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Section 409A of the United States Internal Revenue Code regulates nonqualified deferred compensation paid by a "service recipient" to a "service provider" by generally imposing a 20% excise tax when certain design or operational rules contained in the section are violated. Service recipients are generally employers, but those who hire ...
This tax is 12.4%, split evenly between employers and their employees at 6.2% each. Self-employed workers are responsible for both the employer and employee portions of the tax, so they pay the ...
A cafeteria plan or cafeteria system is a type of employee benefit plan offered in the United States pursuant to Section 125 of the Internal Revenue Code. [1] Its name comes from the earliest versions of such plans, which allowed employees to choose between different types of benefits, similar to the ability of a customer to choose among available items in a cafeteria.
The employer contributions are not tax deductible [27] Employees must pay taxes on deferred compensation at the time such compensation is eligible to be received (not just when it is actually drawn out). [27] Deferred comp is only available to senior management and other highly compensated employees of companies.
To help ensure that companies extend their 401(k) plans to low-paid employees, an IRS rule limits the maximum deferral by the company's highly compensated employees (HCEs) based on the average deferral by the company's non-highly compensated employees (NHCEs). If the less compensated employees save more for retirement, then the HCEs are allowed ...
A Top Hat plan is an unfunded plan maintained by the employer to provide deferred compensation to a select group of management or highly compensated employees. [14] If coverage extends beyond this group then the plan is not a Top Hat plan. [15] A plan with insurance contracts in which the premiums are paid by the employer is considered unfunded ...
Social Security tax: Both you and your employer contribute 6.2 percent of your wages up to a capped amount called the taxable maximum ($168,600 in 2024). This cap means that high-income earners ...
A highly compensated employee for the purposes of testing a plan's compliance for the 2006 plan year is any employee whose compensation exceeded $95,000 in the 2005 plan year. Therefore, all new hires are by definition nonhighly compensated employees. A plan could not give benefits or contributions on a more favorable basis for the highly ...