casey72

i would tend to think that if the mortgage they're getting is for a principal residence then the plan should be comfortable with that designation as well.

Thanks for the follow up! FYI, I looked into this and that language in the 1998 PLR was verbatim the language in the regs at the time in 1998. That reg has since been removed.

Thanks. I'm not sure EIN is dispositive as to whether the buyer is a new "employer." The target's EIN could easily stay the same post-closing, too, and it's considered a new "employer."

Thanks Artie M. Whether that reg applies depends on whether pre-closing buyer (ABC) is the same "employer" as post-closing buyer (ABCDEF) for purposes of the rule. We are all comfortable that DEF is a new "employer" when it joins ABC, which is why it can terminate its plan pre-closing and join ABC's plan post-closing. Is there a reason that we are not comfortable that the same is true for ABC when it acquires DEF (such that it can likewise terminate its plan pre-closing and join DEF's plan post-closing)? There may be a reason, but I was hopeful someone would have a citation/support.

The question is not why a buyer would terminate their plan or whether they should. The question is whether a buyer can avoid the successor plan rule in the same way that a target can by terminating its plan pre-closing. If Group ABC (buyer, which sponsors a plan) buys Group DEF (target, which also sponsors a plan), forming Group ABCDEF, why would this new group be viewed as a new "employer" with respect to DEF, but not a new "employer" with respect to ABC? We all agree that the rules say Group DEF can terminate its group's plan pre-closing and join the ABC plan post-closing without creating a successor plan issue. But where do the rules say that ABC cannot terminate its plan pre-closing (and distribute funds) and join the DEF plan post-closing due to the successor plan rules?

Exactly, perhaps buyer's plan has lots of issues.... is there an argument that the pre-closing controlled group of buyer is different than the post-closing controlled group of buyer (bc now target is in it), such that the capital "E" employer has changed?

In a stock acquisition, often a buyer requires target/seller to terminate target's 401k plan pre-closing. Can a buyer instead choose to terminate its own (buyer's) plan pre-closing and join the target's plan post-closing? Or does this run afoul of the successor employer / alternative defined contribution plan rules?

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!

thank you!

Can a partner who receives a k-1 from a partnership participate in an HRA? Partnership is setting up a fertility HRA and would like all employees and partners to be eligible.

A company failed to make matching contributions to certain former employees for the 2021 plan year. (Company thought there was an allocation requirement to be employed on last day of plan year, but there was not.) Company made corrective contributions to those former employees. Is it necessary to re-run the ACP test using the new matching contribution data?