GBurns

There is a relationship/difference between an accrual basis taxpayer and a cash basis tax payer, but what is the relevance knowing the difference between " constuctive receipt and accrual basis taxpayer" ? I do not recall whether "constructive receipt" or "currently available" (as pointed by KJohnson) or both, was the argument by the auditors, nor would it have made any sense to make notes of any cites etc given back then. What we do not know from the OP is the nature of the money.. Apparently some is bonus but according to the OP some is commission. Commission by its nature would be earned during the year as each sale was made. We also do not know what happens when someone terminates during the year. There is nothing in the OP that makes this clearly an issue of end of year bonus, which would be necessary for the positons taken by mjb and Sieve. The OP says bonus/commission.

What do you mean by "left over"? If this is the unused amount in a "Benefits Credit" type of cafeteria plan there usually is the option to apply this amount to a 401(k). If this is the amount "left over" in the FSA at the end of the year, then No, you cannot.

Ask the auditor for cites etc. In probably seemingly similar cases that I have seen the auditor was right. In those cases the bonus/compensation was constructively received although not paid. If an employee had terminated before the end of the year, their bonus etc woould have been pro-rated and paid, hence, they had the option to receive cash making the whole arrangement a deferral of compensation arrangement. Your facts and circumstances might be different, so you need to get the auditor to commit to a position so that you can properly defend.

If the health club had offered the free membership to everyone living in a particular neighborhood or to readers of the local newspaper or had simply handed out a flyer with the coupon to everyone leaving your premises, Would you be asking this question ? Imagine if every coupon or free offer in the newspaper or anywhere else was taxable income.

It is amazing that after more than 25 years of section 125, there are still opinions such as that of colleague 2.

I do not see " such as that the employee was never interested in the profit sharing plan in the first place,", since the employee is fully vested according to the OP. If it was the employer's intention to exclude this employee, then there would have been no need for reimbursement for allocation/contribution since none would have been made or contemplated. The same would apply if there had been negotiatiion for a raise, no allocation/contribution after the raise. Let's see if more facts emerge.

I am only "up in arms" because I see usually sensible people apparently condoning the exploitation of employees. The posited scenario (including the claim of employee agreement) is one that I see regulary since 1967. I have yet to see 1 that was legitimate, moral or legal. Even not considering the current job climate, I doubt that any employee would not be intimidated into "agreeing' with their employee so as to be able to keep their job. So I seriously question that the employee agreed. What is the difference between this scenario and one in which the employee giives back the 1/2 of OT time& 1/2 ?

I do not see how this could be regarded as "the employee's total compensation will be X, and he can't have X plus a profit sharing contribution.". The employee is either eligible for participation and the allocation or he/she is not. What was posited could not be a "business deal". It has nothing to do with business. What was posited was a reversion of a valid pension plan allocation/contribution. Are you saying that such reversion is permitted ? What was posited also appears to be a condition of continued employment and not a condition of employment. Hence coercion etc. If it was a condition of gaining emplyment, it would have been simple to opt out of participation at the outset and before eligibility and allocation/contribution etc.

From my perspective as a non-lawyer, Cash the check. You have given written advice by means of the notice on the invoice. You have advised the ED and verbally explained. You have advised the client's authorized Officer, namely the ED. You have no knowledge regarding any arrangements or compensatory agreements or accounting contra entries between the Trust and IHELPU, so your knowledge of the funding of the check is limited to the name of the payer of the check. You have done as much as you can practically and prudently do. The only remaining issues are, What could be the penalty for cashing the check ? Is that possible penalty more than the amount of the check?

The SPD is only (as the name signifies) a Summary. The details and formulas etc are in the Plan Document. You should not be trying to modify a questionable SPD but should be composing new ones from the governing PD/PDs. IMHO, your first step is to find the Plan Document. I dot not see how you can do anything without finding it/them. How to find them ??? I suggest asking any and everyone, including your predecessors and searching every possible archives etc. Was a copy every filed with the DoL or in a lawsuit ? Who drafted the various documents ? They might be helpful.

Did you know that BenefitsLink has a Humor Forum..? Does this joke include the employer taking a deduction for the profit sharing contribution ? What does the employer record the reimbursement as ... Extortion Revenue ??

I do not recall Deloitte marketing their KEYSOP as a NQDCP, I recall it being simply a NQ Stock Option Plan used for Key employees. I do not recall them calling it a NQDCP of any sort even in the opinion letter that they used to use. I recall Deloitte stating that their KESOP was under section 83 which I think means that it was not a NQDCP. In any case, didn't they pull it from the market just after they killed their patent application ? This suggests to me that there were some tax/legal issues with the concept. Here is one of the previous discussions on this Board: http://benefitslink.com/boards/index.php?showtopic=1577

What do you mean, "annual additions" to what ? Edit: What sort of contributions and from whom ?

The investment is being made with money taken from the plan, hence from plan assets, so how can you end up with " the person on the other end of the subscription agreement isn't holding plan assets." ?

That probably depends on whether or not your PD etc is already compliant with the changes without being amended. If your COBRA for your various relevant coverages are addressed in your Cafeteria Plan PD rather than in the PD for each coverage, then you would have to amend the cafeteria PD. If not then you have to amend the PD for each coverage eligible for COBRA. Or, as in many cases, every one (sp) has to be amended. Is COBRA the only issue considering all the other new laws ? HIPAA ? FMLA? Have you amended for the new Proposed Treas Regs for cafeteria plans ? http://www.coredocuments.com/docs/Core_Upd..._01-01-2009.pdf

In every plan that I have ever seen that has an employee contribution, that contribution is based on Total Cost which would include Administration fees.

Don Your logic makes no sense. The IRS saying that contributions for a 401(k) cannot be routed through a VEBA does not, clearly or otherwise, state, imply or infer much less acknowledge, that contributions from a cafeteria plan can be routed through a VEBA. The need to state what is covered is simply to define the limits and scope. If you look at section 125, you will see that it also similarly states what benefits are includable. It is standard practice to specify scope and to give definitions. Why would it be needed to route employee contributions through the VEBA anyhow ? Why not straight to either the insurer or to the health plan (if self funded) ?

It says that the benefits are funded by the VEBA. The benefits under the cafeteria plan are health etc. So it says that the health etc benefits are funded by the VEBA. It does not say that the cafeteria plan funds the VEBA.

Where does it say that the cafeteria plan is used to fund the VEBA ?

What does the requirement for those (and other) notices have to do with your insurance carrier? These notices are Plan requirements and not dependent on method of providing health benefits coverage.

Don I do not see where it says anything about funding the VEBA through a cafeteria plan. It talks about a VEBA and a related cafeteria plan and it talks about providing cafeteria plan benefits through a VEBA, but I do not see any mention of funding through a cafeteria plan.

A DoL Advisory regarding payroll deductions for group health without employee permission: DOL_ao2008_02a_re_Payroll_deductions.pdf

I do not see how a US employer with a US regulated health plan with employees on a US payroll, can expect not to be subject to US laws including COBRA. I could find no disctinction or exemption based on citizenship or location. In any case, I have to wonder why the employer would be reluctant, it seems petty and of little consequence.

Is the participation a condition of employment or is it just an employee benefit plan demand ?

Does the employee really work for a US company or is it for a subsidiary licensed/registered/domiciled in a foreign country? For example 3M is a US company but 3M Jamaica Ltd is not. Same for Xerox, IBM etc. Is the employee benefit plan and/or the health plan for those outside the US, the same Plans as for those in the US ?