Kitty

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  1. The mention of employer was secondary because I wasn't sure if that had any bearing. The employer is simply employing union members required to participate in the trust. It's the union pension they're contributing to under a multiemployer plan. The trust says the plan itself is an exempt organization under 401(a) and 501(a) and I'm trying to clarify whether they are governmental under the special rules provision so I can resolve several other questions I have. :/ I believe back in 1937 the pension/trust had ties to the railroad. They are an international organization. Which is why I'm unclear as to how to determine if they're governmental. Or how to locate that info. They're less than helpful and even less knowledgeable than I am at their call center. Lol
  2. 26 U.S. Code § 414 - Definitions and special rules: (d) Governmental plan For purposes of this part, the term governmental plan means a plan established and maintained for its employees by the Government of the United States, by the government of any State or political subdivision thereof, or by any agency or instrumentality of any of the foregoing. The term governmental plan also includes any plan to which the Railroad Retirement Act of 1935 or 1937 applies and which is financed by contributions required under that Act ***and*** (emphasis mine) any plan of an international organization which is exempt from taxation by reason of the International Organizations Immunities Act (59 Stat. 669). The term governmental plan includes a plan which is established and maintained by an Indian tribal government (as defined in section 7701(a)(40)), a subdivision of an Indian tribal government (determined in accordance with section 7871(d)), or an agency or instrumentality of either, and all of the participants of which are employees of such entity substantially all of whose services as such an employee are in the performance of essential governmental functions but not in the performance of commercial activities (whether or not an essential government function). 1) Sorry naive question....How can one determine whether their plan is a governmental plan? Is there some form to search to find out? 2) How does one determine if plan falls under the railroad act or international organizations act? I am confused by the lack of punctuation in this statement. "and any plan of an international organization which is exempt from taxation by reason of the International Organizations Immunities Act (59 Stat. 669). " 3) Does this section intend that this alone (international organization immunities act) qualifies the plan as a governmental plan? 4)Or does it mean they have to be a plan which the railroad act of 1935/1937 applies AND any plan of an international organization. Not either or? Employer paying into said plan is not governmental, under any of these provisions, does that affect anything? (Other than Collective bargaining agreement with union) Pension is: 401(a) and 501(a) tax Taft Hartley qualified defined benefit pension plan (multiemployer) "Trust Agreement is intended to be tax exempt under Sections 401(a) and 501(a) of the Internal revenue Code, and the contributions are intended to be tax deductible by the Employers under section 404(a) of the Internal Revenue Code."
  3. Is this specified in the CBA (not the plan)? Yes, Via a memorandum of agreement (m.o.a.) modifying the c.b.a.'s negotiated wage rate lower. .
  4. The Let me rephrase: The Pension calls it an employer contribution. The Employer reduces the Employees 'wage rates' specified in the c.b.a. by the contribution amount and contributes it to the pension as an employer contribution. No FICA.
  5. I consider the employer non governmental based on the first criteria. In a defined benefit plan, as suggested, salary reduction means that although the employee is 'nominally'* paid $30,000, only $20,000 appears on the W-2 after reduction by the $10,000 pension contribution. *Is that $10,000 being reduced considered employee wages if they never actually receive it, and its not taxed? The plan does not call it an employee contribution, but is 'reducing the wage rates' by the contribution amount and then contributing that wage reduction amount to the pension. The pension is then calling it an employer contribution. *edited for errors when trying to quote
  6. So it seems if no employee contributions are required as in example 3, and it were non governmental, then pick ups wouldn't be relevant anyhow.
  7. Is that accidentally backwards? Pick ups are an anomaly where the "employee" funds the contribution and (the employer) merely designates it as being funded by the "employer"? (See my example #3) In having a Governmental agency doing the 'pick up' it makes it not subject to fica?Or the 'non-elective' part makes it not subject to FICA? Or both are required to make the wages not subject to FICA? >Aren't trusts (organizations) that are tax exempt by 401(a) and 501(a) considered a 'governmental employer' under this pick up rule? I could have sworn I read that. That's my basis for my questioning. Tax exempt 401(a)/501(a) organizations and pick-ups.
  8. I made a typographical error in trying to understand the differences in the salary pick ups with my first reply and just noticed it! I edited the reply to correct employee A's salary in example #2 to $20,000 (not $30,000. That was a typo). Is your answer still the same? I'm sorry!
  9. Thank you! I figured if I tried to talk it out by creating scenarios on paper it might make more sense to me but it still was confusing. One clarification: Salary reduction is in reference to the pretax wages BEFORE calculating the gross line on a paycheck? If we were talking about say one pay check (I will drop some zeros from the prior example) is this how a salary reduction would appear? (I'm not figuring out NET since there's no real way to determine what elections, deductions, what state *taxes etc. would be deducted so this is* just for visual comprehension as place holders lol.) PAYCHECK Employee B Wage: 10 hours @ $30 per hour $300.00 ---------ytd $30,000 Pension: 10 hours @$10 per hour -$100.00---------ytd $10,000 ----------------------------------------------------------------------------------------- Gross pay: $200.00--------ytd $20,000 State Taxes: FICA: NET pay: One last piece I seem to be missing in fully grasping pick ups is the fica...Im going to go back and re-read the IRC to try and comprehend that part. Reading tax laws isn't the same as reading a juicy novel! They're a bit dry and leave things unspoken for when you're new and things aren't familiar yet. *edited a piece of sentence that was incorrect grammatically
  10. I'm very visual, so I tried to lay out a set of examples to make sure I was understanding the process.1) Employee A has a $30,000 salary, and required $10,000 employee contributions. A's salary is therefore $20,000 Employee would pay taxes and FICA in first example. 2) Employer pick up via salary reduction: *Employee A gets $20,000 salary Employer 'pays' employee A $30,000 and reduces that by $10,000 so the employees salary: IS the same but for the contribution. The employee gets a tax benefit by having his employer pay the contribution. His pay essentially didn't change so his wages: ARE the same but for the contribution. Employer paid contribution so no FICA. 3) The union representing B negotiated an agreement with the company under which it would participate in the pension. The agreements states the company will reduce salary and contribute it as a (employer) contribution. ^not sure this is legal, but for sake of the illustration I'm using it. Employee B has a salary of $30,000 and no required 'employee' wage contributions. The employees salary is therefore $30,000. The plan requires (employer?) contributions of $10,000. Employer pays employee a $30,000 salary and reduces it by $10,000 and contributes it as an 'employer contribution'. The employees salary is now $20,000. So, if I understand, The wages are NOT the same but for the contribution? FICA in this example I'm not sure on. *Edited to correct employee A's salary to $20,000 (not $30,000. That was a typo).
  11. I'm a bit confused as to whether ONLY 'government' plans can use pickups or if any organizations that have defined benefit pensions (that were created and qualified as tax exempt plants under 401(a) and 501(a)) permits those plans to use pick ups as well? ? I hope I'm making sense here as I'm new to benefits and trying to fully grasp how they work. Lol
  12. I get it now. I think I was asking the wrong questions to get the information I needed. Posted a new thread in appropriate section, thank you!
  13. Do or can some Defined benefit plans prohibit employee contributions? If there are plan rules that prohibit employee contributions, do employer pick-ups 'circumvent' that rule? Because the wage rates cannot have been the same as they otherwise would have been but for the contribution if no employee contribution would have occurred. Is that a correct assumption?
  14. Are salary reduction contributions permitted in defined benefit plans? (Pertinent info: The pension is through a Union. It is a non-governmental, multi employer, defined benefit plan. Trust Agreement is intended to be tax exempt under Sections 401(a) and 501(a) of the Internal revenue Code, and the contributions are intended to be tax deductible by the Employers under section 404(a) of the Internal Revenue Code.")
  15. Did you go through the checklist to determine if the plan is an exception? If it is, great! If not, then you've got more work to do. I think part of what youre asking is how to go about determining if your plan is unfunded? What type of plan is it? Do you know if your plan insured? "An unfunded defined benefit pension means that no assets are set aside for benefits. Benefits are paid for as they are paid out from current workers contributions and current revenue. An under-funded defined benefit plan is one where there are not enough plan assets to cover projected future liabilities payouts to both current and future retirees. The unfunded liability amount is the difference between projected costs and projected revenues, in current dollars." Or, what you're asking is when an employer pays for say $600 a month of health insurance, and the employee pays $150, how do you fill out the 5500 to properly reflect who is paying what? Can you clarify?