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5500 Preparer's Manual for 2012 Plan Years
The premier resource in the field of Form 5500 preparation, 5500 Preparer's Manual will help you handle the required annual Form 5500 filings for both pension benefits and welfare benefit plans.
From Spencer's Benefits Reports: At a May 9 meeting of the American Bar Association’s (ABA) Committee on Employee Benefits of the Taxation Section, representatives of the Internal Revenue Service provided some answers to questions submitted in advance, along with suggested answers.
Several of the questions addressed COBRA continuation of coverage tax issues. In one of the situations, an employer with a self-funded health care plan agreed to allow a highly compensated executive employee who was terminating employment to continue health care coverage through COBRA for life as long as the executive paid the COBRA premiums after-tax. The IRS representatives agreed that the executive could deduct the COBRA premiums from the executive’s income taxes and that extending the COBRA period beyond the required time period (i.e., 18 months) did not violate IRC Sec. 105(h).
A second situation questioned whether a terminating employee who participated in the employer’s health care flexible spending account (FSA) could elect to change his FSA election to $0 with the same $0 COBRA premium and still be considered an FSA participant who could claim remaining FSA funds after the termination. Stating that the “employee is attempting to game the change in status rules,” the IRS representatives said that in order to make any new claims incurred after the employee’s termination, the employee would have to pay the COBRA premium of 1/12th of the initial election amount.
Finally, the IRS representatives stated that a self-funded employer’s contribution under a separation pay plan for COBRA premium payments is considered a “reimbursement,” not deferred compensation under IRC Sec. 409A.
With respect to a wellness program administered by a third party other than the plan sponsor and separate from the health care plan, any dollar value gift card incentives provided for completing a health risk assessment (HRA) and for physician visits to discuss the HRA results, are considered taxable income to the employee. The employer must report the amounts of the gift card values on the employee’s Form W-2, not a Form 1099-MISC.
Under an employer-sponsored IRC Sec. 125 cafeteria plan, when an employee covers a dependent who is not a qualifying child or a domestic partner, the IRS representatives agreed that the employer will impute the employer’s portion of the premium to the employee’s income and treat the employee’s portion of the premium as made after-tax. However, the employer must inquire whether those covered individuals are dependents to determine the correct amount to report as income and to withhold for the cost of coverage, the IRS individuals emphasized.
For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.
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