Thursday, April 22, 2010

409A Causing Dismay in South Carolina

"Large payments to members of the Santee Electric Cooperative Board of Trustees that prompted some public backlash were the result of a one-time payment from a terminated financial plan, according to officials from the electrical co-op.

Santee Electric CEO Floyd Keels said the termination of a financial plan for board members who were non-employees of the co-op caused the inflated numbers on the organization’s 2008 report of board member compensation.

An IRS 409a Nonqualified Deferred Compensation Plan funded by contributions made from each of the members of the board who were not co-op employees was first implemented in 1989, Keels said. Tax advantages associated with the plan changed under new IRS regulations implemented in 2008, causing the co-op to cease using in the plan and distribute the balance to participating members.

Keels provided a March 23 memo to the board from Ronnie A. Sabb, the co-op’s attorney, explaining the changes. The memo states Santee Electric terminated the 409a plan and distributed the net value of the benefits to the participants in a one-time payment, the large amounts listed on the co-op’s 990-form from 2008.

“Those individuals were participants under the plan,” Keels said, referring to the people on the 990-form, posted online by the IRS, which received payment. “It was a self-funded plan not funded by the co-op.”"

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