Benefits Vet

Client discovers that 1094's have not been filed since 2016. They want to come forward and file and pay any penalties, but hopefully negotiate them down if possible. (We estimate that if the IRS actually imposes the full penalty, the number will be in the low 6 figures.) Any thoughts on how to do this? Just file the forms and wait to see what happens? Or try to do some type of "submission"? Where would you even submit it? All ideas welcome!! Thanks in advance.

Thank you everyone!!

Do you have a cite for that? I looked under the 1563 and the LLC election rules and cannot find anything specific.

LLC has elected to be taxed as a corporation. For purposes of the attribution rules under 1562(e)(2), do you still have to look at 5% owners of the LLC in determining whether a controlled group exists? Does it matter whether it is an S-Corp or a C-Corp? I cannot find anything in the 1563 regs, but my guess is that the answer to both questions is no. Any thoughts appreciated. Thx!

I am trying to reconcile the rule under 424(h)(3)(C) with the accounting rules for share-based compensation. 424(h)(1) provides that if an ISO is modified, then it is a new grant. 424(h)(3)(C) provides that "the term “modification” means any change in the terms of the option which gives the employee additional benefits under the option, but such term shall not include a change in the terms of the option in the case of an option not immediately exercisable in full, to accelerate the time at which the option may be exercised." So far so good. But the accounting rules say that acceleration of vesting is a modification that leads to a new grant. Are both things true in that one refers to status as an ISO and the other refers to accounting treatment? Any thoughts appreciated. TIA.

Agreed - I don't know where the TPA is coming from in telling the client that they can amend back to 1/1, but at least they told the client to double check it!!

A client intended for their 401(k) plan to exclude bonuses from the definition of compensation for purposes of both deferrals and matching contributions. The plan document includes bonuses. The client wants to amend the plan's definition of compensation effective 1/1/2020. It is a calendar year plan. It is not a safe harbor plan. Can the amendment be retroactive to the start of the plan year? I do not think so but the client received advice to the contrary. Any thoughts appreciated. Thanks.

Thank you everyone!

I am an experience benefits attorney but I have not had much ESOP experience, and I need to develop this skill. I would welcome any opinions about the resources and webinars available through NCEO or any other organizations. Thanks!

I have also been told that at least Blue Cross and UHC are voluntarily following the same policy- to continue coverage even if furloughed employees would normally lose coverage. The broker I spoke with mentioned Illinois and Massachusetts specifically but thought that this would likely be the case nationally.

Yes- understood. Thanks!!

That is what I thought too.

I have seen some discrepancy in summaries of the RMD rules for 2020 under the CARES Act. Section 2203 (a)(I)(ii) says that the RMD rules are suspended for 2020. Section 2203(a)(I)(ii) adds what I thought was a special rule/clarification that required beginning dates in 2020 are effectively suspended. But, I have seen summaries that imply that the RMD suspension ONLY applies for distributions for those participants with required beginning dates in 2020. So, which is it: are all RMDs suspended in 2020 or only those for required beginning dates in 2020?

The FFCRA provides a payroll tax credit for the cost of health care coverage provided during paid family or sick leave. A client asked about a "rumor" that he heard regarding the availability of a credit for health care coverage provided to employees on a temporary layoff (unpaid). I don't see anything like this in the CARES Act. Am I missing something? Thanks!!

Thank you!

I am wondering if anyone has thought about or encountered this issue: Fully-insured plan covers employees who are "actively at work" An employer who receives a CARES Act loan has employees on the payroll who are not actively working because of the shut down of non-essential businesses. Would the employer be in technical violation of the medical insurance policy if coverage continues for the employees? Is there anything in the CARES Act about this?

The act defines eligibility in part based on a diagnosis of COVID-19 using a test approved by the CDC. Aren't some states and hospitals developing their own tests? Any thoughts on whether this will be an issue if the language in the Bill is left as it is?

I am concerned about DOL or IRS audit. They are also switching from filing as a single employer plan to a multiple employer plan. There are some testing and compliance issues from the past. I am concerned that the changes to the 5500 could raise a red flag in the system to make it more likely that they will be slected for an audit. I know that it is impossible to predict an audit. But, I just went through a random 5500 audit with another client, so I can't say that it never happens.

Client is moving from the short form 5500 to the long form based on the number of participants. In your experience is that switch more likely to trigger an audit? There are some other issues that require some expensive clean up. TIA

I should clarify- the plan sponsor believes that this provision means that a current participant who goes out on unpaid sick leave cannot lose coverage, even if all other employees on any other kind of unpaid leave would lose eligibility for coverage. My understanding is that the HIPAA regs allow for this type of provision. I think that this is sloppy drafting to address the enrollment rules, but I am just checking to see if I am missing something.

Medical plan requires that a participant be "actively at work" to be eligible. The definition of "actively at work" includes the following: "As required by HIPAA, absence from work due to any health factor (such as being absent from work on sick leave) is treated, for purposes of the Plan or coverage under the Plan, as being actively at work." I have not ever heard of such a requirement under HIPAA. What provision(s) of HIPAA or the regs address(es) this? As always, thank you!

I have never seen it before either. I don't know why they want to do it.

ER uses a uniform formula for allocating profit sharing contributions. The formula utilizes various classes of employees based on years of service. The ER wants to further prorate each employee's share by the number of weeks in the year that the employee is actively employed. Is this what is intended to be allowed under 1.401(a)(4)-2(b)(2)? If not, is there another basis for allowing the proration? THANKS!

I agree. Client is working on one now, but as you seem to have assumed, it is complicated.

Client is a holding company and has different ownership stakes in the subsidiaries. There are some options outstanding but not enough to make this a a controlled group as a whole.