EBN Design


The Luck of the 13th
Feel that this February’s Friday the 13th has caused you bad luck? Yes, Friday the 13th has been said to be an unlucky day where abnormally unlucky things can happen. Maybe some of you lost your keys, were stuck in a longer-than-usual traffic jam or got one too many paper cuts at the office but, perhaps, we should be thankful that those small misfortunes are all that has happened to us on such an unlucky day.
Come April 13th--Friday the 13th--2029, we will all be counting our blessings that those minor mishaps are the only ones bestowed upon us. On this day millions of people will step outside of their homes, look up and be astonished at their good luck. This day will bring a light, gliding across the sky that will be brighter than most stars seen by the naked eye, and faster than many satellites orbiting around Earth.
You’re probably asking yourself, “What’s so special and lucky about that”? Well that luck is asteroid 2004 MN4, not hitting Earth.
For a while, astronomers thought that it might. Back in 2004 on Christmas Eve, Steve Chesley, Paul Chodas and Don Yeomans at NASA’s Near Earth Object Program office concluded there was a 1 in 60 chance that 2004 MN4 would collide with Earth on April 13, 2029.
The asteroid is estimated to be about 320 meters wide, which as Chodas stated, would be “enough to punch through Earth’s atmosphere, devastating a region of, say, Texas, if it hit land, or causing widespread tsunamis if it hit ocean.”
Instead, what we’re going to have is a jaw-dropping close encounter. Astronomers ruled out a collision when they discovered pictures of the asteroid taken, inadvertently, before the asteroid’s official discovery. The extra data surfaced from these pictures was enough to conclude no such collision was going to happen.
However, on April 13, 2029, the asteroid will soar past Earth only 18,600 miles above the ground closer than most satellites, which orbit at 22,300 miles above the ground. Jon Giorgini of NASA’s Near Earth Object Program said “at closest approach, the asteroid will shine like a 3rd magnitude star, visible to the unaided eye from Africa, Europe and Asia—even though city lights.” This is extremely uncommon. “Close encounters by objects as large as 2004 MN4 are currently thought to occur at 1000-year intervals, on average.”
So next Friday the 13th, take those small unlucky happenings and be thankful that those are all that’s coming your way. Friday the 13th might not be as bad as we all thought.
 

Section 409A - Are You Ready For It?

Plan sponsors have had over four years to become familiar with the new Section 409A operation rules, and as of December 31st, 2008, existing non-qualified deferred compensation arrangements are also required to be in documentary compliance. The rules are long and exhaustive, however, the IRS recognizes that certain unintentional operational violations may occur that should be resolved without penalty. To that end, they have issued Notice 2008-113, which outlines correction procedures. 

A violation of Section 409A will result in all amounts deferred under a non-qualified deferred compensation plan for all taxable years being currently includable in gross income, to the extent not subject to a substantial risk of forfeiture, and not previously included in gross income. Section 409A also imposes an additional 20% tax penalty, plus an additional interest penalty on such amounts. 

Notice 2008-113 includes the following: 

  • The relief is provided only with respect to unintentional and inadvertent operational failures.
  • The plan sponsor must take commercially reasonable steps to avoid recurrence of the operational failure and maybe asked to provide documentary evidence with such steps taken.
  • The plan sponsor and participant must satisfy certain information and reporting requirements.
  • The corrections program may not be used if the participant is under examination with respect to his federal income tax return for the year in which the failure occurred. 

It is important to also note that Notice 2008-113 does not provide relief from documentary failures to comply with Section 409A. This puts the onus on the employer to make sure their plan document is in place and up to date. 

As always, if you have questions or concerns about your non-qualified deferred compensation plan, please do not hesitate to consult with an EBN Producer.