Guest Joe Vasko Posted December 19, 2001 Share Posted December 19, 2001 If an employee of a Sub-S who is not a 2% shareholder enrolls in an FSA Plan at the beginning of the year, but then has the opportunity to become a 2% shareholder mid-year, how will this effect his eligibility for the Plan Year? Link to comment Share on other sites More sharing options...
Joe Priselac Posted December 19, 2001 Share Posted December 19, 2001 Once the employee becomes ineligible to participate because of their stock ownership, they are treated like a terminating employee. Link to comment Share on other sites More sharing options...
Kirk Maldonado Posted December 19, 2001 Share Posted December 19, 2001 Joe: If you treat the individual as a terminated employee, would you allow the (now) 2% shareholder to elect to participate via COBRA? Kirk Maldonado Link to comment Share on other sites More sharing options...
Guest Compliance questioner Posted December 19, 2001 Share Posted December 19, 2001 Have to disagree- the person should not participate at all. IRC section 1372(B) states: For purposes of this section, the term "2 percent sharholder" mean any person who owns (or is considered as owning with the meaning of section 318) on *any* (emphasis added) day durthe the taxable year of the S corporation more than 2 percent of the outstanding stock of such corporation or stock posessing more than 2 percent of the total combined voting power of all stock of such corporation. If the person is not sure, they should be prepared to have everything that was taken pre-tax to go back and have it taxed. Mara Link to comment Share on other sites More sharing options...
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