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January 26, 2022

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

EBECatty created a topic in Nonqualified Deferred Compensation

Reporting on Forms W-2 and 941 for a 83(b) Election Across Calendar Years

"A privately held employer issues restricted stock to an employee on December 20, 2021. It is subject to five-year cliff vesting. The employee's last 2021 paycheck is December 31, 2021. There is no other procedure imposed during 2021 for income tax withholding or FICA, because nothing has vested and the employee has not made an 83(b) election so nothing is taxable. The employee files an 83(b) election on January 10, 2022. The employee's next paycheck is paid on January 15, 2022.

Regardless of whether the employer withholds income tax and FICA from the January 15, 2022, paycheck or the employee writes the company a check for withholding on January 10, 2022, how would the employee's W-2 and the employer's 941s (4Q21 and 1Q22) look?

On the W-2, the income can still be reported in box 1, 3, and 5 for 2021, but what would be reported for income tax and FICA withholding?

On the 941, would the wages and FICA be reported all in 4Q21 (the quarter in which the income was received), all in 1Q22 (the quarter in which the election was made), or some of both (the income reported in 4Q21 and withholding reported in 1Q22)?"

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Belgarath created a topic in 401(k) Plans

Employer Contributions to a HSA Made Through a Section 125 Plan -- Income for 401(k) Plan Purposes?

Employer contributions to the HSA are a 'qualified benefit' under the Section 125 proposed regs. (See 1.125-1(3)(J)). And under the W-2 instructions, excerpted below, they would need to be included in Box 12 with a code W. Assuming for the moment that the contributions, when made, are 'reasonably' excluded from the employee's income, is this considered a Section 125 'deferral' which is added back in as compensation under the terms of the plan?

Does the fact that 1.125-1(3) contains the language that the term 'qualified benefit' means ...'any benefit attributable to employer contributions'... mean that it is treated as a deferral that is added back in? Anyone gotten a CPA decision on this question before?

From the instructions to Form W-2:

Health savings account (HSA).

An employer's contribution (including an employee's contributions through a cafeteria plan) to an employee's HSA is not subject to federal income tax withholding or social security, Medicare, or railroad retirement taxes (or FUTA tax) if it is reasonable to believe at the time of the payment that the contribution will be excludable from the employee's income. However, if it is not reasonable to believe at the time of payment that the contribution will be excludable from the employee's income, employer contributions are subject to federal income tax withholding, social security and Medicare taxes (or railroad retirement taxes, if applicable), and FUTA tax, and must be reported in boxes 1, 3, and 5 (use box 14 if railroad retirement taxes apply); and on Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return.

You must report all employer contributions (including an employee's contributions through a cafeteria plan) to an HSA in box 12 of Form W-2 with code W. Employer contributions to an HSA that are not excludable from the income of the employee must also be reported in boxes 1, 3, and 5. (Use box 14 if railroad retirement taxes apply.)

An employee's contributions to an HSA (unless made through a cafeteria plan) are includible in income as wages and are subject to federal income tax withholding and social security and Medicare taxes (or railroad retirement taxes, if applicable). Employee contributions are deductible, within limits, on the employee's Form 1040 or 1040-SR. For more information about HSAs, see Notice 2004-2, Notice 2004-50, and Notice 2008-52. Notice 2004-2, 2004-2 I.R.B. 269, is available at IRS.gov/irb/2004-02_IRB#NOT-2004-2. Notice 2004-50, 2004-33 I.R.B. 196, is available at IRS.gov/irb/2004-33_IRB#NOT-2004-50. Notice 2008-52, 2008-25 I.R.B. 1166, is available at IRS.gov/irb/2008-25_IRB#NOT-2008-52. Also see Form 8889, Health Savings Accounts (HSAs), and Pub. 969.

https://www.irs.gov/instructions/iw2w3#en_US_2021_publink1000308298

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B21 created a topic in Retirement Plans in General

One Employer Leaves a Controlled Group; Effect on Plan Document

"I am a TPA for a profit sharing plan that is sponsored by a 3-entity controlled group. On 1/1/21, one of the members ceased to be part of the controlled group due to a change in ownership. Code section 410(b)(c) provides a transition period of the last day of the plan year following the year of the change for coverage testing purposes. Does that transition period also apply to the plan documentation? When would the plan document have to be amended to remove one of the members as a participating employer? Can all 3 entities share in a profit sharing contribution for the 2021 plan year under the current plan document?"

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TPApril created a topic in Health Plans (Including ACA, COBRA, HIPAA)

COVID Test Reimbursement -- Receipts and Package Bar Code Required?

"A 'friend' was traveling with her family last week, after the effective date of reimbursements for home covid tests, and found her family in need of purchasing multiple COVID tests. In the process of taking these tests, the test materials and packaging themselves were discarded. Upon arriving home, this 'friend' contacted her insurance who has informed her that they will need both receipts and the UPC symbols in order to get reimbursement. Is this excessive and even allowed?"

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Jenny created a topic in Defined Benefit Plans, Including Cash Balance

Determination Letter for Individually Designed Cash Balance Plan

"During the period from Sept. 2019 through Aug. 2020, it looks like the IRS opened the determination letter program for individually designed Cash Balance Plans. Is the program closed now? If so, does that mean that an individual designed defined benefit plan can't amend to become an individually designed cash balance plan any more?"

1 reply so far   |    Click Here to Add a Reply

Belgarath created a topic in 457 Plans

Operational Error in 457(b) Sponsored by a Non-Profit

"Ugh -- just reviewing a 457(b) plan where there was an operational error a couple of years ago. Long story short, a participant who terminated employment was required, under the terms of the plan, to start receiving distributions within 60 days. Instead, participant was allowed to make an election to delay distributions to start at age 70-1/2.

Under the excellent reference book by Peter Gulia, Gary Lesser, and David Powell (the 457 Answer Book) it doesn't sound hopeful as to possibly correcting. Limited at best even for governmental plans, and worse yet for non-profits. So my question relates to what is done in real life, aside from the obvious of seeking legal counsel. Seems like it could be ignored, and hope no one notices, or attempt to correct as best they can (start distributions now, and hope no one notices) or treat it as an ineligible plan, subject to 457(f) as of a couple of years ago."

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