Belgarath

Just wanted to make sure I've got this right. IF someone qualifies for this, it is a deduction taken on the individual owner's 1040. In other words, for unincorporated owner you would calculate Schedule C income and corresponding contribution as usual, and THEN, when they file their 1040, they would take an additional deduction from the otherwise taxable income (if they qualify).

I stand corrected. Don't know why 6 years stuck in my head...

Sure - FIS/Relius. Their PPA DC Prototype/VS document handles this - has a whole section dealing with it. P.S. - without checking, I'm thinking that the period is 6 years, not 7.

I have the same question. In the old post referred to above: I am faced with this same situation. Employer is going out of business and is terminating all health plans including the FSA. My question is what happens to the employee contributions that haven't been used to reimburse expenses. They are plan assets and presumably they cannot revert back to the employer, correct? Anyone have any thoughts? Amounts that the ER has not had to pay to EEs as part of payroll due to pay reductions elected to cover the cost of cafeteria benefits, but then not needed to pay those expenses are cafeteria plan 'experience gains'. The ER may retain them. Prop Treas Reg § 1.125-5(o). I have the same question - and the Prop. Reg. referred to above also appears to also allow for return of the excess to employees. Is there any other guidance on this? It can't be an unknown situation, yet the guidance/information seems sketchy. Allowing the employer to keep the unused money just seems wrong!

Hi Larry - let's see, it is Chapter 1A, Part B.5.a.1 and a.2

And FWIW, Sal says the guidance on this issue isn't clear, and you have to make a reasonable determination. His 2018 EOB is in our conference room, and I'm too lazy to go get it, but the 2017 version has an example of this - see pages 1a.442 and 443.

Is a hero just a form of a Greek Gyro, or is it a type of sandwich not in a pita/pocket type of bread? I've never known, as up here, we have subs or grinders, or a gyro in a Greek place, but no hero sandwiches.

It has always amused me - I've heard them referred to as soda, tonic, pop, cola, fizz, and probably other things I can't recall. Kind of like grinders, subs, and hoagies...

Did the Tax Cuts and Jobs Act, in and of itself, affect Dependent Care calculations? I found the following table for 2018. Does anyone know if it changes for 2019? Total Gross Annual Income Tax Credit Up to $15,000 35% $15,001 to $17,000 34% $17,001 to $19,000 33% $19,001 to $21,000 32% $21,001 to $23,000 31% $23,001 to $25,000 30% $25,001 to $27,000 29% $27,001 to $29,000 28% $29,001 to $31,000 27% $31,001 to $33,000 26% $33,001 to $35,000 25% $35,001 to $37,000 24% $37,001 to $39,000 23% $39,001 to $41,000 22% $41,001 to $43,000 21% $43,001 and Up 20%

I don't think a partial termination is the issue. It revolves around the determination of whether the IRS considers the plan "terminated" - and therefore 100% vesting - due to a "complete discontinuance" of contributions. Perhaps others here have had more experience with this - and it is somewhat of a facts and circumstances determination. My (limited) experience has generally been that 5 years would be a complete discontinuance. See 1.411(d)-2(d)(2) for information on when a complete discontinuance becomes effective. Note that if there were 401(k) deferrals, you should be able to count this as an "employer" contribution for these purposes, although I'm not sure that is ironclad. I think the IRS may determine a complete discontinuance takes place earlier than the 5-year mark in some situations. Again, others may be able to give you an answer based upon more actual experience.

Yuck! But amusing. Tom, I see you are in Pilgrim mode again. When you cross off a completed task on your to-do list, do you refer to it as Pilgrim's Progress? Reminds me, in a way, of a Smothers Brothers skit (that I thought was hysterical) where Jim Stafford is dressed in a ridiculous turkey suit, and does a "Thanksgiving Blues" song. I can't do it justice here, but uses classic blues, and goes something like this: Ba-dum, ba-dum I was born a turkey, Ba-dum, ba-dum, been a turkey all my life, Ba-dum, ba-dum, all my kids are turkeys, Ba-dum, ba-dum, got a turkey for a wife, Ba-dum, ba-dum, they say that this Thanksgiving, Ba-dum, ba-dum, is gonna be my last, Ba-dum, ba-dum, they want to cut my head off and stick stuffing up my (censored).

But you don't have much time to get the termination notice out. According to the IRS, the notice must be sent out before November 2.

FWIW - when setting up new plans in such situations for an owner only, might be worth considering using cliff vesting. Delays the distributions a bit longer if that is something they want. I'd certainly consult the plan actuary before actually recommending it to a client.

Thanks.

Nowhere near 20 employees, but they would like to ELECT to be covered by, or provide, COBRA benefits. Can they do this?

Ah, so each company adopted, therefore no eligible NHCE's were excluded. Now it makes sense to me that this was permitted under the basic check-box filing. Thanks for the additional detail.

No can do, generally. See 401(k)(2) and 401(k)(10).

Luke, I'm curious - was the employer part of a controlled group for longer than the transition period? I guess what I'm asking is were any of the other controlled group employees eligible and not covered? In that situation, I don't think a simple "checkbox and stop doing it" would be sufficient.

The title of the post says SEP, but the question says SIMPLE. Let's assume for the moment it is a SIMPLE. You need to do a VCP as PensionPro says. Honestly, I haven't yet read the newly updated Revenue Procedure to see if it changed this, but under RP 2016-51, Form 14568-D deals with ineligible employers. Why was the employer ineligible? If for one of the listed reasons, it is a checkbox. If otherwise, you might have to do something fancier.

When I resign, they'll replace me with a stuffed monkey...

This is sort of unanswerable, as there are SOOOOO many different factors that numbers of plans are sometimes nearly (but not totally) meaningless. Size of plans, complexity, combined plan testing, support staff assistance (if any) "user friendly" systems and procedures, investment platforms, quality of client HR personnel, TPA services performed, etc., etc. - some plans are giant time-sucks, and some are relatively smooth. You could go on and on. Having said all that, I would say that 120 plans would typically be considered on the high side, but on the other hand, if he's been able to handle it without working an excessive number of hours per year, then it probably isn't "too many." Good luck with whatever you decide.

Hi Bird - FWIW, I think we'll just agree to disagree. From my myopic viewpoint, it can't possibly be an excess deferral, because there can be no "deferral" if there is zero income. Just as an aside, it was properly documented that this was intended as a deferral. They just screwed up, and in the initial calculation of income, determined that there was income from which to defer. Then when numbers got finalized there was a "whoops." Fun stuff..

It is not a 402(g) issue. Plan does have other participants. The issue is less one of actual taxation (his Schedule C loss is such that even with the $24,000 refund, he'll still have a loss, so it isn't going to result in income tax anyway) than it is the mechanics of required reporting/withholding on the part of the plan. If it had been deposited during 2018, this would all be easy - we'd just count it as a 2018 contribution and leave it in the plan, but it unfortunately was contributed in 2017. And just to confirm - the vendor did refund it to Acme Sports. This is one of those things that we all obsess about ('cause that's what we do) that in real life makes no practical difference because in the situation at hand it isn't ultimately taxable anyway! Thanks for all the feedback and discussion. I think I'll put this one to bed at this point.

Thanks. This was helpful.

If a legitimate "change in status" takes place during the plan year, is there a specific timeframe by which the employee must make a change in election? I'm looking at a document that was done in 2008, and it doesn't specifically address this question. I presume it must be prospective only, and can't be retroactive? As an aside, does a new union contract effective during the plan year constitute a "change in status?" Seems like it should if it changes the level of benefits/reimbursement with regard to health insurance, and maybe this is contemplated under 1.125-4(f), but it isn't specifically listed under 1.125-4(c)... and could a health FSA election be changed in this circumstance? I'm thinking I saw somewhere that it can't. Thanks.