rocknrolls2

It may be that the employer classified you and others as independent contractors. Were you issued W-2s or 1099-MISCs? If you were in fact an employee, there are all kinds of tax reporting and withholding rquirements which were violated and are subject to substantial tax penalties. You should also notify the IRS.

Under a multiemployer health and welfare plan, an employer and a local union enter into a collective bargaining agreement which includes a provision that permits the employer to request detailed claims information (which has been santized of HIPAA protected health information) from the fund. The fund is not a signatory to the collective bargaining agreement but later an individual who is both a local union officer and a union trustee for the fund signs in both capacities assenting to the preceding terms, including the portion of the CBA allowing the employer to request detailed claims information. Does the signature on a letter by an individual who is both a local union officer and a union trustee for the fund in both capacities bind the fund to comply with the employer's request for detailed claims information?

QPAetc, I called yesterday and I got a voice message today that the acknowledgement letter had not been issued but that I should check back in 8-10 weeks for an update.

My client is a multiemployer pension plan that has terminated in a mass withdrawal. It is projected to become insolvent and run out of funds in the next plan year. Its only sources of funds are two employers who made complete withdrawals and are making installment payments of withdrawal liability. As you likely know, in that situation, the plan has to be amended to eliminate benefits in excess of the greater of the amount of the plan's assets or the extent of the PBGC's guarantee. See ERISA Section 4281(c). In addition, to the extent that benefit payments under the insolvent plan exceed the resource benefit level (i.e., the difference between the plan's level of benefits and the plan's assets, but no less than the PBGC guarantee), any benefits above the PBGC guarantee shall be suspended. To me, there may be little or no difference between the level at which benefits have to be eliminated versus the level at which benefits have to be suspended. Has anyone seen a sample amendment to reduce/suspend benefit levels of the type described here? If so, could you please supply me with a copy?

Thank you for this very helpful information.

I filed a VCP request on behalf of a client over eight months ago but we have never received even an acknowledgement form from the IRS. Does anyone have a telephone number that they call to speak with a live person to determine the status of the request and possibly, to which agent the request has been assigned? Thanks.

I submitted a VCP filing on behalf of a client. After submitting the filing, it was determined that some of the corrective contributions indicated on the charts will have to be revised due to incorrect data. We have completed the revised charts and want to submit them to the IRS to become part of the filing. Two issues: (1) We have not even received an acknowledgement from the IRS. Should we send it anyway and ask them to replace portions of the existing material that was filed with the new material? Or should we wait until the IRS actually acknowledges our filing or has an agent send us a letter? What if the IRS approves the filing without any further action or change required on our part? (2) We submitted the filing in February 2019, before the new procedure for faxing the filing became effective. If we supplement the filing, can we send the supplemental filing and its attachments via regular mail or should we utilize the new procedure of faxing it to the Service? Thanks.

I felt that I had to put my two cents into this debate. State "revoke upon divorce" statutes treat the former spouse as if s/he died before the participant. A plan provision that revokes the beneficiary designation as to the spouse following a divorce would operate in a similar way. The former spouse is treated as if s/he died first, thus revoking the designation. Since there is only one contingent beneficiary named in the form, the father would get the entire account of the participant. If the father doesn't want the money (what if s/he is in a nursing home or collecting Medicaid and receipt of the participant's account balance would disqualify him for Medicaid?), the father could disclaim his right to the account balance which would also operate as if the father died before the participant. Some plans have the participant's estate as the very last catchall default beneficiary. That would likely not be desirable because it would cause the benefit to be included in the participant's estate for state law purposes and potentially subject it to a state level estate or inheritance tax.

Contributions would generally be required at the contribution rate per hour of service. The employer could cease to be required to make contributions to the plan in any of the following scenarios: (1) the employee is still working as a participating non-bargained employee which the recordkeeping system is not picking up, (2) the employee has stopped working, or (3) the employee has been into a job category that the employer is not required to make contributions to the plan on the employee's behalf. The employee should not be permitted to get a distribution from the plan in scenario (1) or (3), but may get a distribution in scenario (2). In scenario (1), there is possibly an operational compliance issue which would have to be corrected.

A money purchase Taft-Hartley plan provides that an employee is deemed to be retired, for administration purposes, as of the first day of the calendar quarter following 60 days for which contributions from a contributing employer ceased to be required on his/her behalf. At that point, if the employee is unmarried, benefits are payable in the form of a straight life annuity, unless the participant elects a lump sum, or installments payable over 3 years, 5 years or 10 years. If a participant is married, the joint and survivor annuity is payable unless the participant elects, with spousal consent, to receive his/her account in the form of a qualified optional survivor annuity, a straight life annuity, a lump sum, or installments payable over 3 years, 5 years or 10 years. Since the IRS considers a money purchase plan to be a pension plan, there are restrictions on in-service distributions prior to the participant's attainment of age 62. I can appreciate the fact that it may be difficult for a multiemployer fund to determine whether a participant has in fact terminated his/her employment. However, I am concerned that the IRS could question the plan's qualified status if the participant is deemed terminated or retired and it is determined that the participant was not in fact terminated. Does anyone have any thoughts on this? Thank you.

Under the Code and ERISA, spousal consent is not required if the spouse cannot be located. For a participant who is looking to utilize this exception, is the plan required to have the participant submit an affidavit of when s/he last saw their spouse and state in detail what efforts have been made in an attempt to locate the spouse? Or is it simply enough if a participant checks a box on the benefit election form under spousal consent which says. "I do not know where my spouse is currently located."?

Regarding the last part of my question in the above, the regulations at Section 1.501(c)(9)-4(e) provide "Personal legal services which consist of payments or credits to one or more organizations or trusts described in section 501(c)(20) are considered 'other benefits.'" Since the tax exemption under Section 501(c)(20) for group legal trusts was stricken from the Code, this suggests that group legal benefits may not be legitimately provided under a VEBA but it is not necessarily determinative.

A client maintains a VEBA which provides the following coverages: dental, life insurance, critical illness and accident benefits, vision coverage and group legal services coverage. All coverages except group legal coverage are excludable from the participants' gross income. The employer pays the premium for all such coverages and employees do not have the ability to choose whether or not to have certain coverages, other than to indicate for dental and vision whether the coverage is for the employee only, the employee and spouse or family coverage. If the client was unaware that the group legal plan was not excludable from members' gross income but learns for the first time that such coverage is taxable, should the client limit the taxability of such coverage to the current year and prospectively thereafter, prospectively only from the point of learning its true taxability or should the employer retroactively revise its tax treatment of such coverage? A related question relates to the treatment of benefits received for such coverage. Section 120 of the Code excluded both the employer's contribution or premium payment for coverage as well as the value of benefits received for such coverage. How should the employer determine the value of such coverage for tax purposes? A final question is whether the group legal benefit should be completely removed from the VEBA since it is taxable. Thank you.

I agree that a participant cannot waive an allocation of employer contributions to his/her account, even if it is done in connection with a settlement of an emplohment dispute. I did want to interject the point that a lot of this anguish could have been avoided if the plan document required employment on the last day of the plan year as a condition to receiving an allocation of employer contributions. To the extent this is a safd harbof 401(k) plan, I understand that this mighg not be available to the extent the plan is using nonelective contributions to meet the safe harbor. I agree with Luke Bailey's point about the timing of a plan amendment if the plan did not already condition employer contributions upon employment on the last day of the plan year and was beinh amended to do so.

It is almost always preferable to start simple and add complexity only if you feel it is necessary to meet your needs. VEBAs are generally established only by sponsors with some degree of sophistication in the health care field. Unless you are driven to having the administration work done in-house, you may find that it is probably more convenient (and possibly cheaper) to have medical coverage provided through health insurance at first, in which case, you would be outsourcing the administration of the health plan. Even before you get to the point of establishing a relationship with benefit consultants and competent benefits counsel, I think the first thing you need to do is to establish contact with a health insurer, even if you ultimately decide to go the VEBA route.

A client is interested in having their existing VEBA reorganized as a 501(c)(3) organization? Has anyone ever heard of this being done? Even assuming that the IRS would agree to grant this type of request, what are the pros and cons of going down this route?

Most likely the MEP is a multiple employer plan. I agree that the fact that one entity is sitused outside of the US does not in any way exempt the enities from controlled group testing.

Two things come to mind in this situation: 1) were participants whose lump sum value was beneath a certain threshold set by law routinely cashed out at termination of employment? If so, you may be able to rely on that as a plan practice even if you cannot locate the participant's information. 2) it may be worth while to search the PBGC's missing participant web site to see if they have any information about a benefit for this person. if yhey do you can simply direct the participant to the PBGC.

It seemed perfectly suited to the situation at hand. I wonder how much they charge and how many participants they have to search for to make the use of their services worth the cost?

I recommended that the client reach out to current and former employees to ask if they remained in contact with them as one "free" approach. Thanks.

I did a VCP filing for a client in the first quarter of 2019. Because there are a lot of former employees who may be entitled to corrective contributions, I knew that client could face a major issue in locating all former employees who are entitled to receive a corrective allocation. Therefore, I proposed that the client send them a letter asking them to do three things: (1) provide updated contact information; (2) consent to receive documents and notices electronically; and (3) complete an updated beneficiary designation form. The mailing resulted in almost 30 people who have not responded, a number who have and 3 that they still cannot locate. I suggested that the search should start with free Internet searches to locate the missing participants and to verify current addresses of those who failed to respond. Then they should move to cites charging a nominal fee. In your experience, which are the best free internet search sites and which are the best sites that charge a nominal fee for searching for people? Also, does the search include death information? Thanks.

I think it should be mailed to the participant at the last known address (which is likely the address where the prior year 1099-R was sent) in the name of the participant, unless someone comes forward with letters of administration or letters testamentary indicated that that person is the duly apointed personal representative of the estate. As far as tax returns and refunds, since the right to annuity payments ceased at the death of the recipient, the form should report the payments on the recipient's SSN. It would be included in the recipient's final income tax return for the short period beginning January 1, 2018 and ending on the date of the recipient's death.

I am representing a client who is being offered a job with a new company, except that the company does not offer a 401(k) plan. She is likely to accept the offer but thinking of funding a traditional IRA as an option to replace the 401(k) her new employer will not provide. She also has a side business which she hopes to continue to maintain and is considering a solo(k) to help her fund her retirement through that business. Would the maintenance of the solo(k) result in her being treated as an active participant in a retirement plan for IRA deduction purposes? I did some preliminary research on this and nothing I have seen specifically addresses this. Since active participation is reported on the W-2 issued to an employee, I would tend to think that the answer should be No but wanted another set of eyes to back me up. Thank you.

ERISA Section 502(c)(1)(B) allows a court to impose a civil penalty upon a plan administrator if it fails to furnish documents to a participant or beneficiary with 30 days of receiving a written request for such documents absent reasons beyond its control. The dollar amount was bumped up to $110 by 1990 legislation. 2015 legislation imposed a requirement for indexing the dollar amounts for nearly all federal statutory penalty amounts. However, I have noticed that on the four occasions when the DOL has published penalty adjustments, Section 502(c)(1)(B) was omitted from its list. Does anyone know why this is happening?

My client is a 501(c)(3) organization eligible to maintain a 403(b) plan. Even though the plan provided for salary reduction contributions, they had never been implemented. There are a couple of other operational errors as well. The client has raised the following questions: (1) can the user fee be paid from plan assets? and (2) can the correction of QNECs equal to a default of 1.5% of compensation plus earnings be credited to the plan using plan assets? I am inclined to say no to both questions.