Recently in Employee Benefits Category

April 28, 2016

Employee Benefits-IRS Discusses VCP Submission Kit, Which Is Available To Correct The Failure To Adopt A New Pre-Approved Defined Contribution Plan By The April 30, 2016 Deadline

To continue my blogs of the two previous days, the VCP Submission Kit, according to the IRS, is for plan sponsors that maintain a pre-approved defined contribution plan but failed to adopt a new plan document by April 30, 2016, and are correcting the failure by adopting a pre-approved defined contribution retirement plan that reflects the provisions of the Pension Protection Act (the "PPA"). The discussion about the VCP Submission Kit is here.

April 27, 2016

Employee Plans-IRS Discuss New Way To Correct the Failure to Adopt the Pre-approved Plan by the Applicable Deadline

Continuing yesterday's blog, in Employee Plans News, Issue No. 2016-5, April 4, 2016, the IRS announces a new way to correct the failure to timely adopt a pre-approved plan. Here is what the IRS says:

Previously, the only way an employer could correct not signing a pre-approved defined contribution (DC) retirement plan by the deadline was to complete a submission under the Voluntary Correction Program (VCP) as outlined in 1 below.

A new option, 2 below, allows the financial institution or service provider that offers the plan document to request a closing agreement on behalf of all adopters who missed the deadline.

1. You make a VCP submission. You can restore the tax-favored status of your plan by adopting a restated plan document and filing a VCP submission with the IRS. If approved, the IRS treats the plan as entitled to tax-favored status. See sample VCP Submission kit to help you with your VCP submission.

2. A new option allows the financial institution or service provider to request a closing agreement on your behalf. To reduce employers' burden of submitting VCP applications, the IRS invites financial institutions or other service providers to submit proposals for umbrella closing agreements that cover individual employers affected by the failure to update their plans by the deadline. These would be similar to a group submission under the VCP, but under these closing agreements the organization doesn't need to have made a systemic error.

Deadlines

April 30, 2016 - deadline for employers using a pre-approved 401(k), profit-sharing or other defined contribution (DC) retirement plans to sign an updated version.

April 30, 2017 - deadline for new adopters of pre-approved DC plans. A "new adopter" is any plan adopted on or after January 1, 2016 (other than one adopted as a modification and restatement of a DC pre-approved plan that an employer had prior to January 1, 2016). The April 30, 2017 extension is to help plan sponsors who want to switch from an individually designed plan to a current DCpre-approved plan. A "current DC pre-approved plan" is one that IRS approved based on the 2010 Cumulative List. See Notice 2016-3.

Pre-approved plans - These are purchased from a financial institution, advisor, or similar provider. They allow limited customization but give the employer the reassurance that IRS approved the plan's wording. See Deadline to Adopt Pre-Approved Plans for more information.

Consequences of failing to adopt the pre-approved plan by the applicable deadline-If you didn't sign a restated DC plan document by the deadline, your plan is no longer entitled to tax-favored treatment. This may reduce your deduction for contributions to the plan, and make it harder for your employees to save for their retirement and make tax-favored rollovers of distributions to other plans or individual retirement accounts.

April 26, 2016

Employee Benefits-Deadline to Adopt Restated Pre-Approved DC Plans Is Fast Approaching

In Employee Plans News, Issue No. 2016-5, April 4, 2016, the IRS discusses deadlines pertaining to pre-approved retirement plans. Here is what the IRS says:

April 30, 2016, is the deadline for employers using pre-approved retirement plan documents to sign an updated version of their 401(k), profit-sharing or other defined contribution retirement plans.

April 30, 2017, is the extended deadline for any defined contribution pre-approved plan adopted on or after January 1, 2016, other than a plan that is adopted as a modification and restatement of a defined contribution pre-approved plan that had been maintained by the employer prior to January 1, 2016. This extension is to facilitate a plan sponsor's ability to convert an existing individually designed plan into a current defined contribution pre-approved plan. See Notice 2016-3.

Pre-approved plans are purchased from a financial institution, advisor, or similar provider. They allow limited customization but give the employer the reassurance that IRS approved the plan's wording.

Why a revised plan is necessary
Retirement plan documents must be revised when the law changes. Your retirement plan will remain qualified and provide tax benefits only if you update your plan document for law changes by the required deadline.

Document providers who sell pre-approved plans update the plan in its entirety once every six years and request a new opinion/advisory letter from the IRS. The IRS generally approves all updated defined contribution plans at the same time. Most opinion/advisory letters for the latest round of pre-approved defined contribution plans were issued on March 31, 2014. Employers have two years, until April 30, 2016, to adopt these updated plans (Announcement 2014-16).

After April 30, 2016, if you haven't adopted a restated plan, your plan does not comply with the tax laws and may be ineligible for tax benefits.

Adopting a revised plan document
Your provider should have sent you a revised plan document, approved by the IRS, which complies with the Pension Protection Act of 2006 (PPA) and other law changes listed on the 2010 Cumulative List of Changes in Retirement Plan Qualification Requirements (Notice 2010-90). Sometimes a plan reflecting PPA is called a "PPA restatement."

Even if you made amendments to your plan to reflect these laws as they became effective (interim amendments), you are still required to adopt a PPA plan document.

Determination letters for employers adopting a pre-approved plan
Most employers don't need to apply for a separate IRS determination letter for a pre-approved plan. Employers who changed their Volume Submitter (VS) plans can apply for individual determination letters for pre-approved defined contribution plans but must do so by April 30, 2016. Plans eligible for the April 30, 2017 extended deadline (see above) also have an extension until April 30, 2017, to apply for a determination letter, if permissible.

M&P plans - An employer who adopts a master & prototype plan (standardized or non-standardized) may not apply for its own determination letter on Form 5307. Instead, the employer should rely on the approval letter issued to the plan sponsor.

VS plans - An adopting employer who made limited modifications to its volume submitter plan may apply for a determination letter on Form 5307, Application for Determination for Adopters of Modified Volume Submitter Plans (instructions). If the modifications are extensive, causing the plan to be treated as an individually designed plan, the employer must instead file Form 5300, Application for Determination for Employee Benefit Plan.

See Revenue Procedure 2016-6, Sections 8 and 9, for more information on determination letter applications for employers using pre-approved plan documents.

April 11, 2016

Employee Benefits-IRS Discusses How ACA Affects You, If You Are An Employer With Fewer Than 50 Employees


In IRS Health Care Tax Tip 2016-41, April 6, 2016, the IRS discusses how the ACA affects employers with less than 50 employees. Here is what the IRS says:

Most employers have fewer than 50 full-time employees or full-time equivalent employees and are not subject to the Affordable Care Act's employer shared responsibility provision.

If an employer has fewer than 50 full-time employees, including full-time equivalent employees, on average during the prior year, the employer is not an ALE for the current calendar year. Therefore, the employer is not subject to the employer shared responsibility provisions or the employer information reporting provisions for the current year.

Calculating the number of employees is especially important for employers that have close to 50 employees or whose workforce fluctuates throughout the year. To determine its workforce size for a year an employer adds its total number of full-time employees for each month of the prior calendar year to the total number of full-time equivalent employees for each calendar month of the prior calendar year, and divides that total number by 12.

Employers with 50 or fewer employees can purchase health insurance coverage for its employees through the Small Business Health Options Program - better known as the SHOP Marketplace.

Employers that have fewer than 25 full-time equivalent employees with average annual wages of less than $50,000 may be eligible for the small business health care tax credit if they cover at least 50 percent of their full-time employees' premium costs and generally if they purchase coverage through the SHOP.

Employers that provide self-insured health coverage must file an annual information return reporting certain information for individuals they cover. This requirement applies regardless of the size of the employer's workforce. Self-insured employers with fewer than 50 full-time employees should have provided the 2015 information returns, Forms 1095-B, to their employees by March 31. The deadline for sending information Forms 1094-B and 1095-B to the IRS is May 31, or June 30 if filing electronically.

For more information, visit our Determining if an Employer is an Applicable Large Employer page on IRS.gov/aca.

April 7, 2016

Employee Benefits-IRS Discusses Old And New Methods Of Correcting The Failure To Adopt A Pre-approved Plan By The Applicable Deadline

The discussion may be found here. In the discussion, the IRS says the following:

Previously, the only way an employer could correct not signing a pre-approved defined contribution (DC) retirement plan by the deadline was to complete a submission under the Voluntary Correction Program (VCP) as outlined in 1 below. A new option, 2 below, allows the financial institution or service provider that offers the plan document to request a closing agreement on behalf of all adopters who missed the deadline.

1. You make a VCP submission. You can restore the tax-favored status of your plan by adopting a restated plan document and filing a VCP submission with the IRS. If approved, the IRS treats the plan as entitled to tax-favored status. See sample VCP Submission kit to help you with your VCP submission.

2. A new option allows the financial institution or service provider to request a closing agreement on your behalf. To reduce employers' burden of submitting VCP applications, the IRS invites financial institutions or other service providers to submit proposals for umbrella closing agreements that cover individual employers affected by the failure to update their plans by the deadline. These would be similar to a group submission under the VCP, but under these closing agreements the organization doesn't need to have made a systemic error.

Deadlines

April 30, 2016 - deadline for employers using a pre-approved 401(k), profit-sharing or other defined contribution (DC) retirement plans to sign an updated version.

April 30, 2017 - deadline for new adopters of pre-approved DC plans. A "new adopter" is any plan adopted on or after January 1, 2016 (other than one adopted as a modification and restatement of a DC pre-approved plan that an employer had prior to January 1, 2016). The April 30, 2017 extension is to help plan sponsors who want to switch from an individually designed plan to a current DCpre-approved plan. A "current DC pre-approved plan" is one that IRS approved based on the 2010 Cumulative List. See Notice 2016-3.

Pre-approved plans - These are purchased from a financial institution, advisor, or similar provider. They allow limited customization but give the employer the reassurance that IRS approved the plan's wording. See Deadline to Adopt Pre-Approved Plans for more information.

Consequences of failing to adopt the pre-approved plan by the applicable deadline-If you didn't sign a restated DC plan document by the deadline, your plan is no longer entitled totax-favored treatment. This may reduce your deduction for contributions to the plan, and make it harder for your employees to save for their retirement and make tax-favored rollovers of distributions to other plans or individual retirement accounts.

March 30, 2016

Employee Benefits-IRS Reminds Us That Many Retirees Face April 1 Deadline to Take Required Retirement Plan Distributions

In IR-2016-48, March 28, 2016, the IRS reminds taxpayers who turned 70½ during 2015 that in most cases they must start receiving required minimum distributions (RMDs) from Individual Retirement Accounts (IRAs) and workplace retirement plans by Friday, April 1, 2016. Here is what the IRS says:

The April 1 deadline applies to owners of traditional (including SEP and SIMPLE) IRAs but not Roth IRAs. Normally, it also applies to participants in various workplace retirement plans, including 401(k), 403(b) and 457(b) plans.

The April 1 deadline only applies to the required distribution for the first year. For all subsequent years, the RMD must be made by Dec. 31. So, a taxpayer who turned 70½ in 2015 (born after June 30, 1944 and before July 1, 1945) and receives the first required distribution (for 2015) on April 1, 2016, for example, must still receive the second RMD by Dec. 31, 2016.

Affected taxpayers who turned 70½ during 2015 must figure the RMD for the first year using the life expectancy as of their birthday in 2015 and their account balance on Dec. 31, 2014. The trustee reports the year-end account value to the IRA owner on Form 5498 in Box 5. Worksheets and life expectancy tables for making this computation can be found in the appendices to Publication 590-B.

Most taxpayers use Table III (Uniform Lifetime) to figure their RMD. For a taxpayer who reached age 70½ in 2015 and turned 71 before the end of the year, for example, the first required distribution would be based on a distribution period of 26.5 years. A separate table, Table II, applies to a taxpayer married to a spouse who is more than 10 years younger and is the taxpayer's only beneficiary. Both tables can be found in the appendices to Publication 590-B.

Though the April 1 deadline is mandatory for all owners of traditional IRAs and most participants in workplace retirement plans, some people with workplace plans can wait longer to receive their RMD. Usually, employees who are still working can, if their plan allows, wait until April 1 of the year after they retire to start receiving these distributions. See Tax on Excess Accumulation in Publication 575. Employees of public schools and certain tax-exempt organizations with 403(b) plan accruals before 1987 should check with their employer, plan administrator or provider to see how to treat these accruals.

The IRS encourages taxpayers to begin planning now for any distributions required during 2016. An IRA trustee must either report the amount of the RMD to the IRA owner or offer to calculate it for the owner. Often, the trustee shows the RMD amount in Box 12b on Form 5498. For a 2016 RMD, this amount would be on the 2015 Form 5498 that is normally issued in January 2016.

IRA owners can use a qualified charitable distribution (QCD) paid directly from an IRA to an eligible charity to meet part or all of their RMD obligation. Available only to IRA owners 70½ or older, the maximum annual exclusion for QCDs is $100,000. For details, see the QCD discussion in Publication 590-B.

More information on RMDs, including answers to frequently asked questions, can be found on IRS.gov.

March 17, 2016

Employee Benefits-IRS Reviews Whether You Have Minimum Essential Coverage

In IRS Health Care Tax Tip 2016-31, March 15, 2016, the IRS discusses whether or not you have minimum essential coverage. Here is what the IRS says:

The individual shared responsibility provision requires you and each member of your family to have basic health coverage - also known as minimum essential coverage - qualify for a health coverage exemption, or make an individual shared responsibility payment for months without coverage or an exemption when you file your federal income tax return.

Many people already have minimum essential coverage and do not need to do anything more than maintain that coverage and report their coverage when they file their tax returns. Most taxpayers will simply check a box to indicate that each member of their family had qualifying health coverage for the whole year.

Here are some examples of coverage that qualify as minimum essential coverage:

Employer-sponsored coverage:

• Group health insurance coverage for employees under
o a governmental plan such as the Federal Employees Health Benefit program
o a plan or coverage offered in the small or large group market within a state
o a grandfathered health plan offered in a group market
• Self-insured group health plan for employees
• COBRA coverage
• Retiree coverage

Individual health coverage:

• Health insurance you purchase directly from an insurance company
• Health insurance you purchase through the Health Insurance Marketplace
• Health insurance provided through a student health plan

Coverage under government-sponsored programs:
• Medicare Part A coverage
• Medicare Advantage plans
• Most Medicaid coverage
• Children's Health Insurance Program, also known as CHIP
• Most types of TRICARE coverage
• Comprehensive health care programs offered by the Department of Veterans Affairs
• Department of Defense Nonappropriated Fund Health Benefits Program
• Refugee Medical Assistance

U.S. citizens, who are residents of a foreign country for an entire year, and residents of U.S. territories, are considered to have minimum essential coverage for the year.
For more information on the types of coverage that qualify as minimum essential coverage and those that do not, as well as information on certain coverage that may provide limited benefits, visit the MEC page on IRS.gov/aca.

If you need health coverage, visit HealthCare.gov to learn about health insurance options that are available for you and your family, how to purchase health insurance, and how you might qualify to get financial assistance with the cost of insurance.

March 11, 2016

Employee Benefits-IRS Discusses New Reporting Responsibilities for Certain Employers in 2016

In IRS Health Care Tax Tip 2016-29, March 9, 2016, the IRS discusses new reporting responsibilities for certain employers in 2016. Here is what the IRS says:

Under the Affordable Care Act, certain employers - known as applicable large employers or ALEs - may potentially be required to make an employer shared responsibility payment to the IRS if they do not offer health coverage that is "affordable" and that provides "minimum value" to full-time employees and their dependents.

Employers that are subject to the employer shared responsibility provisions have new information reporting responsibilities that require them to report information about health coverage offered to each full-time employee, or to report that the ALE didn't offer coverage to the full-time employee. This includes the requirement to send information statements to full-time employees and to the IRS on new forms. This information will help the IRS determine whether an employer shared responsibility payment applies to the ALE and is also used in determining eligibility for the premium tax credit for the full-time employee and his or her family.

In addition, all employers that sponsor self-insured health coverage - whether or not the employer is an ALE - have additional information reporting responsibilities that apply to health coverage providers. Under this requirement, an employer that sponsors a self-insured plan must report information about employees and their dependents who enroll in the coverage, whether or not the employee is a full-time employee. The IRS will use the information reporting by health coverage providers to verify the months of the individual's coverage for purposes of the individual shared responsibility provision.

An employer determines whether it is an ALE for a specific calendar year based upon the size of the employer's workforce in the previous year. For instance, an employer is an ALE for 2016, if it had an average of at least 50 full-time employees - including full-time equivalent employees - during business days in 2015. Special rules exist for new employers and employers that have seasonal workers, and there is transition relief that applies for determining whether an employer is an ALE for 2015.

The new reporting requirements for employers first apply for coverage provided in 2015, and the reporting on 2015 coverage is due in 2016. The IRS recently extended the due dates for filing and furnishing the 2015 forms. Applicable large employers must file Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns, and Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, with the IRS, no later than May 31, 2016, if not filing electronically, and no later than June 30, 2016, if filing electronically. They must also furnish a copy of Form 1095-C to each full-time employee by March 31, 2016. The IRS similarly extended the due dates for 2015 reporting by health coverage providers, and self-insured ALEs should use these same forms to meet their health coverage provider reporting obligations; for self-insured employers that aren't ALEs see Notice 2016-4.

For more information, see the Affordable Care Act Tax Provisions for Employers page on IRS.gov/aca. You can also check out our questions about answers about Forms 1094-C and 1095-C, and about reporting offers of health coverage.

March 7, 2016

Employee Benefits-IRS Says To Mark Your Calendars For Health Coverage Information Return Deadlines

In IRS Health Care Tax Tip 2016-27, March 3, 2016, the IRS provides guidance on health coverage information return deadlines. This Tax Tip is here.

February 29, 2016

Employee Benefits-IRS Discusses What You Need to Do with Form 1095-B

In IRS Health Care Tax Tip 2016-22, February 23, 2016, the IRS discusses what a taxpayer needs to do with Form 1095-B. Here is what the IRS says:

This year, you may receive one or more forms that provide information about your 2015 health coverage. These forms are 1095-A, 1095-B and 1095-C. This tip is part of a series that answers your questions about these forms.

Form 1095-B, Health Coverage, provides you with information about your health care coverage if you, your spouse or your dependents enrolled in coverage through an insurance provider or self-insured employer last year.

Here are the answers to questions you're asking about Form 1095-B:

Will I get a Form 1095-B?
• You will receive Form 1095-B - which is a new form this year - from your insurance provider if you had insurance for you or your family members.
• The term "health insurance providers" includes insurance companies, some self-insured employers, and government agencies that run Medicare, Medicaid or CHIP.
• You are likely to get more than one form if:
o You had coverage from more than one provider
o You changed coverage or employers during the year
o If different members of your family received coverage from different providers

How do I use the information on my Form 1095-B?
• This form provides information about your health coverage, including who was covered, and when the coverage was in effect.
• If Form 1095-B, Part IV, Column (d), shows coverage for you and everyone in your family for the entire year, you can simply check the full-year coverage box on your tax return.
• If you did not have coverage for the entire year, use Form 1095-B, Part IV, Column (e), to determine the months when you or your family members had coverage. If there were months that you did not have coverage, you should determine if you qualify for an exemption from the requirement to have coverage. If not, you must make an individual shared responsibility payment.
• You are not required to file a tax return solely because you received a Form 1095-B if you are otherwise not required to file a tax return.
• Do not attach Form 1095-B to your tax return - keep it with your tax records.

What if I don't get my Form 1095-B?
• You might not receive a Form 1095-B by the time you are ready to file your 2015 tax return, and it is not necessary to wait for it to file.
• The information on these forms may assist in preparing a return, and you, however you can prepare and file your return using other information about your health insurance.
• The IRS does not issue and cannot provide you with your Form 1095-B. For questions about your Form 1095-B, contact the coverage provider. See line 18 of the Form 1095-B for a contact number.

Depending upon your circumstances, you might also receive Forms 1095-A and 1095-C. For information on these forms, see our Questions and Answers about Health Care Information Forms for Individuals.

February 23, 2016

Employee Benefits-IRS Provides Tax Tips On Understanding The Small Business Health Care Tax Credit

The IRS discusses the small business health care tax credit in IRS Health Care Tax Tip 2016-20, February 17, 2016. Here is what the IRS said:

The Affordable Care Act includes the small business health care tax credit, which can benefit small employers who provide health coverage for their employees.

The small business health care tax credit benefits employers who:
• have fewer than 25 full-time equivalent employees
• pay an average wage of less than $51,600 a year
• pay at least half of employee health insurance premiums
Here are some facts that will help you understand this tax credit and how it may affect your small business or tax-exempt organization:
• Credit percentage is 50 percent of employer-paid premiums; for tax-exempt employers, the percentage is 35 percent.
• Small employers may claim the credit for only two consecutive taxable years beginning in tax year 2014 and beyond.
• For 2015, the credit is phased out beginning when average wages equal $25,800 and is fully phased out when average wages exceed $51,600. The average wage phase out is adjusted annually for inflation.
• Generally, small employers are required to purchase a Qualified Health Plan from a Small Business Health Options Program Marketplace to be eligible to claim the credit.
Transition relief from this requirement is available to certain small employers.

Small employers may still be eligible to claim the tax credit for tax years prior to 2014. Employers who were eligible to claim this credit for prior years - but did not do so - may consider if they are still eligible to amend prior year returns in order to claim the credit.

Gathering the following information will assist you in completing Form 8941, Credit for Small employer Health Insurance Premiums.
• SHOP QHP documentation or letter of eligibility from SHOP, unless transition relief applies
• Numbers of full-time and part-time employees and numbers of hours worked
• Average annual wages for employees
• Employer premiums paid per employee, if applicable
• Relevant K-1s and other pass-through credit information
• Cost of coverage for each employee
• Payroll tax liability - for tax-exempt organizations only
• Pass-through credit info - for K-1s of other small employers

February 18, 2016

Employee Benefits: IRS Discusses Reporting Health Coverage on IRS Tax Forms

In IRS Health Care Tax Tip 2016-18, February 11, 2016, the IRS discussed reporting health coverage on IRS tax forms. Here is what the IRS said:

While most taxpayers will simply need to check a box on their tax return to indicate they had health coverage for all of 2015, there are a few forms and specific lines on Forms 1040, 1040A, and 1040EZ that relate to the health care law.

To help navigate health coverage reporting, you should consider filing your return electronically. Using tax preparation software is the best and simplest way to file a complete and accurate tax return as it guides you through the process and does all the math. There are a variety of electronic filing options, including free volunteer assistance, IRS Free File for taxpayers who qualify, commercial software, and professional assistance.

Here is information about reporting health coverage:

Form 8965, Health Coverage Exemptions
• Complete this form if you need to claim a coverage exemption on your return or report a Marketplace-granted coverage exemption.
• Use the worksheet in the Form 8965 Instructions if you need to calculate the shared responsibility payment.

Form 8962, Premium Tax Credit
• Complete this form to claim this credit on your tax return, and to reconcile advance payments of the premium tax credit.

Form 1095, Health Care information Forms
• If you enrolled in coverage through the Health Insurance Marketplace, you should receive Form 1095-A, Health Insurance Marketplace Statement, which will help complete Form 8962. Wait to file until you receive this form.
• Your health coverage provider or your employer may furnish you with a Form 1095-B, Health Coverage, or Form 1095-C, Employer-Provided Health Insurance Offer and Coverage. You do not have to wait to receive these forms before your file your tax return.
• See our questions and answers for more information about how these forms affect your tax return.

Form 1040
• Line 46: Enter advance payments of the premium tax credit that must be repaid
• Line 61: Report health coverage or enter individual shared responsibility payment
• Line 69: Report net premium tax credit if the allowed premium tax credit is more than advance credit payments paid on your behalf

Form 1040-A
• Line 29: Enter advance payments of the premium tax credit that must be repaid
• Line 38: Report health coverage or enter individual shared responsibility payment
• Line 45: Report net premium tax credit if the allowed premium tax credit is more than advance credit payments paid on your behalf

Form 1040-EZ
• Line 11: Report health coverage or enter individual shared responsibility payment
• Form 1040EZ cannot be used to report advance payments or to claim the premium tax credit

For more information about the Affordable Care Act and filing your 2015 income tax return visit IRS.gov/aca. Visit IRS.gov for more information on this topic if you file Form 1040-NR or 1040-NR-EZ.

January 27, 2016

Employee Benefits-IRS Allows An LLC To Adopt An ESOP

In PLR 201538021, the IRS provided a private ruling which allowed an LLC to adopt an ESOP. The letter was issued in response to a request for a ruling, concerning whether the unit shares of Company A, a limited liability company or LLC, constitute employer securities within the meaning of section 409(l)(2) of the Internal Revenue Code ("Code"). If they do, the LLC could adopt an ESOP which holds the unit shares.

Here is what the IRS said in the PLR.

For federal tax purposes, Company A represented that it is classified as an association and has a valid S corporation election. Ownership interest in Company A is represented by unit shares ("Unit Shares"). Under its operating agreement (the "Operating Agreement"), all profits and losses of Company A, and any dividends to be paid by Company A, are to be allocated among the shareholders in proportion to the number of Unit Shares owned by them. The Operating Agreement further provides that all Unit Shares confer identical rights to voting distributions, dividends and liquidation proceeds, and otherwise meet the requirements of Code section 409(l)(2). In addition Company has no authorized, issued, or outstanding employer securities that are readily tradable on an established securities market within the meaning of Code section 409(l)(1).

Company A intends to adopt an employee stock ownership plan as described in Code section 4975(e)(7) ("ESOP"), in which its employees may participate. Section 4975(e)(7) defines an ESOP as a defined contribution plan which, among other things, is designed to invest primarily in qualifying employer securities. Code section 4975(e)(8) defines the term "qualifying employer security" as any employer security within the meaning of Code section 409(l). As applicable here, Code section 409(l)(2) states that the term "employer securities" means common stock issued by the employer-corporation having a combination of voting power and dividend rights equal to or in excess of:

(A) that class of common stock of the employer-corporation having the greatest voting power, and
(B) that class of common stock of the employer-corporation having the greatest dividend rights.

Further, under the Code, Company A is treated as a corporation, and the Unit Shares as shares of stock.

Based on the foregoing, the IRS concludes that the Unit Shares of Company A are employer securities as described in section 409(l)(2) for the purposes of section 4975(e)(7), so that Company A may maintain an ESOP which invests in the Unit Shares.

January 19, 2016

Employee Benefits-IRS Provides Eight Facts For ALEs About New Information Statements to be Filed in 2016

IRS Health Care Tax Tip 2015-85, December 29, 2015 says the following:

The Affordable Care Act requires applicable large employers to file:

Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns
Form 1095-C, Employer-Provided Health Insurance Offer and Coverage

Here are eight basic facts for employers:

• The due date for furnishing these forms is extended.

o The due date for furnishing the 2015 Form 1095-B and the 2015 Form 1095-C to the insured and employees is extended from February 1, 2016, to March 31, 2016.
o The due date for health coverage providers and employers furnishing the 2015 Form 1094-B and the 2015 Form 1094-C to the IRS is extended from February 29, 2016, to May 31, 2016 if not filing electronically.
o The due date for health coverage providers and employers electronically filing the 2015 Form 1094-B and the 2015 Form 1094-C with the IRS is extended from March 31, 2016, to June 30, 2016.

While the IRS is prepared to accept information reporting returns beginning in January 2016 and employers and other coverage providers are encouraged to furnish statements and file the information returns as soon as they are ready.

• An ALE is required to file Form 1094-C with the IRS; however, an ALE is not required to furnish a copy of Form 1094-C to its full-time employees.
• Generally, an ALE must file Form 1095-C or a substitute form for each employee who was a full-time employee for any month of the calendar year.
• In addition, an ALE that sponsors a self-insured plan must file Form 1095-C for each employee who enrolls in the self-insured health coverage or enrolls a family member in the coverage, regardless of whether the employee is a full-time employee for any month of the calendar year.
• Form 1095-C is not required for the following employees, unless the employee or the employee's family member was enrolled in a self-insured plan sponsored by an ALE member:

o An employee who was not a full-time employee in any month of the year
o An employee who was in a limited non-assessment period for all 12 months of the year.

• If an ALE member sponsors a health plan that includes self-insured options and insured options, the ALE member should complete Part III of Form 1095-C only for employees and family members who enroll a self-insured option.
• An ALE member that offers coverage through an employer-sponsored insured health plan and does not sponsor a self-insured health plan should NOT complete Part III.
• An ALE may provide a substitute Form 1095-C; however, the substitute form must include the information on Form 1095-C and must comply with generally applicable requirements for substitute forms.

For more information, see the Instructions for Forms 1094-C and 1095-C and these additional Questions and Answers.

January 15, 2016

Employee Benefits-IRS Provides Five ACA Facts for Applicable Large Employers

In IRS Health Care Tax Tip 2016-05, January 13, 2016, the IRS says the following:

Some of the provisions of the Affordable Care Act only affect your organization if it's an applicable large employer. An ALE is generally one with 50 or more full-time employees, including full-time equivalent employees.

The vast majority of employers will fall below the ALE threshold number of employees and, therefore, will not be subject to the employer shared responsibility provisions.
If you are an ALE, here are five things to know:

• Applicable large employers have annual reporting responsibilities. You will need to provide the IRS and employees information returns concerning whether and what health insurance you offered to your full-time employees.
• If you're an applicable large employer that provides self-insured health coverage to your employees, you must file an annual return reporting certain information for each employee you cover.
• ALEs must either offer minimum essential coverage that is affordable and that provides minimum value to their full-time employees and their dependents, or potentially make an employer shared responsibility payment to the IRS. Learn more about the employer shared responsibility provision.
• You may be required to report the value of the health insurance coverage you provided to each employee on their Form W-2.
• If you're an applicable large employer with exactly 50 employees, you can purchase affordable insurance through the Small Business Health Options Program (SHOP).

For more information, see the Affordable Care Act Tax Provisions for Employers page on IRS.gov/aca.