Kirk Maldonado

As I recall, the response from the IRS just said the prior year. That could be two days if the expense was incurred on December 31 and the reimbursement was requested on January 2nd, but I doubt that the IRS would want to fight that case. By the way, I interpreted your post as indicating that you might approve reimbursement of an expense that was incurred three years ago, which is what precipitated my post about the view of the IRS on this issue.

But is he enamored of the word "attenuate?"

AndyH: Attenuate: to reduce in force, value, amount, or degree; weaken; diminish. (Stolen from www.dictionary.com.) My favorite word is "counter-intuitive." I have a friend whose favorite word is "juxtapose." (Believe it or not, he is far from being an intellectual.)

I think that you should go up the chain in the IRS before contacting the Congressman for several reasons. First, it might not be necessary to get him involved, because you may prevail on appeal. Second, I'm sure that the Congressman's office doesn't want to get involved in every IRS audit, and they may be afraid that all taxpayers think that they are being abused in audits. Third, if it fails, you may have really alienated the auditor, which is probably the last thing you want to do.

Mbozek: You brought up a very good point when you said: Do you have any suggestions about what an employer that is currently handling checks in that manner can do to generate proof about the date of the mailing? The absence of demonstrable proof could be very costly to the employer in some situations.

slrogers: The DOL has provided some very useful guidance on this topic, some of which addresses situations very similar to yours.

jquazza: Thanks for the clarification. Your post and Janet's post were very helpful.

Do the instructions to the Form 5500 address this issue?

curmudgeon: Do you have a citation to authority that supports your position?

Judy S: Company #1. If I were counsel to that employer, I would give the employer language that they could say to the Key Employess about what to do with their grievances, but I couldn't post it in a public forum. The more tactful approach would be to say to them that you'd be happy to let them keep their money in the plan, if those employees will reimburse the employer for the cost of the top-heavy contribution (for the other employees). Company #2. I think I possibly have spotted a deal-killer issue, which may make your question moot. If the employer will only assume sponsorship of the plan assuming it has no risk of being out of pocket any money, who would assume the responsibility for making any top-heavy contributions that would be required if he plan becomes top-heavy (or the safe harbor contributions designed to avoid top-heavy statusJ)? I want to add a big caveat here. It's late and I'm very tired, so my reasoning in this post may be faulty. Please think this through carefully to make sure that what I said is correct.

I'm sort of in favor of splitting the baby. I agree with QDROphile that if there is a significant lapse of time between the time of the event and when the distribution occurs, it is hard to argue that the distributions is "attributable" to the disability. My recollection is that there is some guidance from the IRS on this point, possibly relating to hardship distributions of section 401(k) contributions. It might have come in informal guidance given by the IRS to the ABA; I just don't recall at this point in time. I think that if the test were simply that the onset of the disability must have occurred first, the statute would say that the distributions must occur "after" the person became disabled, along the lines of the exemption from the premature distributions tax in section 72(t)(2) that applies to payments "made to an employee after separation from service after attainment of age 55." On the other hand, given that the IRS has not yet promulgated any guidance on how long of a delay is acceptable, it is hard to image that the IRS would try to impose an arbitrary limit upon audit. Thus, I think that the risk of the IRS coming after the person who got the distribution is pretty slim. Finally, it is not good public relations for the IRS to go after disabled persons that take reasonable but (in the eyes of the IRS) incorrect interpretations of the law in the absence of any formal guidance from the IRS on that issue. I don't think that the decision makers at the IRS would make a blunder of that magnitude.

CSTS: Will the employers be related or could they be unrelated?

austin3515: The IRS disagrees with you. I submitted a questioninvolving almost the same facts to the IRS by means of the ABA. The IRS response was that you cannot get a hardship distribution with respect to amounts that the participant paid in the prior year.

Grumpy455: I guess I'm not understanding the situation. Here's what I understand the facts to be: On March 29th, you post a message saying: I interpret that language as meaning that a check would be mailed on March 29th but it would have a date of March 15th on it. I presume that the purpose of backdating the check to March 15th would be to avoid the 10% tax. To my way of thinking that would be tax fraud because the check would be prepared in a way to make it look like it was sent out by the deadline, when in fact, it was sent out after the deadline. Please explain where I've gone astray, either on the facts or on the law (or maybe on both).

Sure, living on Earth is expensive, but it does include a free trip around the sun every year.

I would never advise someone to back date a check, particularly where that would affect taxes. Nor would I post a message on a public forum asking if I should get involved in a transaction involving back dating checks. There is such a thing as tax fraud.

Lori: Although you attempted to attenuate my compliment on your powers of statutory interpretation (by saying that you frequently work with that provision), I believe that the ability to comprehend the gobbledygook that comprises the IRC transcends which particular section you are reading. When you mentioned "Kirk's gobbledygook" in your post, I hope you were referring to my quotation of the statutory provisions of section 509, rather than to my attempt to translate those provisions into a form that is easier (note I didn't say "easy") to comprehend. That is because my goal was to convert that statutory "gobbledygook" into plainer (note I didn't say "plain") English.

Vebaguru: Do you have a cite that supports your position? In doing a brief amount of research I couldn't find anything that supports it; everything goes the other way. Section 79 says that it applies to insurance purchased for eemployees and self-employed individuals are, by definition, not employees. Thus, section 79 does not apply to self-employed individuals. It would be a truly odd result if the rules of section 79 governed the tax treatment of individuals who aren't even subject to that provision in the first place.

Here's the result of my attempt to make that language a bit more comprehensible for those who are less gifted at statutory interpretation than Lori: If an organization that meets the requirements of section 501©(4), (5), or (6) would satisfy the rules of section 509(a)(2) (relating to certain support requirements) if those rules would be applied in the same manner if the organization met the requirements of section 501©(3), then that organization will be treated as if it were described in section 509(a)(2) for purposes of applying the rules of section 509(a)(3) (relating to certain operational requirements imposed on entities that are funded by organizations described in section 509(a)(2)). If anybody can improve my revised version, please post your replacement language.

There are some serious issues about whether doing that would cause the stock to fail to satisfy section 1042. I seem to recall that the late Jack Curtis wrote an article about this very topic. If I remember correctly, which is always an iffy proposition, it was published in BNA's Compensation Planning Journal a little more than ten years ago.

For purposes of paragraph (3) , an organization described in paragraph (2) shall be deemed to include an organization described in section 501©(4) , (5) , or (6) which would be described in paragraph (2) if it were an organization described in section 501©(3). Can anybody top this for incomprehensibility? Please post anything that you think might rival or even overtake this model of complete unfathomable text produced by our beloved Senators and Congressmen. Let's start a list!

Here is the relevant language from the regulation: If a group health plan or group health insurance coverage generally provides benefits for a type of injury, the plan or issuer may not deny benefits otherwise provided for treatment of the injury if the injury results from an act of domestic violence or a medical condition (including both physical and mental health conditions). I don't see anything whatsoever in the regulation that supports the position of the insurance company. In fact, I would conclude the exact opposite. If the DOL had intended that the rule not apply to the perpetrator, they would have stated so in the regulation. The absence of any express exclusion here leads me to conclude that the rule applies to the perpetrator as well as the victim. But I will admit that my involvement in this issue is limited to reading the regulation; I've not researched it at all. So if anybody has really delved into this issue, I'd be very interested in hearing their views.

The DOL has issued guidance on providing documents electronically. It could save you some time and money by disseminating the documents that way.

I had (wrongly) interpreted your original post as meaning that the change would be retroactive (to January 1). If the change is only prospective, then I agree with Janet M.

When you say post it, what do you mean? Would you be posting it on the company's intranet or on a bulletin board in a lunch room?