Newspaper article THE JOURNAL RECORD

Survey Pins Major Tax Reform Impact on Deferred Salary Cap

Newspaper article THE JOURNAL RECORD

Survey Pins Major Tax Reform Impact on Deferred Salary Cap

Article excerpt

One of the major impacts of the 1986 Tax Reform Act is the $7,000 cap in the allowable amount of salary that may be deferred under Section 401(k) plans, according to an A.S. Hansen Inc. survey of senior corporate officers in the United States.

The results of Hansen's first in-depth poll of executives to determine their initial reactions to the act were released Monday. Responses to the survey were received from 347 of the 1,000 largest companies in the country.

"The Tax Reform Act represents a complete overhaul of the Internal Revenue Code," said Pierce Noble, Hansen vice president. "The fact is that corporations will be paying a larger percentage of overall income tax revenues than in the past."

"This survey indicates that most compensation and benefit programs will not be cut to compensate," Noble added. "Apparently, corporate management still believes that people are their most important asset."

As to the Section 410(k) setback, 76 percent of the respondents said that some of their executives would be affected. Almost half indicated that executives would be offered non-qualified deferred compensation opportunities intended to compensate for the cutback.

In that context, Hansen principals predict there will be more so-called 401(k) "miror plans" adopted as a result, which would provide benefits to highly compensated employees under a non-qualified plan that would be similar to those provided for under the qualified plan.

In other areas, the survey showed:

- Salary Deferrals - 23 percent indicated additional 1986-1987 compensation deferrals would be permitted.

"The idea," said Hansen consulting principal Ralph Strand, "is for executives to defer what would be 50-cent after-tax dollars in 1986 until 1988, when they will be worth either 67 cents or 72 cents, depending on the individual's marginal tax bracket in 1988. …

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