Belgarath

Thank you. So in two situations, it seems clear to me that an HRA can reimburse: 1. Retiree only HRA 2. Subject to the parameters of IRS Notice 2015-17 (and other applicable guidance) and the MSP rules. But in a 125 plan, I'm still less "certain" of the answer, although it does seem to me that you can't. Thanks again for the link.

Advance notice, yes, but 204(h) doesn't apply to PS plans. So you only have the safe harbor advance notification period to worry about,

Thanks for the above. But am I correct that the guidance is re an HRA, rather than a 125 plan? I feel pretty comfortable that Medicare premiums as discussed can be reimbursed through an HRA, subject to the parameters and the 20-person rule mentioned already, but I thought you couldn't do in a 125 plan? In a twist on this - can a cafeteria (125) plan allow an employee to purchase private Medicare supplemental insurance? I think the answer is no, but a second opinion would be great!

Yes,

Yeah, that' unlikely to work (assuming paperwork was accurate in the first place) - the assignment form where the policy is absolutely assigned to the insured should have specified if it were a sale.

RB - I think the language under 1.402(a)-1(a)(2) is a little confusing, but it seems to draw a distinction between nontaxability due to irrevocable conversion to a nontransferable annuity contract, or treating it as a rollover contribution under IRC 402(c), and either method is acceptable. It isn't entirely clear to me exactly what is meant by "treating" it as a rollover under IRC 402(c), but it seems likely that this might include what you propose. I don't know if there is other guidance on this or not.

Thanks Jpod. Yeah, that's the conclusion I have been reaching after looking into it a little more. Now the general question that was asked has morphed into the REAL question - funny how often that happens - you frequently don't get asked the real question up front. Real question turns out to be whether the employer can offer an HRA (for active employees) that reimburses Medicare premiums. Looks to me as though if the requirements of Notice 2015-17 are satisfied (Q&A-3) that it is ok to reimburse Medicare Part B and D premiums, including Medigap premiums. Also TRICARE. Sadly, I do not yet even know what Medicare Part B & D really are, nor what TRICARE is, and I am merely assuming the Medigap is something that covers expenses that Medicare doesn't. I've got some reading to do! This is probably old stuff to y'all, but I found this website to be very helpful. https://www.medicare.gov/supplement-other-insurance/how-medicare-works-with-other-insurance/how-medicare-works-with-other-insurance.html

Yeah, funny how the owner can just "forget" to make payments. No one ever seems to "forget" to pick up their check when they are withdrawing the funds. Perhaps you can claim that the owner's Achilles limbic system was acting up.

I wonder if they mean you can't use the "streamlined" 14568-E, in which case I agree. But you can still file under VCP. Don't have any experience to judge whether or not it will be successful. Section II - Eligibility for Use of Form 14568-D (my edit - this is what the IRS form says, but that's an incorrect reference, cause the form is a Form 14568-E...) Yes No A. Is any affected participant either a key employee (as defined in Code section 416(i)(1)) or an owner- employee (as defined in Code section 401(c)(3))? If “Yes,” proceed to Section II B. If “No,” skip Section II B and proceed to Section II C. Yes No B. Is the purpose of this request limited to permitting the plan sponsor to report the loan as a deemed distribution in the year of correction instead of the year of the failure? If “Yes,” complete Section III and then proceed directly to Section IV D. (Sections IV A, B, and C do not apply.) If “No,” STOP - do NOT use this schedule. Any request for relief should be made by filing a detailed written attachment to Form 14568, Model VCP Compliance Statement describing the relief requested and the reasons why such relief should be granted.

I see that MoJo responded before I finished typing my post. Looks like the "real life" situations are trending towards conferring fiduciary status. I wonder if that will change...

Would it be possible that that the ROBS "promoter" might be a fiduciary in some circumstances and not in others based upon facts and circumstances? I've pasted in an excerpt from one of MoJo's links, and I frankly find this whole subject confusing anyway. But isn't it possible that a very careful ROBS "promoter" who doesn't recommend to a client that they engage in a ROBS transaction, but has a website describing the ROBS transactions (which I don't much care for either) and essentially saying, in all written and verbal communications, the following: "I'm not recommending that you do this, but if you DO decide to do it, upon advice of your tax and legal counsel, I can assist you with the paperwork to establish the Plan" would avoid fiduciary status? I'm guessing that this is not how they mostly operate (or haven't in the past) so perhaps most "real life" ROBS transactions might put the promoter into fiduciary status - but I really don't know. It does seem like perhaps fiduciary status could be avoided if handled very carefully? Thankfully, this is an academic question for me! Glad I don't have to deal with this stuff. status will occur if a person makes certain "recommendations" (as described below) for a fee and (A) represents or acknowledges that they are acting as a fiduciary within the meaning of ERISA or the Code, (B) renders advice pursuant to a written or verbal agreement, arrangement, or understanding that the advice is based on the particular investment needs of the recipient, or (C) directs the advice to a specific recipient or recipients regarding the advisability of a particular investment or management decision with respect to securities or other investment property of the employee benefit plan or IRA. What are the Key Features of New Fiduciary Rule? Expanded Fiduciary Status - All those who make "Recommendations" The existing five-part test [5] that formed the basis for determining when a person should be treated as a fiduciary investment adviser has been replaced and only the final prong of the old test regarding the provision of "individualized" advice remains a part of the new analysis. Under the new rule, fiduciary investment advisor status will occur if a person makes certain "recommendations" (as described below) for a fee and (A) represents or acknowledges that they are acting as a fiduciary within the meaning of ERISA or the Code, (B) renders advice pursuant to a written or verbal agreement, arrangement, or understanding that the advice is based on the particular investment needs of the recipient, or (C) directs the advice to a specific recipient or recipients regarding the advisability of a particular investment or management decision with respect to securities or other investment property of the employee benefit plan or IRA. What are Recommendations? A recommendation is a communication that, based on its content, context, and presentation, would reasonably be viewed as a suggestion that the recipient of the advice engage in or refrain from taking a particular course of action and includes: • A recommendation as to the advisability of acquiring, holding, disposing of, or exchanging, securities or other investment property. • A recommendation as to how securities or other investment property should be invested after the securities or other investment property are rolled over, transferred, or distributed from the plan or IRA. • A recommendation as to the management of securities or other investment property, including, among other things, recommendations on investment policies or strategies, portfolio composition, selection of other persons to provide investment advice or investment management services, selection of investment account arrangements (e.g., brokerage versus advisory); or recommendations with respect to rollovers, distributions, or transfers from a plan or IRA, including whether, in what amount, in what form, and to what destination such a rollover, transfer or distribution should be made. The determination of whether a recommendation has been made is an objective rather than subjective inquiry and the more individually tailored the communication is to a specific advice recipient or recipients, the more likely the communication will be viewed as a recommendation. A series of actions, directly or indirectly (e.g., through or together with any affiliate), that may not constitute recommendations when viewed individually may be considered recommendations when taken together as a whole.

Not sure if this is the correct forum - question is, (for a governmental entity, if it matters) - can the entity set up an HRA for former employees that also covers expenses for spouses and dependents? I lack expertise in this area (putting it kindly) and although it seems very clear that Retiree Only HRA's are perfectly allowable, I'm not finding hard guidance that permits coverage for spouses and dependents. Or perhaps the guidance is the other way around - coverage for spouse and dependents allowed unless otherwise prohibited, and it ain't otherwise prohibited. 1. Anyone know the answer? 2. Any citations/sources you can point to? Thanks for any assistance!

Curious as to both strict interpretations and "real life" if different. The following is (really, really) a hypothetical question. Suppose you have a 125 plan, and despite a couple of mid-year tests that passed, it still ends up failing the Key Employee 25% benefit test. Let's say only one Key, and $10,000 deferred, and to pass, Key could only have deferred $9,000. You find this out, of course, after the end of the year. So, under the regulations, is the entire $10,000 taxable to the Key, or only the $1,000 excess? Now, if the answer is the entire $10,000 - is there a "real life" fix where if caught before end of January, the W-2 would simply show $9,000 as a contribution/deferral, and the other $1,000 would show up as normal W-2 taxable income? Or some other "real life" fix? Doesn't seem quite legit to me... Thanks for any discussion/answers/insights!

Thanks - that was exactly my understanding as well. But always nicer to hear that someone agrees!

I have found the IRS very reasonable on this, and haven't seen the penalty imposed when a waiver has been requested. I suppose in an egregious situation they might be less forgiving, which is reasonable, but I agree with RBG that the possibility seems remote.

Client first institutes a DB plan after attaining age 70-1/2. Has a 3-year cliff vesting schedule (to delay RMD's). Suppose the end of the 3rd year is 12/31/2017. Must the first annuity payment commence by 4/1/2018, or 12/31/2018? My reading is that he has until 12/31/2018, but I can see an argument for 4/1. Particularly if taking an annual annuity payment, it is hard to see how it really matters, since he would receive it all in the 2018 tax year anyway, but that's a separate issue. The later date seems a bit easier administratively, since the vested accrued benefit as of 12/31 often isn't known until later in the following year anyway...

Having a brain cramp. Suppose an owner of an LLC taxed as an s-corp sells the business. Plan is a calendar year Safe harbor plan. My understanding is that all employees terminated employment as of the sale date. (Is an LLC that is taxed as an S-corp automatically "dissolved" as of the sale, or does it continue to exist as a legal entity, until "dissolved"?) If the former owner wants to maximize contributions, do you see any problem with having the plan termination date of 12/31/2017, so there is no short plan/limitation year, and therefore no prorating of limits?

And FWIW, Sal says, "A qualified plan may offset Davis-Bacon amounts against any other allocations provided under the plan. For example, the Davis-Bacon contribution might help satisfy the safe harbor contribution obligation under a safe harbor 401(k) plan..."

Thanks MoJo - that makes good sense to me...

"If the plan is "clear" that ONLY a spouse may take under the plan (and under no circumstance can the participant name a non-spousal beneficiary), then I don't see the legal separation as having any effect on the plan provision." Thanks MoJo. Yeah, the plan language is very clear that the there is no preretirement death benefit if you are "unmarried." But that brings up the issue of whether "legal separation" means "unmarried." So this is probably a question for ERISA attorney in this state. Here's the actual applicable language - I cut out (b) and (c) as inapplicable to the question at hand: (a) Death prior to retirement benefits beginning. The death benefit provided under this Plan shall be the "minimum spouse's death benefit" provided in Section 5.5(c). In the case of an unmarried Participant who dies prior to such Participant's Retirement Date, no death benefits shall be payable under this Plan. ... (d) Beneficiary. The Beneficiary of the death benefit shall be the Participant's spouse, who shall receive such benefit in the form of a Pre‑Retirement Survivor Annuity pursuant to Section 5.8.

Re-upping this old thread. We have a situation where there is apparently a "legal separation" - whatever that means, and it apparently will never be a divorce (or not for a long time) and it has something to do with the "ex" remaining on health insurance. I really don't have any details. But, the DB plan provides for a pre-retirement death benefit ONLY for a spouse. So is this a question of State law now, as to what constitutes a "spouse" for this purpose? The plan language is silent on this issue. Or, is there some other guidance that would apply where ERISA would override state law - e.g. that until there is a divorce, you are a "spouse" and a legal separation doesn't change that. Thanks!

Thanks. I maintain that she knows a good thing when she has it. She maintains that she is paying her debt to society by preventing some other poor soul from being stuck with me. Sadly, I believe the preponderance of the evidence is against me...

I had erased that episode from my memory banks, mercifully. At this point, my memory banks erase automatically.

Kudos! And agree on the D-Day as well. Sadly, most of those involved have passed on to greener pastures, but we salute their memory. On a lighter note, and meaning no disrespect with my switch over to my strange sense of humor, it also happens to be the 36th anniversary of my wedding day. A fairly heroic undertaking (on my part, not hers, naturally)!

I'd contact an ERISA attorney in the state where your employer (or former employer) is located, and ask them this question.