VFC - finalized program criteria

[Guest LWilson]

We are in the midst of correcting a plan for delinquent deferrals. Because we are talking about nearly a year of ongoing delinquency, we advised our client to follow corrective measures under VFC and submit all supporting documentation to PWBA as a precautionary measure. We started advising the client about a month ago, and have been working on corrective measures, calculating delinquency "principals," putting together timelines, etc, etc. Two of the issues we discussed with our client in detail were employee notification requirements (sticky #1), and the IRS Excise Tax issue (sticky #2).

Yesterday I learned that certain VFC rules have softened under the final, adopted program, specifically, that certain excise tax relief now exists, and notice requirements are less stringent or non existent (depending on whether or not excise tax relief is elected?). To confirm these issues (before I spread any "good news" to this client), I contacted the PWBA this morning, using the phone number specified in the documentation . . . ready for this . . . they knew nothing about these changes!

She said, "You'll have to call the IRS about the Excise Tax issue . . . that isn't our territory," and, "of course you have to notify the employees . . . "

So, any thoughts here? Have I misinterpreted what I've read?

[KJohnson]

My understanding is that your understanding is correct. However, the "gotcha" is that while notice is now not required for the VFC program in general, it is required under the proposed PTE for waiver of the excise tax. Although the PTE is not final, IRS has indicated that it will not charge the excise tax in the interim if you meet the conditions of the VFC and the proposed PTE.

See announcement 2002-31

http://www.benefitslink.com/IRS/ann2002-31.pdf