Sample Client. Executive Deferred Compensation Plan

Transcription

1 INSURANCE INFORMATION and SUGGESTED ACCOUNTING ENTRIES Prepared 1/12/218 for Sample Client Executive Deferred Compensation Plan For the Period: 1/1/217 through 12/31/217 Prepared by The Pangburn Group P.O. Box 9 31 Major Parkway New Roads, LA Phone: (8) Fax: (225) info@pangburngroup.com Website: IRS Circular 23 Disclosure: To comply with regulations issued by the IRS concerning the provision of written advice regarding issues that concern or relate to federal tax liability, we are required to provide to you the following disclosure: Unless otherwise expressly reflected herein, any advice contained in this document (or any attachment to this document) that concerns federal tax issues is not written, offered or intended to be used, and cannot be used, by anyone for the purpose of avoiding federal tax penalties that may be imposed by the IRS or promoting, marketing, or recommending to another party any matters addressed in this document or any attachment.

2 Table of Contents Introductory Reports: Preface 1 Accounting Reports: Suggested General Ledger Accounting Entries 2 Individual Schedule 3 Management Reports: Plan Design Assumptions 4 Inventory 5 Premium Payments 6 Net Effect On Earnings 7 Historical Accounting Entries by 8 Historical Accounting Entries 9

3 PREFACE The following reports are designed to assist Plan Administrators and other parties interested in financial recordkeeping. All reports are based on our current understanding of tax law, Generally Accepted Accounting Principles (GAAP), and information furnished by the Plan Sponsor and any applicable vendors, mutual fund wholesalers, life insurance carriers, or other professional advisors. We do not accept liability for any direct, incidental, or consequential damages or claims resulting from the use of these reports. While the information contained herein is believed to be accurate, all users of this information are encouraged to rely on their own accounting, tax, and legal professionals for exact application and interpretation. IMPORTANT REMINDER FASB Accounting Standards Codification (ASC) On June 29, 29, the FASB released Statement No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles, which establishes the Codification effective for annual periods ending after September 15, 29. This project created a single source for all U.S. Generally Accepted Accounting Principles (GAAP) and organized all existing authoritative levels of GAAP into one flat system of roughly 9 topics. All pre-codification standards were superseded and any accounting literature not included is now considered nonauthoritative. FASB Accounting Standards Codification (ASC) uses a topical structure in which topics, subtopics, and sections are numerically referenced. The ASC structure disregards any reference to the original standard setter or standard from which the content was derived. Additional information regarding FASB ASC can be found at The Codification does not change GAAP, but merely provides a new structure that is intended to reduce the amount of time and effort required to solve an accounting research issue, improve usability of the literature thereby mitigating the risk of noncompliance with standards, and provide real-time updates as new standards are released

4 REPORT: Suggested General Ledger Accounting Entries PERIOD: 1/1/217 through 12/31/217 LIFE INSURANCE EXPENSE CASH SURRENDER VALUE INCREASE DUE FROM INSURED (SPLIT DOLLAR) (1) COMPENSATION EXPENSE INTEREST EXPENSE (POLICY LOANS) (2). 9, CASH OTHER INCOME (INSURANCE) LIFE INSURANCE POLICY LOANS (3) 65,. 25, NOTE: (1) (2) (3) To record the insurance activity on life insurance policies owned by the employer and the associated expense or income based on the increase in the cash surrender values or the receipt of insurance policy proceeds. A "due from account" is an Account Receivable. To record policy loan interest accrued or paid during the current period. IMPORTANT: IRC Section 264 provides for certain restrictions on the tax deductibility of policy loan interest. To record the accrual of life insurance policy loans and policy loan interest during the current period. If the loan is to be repaid within twelve months, it may be classified as a current liability. The obligation may be treated as a non-current liability if the loan will be liquidated by deduction from the proceeds of the policy upon maturity or cancellation (AICPA formerly ARB Number 43). ACTION REQUIRED: (i) POST ENTRIES TO THE GENERAL LEDGER. (ii) SEE INDIVIDUAL INSURANCE POLICY SCHEDULE FOR ENTRIES FOR EACH INSURED. [Suggested entries are based on the period identified above. Entries may include dividends, interest, or investment performance which are not guaranteed and will vary. values should be confirmed by the insurance carrier on or after the end of the fiscal year.] - 2 -

5 REPORT: Individual Schedule PERIOD: 1/1/217 through 12/31/217 Number Doe, Jill Jones, Bob (CR) (DR) (DR) (DR) (CR) (DR) (CR) (DR) 65, Expense Value Increase 9,332 8,834 Due From Insured (Split $) Other Income () 9,332 15,834 Comp. Expense Loans Interest Expense ( Loans) Total: 65, 9,166 25,

6 REPORT: Plan Design Assumptions PERIOD: 1/1/217 through 12/31/217 Address: Phone: Business Type: Plan Name: Effective Date: Fiscal Year End: Employer Tax Rate: Accounting Methodology: Prepared By: Company Square XYZ, LA Regular 'C' Corporation Executive Deferred Compensation Plan January 1, 23 December 31 4.% Conventional (Formerly FASB Technical Bulletin Number 85-4; see preface regarding FASB Accounting Standards Codification) The Pangburn Group P.O. Box 9 31 Major Parkway New Roads, LA

7 REPORT: Inventory PERIOD: 1/1/217 through 12/31/217 Carrier Name Insured: Doe, Jill 1 ABC Number Issue Date 1/1/29 Gross Death Benefit Gross Value Outstanding Loan Net Value Current Period Premium 354, , , Insured: Jones, Bob 2 ABC /1/27 2,337, , , ,. Total: 2,692, , , ,

8 REPORT: Premium Payments PERIOD: 1/1/217 through 12/31/217 Insured Name Number Current Period Premium Paid Aggregate Premium Paid Doe, Jill ,544. Jones, Bob ,. 715,. Total: 65,. 873,544. NOTE: Aggregate Premium Paid represents the aggregate premium paid by the policyholder received by the Carrier and/or a prior Carrier if the policy was 135 exchanged. Aggregate Premium Paid amounts do not include amounts paid to a prior Carrier if the current policy was the result of a multi-policy exchange. Aggregate Premium Paid amounts are based on The Pangburn Group records. It is the policyholders responsibility to maintain accurate records of policy premium

9 REPORT: Net Effect on Earnings (1) - (2) - (3) - (4) = (5) Other After-Tax After-Tax Interest Period Income Compensation Expense Net Effect On From To () Expense Expense ( Loans) Earnings 1/1/27 12/31/27 39,348 (39,348) 1/1/28 12/31/28 44,247 (44,247) 1/1/29 12/31/ ,879 (19,572) 1/1/21 12/31/21 2,643 (2,643) 1/1/211 12/31/ /1/212 12/31/212 6,346 6,346 1/1/213 12/31/213 8,664 8,664 1/1/214 12/31/214 1,675 1,675 1/1/215 12/31/215 14,253 14,253 1/1/216 12/31/216 19,251 19,251 1/1/217 12/31/217 25,166 25,166 12/31/17: 85,543 16,117 (2,574) - 7 -

10 REPORT: Historical Accounting Entries by Period From To Insured: Doe, Jill Number: /1/29 12/31/29 1/1/21 12/31/21 1/1/211 12/31/211 1/1/212 12/31/212 1/1/213 12/31/213 1/1/214 12/31/214 1/1/215 12/31/215 1/1/216 12/31/216 Total for insured: Insured: Johnson, Matt Number: /1/27 12/31/27 1/1/28 12/31/28 1/1/29 12/31/29 ed - 2/25/29. Total for insured: Insured: Jones, Bob Number: /1/27 12/31/27 1/1/28 12/31/28 1/1/29 12/31/29 1/1/21 12/31/21 1/1/211 12/31/211 1/1/212 12/31/212 1/1/213 12/31/213 1/1/214 12/31/214 1/1/215 12/31/215 1/1/216 12/31/216 Total for insured: (CR) (DR) (DR) (DR) (CR) (DR) (CR) Value Due From Insured Other Income Comp. Expense Increase (Split $) () Expense Loans 48,884 13,214 35,67 15, ,27 15,854 15, ,854 16, ,854 17,684 1,829 15,854 18,918 3,63 15,854 2,44 4,586 14,533 2,542 6,9 158,544 14,41 16,756 16,253 25, ,154 25, 5,612 19,388 5, 4, (43,957) (43,65) 37 11,43 11, , 38,52 26,498 65, 38,635 26,365 65, 1,773 63,227 65, 1,816 63,184 65, 65, , 7,613 5,613 65, 71,835 6,835 65, 72,611 7,611 65, 74,667 9,667 65, 78,241 13,241 65, 8, ,91 43,816 (DR) Interest Expense ( Loans) 12/31/216: 819,587 16, ,847 6,

11 REPORT: Historical Accounting Entries Period From To 1/1/27 12/31/27 1/1/28 12/31/28 1/1/29 12/31/29 1/1/21 12/31/21 1/1/211 12/31/211 1/1/212 12/31/212 1/1/213 12/31/213 1/1/214 12/31/214 1/1/215 12/31/215 1/1/216 12/31/216 (CR) (DR) (DR) (DR) (CR) (DR) (CR) 9, 9, 74,927 8,854 8,854 8,854 8,854 8,854 8,854 79,533 Value Due From Insured Other Income Comp. Expense Increase (Split $) () Expense Loans 39,348 5,652 44,247 45,753 19,879 55,355 2,643 78,211 81,736 87,21 89,519 91,529 95,17 98, ,346 8,664 1,675 14,253 19,251 (DR) Interest Expense ( Loans) 12/31/216: 819,587 16, ,847 6,