(Pardon the multiple postings of this question. I couldn't determine which forum it best fit under.)

Question regarding the exclusion for “Health FSAs” for purposes of the exemption from the annual limit restrictions under the PPACA:

The interim final regulations governing the lifetime and annual limits under the PPACA include an exception for Health FSAs under IRC 106©(2). See Treas. Reg. 54.9815-2711T(a)(2)(ii). IRC 106©(2) defines a Health FSA as a benefit program under which specified medical expenses may be reimbursed and the maximum amount of reimbursement reasonably available to a participant is less than 500% (5x) the value of such coverage. While there is no clear IRS guidance on how to determine the “value” of coverage under an HRA/Health FSA, the “value” of coverage is generally presumed to be equal to the plan’s average per-participant reimbursement amount (i.e., the average claims cost per participant). For example, if an HRA has 10 participants, a maximum reimbursement of $2,000, and $4,500 in claims during the plan year, it is typically considered to be a Health FSA because the maximum reimbursement of $2,000 is less than 5x the presumed $450 per-participant claims cost—i.e., the “value” of coverage.

My question is this:

Does anyone have any guidance on how “value” of coverage may be affected if an HRA will reimburse the purchase of health insurance premiums (not just medical expenses)? Arguably, if health insurance premiums can be reimbursed, the “value” of the HRA coverage would be more than just the plan’s average per-participant reimbursement amount or even the plan’s maximum benefit amount, because participants can purchase insurance that will pay for larger amounts. Does anyone have guidance or thoughts on this?

Thanks!

Steve

Question regarding the exclusion for “Health FSAs” for purposes of the exemption from the annual limit restrictions under the PPACA:

The interim final regulations governing the lifetime and annual limits under the PPACA include an exception for Health FSAs under IRC 106©(2). See Treas. Reg. 54.9815-2711T(a)(2)(ii). IRC 106©(2) defines a Health FSA as a benefit program under which specified medical expenses may be reimbursed and the maximum amount of reimbursement reasonably available to a participant is less than 500% (5x) the value of such coverage. While there is no clear IRS guidance on how to determine the “value” of coverage under an HRA/Health FSA, the “value” of coverage is generally presumed to be equal to the plan’s average per-participant reimbursement amount (i.e., the average claims cost per participant). For example, if an HRA has 10 participants, a maximum reimbursement of $2,000, and $4,500 in claims during the plan year, it is typically considered to be a Health FSA because the maximum reimbursement of $2,000 is less than 5x the presumed $450 per-participant claims cost—i.e., the “value” of coverage.

My question is this:

Does anyone have any guidance on how “value” of coverage may be affected if an HRA will reimburse the purchase of health insurance premiums (not just medical expenses)? Arguably, if health insurance premiums can be reimbursed, the “value” of the HRA coverage would be more than just the plan’s average per-participant reimbursement amount or even the plan’s maximum benefit amount, because participants can purchase insurance that will pay for larger amounts. Does anyone have guidance or thoughts on this?

Thanks!

Steve

(Pardon the multiple postings of this question, but I couldn't determine which forum it best fit under.)

Question regarding “Integrated HRAs” for purposes of the exemption from the annual limit restrictions under the ACA:

The recent Q&As under the January 24, 2013, FAQs about the Affordable Care Act Implementation (Part XI) that is available on the DOL’s website noted that an HRA is not considered “integrated” with and employer’s primary health coverage unless the HRA is available only to employees who are covered by the primary health plan (i.e., the employee must actually be enrolled in the primary coverage). What is left unsaid is the treatment of coverage for spouses and dependents—i.e., whether an employee must enroll their spouse and/or dependents in the primary health plan to receive reimbursements under the HRA for medical expenses incurred by the spouse and/or dependents.

Based on the statement that an employee must actually be enrolled in/covered by the primary coverage for the HRA to be considered “integrated” it would make sense that the same requirements would apply for spouses/dependents, but I have seen no clear guidance on this aspect. If such is the case, employees who select “employee-only” primary coverage could only receive HRA reimbursements for their own medical expenses, not for medical expenses incurred by their spouse and/or dependents. To do otherwise would run the risk that the HRA is not “integrated” because the spouse/dependents could receive HRA benefits (subject to an annual limit) but not primary coverage (which would be unlimited).

Has anyone seen any guidance on this?

Thanks!

Steve

Question regarding “Integrated HRAs” for purposes of the exemption from the annual limit restrictions under the ACA:

The recent Q&As under the January 24, 2013, FAQs about the Affordable Care Act Implementation (Part XI) that is available on the DOL’s website noted that an HRA is not considered “integrated” with and employer’s primary health coverage unless the HRA is available only to employees who are covered by the primary health plan (i.e., the employee must actually be enrolled in the primary coverage). What is left unsaid is the treatment of coverage for spouses and dependents—i.e., whether an employee must enroll their spouse and/or dependents in the primary health plan to receive reimbursements under the HRA for medical expenses incurred by the spouse and/or dependents.

Based on the statement that an employee must actually be enrolled in/covered by the primary coverage for the HRA to be considered “integrated” it would make sense that the same requirements would apply for spouses/dependents, but I have seen no clear guidance on this aspect. If such is the case, employees who select “employee-only” primary coverage could only receive HRA reimbursements for their own medical expenses, not for medical expenses incurred by their spouse and/or dependents. To do otherwise would run the risk that the HRA is not “integrated” because the spouse/dependents could receive HRA benefits (subject to an annual limit) but not primary coverage (which would be unlimited).

Has anyone seen any guidance on this?

Thanks!

Steve

What compensation is used to determine whether or not a person is a HCE?

Example: If a person receives compensation of $60,000 from one employer from Jan 2012-May 2012, then works for another employer from June-Dec 2012 and earns $75,000 all under the same collectively bargained agreement and the same plan document, would they be considered a HCE for 2013?

My "strange" questions/problems seem to be coming out of the woodwork along with the pollen!!

I have a doctor's group that for several years has been a quasi self-directed. Meaning, there are 5 different accounts set up from which participants may choose to go into, based upon their risk tolerance (ie, high risk, moderate, low risk, etc.). They have been able to change 2x per year, and I prepare a year-end allocation report as well as a mid-year.

The doctors wish to change from this set-up to a plain Trustee-Directed account.

Do I need to prepare a Blackout Notice? My inkling is "no", but I do think that some form of a notice must be given.

Please help! Thank you!!

Some participants in a plan took final distributions who, as a result of termination of employment, defaulted their loans.

However, the office preparing the 1099-R's did not issue them for the loans, only the distributions. Evidently, this has gone on for some years.

How can we correct this? Can we issue 1099's currently?

Are the ones that happened the past couple years eligible for SCP and older ones VCP?

These aren't loan problems, but reporting problems as we see it.

As always, your thoughts are appreciated.

We have a P/S plan sponosred by a tax-exempt 501©(3) organization and the plan provides that vesting computation period for determining vesting years of service will be the plan year. However, the plan has been administering the plan with the computation period defined as the participant's employment year. Recognizing this as an operational error, what is the recommended correction to this error?

Company exceeded 100 employees in 2011. 2012 will require their welfare benefit plans to file 5500.

Now that it is 2013, can they proceed with filing as a wrap plan for 2012?

Do they need a corporate resolution to do so?

Control group with 2 401(k) plans. Both are contributing a safe harbor match- but different formulas. 1st company safe harbor match is 100% up to 5% and second company is a safe harbor match of 100% up to 3% and 50% up to 2%. Is this okay? What do I need to look at? As long as each plan passes coverage testing separately then this is okay? Thanks.

We have a plan that had spin-off in 2012. The effective date of the spin-off plan is 01/01/2012. The assets were all transferred in January, 2012. We are not involved with the now spinned off plan.

For our plan purposes, does our beginning of year participant count include the eligible employees of the plan that left? They were included in our end of year count for 2011, but as of 0101/2012, they were not eligible to participate in our plan.

Is it okay to have a beginning of year count that is less than last year's end of year?

Thank you.

We have a revenue credit program with our vendor. We have the standard list of what these monies can be used for. If you also have this program can I get examples of what you have actually used this for. One example of what I used it for was to pay for our annual audit. Thanks

I filed a Schedule SSA with the 5500 of a PS 401(k) back in the year 2000, for a missing participant with a balance of $217. Since then, back in the mid-2000's time frame, this plan closed. This girl's $217 was not a thought in my head, and guess what? She has filed for some sort of SS benefits, and they've given her notice that she has $217 in this old, closed plan.

What do I tell her?

Thank you!!!!!!

There is a participant who was terminated for using a false social security number. They have approximately $500 in their account. Are they entitled to receive the funds and if yes, does anyone have suggestions to go about determining the correct social security number? I suppose their name could be incorrect as well. What steps can be taken in this situation?

My client was recently audited by the DOL. The agent discovered various problems including chronic late deposit of salary deferrals and failure to suspend salary deferrals following a hardship distribution. My client made a contribution to the plan for lost earnings (calculated by the DOL agent at the greater of the IRS rate or the plan earnings for the year in question) and revised its policies to ensure the problems would not recur. The DOL issued a letter saying the investigation is concluded and due to the actions taken by my client, the DOL "will take no further action with respect to these matters."

The letter continues to state that because a prohibited transaction occurred, the matter will be referred to the IRS and if client agrees that a prohibited transaction occurred, client should file a Form 5330 with the IRS. Client's TPA is working on this filing.

When I spoke to the DOL agent handling the case I mentioned that I would be preparing a filing under EPCRS to address the operational failures of the Plan and the agent acted surprised that I would do this. Previously she had repeated several times that she would be sending the IRS information regarding these failures so it makes sense to me to file under EPCRS instead of waiting to see if the IRS will audit the plan.

Now I am second guessing myself. I don't want to waste the client's money on an EPCRS filing if it is overkill. The EPCRS fee is $2500 plus there are legal expenses.

Does anyone have any thoughts or advice?

If db plan was taken over by pbgc;and it had at the time unfunded Lx of about 1.7 mill.

Company is not in bankrupcy;but is making no money.

Q;

Is it 100% certain that money will be collected from plan sponsor if they dont go bankrupt?

when?

slipton@intpen.com

thanks

How does 415 handle back wages? Client had a settlement and to pay employees back wages from a couple of years ago. It seems like they should be eligible for the employer contribution (fixed % of pay), but it seems hard to justify based on what I know the final 415 regs.

As silly as it may seem, it appears to me that a literal reading of Reg. 54.4975-7(b)(5) leads to the conclusion that - absent substantial C corp dividends or S corp distributions - an ESOP is hamstrung and cannot prepay a loan even though: (i) the loan documents expressly permit prepayment, (ii) the ESOP has plenty of cash (assume that the cash has accumulated through employer contributions that were in excess of the ESOP's payment obligation and were not designated as being made to the ESOP to enable it to meet its loan obligation), and (iii) prepayment would be in the best interests of participants and beneficiaries of the ESOP.

Reg. 54.4975-7(b)(5) reads as follows (in italics) - -

BEGIN QUOTE:

"(5) Liability and collateral of ESOP for loan.-- An exempt loan must be without recourse against the ESOP. Furthermore, the only assets of the ESOP that may be given as collateral on an exempt loan are qualifying employer securities of two classes: those acquired with the proceeds of the loan and those that were used as collateral on a prior exempt loan repaid with the proceeds of the current exempt loan. No person entitled to payment under the exempt loan shall have any right to assets of the ESOP other than:

(i) Collateral given for the loan,

(ii) Contributions (other than contributions of employer securities) that are made under the ESOP to meet its obligations under the loan, and [emphasis added]

(iii) Earnings attributable to such collateral and the investment of such contributions.

The payments made with respect to an exempt loan by the ESOP during a plan year must not exceed an amount equal to the sum of such contributions and earnings received during or prior to the year less payments in prior years. Such contributions and earnings must be accounted for separately in the books of account of the ESOP until the loan is repaid." [emphasis added]

END OF QUOTE

Beginning with the next-to-last sentence, we see that "payments made with respect to an exempt loan by the ESOP during a plan year must not exceed an amount equal to the sum of such contributions and earnings received during or prior to the year less payments in prior years." If there are no signficant dividends or S corporation distributions, doesn't the language effectively mean that payments cannot exceed "such contributions" (i.e., contributions shown in bold above; in other words, contributions "made under the ESOP to meet its obligations under the loan")? And doesn't this effectively foreclose any possibility of prepayment by the ESOP in the situation described?

Please set me straight on this.

May a participant who is currently on military leave request a loan from the plan? The document states that a loan can be given to a "party-in-interest", which would include an employee, but I am not sure if someone on leave is still considered an employee for this purpose. Thanks!

We just took over a profit sharing plan (no deferrals). The last plan document they have was signed in 1994. However they did send me an EGTRRA amendment signed in 2001 and a determination letter in the name of the plan dated May 2002.

We need some guidance on how to get this plan in compliance. It's my understanding we can submit to VCP - I found a kit on the IRS website but wasn't sure exactly what to send to them.

Am I correct in assuming since the plan has a determination letter dated May 2002 in the plans name I wouldn't have to submit any plan documents before this date?

The documents we would send in to the VCP would include (note: we use sungard vs pre-approved plans):

1. The 2002 Determination letter

2. Automatic Rollover Amend (adopted currently)

3. The 415 Amendment (adopted currently)

4. PPA Amendment (adopted currently)

5. The EGTRRA Plan Document (adopted currently)

6. HEART/WRERA Amendment (adopted currently)

The company has less than 20 EEs so I believe the VCP fee is $750 but we are trying to figure out if that includes the missing amendments?

Any responses are appreciated!