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Wondering if others have dealt with this idea or can anticipate any hurdles -- Say a company had a standard dependent care FSA program, no pre-tax employer contributions to the employee accounts. Company now wants to establish a fund for employer contributions but subject to taxes, for participating DC FSA employees but not directly to their DC FSA accounts (so to avoid any pre-tax issues plus to avoid being considered towards the employees' $5k/$2.5k contributions limit). Fund would be fixed per year at $xx total (decided at the beginning of the year or end of prior year), and then allocated between participants based on the # of participants in the prior plan year (as if it's a pool to be divvied up based on prior year participation). Eligible participants include anyone who participated in the prior plan year and is still employed at the beginning of the applicable year. Anyone seen this before, or something similar? So long as it's post-tax and not directly to their accounts, any hurdles?

does anyone have experience with 1099R coding when old post-tax contributions are cashed out of a qualified retirement plan? I have always been under the impression that there is no code and leave Box 7 blank, adding the post-tax contribution amount in Box 5, and the taxable field would be 0.00. any push back on this? I have submitted several 1099Rs to the IRS over the years like this. now being questioned that there should be a code in Box 7. thanks!

I have a client who has just closed a U.S. DOL investigation for (very) late deposit of prevailing wage contributions. They have now paid in all of the unpaid contributions and paid and allocated estimated interest based on a method approved by the DOL investigator, paid corrective distributions to former employees and they have received a closing letter. I expected that these late contributions would also be an operational defect that would require a VCP filing, and my client is prepared to do this. My biggest concern had been whether the (DOL-approved) method of allocating interest would be acceptable to the IRS. But, I am now wondering if there is in fact any operational defect, because I cannot find any plan provision that specifies when these contributions have to be made. The plan has a schedule to the Adoption Agreement that lists the prevailing wage fringe benefit portion to be paid for each covered hour. The plan provision for Time of Payment of Employer's Contribution states: "Unless otherwise provided by contract or law, the Employer may make its contribution to the Plan for a particular Plan Year at such time as the Employer, in its sole discretion, determines." I don't think the "unless otherwise provided..." language incorporates the statute or contractual language by reference. There is also plenty of typical plan language about when annual addition are credited, and when contributions must be made to be deductible for a plan year, or to be taken into account for testing, but those aren't really the issue here. State law does in fact require the contributions to be made quarterly, and there clearly has been a violation of this law. If the plan document doesn't have a deadline for the contribution, is there an operational defect when contributions are made later than the statutory or contractual deadline? I had assumed the answer was yes. But after parsing all the plan language relating to employer contributions, I am now thinking that the answer is no. And that would mean there is no operational failure that could be corrected under VCP. Agree or disagree?