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I agree with Brian that it is difficult but not impossible. 1. At enrollment, the employee is required to attest whether the dependents have access elsewhere. There is a warning about providing false info. 2. The employee with dependent coverage can be asked to provide proof that the dependent does not have access to coverage. A letter from the other employer is often used. 3. Check your COB information. I am sure there may be other ways, but these are what I am familiar with now.

These are often structured as spousal surcharges. As you noted Peter, they are close to unenforceable. It is nearly impossible to verify whether an employee’s spouse has access to other coverage. Without the teeth of any effective audit potential, these generally need to be run on the honor system—which can lead to employee fraud issues. More discussion: https://www.newfront.com/blog/conditional-offer-coverage-spouses-2 That's part of the reason spousal incentive HRAs (SIHRAs) have become a more popular alternative lately. That carrot of that approach is instead to reimburse employees for cost-sharing amounts incurred under the spouse's plan. I consider it a superior approach. More discussion: https://www.newfront.com/blog/ten-spousal-incentive-hra-compliance-considerations

Regarding your original question, Code Sec. 402(a) provides that, "[e]xcept as otherwise provided in this section, any amount actually distributed to a distributee by an employees’ trust described in section 401(a) which is exempt from tax under section 501(a) shall be taxable to the distributee, in the taxable year of the distributee in which distributed, in accordance with section 72 (relating to annuities)" (emphasis added). The transfer of funds by the Plan Administrator to the "distributing custodian" is not an "actual" distribution to the participant. The distribution would occur when the distributing custodian actually distributes the check to the participant. Under your facts timing is important because it affects the participants' year of taxation for the distributions. As to the issue of whether interest should be added, what does the plan state is the annuity starting date... usually the first day of the month following the later of....? If paid after the annuity starting date, seems like there should be an actuarial increase for late payment unless the plan provides for RASD. If an actuarial increase is required, the service/custodial agreement between the plan and the distributing custodian should be reviewed to determine the custodian's obligations to distribute the payment to the participant following receipt of the amount to be distributed to the participant. If under the terms of the service/custodial agreement, the custodian was delinquent in paying the amount, it should pay the actuarial increase, if any. Seems like this would be spelled out in the agreement. Also, review the float income provision (there should be one or there may be a fiduciary issue) because it usually requires that amounts are distributed within at least a reasonable period after being provided to the custodian (if not within a set number of days or period).

Building on what Peter said, depending upon the profession of the advisor, there may be strict ethical considerations -- essentially, if you merely tell the advisee to ignore it and it will not get picked up by the IRS, you are aiding and abetting the advisee in breaking the law and could have your license to practice suspended or revoked. In addition, the risk of getting caught should never be the basis for providing professional advice. Perhaps a better way to handle this is, tell the advisee, "As your [name of your profession], fed eral tax law specifically prohibits you from having the HSA if your spouse has a general purpose health FSA. As a business person, however, given the circumstances that there is no reporting of the amount of health FSA contributions or distributions, it is unlikely, unless the IRS conducted an audit of your tax return, that the IRS would detect this. My advice to you is that either you or your spouse needs to either stop contributing to the HSA or stop contributing to the health FSA as soon as possible. What you ultimately decide to do is up to you, but I have provided you the benefit of my advice. If you decide to follow my advice, I will be glad to be of any assistance you need to help you implement that advice." This will not necessarily sit well with your client, but it will help keep you out of trouble, and maybe, the client will decide to listen.

No idea, but I would assume not often. I am on the wholesale side (42 years) of the group business, and since ACA I have quoted in excess of 5,000 groups. Believe I have seen it 2 or 3 times.

Almost never. Pretty much all plans offer coverage to spouses/children (and sometimes domestic partners). But the ACA does not require offering coverage to a spouse (it requires only the full-time employee and children). So it can be done without penalty exposure.

Just to be clear, are you looking for a present value calculation using some set of 430/404/417(e) segment rates and either the 2024 or 2025 417(e) mortality table for a given attained age and retirement age? It's not a trivial calculation, although with some effort you could do it in Excel. What software do you use for valuations? I'm sure your software can do the calculation and give you a result.

If a health plan provides a worker’s spouse is ineligible if the spouse has another employer’s offer of health coverage, what methods does an employer use to detect that its worker falsely stated that the spouse lacked another employer’s offer of health coverage?

Yes, it is fairly common. I cannot speak to others' incentives for choosing, but they should choose based on their perceived needs and OOPs. Some companies also have a policy that makes dependents ineligible if their dependent has access to coverage elsewhere.

The April 17 notice extending the deadline references Rev. Proc. 2018-58 -- discussion of Form 5500 and PBGC filings are on pages 57-58.

I don't think you're missing anything. The IRS could always audit and find it, but it would be quite difficult because (as you said) there is no W-2 reporting of the health FSA. In theory it would have to involve review of paystubs or interaction with the employer to confirm. But as noted above, there are many aspects like this in tax liability where it would be difficult to discover the issue. A rolling 6% excise tax on the ineligible HSA contributions that could apply is also no joke.

Imagine you are teaching your child to drive. You reach an intersection with a red light with absolutely no sign that anyone else is around. You child asks "Why can't we go through the light? How will the police know we did that?" How would you respond?

You are correct that a General-Purpose Health FSA are considered disqualifying coverage for HSA eligibility and that it would be difficult for the IRS to know. However, there are few things that could occur, leading to the IRS knowing. 1. Employer Records - employers track these contributions. If the employee is audited, the IRS could request these records. 2. HSA Contribution Form 5498-SA - the institution that holds the HSA funds report contributions to the IRS. 3. Dependent Care FSA information - is reported on W-2. 4. IRS Form 8889 - employees with HSA contributions must file form 8889. Part of this form is a certification for eligibility. 5. Random IRS audits.

PSP can have in-service. A rollover to a Roth IRA is taxable but there is no 20% tax withholding because the distribution is rolled over. The taxable nature of the distribution should be evidenced by the 1099R that is issued for the distribution.