Jaeded

Yes, it does. It's the #1 selling point of MEC plans. And no, it's not consistent with the employer mandate but it's also something the DOL has to ignore otherwise every fast food chain and retail establishment in the country would go out of business.

That's interesting to me as Oregon is just now rolling out PFML this year. I've wondered whether the insurers who have jumped into the market to provide to coverage were going to give us Schedules A for the coverage and whether it does, in fact, qualify as an ERISA plan. On the one hand, PFML covers absences due to your own personal disability, so like traditional STD/LTD coverages, it would be a health plan. On the other hand, it covers absences for all sorts of non-ERISA reasons. Family leave isn't a funded vacation benefit. It's not payment for health care purpose. Is it covered by ERISA at all (meaning it doesn't have to be reported on a 5500)? Federally, I do not think the IRS or DOL has weighed in and we would have to rely on PLRs - if there are any. Sorry, not helpful at all, just agreeing that it's a very interesting question of law.

I did a VCP Submission for my client and submitted it June 10, 2022. I have dutifully been calling the VCP "check the status" line every couply months or so, and continue to get the message that "the case has been assigned to an agent, don't call us back for at least another 60 days." I knew the IRS was behind, but are they really a YEAR behind? Anybody else with recent experience using VCP?

I don't disagree with the rant - can we just call these "bonuses" and let employees spend the money the way they best see fit? If I'm going to buy pet insurance, I'm going to buy pet insurance. I don't want to have to involve paperwork and reimbursement procedures. Reminds me of the old Mitch Hedberg rant about giving you a receipt for a donut. (Mitch Hedberg - The donut joke - Bing video, you're welcome). I argued against a VEBA company getting into the LSA market, I really did. Nobody funds these benefits - the selling point to employers is that this is a bonus that not everybody will use so it will be cheaper than giving everybody $1,000 cash, so why fund it? There's absolutely no tax benefit to involving a VEBA, and it adds a ridiculous amount of complexity to something that is already goofy to begin with. However, if my client wants me to spend hours researching the constructive receipt doctrine and issues of deferred compensation, I'm going to do it so I'm thankful for this post.

I am also being asked to advise a large TPA firm who wants to jump into the LSA market. My independent research of IRS documents, before finding this page, also led me to believe that the benefit should be taxed when made available, rather than when a claim is reimbursed. However, as others have pointed out, the plethora of online providers marketing this "revolutionary benefit" universally say the employee isn't taxed under they use the money. I can understand how, if the benefit was relatively small, the reimbursable events limited, and the benefit was use-it-or-lose-it, it would make sense that you wouldn't tax a person until they used it. For instance, if a plan only paid $50/month for physical fitness classes or gym memberships, lots of people won't use that benefit and they'll be quite angry if they are taxed for something they didn't want. However, with these LSA accounts being expanded to be used for darned near anything an employer can think of (new golf clubs or tickets to Hamilton anyone?), it makes more sense to tax when the money becomes available because there's really no reason to NOT use it. Further, my client wants to make the LSA a funded account held in a VEBA, so in theory somebody could accumulate considerable money in that account, take it with them when they leave employment, etc. In this instance, this really does look like a deferred comp plan subject to 409A even if the employee might not ever turn in a claim for the money. That leaves to me wonder, what if somebody got $1,000/year for 10 years and never used it? They've been taxed on it .... where does the money go? Back to the employer with the individual then taking a tax credit (as you would in a more standard deferred comp plan when it loses value over time?) Can you have a beneficiary? Many thanks to Brian Gilmore who came to the same conclusions I did, but with much greater grace and style! I'm going to advise them to tax when funded and we'll see if they are successful selling such a product!

A client has chosen to withdraw from a union MEP and wonders how other employers in this situation have addressed the loss of potential future benefit to unvested participants. Has anybody had this experience / negotiated with a union to address some recompense?