since the enactment of TCJA 2017 to restructure credit union SERPs (aka 457f plans) to reduce – even eliminate – the excise penalty. While not all plans can be restructured, if you have a 457(f) SERP we welcome the opportunity to do a no-obligation review and share ideas we have successfully implemented at your peers.
Contact your IZALE representative directly or email us to learn how we can assist your Credit Union with these changes.
We are proud so share this amazing opportunity to learn from Scott Richardson, CEO/Founder of IZALE Financial Group, plus his remarkable team Chris Richardson, Jonathan Barnes, and Phil Aderton as to why they are the go-to BOLI experts and why BOLI is a viable solution today for financial institutions to attract, reward and retain their key talent – their most valuable asset.
Action Call and Urgent Message from Scott Richardson, President and CEO of IZALE Financial Group:
To Clients, other businesses and their stakeholders, and our industry colleagues: this is a must read summary of the House tax bill that was released on November 2, 2017.
While the contents of any bill are far from certain, if this bill becomes law, employers’ ability to retain and reward key talent will be profoundly impacted. Call your Congressman and Senators and express that concern! Please use our Social Media share buttons to educate your peers on this rapidly evolving issue.
This report provides K&L Gates' initial executive summary of Section 3801 of the Tax Cuts and Jobs Act, which would virtually eliminate the NQDC market and have broad impacts on a number of common compensation arrangements across our economy.
Section 3801 Increases Taxes on Savings and Fundamentally Alters Compensation Plans in America
Section 3801 of the Tax Cuts and Jobs Act created a new section, Internal Revenue Code §409B, which:
§409B Would Adversely Impact U.S. Businesses, Employees, and Shareholders
The following lists some of the potential adverse consequences of §409B:
§409B Would Effectively Eliminate Many Common Compensation Practices
The following widespread and long-standing forms of compensation would effectively be eliminated or dramatically curtailed by §409B:
Many of these practices are especially common among small and private businesses, where the potential for growth and innovation is high but cash-flow and liquidity are constrained. These practices are also broad-based and allow employees outside of executive management to share in the upside of a growing company and save for retirement.
Additional Details on Adverse Impacts and Unintended Consequences
This special edition WR Marketplace is created exclusively for R. Scott Richardson, IZALE Financial Group by experts at K&L Gates and the AALU staff.
The AALU WR Newswire and WR Marketplace are published by the AALU as part of theEssential Wisdom Series, the trusted source of actionable technical and marketplace knowledge for AALU members—the nation’s most advanced life insurance professionals.
About K&L Gates
K&L Gates is a fully integrated global law firm with lawyers located across five continents. Our broad global platform allows us to guide clients through the legal challenges inherent in the ever-changing international landscape. The deep latticework of relationships across our offices and practices enables our clients to respond to diverse legal issues and risks through the services of one law firm with a single communication. Read more here.
This information is intended solely for information and education and is not intended for use as legal or tax advice. Reference herein to any specific tax or other planning strategy, process, product or service does not constitute promotion, endorsement or recommendation by AALU. Persons should consult with their own legal or tax advisors for specific legal or tax advice.
IZALE Financial Group
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