William Byrnes' Tax, Wealth, and Risk Intelligence

William Byrnes (Texas A&M) tax & compliance articles

TaxFacts Intelligence: Court Defines ‘Retirement’

Posted by William Byrnes on April 4, 2022


Robert and I have an exciting announcement for our Tax Facts subscribers. In February, our publisher ALM will be launching Tax Facts Premium, a new add-on product that provides valuable tools and content, including:

  • calculators (tax, retirement income, investment, personal finance, business, and more)
  • practice aids (buy sell agreements, as well as documents related to business life insurance, estate planning, retirement planning, and employee benefits)
  • soft skills (practical guidance on how to build and maintain clients)
  • archives (archived content including featured articles and the intelligence weekly).

Also, the Texas A&M graduate program for tax, wealth, and risk management is accepting applications from financial professionals with at least five years of industry experience for the summer. Even though our graduate program has grown to over 750 enrollment, the typical enrollment for a course section is between 20 and the maximum of 30 so that each student receives meaningful feedback throughout the course from the full-time academic faculty and renowned professional case study leaders, and each other via teamwork and peer review. Learn more about how we educate and position the industry’s leaders: https://law.tamu.edu/distance-education

Prof. William H. Byrnes         Robert Bloink, J.D., LL.M.

This week, we have some important IRS and court updates regarding interpreting the definitions of two key terms that apply in the retirement plan context–“retirement” and “compensation.”  The IRS has also released the limitations that apply under IRC Section 280F for taxpayers with certain luxury passenger auto leases and depreciable passenger automobiles.  Read on for more.

Second Circuit Weighs in on “Retirement” Definition for Defined Benefit Plan Purposes.  The Second Circuit recently affirmed a lower court ruling dealing with the definition of “retirement” in a situation involving a multi-employer defined benefit pension plan.  In Metzgar v. U.A. Plumbers & Steamfitters Local No. 22 Pension Fund, the plan set the normal retirement age at 65 but also contained a special early retirement option for employees after their 55th birthdays.  The special option was available if the employee’s combined age and years of service was at least 85.  For many years, the plan interpreted the rule to not require an employee to stop working to receive plan benefits (the employee only had to stop working in a “disqualifying position”).  So, participants could receive benefits and work in management-related positions at the same time.  Later, the plan changed the rules to require employees to stop working to receive benefits.  The court agreed that the reinterpretation was required to protect the plan’s tax-exempt status, and that the plan did not violate the plan participants’ rights by requiring the employee to stop working in order to continue receiving plan benefits.  For more information on the rules governing multi-employer retirement plans, visit Tax Facts Online. Read More

IRS Releases 2022 Depreciation Limits for Certain Passenger Automobiles.  Revenue Procedure 2022-17 provides the depreciation limits for certain passenger automobiles first placed into service during 2022, and also provides the amounts that must be included in income for taxpayers who lease certain automobiles beginning in 2022. For passenger automobiles purchased after September 28, 2017 and first placed in service in 2022, and to which the extra Section 168 depreciation deduction does apply, the first year limitation is $19,200, decreasing to $18,000 in year two and falling to $10,800 in year three.  For all subsequent years, the limit is $6,460.  If no bonus depreciation applies, the limits are $11,200 in year one, $18,000 in year two, $10,800 in year three and $6,460 in all subsequent years.  For taxpayers with a lease term that begins in 2022, the dollar amounts that must be used to determine income inclusion begin at $56,000 and can be found in Table 3 of Rev. Proc. 2022-17.  For more information on the depreciation rules and limits that apply to passenger automobiles, visit Tax Facts on Insurance and Employee Benefits Online. Read More  

Is Your Lump Sum Payout of Unused Vacation Time “Compensation” for Retirement Plan Purposes?  It’s been a strange couple of years in the workplace.  Many American workers have been unwilling or unable to use their vacation time and are now looking at a situation where their employers may be compensating them in the form of a lump sum payout based on company policies.  That can leave clients wondering whether that payout counts as “compensation” for purposes of determining the retirement plan contribution limits.  Lump sum payments of unused vacation are treated as supplemental wages that are subject to Social Security and Medicare taxes.  That means that a lump sum payout of unused vacation should also be included as “compensation” for retirement plan purposes unless the specific retirement plan actually provides otherwise.  So, unless the payout is specifically excluded by the plan, taxpayers should be entitled to include that compensation when determining their permissible retirement plan contributions for the year.  For more information on the definition of “compensation” and relevance for Section 415 contribution purposes, visit Tax Facts Online. Read More 

Look in your Tax Facts Online app for our continuing analysis of 2022 legislative and regulatory updates, weekly intelligence, and the impact on planning for a client’s wealth preservation and growth.

Wealth & Risk Management Degree for Industry Professionals – learn about the graduate degree here: https://law.tamu.edu/distance-education

Texas A&M, operating budget of $9.6 billion (FY2022) and capital budget of $1.9 billion, is #1 for U.S. public universities, one of only 60 accredited U.S. universities of the American Association of Universities (R1: Doctoral Universities – Highest Research Activity) and one of only 17 U.S. universities that hold the triple U.S. federal grant of Land, Sea, and Space! The law school, ranked in the 1st tier, has the #1 bar passage in Texas, and #1 for employment in Texas (and top 10 in U.S.)

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