Secs. 419 and 419A, I.R.C., as enacted by the Deficit Reduction Act of 1984, Pub. L. 98-369, secs. 511(a), 512(a), 98 Stat. 494, 854, 862, limit an employer's deductions for contributions made to a welfare benefits fund for employees. These limitations do not apply to a welfare benefits fund that is part of a "10 or more employer plan" described in sec; 419A(f)(6), I.R.C. Under the Prime Plan, in which Ps participated, each participating employer made a one-time, nonrevertible contribution to a single trust, equal to the amount necessary to fund the dismissal wage and death benefits of its qualifying employees. The trust segregated each contribution into a separate account for payment of benefits to only the contributing employer's qualifying employees. If an employer's account did not have enough assets to pay a promised benefit, the trustee could supplement the account's assets with assets from a "suspense account" that was funded primarily by actuarial gains and amounts forfeited from the employers' accounts in certain enumerated situations. Each employer selected options under the Prime Plan, including participation and vesting requirements. Except through the suspense account, an employee had no right to receive benefits from other than his or her employer's account.
HELD: The Prime Plan is a "welfare benefit plan" within the meaning of sec. 419, I.R.C.
HELD, FURTHER: The Prime Plan is not within the scope of sec. 419A(f)(6), I.R.C., because it is an aggregation of separate plans each having an experience-rating arrangement with the related employer.
- PBGC periodically audits a sample of fully funded pension plans that employers terminate to determine if earned benefits have been distributed to participants.
- In response to a request from the Senate Select Committee on Aging, PBGC provided summary statistics on the results of audits since 1986.
A controversial IRS memorandum concludes that a company's deduction for the company plane's cost of flying an executive and spouse to their vacation is only the amount the company treated as the executive's compensation, as calculated under the IRS's own special valuation rules for such flights -- far below the flight's actual cost to the company.
On June 4, as one of the first steps in the budget reconciliation process, the House Ways and Means Health Subcommittee approved a Republican proposal to reform the Medicare program. The Republican plan, introduced by Rep. Bill Thomas (R-CA), would freeze Medicare payments to hospitals and slow the growth of payments to HMOs, doctors, nursing homes and home health care agencies.
QUESTION 34: In Q&A 32 and Q&A 33, we dealt with this question from a reader: What would be the proper correction in the case of a profit sharing plan that has allocated a company profit sharing contribution (say, 2% of pay) to participants who had satisfied the plan's eligibility requirements, but had not yet entered the plan because the entry date was after the plan's year end? What is the VCR procedure for correcting this defect and what is the form of correction?ANSWER: As we discussed in the prior two Q&A's, it is often difficult to tell whether a defect falls within the IRS' new Administrative Policy Regarding Self-Correction (APRSC), unless it is found and corrected within the one-year self-correction period. While APRSC lists seven criteria for determining whether a defect is insignificant, the application of the criteria is not always clear, leaving the plan sponsor and its advisors without a conclusive answer. Further, the form of correction is not specified in APRSC, so that if the IRS were to audit the plan and disapprove of the form of correction--even where the defect was corrected within the one-year self-correction period--the defect could still disqualify the plan.