Local Office Blogs

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April 18, 2014

We recently discussed 5 strategies to consider prior to terminating your Defined Benefit Plan. However, in certain cases, terminating your plan will ultimately remove long-term risk and improve your organization's financial profile. A well though out strategy is essential to terminating a Defined Benefit Plan. Plan sponsors need to take into consideration plan funding, employee payouts, time line, termination options, labor agreements and company goals.

The following timeline shows the Defined Benefit Plan Termination Process:

Having the right partner guide you through the process can reduce workload and risk, ensure confidence, and bring clarity to the process. If you have questions regarding Defined Benefit Plans or the termination process, contact Linda Lauer, Managing Director and Employee Benefit Plan Specialist, at llauer@cbiz.com or 901.685.5575.

April 16, 2014

CBIZ MHM had the honor of participating as a National Sponsor in Bizwomen Mentoring Monday held at the Memphis Botanic Gardens on April 7, 2014.

This year was the first time the Memphis Business Journal hosted the event, and the response was tremendous. Tickets sold out, and 250 women (and men - see photo by Alan Howell, MBJ, at left) gathered for one-on-one mentoring sessions with some of the Mid-South's most influential women in business. The event coincided with Mentoring Mondays hosted across the United States in all the American City Business Journal (ACBJ) markets.

Linda Lauer, Managing Director in the Memphis office of CBIZ MHM and Executive Board member of CBIZ Women's Advantage, was one of 40 mentors who coached mentees in five-minute one-on-one conversations. Attendees ranged in age from high school students to experienced professionals, all seeking business or career advice. Mentoring Monday also featured Lori Greiner of hit TV-series Shark Tank, who spoke on entrepreneurship and the importance of having confidence in the business world.

Though the speed-networking sessions demonstrated quite literally the term "organized-chaos," the event's success was evident in the exchanges between the mentees and the mentors.

Look out for a follow-up post including video footage from the event. You can see more pictures and tweets from Mentoring Monday by searching for #bizwomen and #bizwomenmentoring on Twitter. Further information regarding women in business can be found on the ACBJ's new website: www.bizwomen.com.  

April 14, 2014

On March 31, 2014, Governor Andrew Cuomo signed the New York State fiscal year 2014-2015 budget bill. This tax reform includes a major overhaul of the New York Corporate income and franchise tax. The Governor cites simplification as the main driver for the changes, as he is determined to make New York more attractive to do business in.

With changes being phased in until 2020, the now complicated structure of the New York consolidated return will mean major changes for taxpayers. As the effective date of this legislation is March 31, these changes will need to be considered for first quarter provision calculations. The budget bill is expansive, as there will be changes outside of just income and franchise tax, such as other miscellaneous repeals, adjustments, and additions. However, for the purpose of this post, we will only cover those reforms made to income and franchise tax for corporate taxpayers.

The following highlights of the tax changes are effective for the 2015 tax year unless otherwise noted and will impact your organization if you do business in New York:

Income Tax

  • New York’s previous combined reporting method converts to a water’s edge unitary filing, largely following the federal return. The intercorporate rules for combined reporting have been repealed. Each entity of an entire group of entities is liable for the tax and franchise tax of said group and calculated on a combined basis.
  • Provisions establishing the Subsidiary Capital tax and modifications have been repealed. For all taxpayers, the income tax rate reduces from 7.1% to 6.5% starting in 2016.
  • MTA Surcharge tax rate increases to 25.6% for the 2015 tax year, and will then be adjusted by the Tax commissioner as necessary each year.
  • The Net Operating Loss (NOL) changes from pre-apportionment to post-apportionment and allows for an option of taking the NOL over 2 or 10 years as a subtraction. NOLs remaining after 2014 will have to be converted to post-apportionment NOLs.
  • Many receipts will now be sourced under Market-based sourcing instead of the historical cost of performance methodology.

Franchise Tax

  • Capital tax will be phased out between 2016 and 2020.
  • The cap on capital tax increases to $5 million beginning in 2015.
  • The fixed dollar minimum tax based on a taxpayer’s New York sourced receipts has been retained, but increases the tax incrementally up to $200,000 for taxpayer’s with over $1 billion of NY receipts (the maximum before was $5,000).

Keep in mind that both domestic and foreign corporations doing business, employing capital, owning or leasing property, or maintaining an office in New York State will be subject to New York’s Article 9-A Corporate Franchise Tax. The budget bill adds “deriving receipts from activity” in New York to this list, and a corporation will be considered active in this regard if it has $1 million or more in receipts within New York under the bill’s revised sourcing rules. Additional changes included in the budget bill will be important to take into consideration for taxpayers. At this point, New York City’s fiscal year ends June 30.

As New York City has a history of mirroring New York state tax policy, we could expect to see something pushed out in this year’s New York City budget. You can find detailed information on the 2014-2015 Budget Bill on New York State’s website.

If you have any further questions regarding this budget bill and its impending tax reform, contact Josh Littlejohn at jlittlejohn@cbiz.com or (901) 685.5575.

April 1, 2014

A Defined Benefit Plan can pose a serious risk to an organization’s financial profile, especially in volatile markets with low interest rates. There are multiple de-risking strategies that can be employed to decrease risk and improve an organization’s overall financial profile. Taking de-risking steps now  can help make plan termination an option in the future for your organization.

Consider these 5 strategies before deciding to terminate your plan:

1.   A Plan soft freeze - Some soft freeze strategies can decrease future costs by limiting participation, freezing service or limiting future pay increases among other options

2.   A Plan hard freeze - Hard freeze strategies can also decrease costs by freezing or changing benefit accruals for active employees, or eliminating future increases to retirees

3.   Annuity buy-in - Purchasing annuities from insurance companies as plan assets may provide additional cash flow into the plan

4.   Annuity buy out- Purchasing annuities from insurance companies for all or some participants; the insurance company then assumes all future payments, risks and expenses

5.   Lump sum payouts- Utilize different payout strategies to improve plan health; lump sums can be offered to all or select participants to reduce overall financial risk.

Terminating your plan will remove long-term risk and improve your organization’s economic profile. However, developing and enacting a strategy to improve the health of your organization and retirement plan will be essential to reducing workload and risk prior to plan termination.

If you have questions regarding Defined Benefit Plans or de-risking strategies, feel free to contact Linda Lauer, Employee Benefit Plan Specialist, at llauer@cbiz.com or 901.685.5575.    

March 20, 2014

Last month, the IRS Transfer Pricing Operations (TPO) team issued a Transfer Pricing Audit Roadmap. The roadmap is intended to assist IRS examination teams with developing and auditing transfer pricing issues.

Audit cycles will depend upon the complexity involved with issues under examination, but the IRS has developed a 24-month timeline to guide the process from fact finding to resolution. Examiners will be utilizing Forms 5471, 5472, 8833, 8858, 8865, 926, UTPs and schedule M-3 to perform initial analysis, issue identification, and risk assessment.

With the pragmatic revenue raising goals involved with transfer pricing audits, the TPO is focused on developing high risk issues around intangibles, hybrid instruments, and other perceived income shifting transactions. Also, taxpayers' worldwide effective tax rates and risk based assessments based on industry profitability ratios will be used to identify and select transfer pricing audit targets.

Transfer pricing is an area of risk quickly escalating beyond just tax and finance departments as executives are increasingly recognizing the significant financial risks, controversy risks, and reputational risks that must be strategically assessed and mitigated. Quality transfer pricing documentation provides the taxpayer the opportunity to tell a “compelling story” to the IRS and may provide protection from penalties if prepared contemporaneously.

Even with transfer pricing documentation in hand, taxpayers should be prepared for examiners to request increasing amounts of background documentation and source information, including:

  • Intercompany agreements
  • Financial and accounting data
  • Employee details
  • Entity structure information

The transfer pricing audit roadmap is one more step in the increasing focus the IRS is placing on transfer pricing, coinciding with mounting foreign country focus on transfer pricing. Countries are increasingly prioritizing transfer pricing enforcement as a necessary tax base defense and probable revenue raiser. Media attention is bringing transfer pricing risk into the forefront for multinational executives, and global initiatives such as the OECD Base Erosion & Profit Shifting (BEPS) project reflect the global appetite for transparency and corporate responsibility.

If you have further questions about the Transfer Pricing Audit Roadmap, contact Josh Finfrock at jfinfrock@cbiz.com or 901.685.5575.    

March 18, 2014

CPAs: The question is not if your client will incur a data breach but when your client will incur a data breach.

As a trusted advisor to your clients, you should be discussing and reviewing your clients’ cyber security postures throughout the year. The last thing you want to see is a data breach that lands your client on the front page of the news.  As we have learned recently with Target and Nieman Marcus, data breaches can be very costly. Many merchants are still not aware of their Payment Card Industry (PCI) compliance requirement and, therefore, have never reported their PCI status. Typically, when a merchant account is established, there is a legal statement on the Merchant Agreement that notes, “The merchant must maintain PCI compliance at all times.” Many merchants fail to recognize the importance of this legal statement. 

Today, failure to follow PCI compliance can lead the merchant to incur fines, or worst case, lose their ability to take credit cards. Those clients who have cyber insurance could also possibly jeopardize their policy coverage.

How can you help your clients avoid this fate?

As part of the year-in-review discussions with your clients, you should pay careful attention to identifying if they take debit/credit cards as a form of payment. Since any client who takes a debit/credit card must report their PCI compliance posture annually, this yearly touch presents an opportunity for you to ensure your clients are aware of the PCI compliance mandate. Take these proactive steps each year to reduce your clients’ risks of PCI non-compliance:

  1. Recognize whether your clients take debit/credit cards as a form of payment;
  2. Inform your clients that they must report their PCI compliance status annually, and failure to do so could result in fines or loss of ability to accept debit/credit cards.
  3. If your clients do need assistance with their PCI compliance, make sure to refer them to a Qualified Security Assessor Company certified by the PCI Security Standards Council.

Educating your clients is critical in limiting credit card data exposure and complying with the annual PCI mandate. The gamble of PCI non-compliance is not worth the risks.  

If you have further questions regarding PCI compliance or data security standards, visit www.cbiz.com/pci or email the CBIZ SAS team at pci@cbiz.com.

March 11, 2014

CBIZ MHM Memphis, along with Howell Marketing Strategies and First State Bank, hosted its second annual Women & Business Cocktail Party at Lexus of Memphis February 26, 2014.

This year, 80 women (and men) in business attended the event to mix and mingle over wine and delicious hors d’oeurvres catered by Parties in a Pinch. The event was held from 5-7 p.m., and the setting allowed for in-depth conversation and networking. While attendees were free to come and go as they pleased, most came and stayed past the 7 o'clock hour making new connections and discussing best practices.

The cocktail party preceded the Women & Business Seminar hosted by The Daily News at the Brooks Museum on February 27, 2014. The afternoon event featured keynote, Amy Howell, co-author of Women in High Gear. A Q&A session with panelists Robbin Hutton of Jackson Lewis, Leslie Johnson of Hutchison Leads, and our own Linda Lauer, Managing Director at CBIZ MHM Memphis and Executive Board member of CBIZ Women's Advantage followed Howell's presentation.

The two-hour seminar was a sold-out event. Eric Barnes, Publisher of The Daily News, noted in his opening comments that it was one of the largest events they had ever hosted.

Questions covered in the Q&A section were asked by both men and women and ranged from finding a work/life balance to handling a multi-generational workforce. Additionally, conversations centered around encouraging young women to work together and pursue careers in more traditionally male-dominated fields, such as accounting and law. The exchange was engaging, and Linda Lauer noted this forum for expression "can only further the cause for equal opportunity in the workplace."  You can read a full recap of the event here.

In its second year running, the two-day Women & Business event has shown tremendous growth in the Memphis community.  If you would like more information about CBIZ Women's Advantage, contact Linda Lauer at 901.685.5575 or llauer@cbiz.com.    

March 4, 2014

Are you filing Form 5500 for your health and welfare benefit plans? 

If you have over 100 eligible participants, you should be filing an annual Form 5500 with the Department of Labor (DOL). ERISA requires welfare benefit plans to file this form with the DOL. It must be filed by the last day of the seventh month following the plan’s year end; however, a plan sponsor can request an extension of up to two and a half months. Small plans (defined as having less than 100 eligible participants on the first day of the plan year) do not have to file a Form 5500 if they are fully insured, unfunded, or a combination of fully insured and unfunded. 

Often times, plan sponsors, who have not previously filed a Form 5500, fail to start filing the form once the eligible participants reach 100 or more. The ultimate responsibility lies with the plan sponsor to determine when they reach the threshold and are required to begin filing the Form 5500.

The penalties for failure to file the Form 5500 can be up to $1,100 per day on the plan sponsor. Fortunately, the DOL provides plan administrators reduced penalties for voluntarily complying with the annual filing requirements through the DOL’s Delinquent Filer Voluntary Compliance Program. Late filings submitted through this program are subject to a flat penalty amount [which is substantially less than the penalties that could be imposed by the DOL (and the IRS) for the failure to file outside of this program]. This penalty is generally capped at $2,000 per plan per year, with a maximum $4,000 penalty per plan (so, regardless of how many years are filed for the same plan, the penalty will be capped at $4,000).

If you have questions regarding filing an annual Form 5500, please contact Linda Lauer at llauer@cbiz.com or (901) 685.5575.  

March 3, 2014

As noted in our recent post on Understanding the 3.8% Medicare Tax on Net Investment Income, final instructions for Form 8960, the one page form used to report the calculation of Net Investment Income (NII), were yet to be released. On Wednesday night, February 26, 2014, the IRS posted the final instructions for the form, though the form itself has been finalized since early January.

Changes in the underlying worksheets in the instructions were mostly clarifying in nature, but a few changes could impact calculations of the tax in certain circumstances:

  • Line 5b adjustment: An active calculation has been added when you have a capital loss carryover to the next year. In the draft instructions, this line was N/A for 2013. This adjustment would apply in only limited circumstances, but if you have a capital loss carryover to 2014 and have any other line item adjustments to line 2, you should review these calculations.
  • Application of itemized deduction limited on deductions allocable to NII: This worksheet now includes a line for "gambling losses" which it did not include in the draft instructions. If you have a return with deductible gambling losses, you should review these calculations.

Lack of complete guidance from the IRS may have slowed down the filing process for some taxpayers, as software vendors were waiting for final instructions to be released. Now that additional guidance is available, we should see vendors begin to finalize the form over the next few weeks allowing all taxpayers to file returns that include Form 8960. To see both the draft and final instructions, click on the links below:

If you are an individual subject to the 3.8% Medicare tax, keep in mind that there are potential planning ideas such as examining passive and nonpassive activities, grouping elections for material participation and/or considering the election to become a “real estate professional.” These opportunities could provide you some relief by minimizing your tax, which we will expand upon in a future post.

If you have further questions about this newly implemented tax, feel free to contact Bryan Koch at bkoch@cbiz.com or 901.685.5575.

February 27, 2014

Are you prepared for a DOL audit? Are your records in good order?  If you are an employer, you need to make sure you are prepared for a review before heading into one.

Do you have good record retention? Ensuring you are adequately organized for what may be an inevitable audit is imperative.

Here are 4 items you may want to consider before you step into your 401(k) annual review:

1. Make sure you never throw away plan documents including the adoption agreement, amendments and summary of plan descriptions.

2. Keep a hold on annual filing reports for at least six years, even electronically filed 5500's. You will also want to keep any supporting materials for contributions, testing results, plan audits, summary annual reports, and distribution records.

3. Maintain participant records during employment and up to six years after their termination.

4. Do not throw away loan records even if you've paid it off. Six years is the minimum length of time you should hold on to them. Filing away all of the above hardcopy items can seem overwhelming in an age where computer files make everything easier to separate into online folders. For your paper documents, make sure you keep one file with multiple sections, and store this file in a place that is readily available to you. Use tabs to organize your materials and label them. For example, a documents tab can hold your tax filings, amendments and/or plan documents. An administrative section can take care of all your past audit results, minutes from past plan reviews, fee benchmarking, etc.

Do not let the U.S. Department of Labor catch you unprepared. Recognize where you may be lacking in your organizational skills, and take steps to improve them this year.

If you have further questions about Employee Benefit Plan Audits, contact Linda Lauer, llauer@cbiz.com or 901.685.5575.      


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