| Pacific Benefits
Cafeteria Plan Bulletin |
|
Reservist Distribution
Not required by IRS
Fortunately the IRS has said that there is no requirement to add this to your Cafeteria Plan-it is optional with each company.
There are still unanswered questions on the "reservist distributions" that will not allow us to do a blanket SMMS for all our clients as we had hoped. Each employer will have decisions to make-first is-- do you need and want this in your plan-second is-what amount do you want distributed to the reservist--the account balance on the date of termination or do you want to advance the entire annual election?
There still is nothing definitive on whether or not the distribution is taxable to the reservist-we have reviewed 4 legal opinions from 4 different law firms-two have stated that it will be taxable to the reservist and the other two say that it is not taxable?? Our recommendation at this point is to put this on hold until you know you are actually going to have this event happen in your plan. It seems unlikely that this will be a big issue-- most of the troop deployment is well behind us and it could be going the other way after the election. We can do a SMMS for you at the time you need it and make it effective at that time--however, you can be thinking about the answer to the second question above so you can be ready if and when this is needed in your plan. |
