masteff

"At least since EGTRRA we don't have to worry about..." Was just thinking about 401(k) issues at work and cited EGTRRA to myself and suddenly realized the number of years that have passed since that happened. It's been nearly as long since EGTRRA as it was before that to the big tax reform act of 1986. I remember the senior tax partner at the accounting firm where I did a tax internship telling how he left the IRS as an auditor when 1986 reform happened because it reset the playing field and there was money to be made in tax consulting.

Reg §1.401(a)(9)-6 which is specific to DBs talks to the form of the annuity and that it satisfies 401(a)(9). Nothing was altered about the form of the annuity by a few days change in the timing of the payment. Since the annuity isn't altered then it continues to satisfy 401(a)(9) so the tax year of an individual payment is moot.

Good point. I flipped thru and didn't find anything but will send the order of receiver appointment to our TPA and have them review the plan (it's their VS plan) just to be sure.

FYI - Met the receiver yesterday. He said yes, he has the power to amend the 401(k) plan. I didn't get into any nuances of the question but he was very confident of his authority to control the plan.

Thanks for all of the input! Our corporate counsel replied that I should ask the receiver once he's appointed. I'll post back what the receiver says. One additional thought I've had is preemption and whether it matters if the receivership is done in a Federal versus a state court.

Yes, plan specifies "Employer" has power to amend and "Employer" is defined as the entity identified in the Adoption Agreement which is the company. The draft appointment order contains a line which says "perform all services and take all actions necessary or advisable to oversee, carry on, manage, care for, maintain, repair, insure, protect, and preserve (collectively, “Manage”) the Assets and Operations, without further order of the Court". I guess part of my concern comes from experience w/ powers of attorney for participants. When I was in full time plan administration 10 years ago, our counsel insisted that POAs had to be very explicit about the power to make changes affecting our retirement plans. But I gather from reading that a receiver has full "carte blanche" to run the business.

Okay legal boffins I could use a bit niche expertise... Company I've worked at since February is in financial distress. Bank is in process of having a receiver appointed in Federal court. Draft of order of appointment does not explicitly grant power over the 401(k). Does that matter? We have a safe harbor match that I'm advising should be suspended (I'm working w/ TPA to be sure our annual notice includes paragraph that safe harbor match maybe suspended or reduced as per the 2013 final reg). Board and all officers have all resigned so it will fall to the receiver to make the decision and sign the necessary plan amendment(s). Does a Federal receiver have power over the plan in general or should that power to be explicitly granted by the court? If there's a code section that pertains, that would be great to have. Thanks for any input you might have! Mike (masteff)

Try second paragraph here: http://www.aicpa.org/publications/taxadviser/2013/december/pages/clinic_story-06.aspxAlso further down where it addresses tax exempt entities. Hopefully you can determine that applies and that the plan can treat it as sale of capital asset rather than business income. I merely googled "ubti timber" and that was one of the first results.

Thanks! It was helpful knowing what to look for in the various documents just now (safe harbor notice, adoption agreement, VS plan document, SPD, etc.) I'll wait for the TPA's opinion, but based on what ya'll helped me know to look for, I think we have no problem if we do decide to make the change to payperiod funding of SH match.

I half understand that angle to be more towards company officer and fiduciary liability for the payment to be made at the future date. It may also be to reduce ratios (like liabilities to assets); I've computed a few ratios lately that I haven't seen since textbooks in college.

Hi everyone, I've been quiet on the site for awhile. Had a job change for the better but have lost time to keep up with the board. I know that making mid-year changes to a Safe Harbor is tricky stuff so I wanted to run this past the resident experts.... New SH plan started in late 2013, no plan comp in 2013 so first real year was 2014. People before me interpreted the way the adoption agreement was completed as saying the SH match was funded after year end but before filing of tax return. I concur w/ that interpretation. A management consultant is encouraging us to reduce liability and smooth cash flow by funding SH match more frequently. He first said quarterly until I said pointed out "why not by payperiod?". So, acknowledging we would still have to do a true up based on our current adoption agreement, can we make a mid-year change to fund SH match on a payperiod basis rather than after year end? Or is that a change that can only be made for a future plan year? (And yes, we've put the question to our TPA but I felt his first answer was shot from the hip because he thought we were currently funding by payperiod.) Thanks, masteff

Thanks, that makes sense and helps put Reg 1.125-2(a)(2) & (3) into simpler language. Everything I found on the 30 day period in 1.125-2(d) referenced that it permitted new hires to make a retroactive election back to the date of hire if done w/ in the first 30 days. Follow up question: If medical has a 30 day wait but dental has a 60 day wait, is there anything in the 125 rules that would require the dental election be turned in early with the medical election rather than allowing it to be turned in prior to the pay period related to the dental coverage?

Medical plan entry is first of month following 30 days after hire (so day 31 at earliest). When does the employee have to turn in an election form by? 30 days after hire or some other date based on plan eligibility date? Does your answer change if the plan entry is, say 60 days after hire?

No. You haven't been clear. Given that Fiduciary Guidance Counsel is asking for relevant and practical advice for a client's current situation, going forward, I would like to request that you, please, make a better effort to fully and clearly disclose what part of your statement is what you think the current state of the rules and regulations are and what part is your speculation about what you think the IRS might try to do at some unspecified future point in time. In the meantime, based on his postings, you quite possibly have convinced Fiduciary Guidance Counsel that he should avoid a course of action which you just now conceded is a legitimate current course of action.

I am not just speculating. The IRS said it is not pre-tax in Rev Rul 91-26. The IRS explicitly states that the premiums are disallowed "pre-tax" treatment under Section 106. This means the premiums are after-tax dollars. http://bradfordtaxinstitute.com/Endnotes/Rev_Rul_91-26.pdf "A and B may not exclude the cost of the premiums from their gross income under section 106, but must include the cost of the premiums in gross income under section 61 (a). Provided all the requirements of section 162 (1) are met, however, A and B may deduct the cost of the premiums to the extent provided by section 162 (1)."

So here's something Flyboyjohn and I can agree on... I say no also. If it were found to be in violation, one of the rules that would be violated is the one on annual dollar limits. Given how the Service is on fixing other things that lap from one year to another, I would not expect them to be happy w/ a repayment happening a year or two from now to fix a violation in this year. --------------------------- I've been re-reading Notice 2008-1 and Rev Rul 91-26. I encourage both of you review those against the IRS's statement in Notice 2013-54 in section II.B. Specifically: "Individual employers may establish payroll practices of forwarding post-tax employee wages to a health insurance issuer at the direction of an employee without establishing a group health plan, if the standards of the DOL’s regulation at 29 C.F.R. §2510.3-1(j) are met." Such a payroll practice is completely compatible with Example 3 in Notice 2008-1. http://www.irs.gov/pub/irs-drop/n-08-01.pdf If nothing else, I think if you combine that payroll practice from 2013-54 with Example 3 from 2008-1, then you fully bypass the risk.

Notice 2010-84 Q&A-12 cites the relevant code section. http://www.irs.gov/pub/irs-drop/n-10-84.pdf

FGC - regarding your attribution question, from the few articles I looked at that cite the Code, it appears that Section 318 governs for determining who is a 2% s-corp shareholder. So the answer would appear to be yes, it's attributed to the adult sons. 318 does not appear to restrict it to, for example, minor children. Your concern is specifically addressed in the notice: "An employer payment plan, as the term is used in this notice, does not include an employer-sponsored arrangement under which an employee may choose either cash or an after-tax amount to be applied toward health coverage." (Also, the exact phrase "any arrangement" does not occur in the Notice; perhaps you're citing an article which was less than precise in its quotation of the Notice?)

Flyboy - did you happen to see the last 2 posts in the thread you mention: http://benefitslink.com/boards/index.php?/topic/56028-tax-free-premium-reimbursement-s-corp-loophole/ Others of us disagree w/ your conclusion. I remain of the opinion that 2% s-corp shareholders are entitled to the SE health insurance deduction on their personal 1040. But only if it is paid for with after-tax dollars by the s-corp and reported as taxable income on the individuals W-2. The deduction on 1040 is a dollar for dollar reduction of AGI, meaning it is effectively equivalent in individual income tax savings. Because the s-corp pays it with after-tax dollars, it avoids the health reform prohibition on pre-tax reimbursement of individual premiums. See post #5 in the linked thread for relevant quotes from Notices 2008-1 and 2013-54.

Rev Rul 73-447 http://www.charitableplanning.com/document/680858 Rev Rul 67-101 http://www.charitableplanning.com/document/665480 I'll see your two Revenue Rulings and raise you one... Rev Rul 68-391. http://www.charitableplanning.com/document/675885 My opinion based on the above Rev Rulings is that she is a common-law employee of all three dentists but because she only has compensation from one, she only gets a contribution from that one. But for all other purposes of the plans, she remains a full-time employee. Which means 1) she has not had a separation of service and therefore cannot take a distribution (unless otherwise provided by the plan) and 2) she will continue to accrue service toward vesting w/ the other dentist and provided she keeps working will eventually be 100% vested in all of her benefits. http://benefitslink.com/modperl/qa.cgi?db=qa_who_is_employer&n=57#.U_piGk90zcs

It is not a pretax problem. Generally if you see both with individual coverage, it's a matter of cost savings (to them as a couple) that results from how the employer subsidizes the insurance cost.

Perhaps that's why HAFTA has a provision allowing to elect out of retroactive application? https://beta.congress.gov/bill/113th-congress/house-bill/5021/text (e) Effective Date.-- (1) In general.--The amendments made by subsections (a), (b), and (d) shall apply with respect to plan years beginning after December 31, 2012. (2) Elections.--A plan sponsor may elect not to have the amendments made by subsections (a), (b), and (d) apply to any plan year beginning before January 1, 2014, either (as specified in the election)-- (A) for all purposes for which such amendments apply, or (B) solely for purposes of determining the adjusted funding target attainment percentage under sections 436 of the Internal Revenue Code of 1986 and 206(g) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1054(g)) for such plan year. A plan shall not be treated as failing to meet the requirements of section 204(g) of such Act and section 411(d)(6) of such Code solely by reason of an election under this paragraph.

It's definitional. She is a citizen. An alien is a non-citizen. See the first 2 sentences here: http://www.irs.gov/Individuals/International-Taxpayers/Taxation-of-Nonresident-Aliens

Unless you have anything to show otherwise, it appears to me that "prompt pay" laws are at the state level. You will need to review applicable state law as well as federal district court cases such as discussed in this article: http://www.healthcarepayernews.com/content/ama-erisa-doesnt-preempt-state-payment-regulation#.U_ZOgE90zcs

ERISA 732(a) and IRC 9831(a) refer to plans that have less than 2 participants who are current employees. Unless you know of another IRC or ERISA section that trumps the above, then no because your scenario involves current employees. I got the section reference from here: http://www.gpo.gov/fdsys/pkg/FR-2010-06-17/pdf/2010-14488.pdf