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Opinions and views from expert CFOZone members.


Oct 22
2009

The perk that takes the taxpayer cake

Posted by Ron F in TaxRegulation, Intel, C-level executivesAccounting

Ron F

If you think bailed-out -bankers' bonuses are capable of producing a populist backlash, consider the supplemental executive retirement plans that most companies use to pump up senior executives' pay-outs. These are specially designed, tax-deferred plans that let executives get around limits on benefits they can get from regular so-called "qualified" plans in which all employees take part.

According to new research, the plans create an easy incentive for executives to engage in earnings management to pump up stock prices and their SERP benefits with it.

Sure, such findings can be dismissed as inconclusive, since correlation isn't necessarily an indication of cause and effect.

But as I've written before, these plans are subject to considerable abuse, especially by companies in trouble.

And while there have been some half-measures by Congress to crack down on such abuses, it seems as if their designers are way ahead of Washington. Natch.

In the latest twist, consultants have come up with a new way to fund these plans without triggering immediate tax on the benefits. While companies used to locate plans in off-shore tax havens to get around that limitation, they can now manage the trick by simply tapping their other employees' plans through "qualified" SERPs.

I'm not sure why Q-SERPs doesn't violate the tax law, nor is it clear how many companies take this route. But as the WSJ reported, Intel is among them.

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