Compliance August 25, 2015

Certain Identity Theft Benefits Not Considered Taxable

The IRS says identity protection received as a result of a data breach will not be considered taxable benefits.
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In Announcement 2015-22, the Internal Revenue Service (IRS) notes that data breaches at organizations’ recordkeeping systems can, and do, happen, and in response to such events, customers and/or employees are offered identity protection services.

The IRS says it will not assert that an individual whose personal information may have been compromised in a data breach must include in gross income the value of the identity protection services provided by the organization that experienced the data breach. Additionally, the agency will not assert that an employer providing identity protection services to employees whose personal information may have been compromised in a data breach of the employer’s (or employer’s agent or service provider’s) recordkeeping system must include the value of the identity protection services in the employees’ gross income and wages. The IRS will also not assert that these amounts must be reported on an information return (such as Form W-2 or Form 1099-MISC) filed with respect to such individuals. 

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The agency says the announcement does not apply to cash received in lieu of identity protection services, or to identity protection services received for reasons other than as a result of a data breach, such as identity protection services received as part of an employee’s compensation benefit package. The announcement also does not apply to proceeds received under an identity theft insurance policy; the treatment of insurance recoveries is governed by existing law.
Administration August 25, 2015

Newell Rubbermaid Announces Lump-Sum Offering

Employees with deferred vested benefits under the firm’s pension plan may elect to receive a lump-sum payment.
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Newell Rubbermaid Inc. intends to offer approximately 3,300 former employees who have deferred vested benefits under the company’s defined benefit pension plan a one-time election to receive a lump-sum distribution of the present value of their benefits by the end of 2015.

In an 8-K filing with the Securities and Exchange Commission (SEC), the company said this will reduce the size of its pension plan obligation and related expenses. The benefit obligation associated with these former employees is approximately $120 million, equivalent to about 13% of the company’s benefit obligation.                  

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According to the filing, based on the average acceptance rate of similar offers of approximately 50%, Newell Rubbermaid would recognize a one-time, non-cash settlement charge in the fourth quarter. At that participation level, the company would expect to incur a non-cash charge of approximately $35 million during the fourth quarter, but it noted that it will not be able to determine the amount of the fourth quarter charge until the offer is completed.

The Internal Revenue Service (IRS) recently amended regulations that prevent companies from making lump-sum offerings to pension plan beneficiaries who are already receiving regular payments of their benefits, but for beneficiaries whose payments have been deferred, lump-sum offerings can still be made.

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