casey72

Has anyone received IRS approval of a correction in VCP that was less participant-friendly than EPCRS guidelines would have required? (For example, IRS approved a 25% QNEC when EPCRS guidelines would have required 50%?) For anyone who has filed a VCP application in the last couple of years, how long is it taking the IRS to get back to you? Thanks!

There is a common practice of companies filing a 5500 without a financial statement (generally because it's not ready yet), and then re-filing an "amended" return with the financial statement attached. I've always wondered if IRS/DOL would at some point crack down on that and treat such filings as late.

I agree with brian. I think offering coverage to surrogates (some of whom are presumably employees of other entities) is effectively offering coverage to employees of two or more employers. it technically meets the definition of a MEWA.

I have. Usually the response is to consult with ERISA counsel! Thanks for the sanity check.

Let's say an employee enrolls in an HDHP with family coverage and contributes to an HSA. Their spouse contributes to a general purpose health FSA, which we know is disqualifying coverage for purposes of the HSA. But how would the IRS know this? It doesn't seem that health FSAs are reported to the IRS (whereas dependent care benefits, like dependent care FSA contributions, are reported on W-2). What am I missing?

Hi Brian, Have you seen any providers that structure their programs in this way (where an employee is offered a flat taxable amount and can use that amount to cover surrogacy-related expenses, including a surrogate's medical expenses)? The only providers I've seen tie reimbursement directly to a surrogate's medical expenses (e.g., they want to see the receipts for such medical expenses in order to reimburse employee).

Is there reasonable argument for treating the LTD premiums as a taxable fringe benefit? Not a ton of guidance out there on fringe benefits, but 1.414(s)-1 suggests that fringe benefits and welfare benefits are separate items, and I would think of LTD premiums as being a welfare benefit.

Likewise, if considering the retroactive amendment, keep in mind that you would need to make sure that the plan was operated that way with respect to all participants (immediate entry rather than first of January/July).

Some plans are drafted to require the entire distribution to be repaid in order for forfeitures to be restored. Just because the plan won't accept a rollover of the Roth IRA doesn't mean the participant can't repay it. Participant could repay with funds outside of IRA.

A company failed to process participants' after-tax elections during January 2024. Company corrected by depositing a 40% QNEC early in 2024. Then a handful of participants proceeded to max out their contributions, exceeding the 415(c) limit. (Basically, client let contributions continue in 2024 as if QNEC had never been made; it wasn't factored in when applying the 415(c) limit.) Essentially, the participants would not have been owed anything if the company had waited to correct because those participants ultimately hit the 415(c) limit. Is it appropriate to forfeit money out of the QNEC source, with the view that the correction was never required? Or do they have to fix the 415(c) limit issue by distributing the after-tax contributions? (Side note: I always advise plan sponsors to wait until after the plan year has ended before making corrective contributions, just in case they aren't owed. However, they don't always ask.)

Thanks all.

Employer withheld premiums for welfare benefits from employees' pay, but only deposited a portion of such premiums into the VEBA/trust. (Reasoning is unclear, but may have been to avoid UBI/UBTI, as VEBA is overfunded.) Employer held in its general assets the remainder of those employee "premiums" apparently for its own use. If the "surplus" premiums never went to the VEBA is it a reversion? Does it matter that the contributions were not dictated by the VEBA but rather simply by open enrollment materials? How does one correct an issue like this? Is there a correction program for VEBAs? Appreciate any thoughts!

It's odd, it actually says they can file by paper for the 2024 taxable year. It doesn't say that filers can do so for the 2023 taxable year!

A client wants to offer a generous reimbursement program for surrogacy benefits. (Fertility is already well-covered under their health plan.) The reimbursement program would not reimburse any medical expenses of employees/spouses/partners/dependents. However, it would reimburse medical expenses of the unrelated surrogates. Is there a reasonable argument that this is NOT a MEWA? What are the risks here? Thanks!

I agree that plans should pay the excise tax on a timely basis. File the 8868 (requesting 6-month extension) with the payment by paper and hope this is all worked out by January 2025!