ERISAgeek111

Lou S. Aren't all defined benefit plans covered by PBGC? The plan is over funded. Is a difference between the treatment of the DB plan in an asset sale vs a stock sale? I don't know if the business will assume the plan -- they want me to just give them various options, i,e. whether they should terminate or continue, and the pros and cons of each. i was just wondering whether they really should terminate the plan.

A client (owner of a two-member LLC) is considering selling his business (the LLC) or transferring his interests to the other member (his brother). The LLC maintains a defined benefit plan for the LLC's members/employees. Does the LLC have to or should it terminate the plan? Can the plan continue in effect? Under what circumstances would it be best to terminate the plan? Should the plan be frozen regardless?

An employer can deduct from wages the cost of a health insurance premium that an employee agrees to. When an employee is on an unpaid leave of absence pursuant to the Family and Medical Leave Act, the employer must maintain the employee’s health insurance coverage but can require the employee to continue paying his share of premiums. Since the leave is unpaid, the payment cannot be made via payroll deduction. Typically, the employer will require the employee to submit checks for payment. Are there any other options available to the employees for the payment of premiums? For example, can the company permit the employee to catch up on premiums when they return to work via extra payroll deductions? Would that be a permitted payroll deduction? Maybe do it as a loan from the Company to the employee? Is it still considered to be a health insurance premium, or has it become a loan that must be repaid to the employer? Thanks

you mean the agreement? it says they options are intended to be NQSOs.

the agreement does meet all the ISO requirements, and no options have been exercised, but the FMV of the stock has gone up.

Client executed a non qualified stock option agreement with an employee, but claims it actually meant to give the employee incentive stock options. Is there a quick way to fix this? I have not yet seen the actual equity incentive plan (asked for a copy). Thanks.

So the service provider, which is a corporation, is an IC. I thought we had a related party issue here potentially, so was hoping for another way out. Owner/SH of the vice provider company also owns shares in company which owns 44% of the service recipient. I think we're good though.

Consulting Agreement provides for a fee of 250K payable quarterly in arrears. Term of agreement continues until a liquidity event or an event of default under certain senior subordinated debt agreement. If an event of default exists with respect to that certain subordinated debt, fee payable under the agreement is limited to 125K. Deferred amounts continue to accrue during the default period, and once default cured, the accrued amounts are paid to consultant, and thereafter normal schedule of payments resumes. Subject to 409A?

For NQSOs issued to a non-employee director, does the Company issue him/her an IRS Form 1099 to report the income on exercise? Thanks

Thanks Luke. Yes, this is a 409A plan. Payments do have fixed payment dates, and this is not a public company. Agreed, points well taken and as always, thanks for providing your insight.

Thanks jpod. That is exactly my thinking.

Executive has a $600k base salary under an written employment agreement. If he is terminated w/o Cause or he terminates for Good Reason, he gets base salary continued for 1 year plus pro-rated annual performance based bonus. Employer can extend the severance for up to another year and continue to pay him the base salary for up to 1 more year. Meaning, executive would get another 600k of salary (for another year) if the employer extended the noncompete by another year by giving executive notice within 45 days after termination date. Any 409A issues?

Thanks Luke. Do you see any ERISA/tax code issues here? I really can't think of many. I agree the insurance policy is likely to reference an "employer" as the owner of the policy, hence the 501c3 could not be the owner of the policy, but what if the 501c3 pays them some sort of a "bonus" (although there is no employer-employee relationship) and the employee uses that bonus to buy their own insurance? Employee gets a 1099 as relates to the bonus and reports the amount as income, so it's taxable, hence any benefits subsequently received are tax free? I agree that the 1099 implies a service relationship. Right now, the employer (the med school) pays and just reports the additional earnings as "clinical services". I believe that part goes in a different box on the W-2 (not box 1), but haven't confirmed. Any thoughts welcome.

A client - a 501(c)(3) entity - has a contract with a local medical school pursuant to which school faculty (employed by the school) provide clinical services (treat patients) on the premises of this client. The faculty providing the services assign their right to send their bills for services to my client, meaning the client bills the patients and receives payment. The arrangement is that the faculty providing the clinical services gets paid 45 cents on $1 for each service provided, the rest of the money goes to support various departments of the 501c3. The way the money collected is actually paid to the faculty/physicians is that, after my client collects the payments, it wires a lump sum to the medical school, with a list of which faculty/doctors to distribute payments to. There is no 1099 or W-2 from my client (the 501c3). Instead, the faculty/doctors get paid from the medical school through their regular pay stub/W-2 with an entry that says "clinical earnings". My client wants the medical school to contract with an insurance company to provide disability insurance to the clinical faculty. Medical school wants nothing to do with it. Is there a group that can be joined to allow for the provision of this disability insurance to the clinical faculty? The medical school does not want to pay the premiums, but the 501c3 client offered to cover the cost out of their reserves. My client wants the disability benefits to be tax-free to the faculty/physicians; however, in order to do so, the premiums would have to be paid with after-tax dollars. So for example, if the medical school agreed to do it, the medical school pays $100 for disability premium for an employee, that is then added to the employee's income, the employee than pays tax on regular salary plus the $100, and subsequently, the disability benefits are tax-free to the employee (because tax already paid on the $100). Is there a way that my client can pay these disability premiums? They are offering to do so. So in other words, since the medical school doesn't want to be involved with this, can my client, the 501c3, somehow (maybe before releasing the money to the medical school) pay the disability premiums for the faculty/physicians, then issue them a 1099 reporting it as additional income to them, such that the faculty/physicians pay tax on that extra income, and thus the benefits become tax free? Is something like this permissible? I welcome any suggestions at all. I have zero ideas. Thanks.

The plan is self-insured. So doesn't that pose problems if non-radiologists have to work 30 hours to get medical but radiologists can get benefits if they work 24 hours?

I have a client who has a radiology practice, and offers medical benefits to all employees and radiologists, but they need to work the equivalent of 30 hours per week to be eligible for the benefits. It is only one class. They have a radiologist who’s dropping to 65% working time. She is currently on medical benefits and wants to stay on. Can they create a class that would allow “radiologists only” to be eligible for benefits if they work at least 60% of the time (24 hours per week or more). I think the answer is yes, but does that in your opinion create a potential discrimination problem? Any other issues? Thanks

It's a Mutual of America prototype plan, so I assume qualified. Does that help answer the question?

Has anyone ever heard of a DB plan not having trustees? I'm being told only 401k and 401a plans require trustees. Is that true? and if so, what is the authority for this? Thanks

If an Employer wants to pay a former employee's health premiums, first COBRA, and then after COBRA ends, whatever it costs for the employee to get health coverage, how are payments of those premiums treated for tax purposes? I know premiums paid for COBRA are nontaxable if the Company pays directly or pays to former employee upon proof of payment to insurance company, but if the Company continues to pay the former employee's premiums after COBRA ended, how is that treated? Is that income, subject to a 1099 or something like that?

I got that. Thanks. Question was whether there are circumstances when you'd file both. I imagine yes for example for untimely contributions, but just checking

What is the difference between a VCP filing and VFCP filing? I understand one is for operational failures, and the other for fiduciary violations, but can they ever overlap? Are you ever required to file both?