The Pass Tax Deferred Compensation Solution

Traditional deferred compensation plans are an unsecured promise that an employer makes to pay compensation to an employee in the future. The funds deferred by the employee are not taxed until they are received at a future date. However, the deferred funds are not deductible by the employer until they are paid to the employee.

The Pass Tax Deferred Compensation Plan is NOT a Traditional Deferred Compensation Plan!

The Pass Tax Deferral Solution comply with all Treasury Regulations regarding deferred compensation. It also provides tax deferral to the employee and a current tax deduction for the company.

Each time an employee defers a portion of their income the future payments to the employee are fully funded at that time. That makes our plan ideal for owner employees who may be looking to sell their company in the future.

How it works. A company will enter into an agreement with an employee to provide for the deferral of   compensation from a salary or a bonus and for the timing of the future periodic payments to the employee. The employee agrees to allow the company to assign that periodic payment obligation to Pass Advisors, Ltd. for a fee to be paid by the company to Pass Advisors, Ltd.

When employer and employee have agreed to the final timing and amount of the periodic payments, Pass Advisors  will prepare the contract language necessary to enter into the deferred compensation agreement.

The Liability Transfer and Novation Agreement. With the consent of the employee, the company will enter into a Liability Transfer Agreement with Pass Advisors, Ltd. that will transfer to Pass Advisors, Ltd. the company’s liability for the future payments. For the convenience of Pass Advisors, Ltd., Pass Advisors, Ltd. will purchase a Private Placement Variable Annuity to fund the deferred compensation. The employee will not be permitted to accelerate, defer, increase, or decrease the deferred compensation payments, nor may the employee sell, pledge, hypothecate, or otherwise transfer or encumber the deferred compensation payments, except for disability, hardships or permitted early distributions.

The employee may provide an Investment Directive, based on the employee’s risk tolerance, at the time the contracts are signed and periodically thereafter. The employee may also request a nonbinding change to the investment policy (“Investment Request”) directed to Pass Advisors, Ltd. The employee may not make an ‘Investment Request” during the first year of the contract and is limited to making two Investment Requests per year and no more than one Investment Request in any given quarter. The requests of the employee will be limited to general changes in investment policy. Pass Advisors, Ltd. is permitted, but is not legally required, to consider the Investment Requests of employee. Instead, Pass Advisors, Ltd. will have full discretion and control over the decisions to acquire, sell or hold any investments as well as over any changes to the investment policy.

The Funding Asset. As described above, the funding asset will be a Private Placement Variable Annuity from Lombard International life Assurance Company. The assets will be invested and managed by an investment manager selected jointly by the employee and Pass Advisors, Ltd. after non-binding consultation with the employee. The designated investment manager or trust company will be given the authority to invest the annuity funds based on the Investment Directive. The gain or loss of the investment manager on those assets will determine the amount of the periodic payments to be paid to the employee on the dates set forth in the underlying deferred compensation agreement.

Beneficiary Designation. Decisions with respect to beneficiaries will be made by Pass Advisors, Ltd. in consultation with the employee. For tax reasons, Pass Advisors, Ltd. is the owner of the annuity and retains the ability to change the beneficiary of the annuity.

Pass Advisors, Ltd. may have the annuity issuer send payments under the annuity contract directly to the employee. Such direction of payments shall be solely for the convenience of Pass Advisors, Ltd. and shall not provide the employee with any rights or incidents of ownership.