Page 270 - Bruce Ellig - The Complete Guide to Executive Compensation (2007)

256 The Complete Guide to Executive Compensation

Increasingly, they are turning to personal umbrella liability insurance, typically available through
the company insuring the car of home, although group policies paid by the company may be
available. This type of policy provides a stated maximum dollar liability beginning where the
auto and homeowners’ policies end. Policies in multiples of millions are not uncommon at a
fraction of the cost of the basic auto and homeowners’ protection. Accidents or pet attacks will
increase the premium or, worse, result in denial of coverage. If the executive pays the premium,
the company is normally able to get a lower rate by arranging for the insurance; if the company
pays, it will have a tax deduction but the individual will have an imputed income probably
without a tax deduction. Nonetheless, this can be a high-importance executive perk.
Preretirement Counseling. Preparing for retirement requires careful planning. Typically,
executives and other employees nearing retirement are invited to attend seminars addressing
such issues as how to utilize increased leisure time, the company benefit program upon retire-
ment, and what the individual can expect in the way of social security and Medicare benefits.
Seminars can help to estimate expenses during retirement and compare them to projected
income, adjusting each for inflation and appreciation. They can then help develop strategies
to reduce expenses and/or increase income, possibly deferring date of retirement until a
comfortable balance is achieved. Seminars are supplemented by magazines, reports, and
individual sessions with company representatives as needed. More and more companies are
making such services available many years before retirement. If one waits until a few years
before retirement, it is too late. General programs such as these, although probably not
taxable, are of moderate importance to executives. The more inclusive form of financial
planning described earlier would include retirement planning for executives.
Tax Assistance. For many, this is an extension of financial planning and in some respects
comparable to the legal services provided by some companies. Due to the low cost for most
employees, this is a benefit of increasing popularity.
In addition to regularly preparing federal and other income tax returns, it is not uncom-
mon for company advisers to give executives opinions on significant investment opportunities
(e.g., tax shelters). Traditionally, company tax attorneys have provided such assistance; however,
a number of executives feel uncomfortable about others in the company knowing their full
financial status, and companies are equally uneasy in providing such services. Therefore, it is
not uncommon for such services to be provided by an outside firm with the company and/or
the executive paying the cost. Any portion paid by the company is a deductible expense, and
the executive receives a like imputed income charge. All expenses related to taxes are
deductible expenses for the executive if they and other described expenses exceed 2 percent of
adjusted gross income. Executive interest in tax assistance is high.

Food Service
This category includes everything from small lunchrooms with vending machines to full-
scale cafeterias with walkthrough and table service. Typically, the company will absorb the
cost of rent and related services (e.g., electricity and gas), requiring the employee to pick
up all or some portion of the cost of food and its preparation. Such facilities are especially
welcome when there is a lack of nearby moderate-priced facilities and on bad weather
days. Many executives find cafeterias an excellent place to discuss business and/or develop
personal relationships. Typically, where revenue equals or exceeds direct operating costs,
there is no individual tax liability (see Section 132(e) of the IRC).