Page 259 - Bruce Ellig - The Complete Guide to Executive Compensation (2007)

Chapter 6. Employee Benefits and Perquisites 245

College Savings Plans
The two most common plans for setting aside dollars for children’s education are the
Coverdell Education Savings Account (CESA) and Qualified 529 Tuition Program, also
known as 529 plans (named after the section in the Internal Revenue Code that describes its
federal tax treatment). CESAs pay-ins are not tax deductible but are exempt from taxation
and can receive up to $2,000 a year for later use in school education (including elementary
and secondary education), but this amount is limited by parental income and therefore is of
little value to executives. They are covered by IRC Section 530.
529 plans, on the other hand, can receive up to $60,000 ($120,000 if the individual is
married) of after-tax dollars in one year (regardless of employee income level) because they
are treated as pro-rata gifting over five years, thereby removing the funds from estate taxes.
The plans are state sponsored and offer mutual fund–type investment decisions. There is no
federal income tax liability on withdrawals for higher education use. Several states provide
similar tax-advantaged treatment. Money withdrawn early or for noncollege use is subject to
a 10 percent penalty tax in addition to federal income tax on the appreciation. Favorable tax
treatment will expire by 2011 unless extended by Congress. Executive interest may be high
if setting aside funds for college.

Company Products

Catalogs and company stores enable employees to purchase company products at a signifi-
cant discount, typically wholesale price. Selling at wholesale, the company receives revenue
as if sold to a retailer, while the individual has no tax liability (Section 132(c) of the IRC).
Some companies, either because of limited products or desire to provide a broader benefit,
include products of other noncompetitive companies.
The samples that may be given at no cost to the executive for personal use range from
large-ticket items such as a car (for a stated period of time) to small disposable items such as
magazines or newspapers. In many such situations, the company takes the posture that it is
really requiring the executive to put the product through extensive product testing and
then report back any findings. Depending on the nature of company products available, a
moderate importance might be possible.

Concierge Service
Buying a gift, making a dinner reservation, working with a caterer, dropping off dry cleaning,
taking a pet to the veterinarian, and getting the car serviced are duties often expected of
an executive’s assistant. A few companies have extended this service throughout the organi-
zation, some charging a small fee. Those working long hours or traveling extensively espe-
cially welcome a concierge service or a personal shopper. The service may be provided by a
single independent contractor or by several companies dedicated to providing such service.
It could be of moderate importance for executives with little free time.

Dependent Care
Initially only childcare, this benefit has expanded to include support in caring for other
employee dependents, namely, spouse and parents. Executives must often ensure that ailing
parents receive proper care. The first stage of assistance is typically having someone come to