409A Direct can be engaged to provide guidance and consulting on designing and establishing a new DCP or auditing an existing plan.
Our approach is consultative and includes all aspects of deferred compensation including:
- Plan design and funding
- Implementation, enrollment, and plan administration
- Plan accounting
- Proxy disclosure
- Tax and payroll deductibility
- Plan documentation and security
- 409A compliance
Plans can be flexible and provide executives with an opportunity to choose from a variety of investment funds including fixed rate of return, deferring from multiple sources of income, and electing from a variety of payout options.
Audit and Analysis of the Following Areas:
Plan Funding
- Costs of funding structure – impact to P&L and cash flow
- Plan funding capacity evaluation
- Asset/Liability reconciliation
- DCP process and reallocations
- Benefit payout strategies
Plan Communication
- Quality/completeness of enrollment materials
- Frequency of enrollments and mediums of communication vs. best practice
- Alignment of plan communication with plan document
- Quality/accuracy proxy disclosures, excess interest calculations, forms and elections record keeping
Plan Design & Plan Mechanics
- Costs of funding structure – impact to P&L and cash flow
- Plan funding capacity evaluation
- Asset/Liability reconciliation
- DCP process and reallocations
- Benefit payout strategies
Investment Fund Performance
- Quality/completeness of enrollment materials
- Frequency of enrollments and mediums of communication vs. best practice
- Alignment of plan communication with plan document
- Quality/accuracy proxy disclosures, excess interest calculations, forms and elections record keeping
Plan Security
- Quality/completeness of enrollment materials
- Frequency of enrollments and mediums of communication vs. best practice
- Alignment of plan communication with plan document
- Quality/accuracy proxy disclosures, excess interest calculations, forms and elections record keeping
Audit Process & Deliverables
Company-Provided Information
- Current plan documents
- Census data
- Current funding structure information
- Current enrollment materials
- Participant information
The 409A Direct Value-Added Commitment
- Clarity and transparency of financial impacts of plan to corporation and risk mitigation
Plan Design
- Observations and recommendations to enhance plan design and features
- Analysis of proposed changes to determine participant and corporate impact
The 409A Direct Value-Added Commitment
- Maximum plan flexibility
- Maximum choice and options for participants
Asset & Liability Reconciliation
- Observations and recommendations to improve standard operating procedures for asset/liability management
- Analysis of P&L impact of timing differences based on overfunded or underfunded status
- Analysis of cash flow impact of deferrals and payouts
The 409A Direct Value-Added Commitment
- Clarity and transparency of financial impacts of plan to corporation and risk mitigation
Funding Analysis
- Observations and recommendations to improve current funding structure
- Best in Class Fund review with Morningstar ratings and comparisons
- Analysis of proposed changes
- Payout strategy analysis (cash flow and P&L impact)
The 409A Direct Value-Added Commitment
- Identification of practical cost savings and opportunities
- Ensure efficiency of tax structure
Plan Communication & Administration
- Observations and recommendations to improve participant planning tools and modeling capabilities
- Observations and recommendations to improve participant and plan sponsor IT platform (data and functionality)
- Confirmation of 409A Compliance
The 409A Direct Value-Added Commitment
- User-friendly modeling and functionality for participants
- Highly flexible administrative platform
Examples of Findings / Recommendations
- Change in participant investments not timely mirrored by plan assets resulting in P&L impact due to market performance
- Assets and liabilities not timely reconciled leading to over/underfunding resulting in unnecessary P&L impact
- Lag in asset funding to match participant contributions resulting in P&L impact due to market performance
- Plan assets not institutionally priced or not efficiently purchased
- Plan asset structure not tax efficient
- Plan distribution strategy (cash vs. trust assets) not favorable to P&L
- Allow for deferral of RSUs/PSUs which can make up a significant amount of one’s income
- Expand participant distribution strategies by deferral year and type
- Asset and liability not managed on one platform
- Product due diligence – evaluate cost of insurance, underlying insureds, CSV IRR, death benefits, carrier financial strength, performance of investment managers
- Align and integrate deferred compensation plans inherited from acquired companies
Securities offered through Lion Street Financial, LLC. (LSF), member FINRA & SIPC. Investment Advisory Services offered through Lion Street Advisors, LLC (LSA). LSF and LSA are not affiliated with 409A Direct, an affiliate of Mezrah Consulting. LSF, LSA, Mezrah Consulting and 409A Direct do not offer legal or tax advice. Please consult with the appropriate professional regarding your individual circumstances.