Source: https://www.jdsupra.com/legalnews/employee-benefits-developments-13166/
Timestamp: 2019-05-27 12:17:41
Document Index: 140521164

Matched Legal Cases: ['§ 403', '§ 457', '§ 501', '§ 403', '§ 403', '§ 403', '§ 457', '§ 457']

Employee Benefits Developments - September 2016 | Hodgson Russ LLP - JDSupra
Peter Bradley, Michael Flanagan, Richard Kaiser, Ryan Murphy
Final IRS Regulations Eliminate Requirement to File 83(b) Election with Tax Return
Under Section 83(a) of the Internal Revenue Code (the “Code”), if property is transferred in connection with the performance of services, the excess of the fair market value of the property over the amount (if any) paid for the property is includible in income by the service provider in the taxable year in which the service provider’s rights to the property are transferable or not subject to a substantial risk of forfeiture. Notwithstanding the general rule on timing of income inclusion under Code Section 83(a), Code Section 83(b) permits a service provider to make an 83(b) election to include in income the excess of the fair market value of the property over the amount, if any, paid for the property at the time the property is transferred to the service provider, even though the property is not transferable and is subject to a substantial risk of forfeiture.
The Treasury Regulations under Code Section 83 required a taxpayer making an 83(b) election to include a copy of the 83(b) election when filing the taxpayer’s income tax return for the taxable year in which the property was transferred to the taxpayer. In certain circumstances, taxpayers were unable to electronically file their income tax returns because of the requirement that they include a copy of the 83(b) election with their return.
After learning that certain taxpayers were unable to electronically file their income tax returns due to the requirement that the taxpayer include a copy of any 83(b) election made by the taxpayer, the Treasury Department issued proposed regulations under Code Section 83 in 2015 that eliminated the requirement for taxpayers to include a copy of an 83(b) election with their income tax return. The Treasury Department recently issued final regulations under Code Section 83 that adopted the proposed regulations without change.
Even though taxpayers are no longer required to include a copy of an 83(b) election with their income tax return, taxpayers must still file a copy of an 83(b) election with the internal revenue office with which the taxpayer files his or her return within 30 days of making the 83(b) election.
The final regulations apply to property transferred after January 1, 2016. For transfers of property on or after January 1, 2015 and before January 1, 2016, taxpayers may rely on the 2015 proposed regulations.
IRS Issues Proposed Rules on ACA Information Reporting
The IRS recently published proposed regulations relating to information reporting of minimum essential coverage under Internal Revenue Code section 6055. Under the Affordable Care Act (ACA), health insurance issuers (including employers who sponsor self-insured medical plans) must report information to the IRS and covered individuals regarding the type and period of medical coverage provided. Employers sponsoring self-insured medical plans may report this information on section III of form 1095-C. These proposed rules clarify issues related to supplemental and duplicative coverage, as well as, taxpayer identification number (TIN) solicitation requirements. With regard to situations where an employer may be providing coverage to an individual under more than one plan providing minimum essential coverage, reporting is only required for one of the plans. In addition, reporting is not required for coverage that is only available if the individual is enrolled in other reportable coverage sponsored by the same employer. For example, if an employer offers a self-insured major medical plan and an integrated health reimbursement arrangement (HRA), assuming the employee is enrolled in both plans, the employer would not have to separately report the HRA coverage. However, the employer would be required to report the employee’s HRA coverage if the employee was enrolled in a different employer’s major medical plan (such as a spouse’s employer’s plan). The proposed regulations also address TIN solicitation issues. As part of the information reporting requirement, a reporting entity must include certain information, such as the individuals’ name and TIN. An employer or other reporting entity that does not include this information may be subject to penalties for failure to comply with the IRS filing and statement furnishing requirements. These penalties may be waived if the failure is due to reasonable cause. That is, if the employer demonstrates that it acted in a responsible manner and that the failure is due to significant mitigating factors or events beyond its control. A person will be treated as acting in a responsible manner if the person properly solicits a TIN but does not receive it. Proper solicitation of a TIN involves an initial request and two subsequent annual solicitations. These regulations provide additional guidance regarding the timing and manner of this process.
New IRS Guidance Allows Individuals to Self-Certify Waivers of the 60-Day Rollover Requirement - IRS Revenue Procedure 2016-47
Employer Avoids Withdrawal Liability Under Construction Industry Exemption - Stevens Eng'rs & Constructors, Inc. v. Iron Workers Local 17 Pension Fund (N.D. Ohio, 2016)
Court Upholds Mandatory Arbitration and Cost Sharing for Retirement Plan Claims - Luciano v. TIAA-CREF (July 2016)
A New Jersey district court ruled that an employee’s widow must submit her claim for survivor benefits in her husband’s retirement plan to binding arbitration and must pay half the costs. The Internal Revenue Code Section 401(a) retirement plan sponsored by the husband’s employer contains a mandatory arbitration provision compelling final and binding arbitration for any claim that is again denied after the original benefit denial is reviewed by the plan administrator. The arbitration provision also requires the claimant and the plan to “equally share the fees and costs of the Arbitrator.”
The plaintiff-widow in this case had challenged the calculations of the spousal survivor benefit made by the plan administrator following her husband’s death. After her appeal of the initial decision was denied, the widow filed a putative class action challenging the mandatory arbitration provision as invalid “because its cost-splitting provision unduly inhibits and hampers the initiation and processing of claims for benefits” in violation of ERISA. The court disagreed, holding that the arbitration process constitutes “a reasonable opportunity” for a “full and fair review by the appropriate named fiduciary” in compliance with ERISA. Although the court ruled that the plan may compel arbitration of the widow’s claims, however, it also noted that the widow would be permitted to argue in future court proceedings that the cost-splitting provision “would deny her a forum to vindicate her statutory rights.” Luciano v. TIAA-CREF (July 2016)
IRS Releases Memo on Participation by Single-Member LLC’s Employees in Member’s 403(b) and 457 Plans - C.C.A. 2016-34-021 (July 11, 2016)
In a recently released Chief Counsel Advice memorandum, the IRS addressed participation by employees of a single-member LLC that is a disregarded entity (the “LLC”), in the § 403(b) and § 457(b) retirement plans sponsored by its member owner, a § 501(c)(3) tax exempt organization (the “owner organization”). As a disregarded entity (i.e., treated as not being separate from its owner organization), the IRS opined that the LLC is a branch or division of the owner organization, which is an eligible employer under the § 403(b) rules. As a result of this status, the LLC does not have to separately qualify as an eligible employer for its employees to be able to participate in the § 403(b) plan. In fact, the IRS cautioned that as employees of a branch or division of the owner organization sponsoring the plan, the employees are covered by the universal availability requirement in the § 403(b) regulations, which generally requires that all employees be permitted to make elective deferrals to the plan. As a result, all of the owner organization’s and LLC’s employees must be permitted to participate in the plan. With regard to a § 457(b) plan sponsored by the owner organization, the IRS opined that the LLC’s employees are permitted to be covered by the plan. However, because § 457(b) plans are not subject to a universal applicability rule, the IRS stated that coverage of the LLC’s employees is not mandatory. C.C.A. 2016-34-021 (July 11, 2016)
Stevens Eng'rs & Constructors, Inc. v. Iron Workers Local 17 Pension Fund , CASE NO. 1:15 CV 1965 (N.D. Ohio Aug. 24, 2016)