A compilation of online resources for employers on the Affordable Care Act
A compilation of online resources for employers regarding Cash Balance plans
Ivins, Phillips & Barker has developed two tax-reduction strategies for employers that maintain VEBAs to fund retiree medical expenses for non-union employees.
With careful drafting, a 401(k) plan generally can permit all employees, even HCEs, to continue to defer compensation under the plan until they hit the full § 402(g) limit of $16,500 (indexed) plus any catch-ups, without regard to the employee's compensation. The payroll department need not track cumulative compensation during the year.
Amidst the recent economic downturn, many companies have suspended their 401(k) matching contributions, and plan participants have been reducing their elective deferral levels. These trends could lead to failures in the ADP and ACP nondiscrimination tests that 401(k) plans must pass each year. With some advance planning and plan design adjustments, these problems can be permanently eliminated.
In January 2010, the IRS announced a tax amnesty program under which many inadvertent 409A failures can be corrected with no tax or penalties during 2010. Because of Section 409A’s complexity and increasingly-strict IRS interpretations, many employers are likely to find that one or more of their deferred compensation plans or executive employment agreements have 409A failures that may be eligible for the amnesty program. To help employers identify and correct Section 409A defects like the ones illustrated above, Ivins, Phillips & Barker has developed a comprehensive Section 409A Compliance Review under which we will systematically review all of your (and your subsidiaries’) compensation and fringe benefit programs to identify potential defects and provide advice and assistance regarding the ways in which defects may be corrected under the 2010 amnesty program or other means.
It has come to our attention that some employers have been unnecessarily reducing their expense deductions for benefits paid under self-funded medical reimbursement plans based on the 2-1/2 month and 8-1/2 month payment deadlines that apply under the Code for certain other tax purposes. Any company not deducting the entire amount of their current-year liabililty for employee medical and dental expense reimbursements for this reason should consider filing an accounting method change request with the IRS.