Jump to content

Recommended Posts

Does any body who owns or runs a TPA have a good grasp how tax reform may affect our industry?  If so I'd be interested in your thoughts on whether your typical TPA is a "Professional Services Firm".  Would be nice to take advantage of the 20% deduction on pass through income if it's available for a lowly pension administrator :).

Share this post


Link to post
Share on other sites

I think you have it backwards - service firms are not eligible for that kicker.  So accounting firsm, law firms, medical practices, and us, would not be eligible.  That's my understanding so far anyway.  Please Lord let me wrong :) 

Share this post


Link to post
Share on other sites

This is a little outside my area, but I will take a stab at it and someone may correct me. For purposes of the deduction, a professional services firm is "any trade or business involving the performance of services in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts, consulting, athletics, financial services, brokerage services, or any trade or business where the principal asset of such trade or business is the reputation or skill of 1 or more of its employees." See Code sec. 1202(e)(3)(A). So does not seem to require a professional license. My guess is that even TPA services that do not involve actuarial work would hit one or more of the other categories, e.g. accounting, financial services, or principal asset being reputation or skill of employees. However, nothing is certain until we have guidance from IRS.

However, a lot of "lowly pension administrators" (assuming they are not W-2 employees, but sole proprietors or partner of the TPA firm) will still get all or much of the benefit, since the exclusion for "professional service firms" only applies to joint returns where taxable (not gross or AGI) income exceeds $315,000, or individual returns $157,500. Above that the benefit is phased out to 0% once taxable income hits $415,000 or $207,500 respectively.

  • Like 1

Share this post


Link to post
Share on other sites

That is similar to, but not identical, to the PBGC exemption under ERISA section 4021.  FWIW, I'm aware of no PBGC elaboration/expansion on this concept, but they do make individual rulings whenever asked.  Perhaps that general concept might be applicable?

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
Sign in to follow this  

×
×
  • Create New...