Communique -- August 2014

In this issue
  >>  New remittance mailing address
  >>  New employees = New applications, says IRS
  >>  Salary Reduction Agreements
  >>  Cash in lieu of health insurance

 

New remittance mailing address

Effective April 28, 2014, we have a new address for remittance payments. All checks should be made payable and sent to:

Verisight Trust Company
PO Box 23185
Pittsburgh, PA 15222

To ensure proper credit, please be sure to include both the bin number and the district's plan name on all deposits. To generate your district’s bin number, place your Plan ID number between pound (#) signs. The bin number should be written on checks.

Bin number example 
EXAMPLE:
Bin number: #WE00437#
 

New employees = New applications, says IRS

Due to IRS regulations, any new employee to a district who wishes to contribute to the WEA TSA Trust must open a new account even if the participant starting with your district has an existing WEA TSA Trust account from a previous district. The participant will have the option of consolidating his or her accounts once the new one has been opened.

We would be happy to provide enrollment kits that you could hand out to any new employees of the district. Please call us at 1-800-279-4030 or email us at retirement@weabenefits.com to make any requests.

Salary Reduction Agreements

To ensure the tax benefit of a 403(b), a salary reduction agreement (SRA) must be in place before deducting a contribution from an employee’s salary. The SRA must be in writing. Noncompliance is a violation of IRS regulations that could subject an employer to penalties if a contribution amount is changed without an SRA on file. Additionally, an employee must complete an SRA if he or she elects to have all or part of the Section 125 Cash Option amount contributed to a 403(b).

To avoid having to submit a new SRA each time the cash option amount fluctuates, have the employee state on his or her SRA the percentage of the cash option to be contributed, rather than a fixed dollar amount. Please consult your employer’s tax advisor for specific instructions.

Cash in lieu of health insurance

For a long time there has been significant confusion over the appropriate handling of nonelective contributions in lieu of health insurance. The IRS clarified this issue and provides that when employees are allowed to choose between a taxable benefit, such as cash or cash equivalents, and a nontaxable benefit, such as health insurance, regardless of the employee’s choice, the nontaxable benefit is considered taxable income. This means that if given the choice between a taxable and nontaxable benefit, employees who choose health coverage will have to pay taxes on the value of the benefit.

Many school districts have adjusted their plans to eliminate nonelective contributions for this benefit and are appropriately providing choice by sending this money through a written 125 plan. We believe there are still some school districts that continue to contribute health insurance premiums as nonelective contributions to employees’ 403(b) plans. This can only be accomplished with a written 125 plan document that permits employees to choose between a taxable benefit and a nontaxable benefit. The cash is remitted to payroll and applied as directed by the employee—to fund an elective 403(b) contribution in accordance with the employee’s salary reduction agreement or the employee may choose to take the cash.

If you are a school district that remits nonelective contributions in lieu of health insurance, you may want to speak to your employee benefits coordinator or attorney to make sure you and your employer completely understand the tax issues surrounding this. We would be pleased to assist you with any adjustments to your billing or questions you may have to enable you to be compliant with IRS rules. Just call us at 1-800-279-4030.

ira thanks


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