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February 4, 2019

Here are the most recently added topics on the BenefitsLink Message Boards:

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TESNY created a topic in VEBAs

Income Tax on My Husband's VEBA Benefits

My husband is in a construction union in NY. They have what I think is a VEBA. I searched online on ProPublica and it says that it's defined as a Voluntary Employees Beneficiary Association with a Non-Profit Tax Code designation of 501(c)(9). I think money is paid into the account by the employer. The reasons for withdrawals are allowed are listed below. I am wondering if the union member should be paying Federal and State income tax for all withdrawals, especially for medical withdrawals. We've had to withdraw money for very sick and disabled children, for things like coinsurance, copays, special education schooling, and speech therapy. Those withdrawals have been reported on a 1099-MISC. Is that correct? Is there a way the union could have this set up so union members would not have had to pay income tax on medical withdrawals?

Withdrawals can be made for the following reasons: "[1] DEATH OF PARTICIPANT (ATTACH CERTIFIED DEATH TRANSCRIPT); [2] UNEMPLOYMENT, DISABILITY OR COMPENSATION (PROOF OF PAYMENT FOR PERIOD CLAIMED); [3] HOSPITALIZATION, MEDICAL OR DENTAL BILLS NOT REIMBURSABLE (SUBMIT BILLS); [4] ADDITIONAL ASSISTANCE BENEFIT (PROOF OF ECONOMIC HARDSHIP -- ATTACH STATEMENT); [5] SEVERANCE BENEFIT (SUBMIT PROOF YOU HAVE WITHDRAWN FROM THE INDUSTRY)"

Number of replies posted  2 replies      Number of times viewed  54 views      Add Reply
 
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pmacduff created a topic in 401(k) Plans

402(g) Excess Because Employee Also Participates in Another Employer's 401(k) Plan

Participant has informed my client that he is over the 2018 402(g) limit because he contributed the maximum deferral amount into a plan at another employer. Participant entered my client's plan as of 10/01/2018 and deferred a small amount. The participant has requested this small amount of contributions be refunded as excess. As far as the 2018 ADP testing in my client's plan, do I need to remove the deferrals for this person from the testing? I know I would have to remove them if the overage was all in my client's plan, but am unsure of the process when there was no excess, only the request of the participant.
Number of replies posted  9 replies      Number of times viewed  96 views      Add Reply
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s2mone created a topic in 401(k) Plans

Compensation for S Corp Owner-Employee: Include 1099-MISC Payments?

The S corp owner has received a W-2 compensation payment, additionally he has received 1099-MISC from the same corporation. Compensation in the plan document is defined as W-2 wages or earned income for self-employed individuals. Can we use the 1099-MISC line 3 "other income" as income in addition to the W-2 wages?
Number of replies posted  5 replies      Number of times viewed  61 views      Add Reply
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LMD1 created a topic in 401(k) Plans

SH NEC, Top Heavy and Otherwise Excludable Employees

Plan has immediate eligibility for salary deferrals, but has a 1 year of service for safe harbor non-elective. No other contributions in plan. Assets are greater than 60% for Key employees. I know plan is subject to ADP testing for the otherwise excludable group. Does the deemed-not-top-heavy rule apply to those with less than 1 year of service and who are not eligible for the SH NEC? (Or instead are they required to receive a top-heavy minimum?)
Number of replies posted  1 reply      Number of times viewed  32 views      Add Reply
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spiritrider created a topic in 401(k) Plans

401(k) Employee After-Tax Contributions: Source and Timing

Accepting that a one-participant 401k is standard 401k, with a very short list of one-offs. I have a few questions with regards to employee after-tax contributions. Specifically, the contribution deadlines and source of the contributions.

Self-employed individuals can make their employee elective and employer contributions from personal funds on or before their tax filing deadline including extensions. Is there any reason that is not also true for employee after-tax contributions?

S-Corp 2% employer elective contributions are deducted from compensation not already received with a pay date on or before 12/31. The contribution must be deposited as soon as it can reasonably be segregated from the S-Corp's assets. The S-Corp has until its tax filing deadline including extensions to make its employer contributions. Any ERISA 401k plan I am aware of that allows employee after-tax contributions, requires them be contributed from after-tax W-2 wages. However, I seem to remember conversations over the years, that nothing precludes direct employee after-tax contributions from personal funds provided that in the unlikely event the plan document and administrator procedures allow it. Is the deadline for S-Corp 2% employee after-tax contributions 12/31 or the S-Corp's tax filing deadline including extensions? Also, must the contributions be made from the S-Corp shareholder-employee's after-tax W-2 wages or can the contributions be made from personal funds?

Number of replies posted  0 replies      Number of times viewed  23 views      Add Reply
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