Christine Roberts

Mike would your answer be the same if the plan did not have any mandatory cashout rule but added one, rather than just increasing dollar limit?

Employer with more than 20 employees wants to establish a health reimbursement arrangement that is limited to reimbursement of expenses for smoking cessation programs. Would a limited purpose HRA of this nature still be subject to Medicare Secondary Payer Act reporting to CMS? Medicare does cover smoking cessation treatment, from what I could gather online, but surely this can be distinguished from a general-purpose "Group Health Plan" for reporting purposes? That is my wishful thinking, however. Any comments or thoughts are appreciated.

As moderator I had to delete a message that had spam re: "relationship advice" in the signature tag; it was the last post but I believe I deleted the one prior by accident; if you have contributed to this string please restore your deleted message provided it is not the one offering "relationship advice" in your signature tag, thanks.

Thanks for the replies. It is an administrative nightmare. In Minnesota - if the legislature does not end up tracking federal law, won't the employers that took the relief offered have under-withheld for state income tax purposes? Will the state allow a penalty-free catch up?

Many states do not conform to PPACA/HCERA and Notice 2010-38 regarding federal tax exclusion of value of coverage provided to over age dependents (up to age 26 regardless of student status, etc.). In determining imputed income at the state level resulting from such coverage, what of the instance of an employee who is already paying the maximum family coverage premium? Addition of a minor dependent would not increase his or her premium, so can there really be said to be imputed income at the state level? And for the employee whose overage dependent causes coverage to increase from, say, self-plus-one to family coverage, is the imputed income equal to the difference between the old and new premium amounts? I would be interested in others' comments as we head into Form W-2 season. Thank you.

Has anyone had experience working with this North Carolina consulting group on a common client's TIAA-CREF 403(b) Plan/Form 5500 preparation? My understanding is that the group is staffed by former TIAA-CREF employees who wanted to deliver customer service on a different model; they are recommended by TIAA-CREF so I am assuming there's an amicable relationship, just wondering what quality work they provide. They are at www.newpcg.com; there is another new pinnacle consulting group that is some sort of tactical weapons specialists - not what I am inquiring about! Any and all comments appreciated.

Is anyone aware of a product of this sort in existence or in the works? Presumably when regulations issue on how nondiscrimination rules will apply to insured arrangements it may have to change but just wondering if anything exists at the present time.

when you do the safe/nonsafe harbor test do you revert to the HCE definition for retirement plans or keep using the HCI definition under 105(h)(5)??

If you have submitted a VCP application in recent weeks and have not received your acknowledgment of receipt letter back (2008-50 Appendix E) this does not mean that it has been lost. The IRS has changed computer platforms (at least w/respect to VCP processing) and due to the change is not yet able to generate the VCP case numbers they stamp on the receipt letter before sending out. A VCP coordinator told me it may be a few more weeks before I get a receipt for an application I submitted on 6/29/10. Just FYI.

For answer to above qusttion to be "yes" the term sheet must meet the definitions of "option" and "date of grant of option" set forth in Treas. Reg. Sec. 1.409A-1(b)(5)(vi)(A) and (B), respectively, which are equally applicable to stock appreciation rights under (vi)(H). The definitions require that, among other items of information, the maximum number of shares subject to the option/appreciation right be stated in writing or electronic form. If this information is not part of the term sheet, or part of a writing/email, etc. that can be proven to have been made contemporaneously to the term sheet (I don't think there is any requirement that all required items of information be part of the same document), the pre-2005 actions were incomplete, for grandfathering purposes. Any comments appreciated.

A newly hired executive and the employing closely held coroporation enter into an undated "proposed" term sheet in late 2003. Term sheet proposes "equity participation" equal to a 5% grant of shares outstanding at 1/1/2004, and stock options equal to 15% of the company based on fiscal year end values (April 30 of 2004, 2005 and 2006). The "equity participation" shares vest in 1% increments at 6 months, 12 months, 18, 30 and 42 months, such that shares equal to 2% are vested and nonforfeitable as of December 31, 2004. No shares actually change hands nor is any additional compensation provided to the executive at any time. The options vest in 5% increments at June 30, 2004, June 30, 2005 and June 30, 2006; each increment expires after 10 years. Thus options equal to 5% are vested as of December 31, 2004. No further documentation of the options is made. Fast forward to 2010; parties to "proposed" term sheet want to give it effect to the extent possible and primarily desire to continue deferral of the options and "equity participation"/appreciation rights to extend until change in control of closely held company. To the extent the term sheet constitutes an "issue" or "grant" of stock rights before January 1, 2005, all stock rights would appear to be entitled to "grandfathered" valuation rules under Notice 2006-4 which states in relevant part: "Until further guidance is issued, with respect to a stock right issued before January 1, 2005, for purposes of determining whether the stock option results in a deferral of compensation pursuant to Notice 2005-1, Q&A-4(d)(ii), or the stock appreciation rights results in a deferral of compensation pursuant to 1.409A-1(b)(5)(i)(B) of the proposed regulation, prinviples similar to those set forth in Sec. 1.422-2(e)(2) will be applied. Accordingly where there was a good faith attempt to set the exercise price of a stock right granted before January 1, 2005, at a price not less than the fair market value of the stock subject to the stock right at the time the stock right was granted, that such exercise price will be treated as being not less than the fair market value of the stock at the time of grant for purposes of determining whether the stock right is excluded from the requirements applicable to deferred compensation under section 409A." As grandfathering of valuation method = all stock rights, whenever "vested" are deemed to be non-discounted and hence not subject to 409A, is the whole arrangement exempt from 409A and thus capable of being revised and restated at any time in any way the parties see fit?

May I ask how far back you are going to submit returns, in DFVC? The thing I find interesting is that the supplemental plan may always have been subject to ERISA as a result of employer involvement in approval of harship withdrawals, loans, etc., but the employer had no concept of the supplemental arrangement as a "plan" with reporting duties until the documentation requirement cropped up (or more specifically when the TIAA-CREF/Ascensus process resulted in it being labled "Plan No. 002.") Also I am finding that the employers often did not get information on supplemental "plan" assets, so as to be able to re-create past returns.

Please comment if you have experienced the following scenario: Nonprofit client has TIAA-CREF 403(b) arrangement. Client has two TIAA-CREF contract numbers, one for the "RA" plan which receives salary deferrals and matching contributions, and one for a GSRA or group supplemental retirement annuity, which receives no match but which is intended to receive salary deferrals above and beyond the maximum amount or percentage that the employer matches. Both arrangements permit loans and have other features requiring employer administrative efforts such that even the GSRA is an ERISA arrangement despite receiving no employer match. Client traditionally filed a single Form 5500 return using plan number 001 for the RA arrangement. Ascensus sends out plan checklists for each contract number. Employer completes checklists separately and receives two adoption agreements and two SPD, one for each contract number. The SPDs say nothing about the "other" plan and each cite the full salary deferral and catch-up limitations. One is identified as plan 001, the other as plan 002. Does the client now have to file two Form 5500s, one for the RA and one for the GSRA? If so, must the employer "merge" the two arrangements onto a single Ascensus checklist (which is permissible) in order to eliminate plan 002 and the attached reporting obligations? Comments and input much appreciated.

I have dealt with this situation for a client. You basically follow EPCRS for exclusion of otherwise eligible employees, yes it is 50% of missed deferrals using passing ADP rate for appropriate group and 100% of match.

How definite must a deferral election be? Partners have until 12/31 each year to make a deferral election w/respect to self-earned income, the amount of which won't be final in amount until after the end of the year; as ADP testing will be performed by the time the contribution must be funded (i.e., deadline for 1040) is there any reason the partner's annual deferral election can't be defined as "the maximum dollar amount permitted for an HCE under final ADP testing"? What about a deferral election stated as a flat dollar amount equal to the annual 402(g) limit, or, "if lesser, the maximum permitted under ADP testing"? Or is this just too "cute" an end-run around maintaining a safe-harbor plan?

Thanks for your reply. What about not deleting the separation from service but requiring that separation from service occur on or after the employee's 50th anniversary of hire, to be a distribution event? This would not be an additional payment event but a subsequent deferral (it seems to me), made more than one year before he intends to retire, and pushing the payment event out by more than 5 years.

The final 409A regulations contain 24 examples under 1.409A-2(b)(1)(9) on subsequent deferral elections but this scenario is not addressed: Plan defines "payment date" as the later of participant reaching age 65, or his termination of employment. On which event/date does the 5 year minimum subseqent deferral rule depend? Participant is less than 1 year from his 65th birthday but plans on working another 5 to 10 years. He has over 40 years of service with the employer. First, is there a substantial risk of forfeiture just due to the "later of" language and the participant's good faith intention to continue working? Does the fact that the participant is a substantial but not majority owner of the entity make any difference? In other words does the plan on its face have to have a more material risk of forfeiture? If so can the participant now change the definition of "Payment Date" to the later of age, say, 70, and completion of, say, 50 years of employment? Or just leave 65 as is, and make later trigger his "separation from service on or after completing 50 years of service"? Any comments appreciated.

I have also taken a client through "self-correction" which is an informal process, not a set procedure. And no real "reliance" on going through the process the way there is with EPCRS, VFCP, etc., but they do seem to be acting in good faith by inviting voluntary disclosure of failures properly to participate. Christine P. Roberts Mullen & Henzell L.L.P. 112 E. Victoria St. Santa Barbara, California 93101 tel (805) 966-1501 fax (805) 966-9204 croberts@mullenlaw.com

Yes to your questions re EPCRS and earnings - see Revenue Procedure 2008-50, Appendix F, Schedule 4 which is a "streamlined" application for correcting the failure you describe. Excise taxes would ordinarily apply to excess contributions but relief may be available under EPCRS; this is part of the streamlined application.

Employer sponsors 401(k) plan that uses W-2 definition of compensation. Employer permits employees to extend group health and other insurance coverages to domestic partners, both "registered" domestic partners who have the same status as spouses under state law, and unregistered domestic partners (e.g., opposite sex) who have no special status under state law. Presume 100% of all domestic partners receiving coverage DO NOT qualify as the employees' dependents under IRC Section 152. For federal tax purposes, employer reports imputed income equal to the value of the coverage provided to the domestic partners, on the employees' Form W-2s, in boxes 1, 3, 5, and 12. Will the "phantom" income be included in compensation for plan purposes unless the employer expressly excludes it from the definition of compensation in the plan document? Or is it a non-issue, in most instances, because salary deferrals and matching contributions are based on payroll period income and the imputed income from domestic partner benefits is only tracked for W-2 purposes on an annual basis, and not reflected payroll period to payroll period??? Have others had this issue come up?

If a corporation adopts a NQDC plan by documented board of directors action prior to the stated effective date of the plan, and participants complete individual salary deferral agreements prior to that time (or within 30 days), is there any reason why the IRS would not view the plan to have been "adopted" or "in existence" due to the failure a plan sponsor excutive to physically sign and date the plan document before its effective date? Stated otherwise, would the IRS take a different position re: what constitutes adoption of a plan document (i.e. timely corporate resolution suffices) than it has taken in the qualified plan arena, as outlined in the attached thread. http://benefitslink.com/boards/index.php?s...amp;hl=unsigned I don't see anything in this regard in Notice 2010-6. Any and all comments are appreciated.

Thanks for your response!

I have the very helpful EBIA HIPAA manual but could not construe a clear answer to the following questions: A local governmental entity contributes towards a VEBA trust that primarily provides short and long-term disability and hardship loans (e.g. for medical, funeral expenses) to certain groups of gov't. employees. All benefits except for long term disability are self-funded; the LTD benefit is insured. Sort of a modern version of "widows and orphans" fund. A few years back the VEBA was amended to allow up to $500 reimbursement towards the costs of LASIK surgery. The VEBA reimburses eligible participants who provide proof of payment for the LASIK procedure, up to the dollar amount. For purposes of HIPAA compliance (portability, privacy) - is it an excepted FSA? Other type of limited purpose excepted benefit? Or, if not excepted - is an "opt-out" not available because, though a governmental plan, its not fully self-funded? Already posted to Health/COBRA/HIPAA Board with no reply...

I have the very helpful EBIA HIPAA manual but could not construe a clear answer to the following questions: A local governmental entity contributes towards a VEBA trust that primarily provides short and long-term disability and hardship loans (e.g. for medical, funeral expenses) to certain groups of gov't. employees. All benefits except for long term disability are self-funded; the LTD benefit is insured. Sort of a modern version of "widows and orphans" fund. A few years back the VEBA was amended to allow up to $500 reimbursement towards the costs of LASIK surgery. The VEBA reimburses eligible participants who provide proof of payment for the LASIK procedure, up to the dollar amount. For purposes of HIPAA compliance (portability, privacy) - is it an excepted FSA? Other type of limited purpose excepted benefit? Or, if not excepted - is an "opt-out" not available because, though a governmental plan, its not fully self-funded?

What 409A practice guides are out there and what are you using/finding helpful? I am looking for a secondary source in this practice area. Thanks.