Many readers are off this week, so I will blog on a development that is not hugely important. Readers will recall my previous two blogs on Davidson v. Henkel Corp., 2015 BL 402308, E.D. Mich., 2015 Unfortunate Court Decision Holding Employer Liable for Legal, But Not Optimal, Tax Withholding and Is This the Template for Future Lawsuits Against Employers by Executives Hit with a 409A Penalty?. Since I blogged on Henkel twice before, I thought readers might like to know the final outcome.
Earlier this month a federal judge approved a $3.3 million settlement, which includes attorneys’ fees and expenses, between Henkel and a class of its retirees in a dispute over the company’s failure to properly withhold payroll taxes from nonqualified retirement plans as required by the Code. The settlement reportedly also provides 5% interest on past damages and a 40% tax gross-up, or extra compensation to the retirees to cover their tax payments. A very sweet deal indeed. It is always a good idea to verify that you are correctly reporting FICA and other taxes on non-qualified plan deferrals and accruals.