Starratt Earns QPA Designation

Heather M. Starratt, ERPA, QKA, a Manager in the Retirement and Medical Plans Department at Saltmarsh, Cleaveland & Gund has received the designation of Qualified Pension Administrator (QPA) from the American Society of Pension Professionals & Actuaries (ASPPA). Starratt is also a Qualified 401(k) Administrator (QKA) and an Enrolled Retirement Plan Agent (ERPA).

The Qualified Pension Administrator (QPA) credential was created by ASPPA to recognize professionals who are qualified to perform the technical and administrative functions of qualified plan administration. QPA's assist employers, actuaries, and consultants in performing functions such as determination of eligibility benefits, computation of benefits, plan recordkeeping, trust accounting and disclosure, and compliance requirements.

New FBAR Guidance Released

1. The IRS and FinCEN recently have been informed that individuals with signature authority over, but no financial interest in, foreign financial accounts are having difficulty compiling the information needed to file complete and accurate Foreign Bank Account Reports (FBARs) with respect to 2009 or earlier calendar years by the June 30, 2011 deadline, as previously extended by Notice 2009-62 or Notice 2010-23. Accordingly, the IRS and FinCEN are providing the following additional administrative relief in IRS Notice 2011-54:


• Persons having signature authority over, but no financial interest in, a foreign financial account in 2009 or earlier calendar years (for which the reporting deadline was extended by Notice 2009-62 or Notice 2010-23) will now have until November 1, 2011 to file FBARs with respect to those accounts.

• Administrative relief provided in this Notice does not affect the requirements and deadlines to provide information or file FBARs in connection with the IRS’s 2009 Offshore Voluntary Disclosure Program or the 2011 Offshore Voluntary Disclosure Initiative.

Observation: The deadline for reporting signature authority over, or a financial interest in, foreign financial accounts for the 2010 calendar year remains June 30, 2011 for those not covered by the narrow FINCEN Notice 2011-1 and -2 extensions described immediately below.

2. FinCEN Notice 2011-1 previously extended the FBAR filing deadline to June 30, 2012 for those officers and employees of a regulated entity who fall outside the reporting exceptions contained in the final regulations and have signature or other authority over a foreign financial account of an entity which is more than 50% owned, directly or indirectly, by the regulated entity; or officers or employees of one entity within a regulated entity’s controlled group who have signature or other authority over a foreign financial account owned by another member of the controlled group. This narrow exception covers basically U.S. officers or employees with signature or other authority over foreign financial accounts owned directly by foreign subsidiaries of the regulated entity.

3. FinCEN Notice 2011-2 has now also extended the FBAR filing deadline to June 30, 2012 for employees or officers of SEC registered investment advisors who have signature authority over, but no financial interest in, foreign financial accounts of persons that are not registered investment companies.

FinCEN Notice 2011-1 and Notice 2011-2 may be found at www.fincen.gov and their extensions -- which are longer but narrowly targeted -- are not reduced by the shorter but more broadly applicable IRS extension described further above.

If you have any questions on these filing requirements, please contact Saltmarsh, Cleaveland & Gund, (850) 435-8300.

© 2011 EisnerAmper LLP


This publication is intended to provide general information to our friends. It does not constitute accounting, tax, or legal advice; nor is it intended to convey a thorough treatment of the subject matter.

IRS Increases Mileage Rate to 55.5 Cents per Mile

IR-2011-69, June 23, 2011

WASHINGTON —The Internal Revenue Service today announced an increase in the optional standard mileage rates for the final six months of 2011. Taxpayers may use the optional standard rates to calculate the deductible costs of operating an automobile for business and other purposes.

The rate will increase to 55.5 cents a mile for all business miles driven from July 1, 2011, through Dec. 31, 2011. This is an increase of 4.5 cents from the 51 cent rate in effect for the first six months of 2011, as set forth in Revenue Procedure 2010-51.

In recognition of recent gasoline price increases, the IRS made this special adjustment for the final months of 2011. The IRS normally updates the mileage rates once a year in the fall for the next calendar year.

"This year's increased gas prices are having a major impact on individual Americans. The IRS is adjusting the standard mileage rates to better reflect the recent increase in gas prices," said IRS Commissioner Doug Shulman. "We are taking this step so the reimbursement rate will be fair to taxpayers."

While gasoline is a significant factor in the mileage figure, other items enter into the calculation of mileage rates, such as depreciation and insurance and other fixed and variable costs.

The optional business standard mileage rate is used to compute the deductible costs of operating an automobile for business use in lieu of tracking actual costs. This rate is also used as a benchmark by the federal government and many businesses to reimburse their employees for mileage.

The new six-month rate for computing deductible medical or moving expenses will also increase by 4.5 cents to 23.5 cents a mile, up from 19 cents for the first six months of 2011. The rate for providing services for charitable organizations is set by statute, not the IRS, and remains at 14 cents a mile.

The new rates are contained in Announcement 2011-xx on the optional standard mileage rates.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

Mileage Rate Changes

Purpose               Rates 1/1 - 6/30/11               Rates 7/1 -12/31/11

Business                           51                                         55.5

Medical/Moving               19                                          23.5

Charitable                        14                                           14

Happenings during a power outage...

During a 4 1/2 hour power outage yesterday... the audit staff got a bit mischievous... hope Brad was thristy when he returned to his desk!

Apparently squirrels should not be hanging out on power pole transformers ...

Elkins earns the designation of Certified Public Accountant (CPA) and promotion

Jen Elkins, with Saltmarsh, Cleaveland & Gund, has recently earned the designation of Certified Public Accountant (CPA) and has been promoted to Senior.  Elkins passed a four part exam that tested her knowledge in Auditing and Attestation, Business Environment and Concepts, Financial Accounting and Reporting, and Regulation.

Correcting 403(b) Plan Errors – The Current State

As a result of having gone through the process of the first financial statement audit of their 403(b) plans last year, many 403(b) plan sponsors have been confronted with operational errors discovered during the audit and are now wondering how to correct these errors without jeopardizing the tax favored status of their plans. The following is a general discussion of which errors may be corrected and how they may be corrected utilizing Internal Revenue Service (“IRS”) guidelines and correction programs.


Plan Document Errors

The IRS does not currently offer a program for 403(b) plan sponsors to correct plan document errors; however, they are in the process of updating their current correction programs under Revenue Procedure 2008-50, Employee Plans Compliance Resolutions System (“EPCRS”), to provide 403(b) plans with a correction procedure. What this means for now is that if 1) a 403(b) plan sponsor did not adopt and execute a written plan document that satisfied the legal requirements of Internal Revenue Code (“IRC”) section 403(b) and the final regulations thereunder by December 31, 2009, or 2) the plan sponsor had a plan document, but failed to operate the plan in accordance with the written provisions of the plan document, then the plan sponsor cannot, currently, submit such errors to IRS to correct the errors, which would give the sponsor assurance that such issues will not be raised by IRS during a future audit of the plan.

What a plan sponsor can do currently if they discover plan document errors is to contact their plan adviser to discuss a process for correcting the errors in a manner similar to what IRS would require of a plan sponsor that could utilize EPCRS to correct such errors. If a plan sponsor takes such action and documents the corrections, they have at least demonstrated a good faith effort to correct the error and comply with the law. The IRS will, generally, look favorably on such correction efforts and will be willing to work with the plan sponsor if the plan is audited.

Operational Failures

403(b) plan sponsors that have discovered errors in their plan’s operation may currently use EPCRS to correct the following types of errors:

     1. Excluding eligible employees from the plan

     2. Failure to make salary deferrals universally available to employees

     3. Failure to limit participant salary deferrals to the IRC section 402(g) limit (currently $16,500)

     4. Failure to limit employer matching contributions under IRC section 401(m)

     5. Failure to limit participant compensation for plan purposes to the IRC section 401(a)(17) limit              
         (currently $245,000)

     6. Failure to pay required minimum distributions to plan participants

     7. Failure to satisfy distribution restrictions on salary deferrals and employer contributions under IRC
         sections 403(b)(7) and 403(b)(11)

     8. Problems with direct rollovers of participant distributions

     9. Failure to meet the general nondiscrimination rules under IRC section 401(a)(4) as applied to 403(b)   
         plans

     10. Failure to meet the minimum coverage requirements of IRC section 410(b).

The correction of these types of operational failures may be pursued in a manner similar to that outlined in Revenue Procedure 2008-50 and may or may not require the plan sponsor to submit the errors to the IRS for review and approval. Plan sponsors should contact their plan advisers to determine how best to correct an operational failure under the IRS’ correction program and whether the situation requires a formal submission to the IRS to correct the problem.

Conclusion

Sponsors of 403(b) plans whose plans are required to file a Form 5500 and/or have audited financial statements for their plans should not ignore problems with their plans should they be uncovered in a future IRS audit. Rather a plan sponsor should take advantage of the programs available through EPCRS to mitigate their risk of penalties should the IRS audit their plan in the future.

For further information or assistance, please contact Saltmarsh, Cleaveland & Gund, (850) 435-8300.

© 2011 EisnerAmper LLP


This publication is intended to provide general information to our friends. It does not constitute accounting, tax, or legal advice; nor is it intended to convey a thorough treatment of the subject matter.

Dodd-Frank Implementation Update: SEC Listing Standards Regarding Compensation Committee and Advisor Independence

The Dodd-Frank Act was a game-changing event in executive pay – and a new season is underway. The Dodd-Frank Wall Street Reform and Consumer Protections Act of 2010 (“Dodd-Frank”) was initially about financial institutions reform but was expanded to address the executive pay policies and practices at all publically held companies.

The SEC has proposed listing rules for comment in reaction to Dodd-Frank that would apply to proxy filings made after July 16, 2012 pending the resulting rules by each independent exchange. The reality, however, is that institutional investors and shareholder groups may react sooner than this timeframe in their say-on-pay votes.

This is just the first installment by the SEC to address the provisions of Dodd-Frank. The issues that remain on the 2011 regulatory docket include pay equity, pay for performance, incentive payment clawbacks and stock option award hedging prohibitions. 2011 is shaping up to be a very memorable year in the history books of executive pay legislation and regulation.

What Has the SEC Proposed?

Section 952 of Dodd-Frank requires:

• compensation committee independence,
• compensation committee advisor independence,
• funding that will allow the compensation committee to retain independent advisors, and
• proxy statement disclosures on independence issues of compensation advisors to the compensation committee, conflicts of interest, and how those issues were resolved.

Who Does this Impact?

The SEC listing rules would only apply to companies with equity securities that are listed on public exchanges. The independence standards apply only to directors on the board serving on a committee that oversees executive compensation issues. The SEC calls this a “compensation committee” but this could be any committee that addresses executive compensation issues and the committee could address other additional functions or issues. The SEC’s committee independence requirements have five categories of companies that can be exempt from these standards:

• controlled companies (those owned 50% or more by another company or entity – this is a departure from the definition used for Audit Committee independence),
• limited partnerships.,
• companies in bankruptcy proceedings,
• open-end management investment companies registered under the Investment Company Act of 1940, and
• any foreign private issuer that discloses in its annual report the reasons that the foreign private issuer does not have an independent compensation committee.

In addition, the proposed rules could authorize the exchanges to exempt a particular relationship from the independence requirements that apply to compensation committee members.

Compensation Committee Independence

The proposed SEC listing rules prohibit an exchange from listing an equity security for a company that does not meet certain independence standards. To consider the independence of a director, the exchanges must consider:

• the sources of compensation of a director, including any consulting, advisory or compensatory fee paid by the company to such member of the board of directors and
• whether a member of the board of directors of a company is affiliated with the company, a subsidiary of the company, or an affiliate of a subsidiary of the company.

As with all listing standards, the exchanges would seek the approval of the SEC before adopting them. The exchanges could add to or broaden how director independence will be determined beyond those listed in these guidelines. Similar to the rules for audit committees, a compensation committee would have one year to cure a defect should a committee member cease to be independent for reasons outside of their control.

These proposed listing rules are generally similar to the mandates of Dodd-Frank. Unfortunately, we all may have to wait for the modified listing rules established by the exchanges before we get a complete picture the rules that will be in effect for each exchange and registrant.

Compensation Committee Advisor Independence

The proposed rules also would require the exchanges to adopt listing standards providing that a compensation committee may select a compensation consultant, legal counsel or other adviser only after considering the following five independence factors:

1. Whether the compensation consulting company employing the compensation advisor is providing any other services to the company.
2. How much the compensation consulting company who employs the compensation advisor has received in fees from the company, as a percentage of that person’s total revenue.
3. What policies and procedures have been adopted by the compensation consulting company employing the compensation advisor to prevent conflicts of interest.
4. Whether the compensation advisor has any business or personal relationship with a member of the compensation committee.
5. Whether the compensation advisor owns any stock of the company.

Again, the SEC has essentially mirrored the requirements of Dodd-Frank, thus allowing the exchanges themselves the ability to impose additional considerations. If the compensation committee determined that a conflict of interest did exist with its advisor, the company would be required to describe the conflict clearly, concisely and in a manner that can be easily understood. They would also have to describe how the conflict was addressed on a case-by-case basis (a generic reiteration of corporate policies and procedures will not be viewed as satisfactorily addressing this requirement).

Note that while advisor independence is not mandatory, the optics of a perceived lack of independence would likely have a very negative impact on future mandatory say-on-pay shareholder votes.

Compensation Committee Funding

The proposed SEC listing rules would require the exchanges to adopt listing standards providing that the compensation committee of a listed company:

• may, in its sole discretion, retain or obtain the advice of a compensation advisor,
• is directly responsible for the appointment, payment and oversight of compensation advisors, and
• must be appropriately funded by the listed company.

This funding requirement essentially places the responsibility of advisory independence and the resolution of possible conflicts with the compensation committee.

Proxy Statement Disclosures

Note that Exchange Act registrants subject to the federal proxy rules are already required to disclose information about their use of compensation consultants, including specific information about fees paid to consultants that the SEC added in late 2009. The proposed rules would modify existing rules to require disclosure about whether:

• the compensation committee has retained or obtained the advice of a compensation consultant and/or.
• the work of the compensation consultant has raised any conflict of interest and, if so, the nature of the conflict and how the conflict is being addressed.

The proposed rules also would eliminate the current disclosure exception for services that are limited to consulting on broad-based plans and the provision of non-customized benchmark data, but would retain the fee-disclosure requirements, including the exemptions from those requirements.

Conclusion

The rules of the game have changed: The best approach is to make sure you have a trusted advisor who understands and can relate the regulatory revolution that is approaching, is independent from other management advisors, and will offer advice that is grounded in business. An SEC registrant effectively has less than a year to coordinate advisors between management and the Board. The SEC’s proposed listing rules places the onus on the Board to find advisors they trust. The following is a list of questions a Board/Compensation Committee may find useful in this selection process:

• Which business advisory service firms have existing or recent historic relationships with management that would impair or might give shareholders/regulators the perception that there are independence problems?
• Do we need a second outside opinion to make sure the advice we are receiving makes sense and best fits our unique needs and circumstances?
• Can we stay with our existing advisors or do we need to find another source of business advice and review for the Board/Compensation Committee?
            o Do the alternative providers under consideration have the horsepower to
                         Remain in business over the long-term or does their viability depend on the talents
                                of less than a handful of specialists?
                         Track key accounting, tax and legal trends as they apply to executive pay issues?
                         Stand up to the demands of management and other dissenting directors?

Look for future updates as other major executive pay provisions of Dodd-Frank are enacted this year. Expect to hear more on pay equity, pay for performance, incentive payment clawbacks and stock option award hedging prohibitions as rules and requirements develop.


© 2011 EisnerAmper LLP


This publication is intended to provide general information to our friends. It does not constitute accounting, tax, or legal advice; nor is it intended to convey a thorough treatment of the subject matter.

Temporary Decrease in Self Employment Taxes

Did you know for 2011 the FICA portion of self-employment tax has decreased 2% for 2011?  The temporary rate is 10.4% (down from 12.4%) up to the social security limit of $106,800 on net earnings from self-employment.  If you expect to owe at least $1,000 in tax  for 2011 after taxes withheld, you are generally  expected to pay quarterly estimated tax payments.  If you base your quarterly estimated tax payments on 90% of the tax expected to be shown on your 2011 tax  return, you may be able to reduce your quarterly estimated tax based on your net income from self-employment by the 2% temporary FICA tax reduction.  Consult your tax advisor to see if you can reduce your quarterly estimated tax payments.

Report of Foreign Bank and Financial Accounts (FBARs)

U.S. persons are required to file FBARs Form TD F 90-22.1 annually if they have a financial interest in or signature authority over financial accounts, including bank, securities or other types of financial accounts, in a foreign country, if the aggregate value of these financial accounts exceeds $10,000 at any time during the calendar year.