The Joint Committee on Employee Benefits (JCEB) of the American Bar Association (ABA) recently released Q&As containing nonbinding responses from IRS and Treasury Department representatives to 22 questions regarding employee benefit issues. The document, compiled by JCEB, is based on informal discussions between representatives of JCEB, the IRS and the Treasury at the May 10, 2013 meeting of the ABA Tax Section's Employee Benefits Committee.

Responses to the questions are unofficial and nonbinding and reflect the individual views of the government participants. Topics addressed include (but are not limited to):

Beginning in 2014, the Affordable Care Act (ACA) imposes annual cost-sharing limits for group health plans (see Practice Note, Cost-Sharing Restrictions Under the ACA). For 2014, the annual limits on group health plan cost-sharing will be the same as the limits for HDHPs for that year. In 2015 and later years, however, it is possible that HDHPs, which are also group health plans, could be subject to both:

In Q&A 1, IRS representatives were asked whether an HDHP must adhere to the IRS' adjustment, in the event the HHS adjustment creates a higher out-of-pocket maximum than the IRS' adjustment. According to the officials, if two different out-of-pocket maximums apply, the HDHP complies with both by satisfying the lower out-of-pocket maximum. Thus, an HDHP that is subject to different out-of-pocket limits under the IRC and the ACA rules must comply with the lower limit. The officials noted that the HDHP must meet the IRC out-of-pocket limit to be an HDHP that supports a health savings account (see Practice Note, Defined Contribution Health Plans: Overview).

In Q&A 2, IRS representatives addressed a question regarding whether a valid QDRO awarding $50,000 to an alternate payee could be honored where a participant in a defined contribution plan has:

The IRS representatives stated that the plan could make an immediate distribution of $50,000 to the alternate payee, even though IRC Section 72(p)(2)(A) requires, among other things, that a plan loan cannot exceed 50% of the account balance, or else the loan is taxable. The IRS explained that changes to the participant's account balance after the inception of the loan are not relevant to whether the requirements of Section 72(p) are satisfied (see Practice Note, Qualified Retirement Plan Loans: Overview: Maximum Loan Amount). Therefore, as indicated in IRS Notice 82-22, a distribution to the alternate payee can be made from the account unless the loan is later renegotiated, renewed or modified. However, the IRS representative stated that the DOL may have a different opinion on this issue.

It should be noted that a plan's QDRO procedures may require the parties to determine the participant's total account balance available for the QDRO to be reduced by the value of outstanding loan balances (see Standard Documents, Model Qualified Domestic Relations Order for Defined Contribution Plan, Drafting Note: Participant Loans and Procedures for Identifying a Qualified Domestic Relations Order).

Q&A 4 dealt with a situation where an employer provides a matching contribution to participants in a defined contribution plan on a plan-year basis and erroneously excludes an employee from making elective deferrals to the plan for the first two months of the plan year. An IRS representative stated that the employer would be required to make a qualified non-elective contribution (QNEC) to the employee even though the employee has the opportunity but does not elect to contribute an amount that would provide him with the maximum match for the remaining ten months of the year.

However, the IRS representative noted that the resolution of this issue depends on the facts and circumstances of each situation and there could be a different result if the plan was submitted under the Voluntary Correction with Service Approval Program (VCP) (see Practice Note, Correcting Plan Errors under EPCRS: Voluntary Correction with Service Approval Program (VCP)).

For information on how to correct this type of error under the IRS Employee Plans Compliance Resolution System (EPCRS), review Practice Notes, Correcting Qualified Plan Errors under EPCRS: SCP Example: Exclusion of Eligible Employee from 401(k) Plan and Common Qualification Errors and Corrections under EPCRS.

The IRS was asked in Q&A 5 whether an employer that restates a retirement plan near the end of Cycle C, and subsequently adopts a plan amendment, is required to restate the plan again before filing the plan on January 31, 2014 for a determination letter request. The IRS representative indicated that, in order to be considered for a favorable determination letter, the amendment:

For resources that assist an employer in applying for an IRS determination letter for its qualified retirement plans, see Retirement Plan Determination Letters Toolkit.

In Q&A 6, the IRS was asked whether it would address a determination letter request where an employer cannot locate a required plan amendment for reasons beyond its control (in this example, the amendment was made to an acquired company's plan prior to a merger of the plan) and whether the employer could instead provide the IRS with information or documentation supporting a timely plan amendment. The IRS representative did not say that the IRS would address the determination letter request but rather stated that:

For more information, see Practice Note, Applying for an IRS Determination Letter.

In its response to Q&A 10, an IRS representative revealed that there is a lack of consensus among IRS representatives regarding whether a plan that permits Roth contributions can be merged into a plan that does not contain a Roth contribution provision (a Roth contribution provision would not be added to the successor plan following the merger). The IRS representative stated that the IRS would likely be able to opine on this issue at next year's conference.

For more information on Roth contributions, see Practice Note, Roth 401(k) Plans.