Henderson Franklin’s Employment Law and Workers’ Compensation teams invite business owners, HR professionals, in-house counsel and those wanting to stay up-to-date on issues impacting the workplace to attend the 28th Annual HR Law & Solutions Seminar on Thursday, March 26, 2020, at the Marriott Sanibel Harbour Resort & Spa in Fort Myers, Florida. For more details, please click here to view or download the seminar brochure.

The day will kick-off with registration and a continental breakfast at 7:15 a.m. sponsored by Sanibel Captiva Community Bank. After the morning session, attendees will enjoy a plated lunch, sponsored by BKS-Partners, and conclude around 3:00 pm after an incredible inspiring session delivered by former US Black Hawk Helicopter Pilot, Elizabeth McCormick, sponsored by Contemporary Business Resources. Topics and speakers include:

A Day in the Life: Practical Tips for Today’s Employers


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iStock_000015122897XSmallIn 2014, S Corporation returns greatly outnumbered both “regular” corporate returns and partnership returns. Perhaps one of the reasons that S Corporations continue to be so popular, particularly relative to partnerships, is the ability in some circumstances to limit or avoid the imposition of self-employment tax on corporation income that passes through to the individual shareholder. For 2014 the self-employment tax rate was 15.3%, with the elimination of the (larger) Social Security component on compensation over $117,000.

The S Corporation Approach to Self-Employment Tax

An individual partner in a partnership is generally subject to this 15.3% self-employment tax on the pro rata share of the partnership’s income passed through to them, subject to the limits described above. However, the rules under Subchapter S differ significantly. If an S Corporation shareholder provides services to the corporation – let’s call them an “owner-operator” – and is paid a salary, that compensation is subject to FICA tax (the equivalent of self-employment tax) as if the owner-operator were an employee of an unrelated corporation. Alternatively, the corporation could not pay the owner-operator a salary but instead simply distribute cash to the owner-operator on a pro rata basis. As a shareholder is already subject to income tax on his or her pro rata share of the corporation’s net income, whether distributed or not, this distribution would not be separately taxed and, more importantly, would not be subject to the 15.3% self-employment tax. Few S Corporation owner-operators would ever take even $1 as compensation if this would be the actual result.
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True, tax-exempt organizations are altruistic in nature. But even a tax-exempt organization needs to attract and retain talent.  And altruism will only go so far in landing a key executive hire. So what can charitable institutions do to give themselves a bit of an extra edge when it comes to hiring a key executive?

One option is to provide deferred compensation outside of the “typical” 403(b) or 401(k) Plan. This additional deferred compensation is often referred to as “non-qualified deferred compensation.” This post will cover the basic, non-qualified deferred compensation (“NQDC”) alternatives available to a private (i.e., non-governmental) tax-exempt organization.

Basic Rules Applicable to Tax-Exempt Organizations

Any NQDC plan sponsored by a tax-exempt entity must comply with the rules of Section 457 of the Internal Revenue Code. There are basically two (2) types of Section 457 arrangements that a tax-exempt entity can sponsor, commonly called “Section 457(b) Plans,” and “Section 457(f) Plans.”
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