A client maintains a VEBA which provides the following coverages: dental, life insurance, critical illness and accident benefits, vision coverage and group legal services coverage. All coverages except group legal coverage are excludable from the participants' gross income. The employer pays the premium for all such coverages and employees do not have the ability to choose whether or not to have certain coverages, other than to indicate for dental and vision whether the coverage is for the employee only, the employee and spouse or family coverage. If the client was unaware that the group legal plan was not excludable from members' gross income but learns for the first time that such coverage is taxable, should the client limit the taxability of such coverage to the current year and prospectively thereafter, prospectively only from the point of learning its true taxability or should the employer retroactively revise its tax treatment of such coverage? A related question relates to the treatment of benefits received for such coverage. Section 120 of the Code excluded both the employer's contribution or premium payment for coverage as well as the value of benefits received for such coverage. How should the employer determine the value of such coverage for tax purposes? A final question is whether the group legal benefit should be completely removed from the VEBA since it is taxable. Thank you.

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Unusual question came up. Sole prop - plan is a 3% SH plan, HC's are NOT excluded. It has been proposed that the plan be amended to exclude the sole prop from receiving the SH for 2019, on the grounds that since the sole prop isn't required to receive a SH (if the plan is set up that way) that it is ok. To me, this seems like a very aggressive approach, and I wouldn't do it. However, I always like to hear the opinions of others - anyone have a different viewpoint?

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?

If there is a plan sponsor who wants to switch from a Closed MEP to their own plan after 10/1, and they currently have safe harbor status with the Closed MEP, can they maintain that safe harbor status with the new spinoff plan? I have been researching and see mixed opinions, but nothing definite.

I have a deep in the weeds question with a narrow application that I wonder if anyone has come across: Background The Code has a concept of a "statutory employee," which makes an otherwise non-common law employee an employee for employment tax (but not for income tax) purposes. These employees receive a W-2 with box 13 checked. A common type of statutory employees are full-time life insurance salespersons. The Code also provides that a full-time life insurance salesperson is treated as an "employee" for purposes of participating in a qualified retirement plan and for Code Sections 104, 105, 106, 125, and certain other sections (which generally provide that an employer can provide welfare benefits on a tax-favored basis). ERISA generally subjects welfare plans that cover employees of two or more unrelated employers to state insurance law (among other things) because the plan is a MEWA. If an entity provides benefits to independent contractors, for example, it risks creating a MEWA. Question Can a life insurance company offer welfare benefits to its full-time life insurance salespersons (i.e., ones who are statutory employees) without creating a MEWA? While the Code provides for favorable tax treatment on providing these benefits, it does not appear as if ERISA will permit this type of arrangement without invoking the dreaded MEWA rules because these salespersons are not common law employees. (The Code is not ERISA and ERISA is not the Code.) At least, I have not found any DOL guidance that addresses this issue. Has anyone come across this admittedly obscure situation? Thanks

Hello. We have a prospective client that is looking to pull out of a MEP and start their own plan effective October 1, 2019. Current MEP provisions include a safe harbor non-elective contribution. New document to include a safe harbor non-elective. 1. Does the client lose safe harbor status by pulling out of the MEP before the MEP plan year ends? I think so. What are your thoughts? The new plan being established is also a safe harbor plan. Does that make any difference? Do the ER contributions made in the MEP and the contributions made to the new plan need to be tested together? New plan has a new comp allocation formula. Still waiting for prior MEP Participating Employer agreement to determine prior ER contributions and allocation conditions. 2. In the above example, what if the client is pulling out of the MEP (safe harbor provisions) because it has been purchased by an other entity, Employer A. And Employer A is setting up a new plan effective 10/1/19 , which is not safe harbor? I believe that safe harbor provisions are preserved due to business transaction. what are your thoughts?

I just received and interesting question from a client whose Plan EXCLUDES bonuses from the definition of Plan Compensation: "Participant has a $30K/year guaranteed hours bonus to his base salary. Owner uses the term �bonus', but the spirit of the hours bonus is really to incentivize attorneys to meet a set goal of hours. Since participant's amount is guaranteed for this year (and next), is it fair to say that this should simply be classified as regular salary?" What does everyone think?

New plan - effective date 01/01/2018 4 employees - Dr. & his spouse & 2 non-related staff members Allows for EE deferrals, Profit Sharing & SHNE. SHNE limited to only NHCE's EE deferral and SHNE component of plan set up with special effective date of 10/01/2018 4 employee all became eligible 07/01/2018 Compensation is based on full year pay - not date of entry Only contributions into the plan will be two $18,500 contributions made by the doctor and his spouse and the 3% safe harbor to the two staff members (neither of the two staff members deferred) When calculating the 3% safe harbor non-elective for the 2018 plan year is the SHNE contribution based on just compensation from 10-01-2018 to 12-31-2018 due to the SH being effective 10/01/2018? Or should it be on the full year compensation 01/01/2018 to 12/31/2018? Plan will be top-heavy for 2018 based on the two HCE's deferral but it is a consists solely of plan.

Hi. We have a few participants that are receiving installment distributions (monthly) from their 457(b) accounts. Typically the monthly distribution occurs on the 15th of the month. Due to an administrative issue, the distribution still has not occurred for September. At what point is the distribution deemed late? And what type of correction is required? Thanks.

Looking for guidance to convert 412e3 plan into Cash balance plan. Am a single owner S-corp 44 years with 2 years into 412(e)3 plan with Whole life and Annuities. Life insurance was not required personally and seems foolish now to got sold into policy by the CPA. (should have been a red flag that CPA is the sales agent). I was not even mentioned about the CB plan option that looks more attractive with conservative investment strategies and flexibility compared to 412e3. Can the 412e3 converted into Cash balance plan instead of Termination? Any references for good companies with this kind of experience will be appreciated. Goal is to fund the pension plan in 10-12 years instead of stretching for 20 years.