Section 6039D Still Exists, But The IRS Has Suspended Its Annual Return
Section 6039D is the Code provision that calls for returns and records from employers with certain fringe benefit and cafeteria plans. Here is what it says, what the IRS has said about filing, and what we could not confirm.
Three Things To Know About Section 6039D.
General information, not legal or tax advice. Confirm current status with your tax adviser before relying on any reporting position.
All Six Code Sections
Return to the overview of the six Internal Revenue Code sections this series explains.
Cafeteria Plan Document Requirements
The written plan and records that support a cafeteria plan, whatever the reporting position.
Compliance Calendar
The filings and notices that do appear on a plan-year calendar.
Returns, Records And Covered Plans.
Section 6039D took effect on January 1, 1985. Subsection (a) says that every employer that maintains a specified fringe benefit plan must file a return, at the time and in the manner the Secretary of the Treasury prescribes by regulations. The return is to show the employer’s total number of employees, the number eligible to participate in the plan, the number participating, the total cost of the plan for the year, the employer’s name, address, taxpayer identification number and type of business, and the number of highly compensated employees among those counted.
Subsection (b) is separate and short: each employer maintaining a specified fringe benefit plan must keep the records needed to decide whether the requirements of the applicable exclusion are met. Subsection (c) lets the Secretary require additional returns, but only from a representative group of employers.
The covered plans are listed in subsection (d). A specified fringe benefit plan is a plan under section 79 (group-term life insurance), 105 (accident and health), 106 (employer-provided coverage), 125 (cafeteria plans), 127 (educational assistance), 129 (dependent care assistance) or 137 (adoption assistance). The list explains why the section is often mentioned alongside cafeteria plans even though a cafeteria plan is only one of the plan types it reaches.
Notice 2002-24 And The Suspended Return.
The practical question is whether an employer has to file anything. The statute leaves the time and manner of filing to regulations, and the IRS addressed the subject in Notice 2002-24. That notice relieves employers maintaining plans under sections 125, 127 or 137 from the requirement to file the annual information return under section 6039D, which had been reported on Schedule F attached to Form 5500. It applies to plan years for which returns had not yet been filed, and it provides that any future reporting obligation would apply only to plan years beginning on or after the date further guidance is published.
The notice is narrow in two ways. It does not change the annual reporting that ERISA Title I requires on Form 5500 and its other schedules. And, in the text we reviewed, it does not address the recordkeeping requirement in subsection (b). An employer that wants to be careful will therefore keep the plan document, eligibility and participation records, and any nondiscrimination testing that supports the exclusion, as it would for any other benefit plan.
Open Points And A Conservative Reading.
You may see statements that regulations under section 6039D were never finalized and that no reporting is required today. The notice supports the second point for cafeteria, educational assistance and adoption assistance plans, and the statute itself leaves the filing time and manner to regulations. We have not found a primary source that states, in so many words, that no final regulation exists, so we do not make that claim here. We also did not find a later IRS notice that reinstated the return in the sources we reviewed.
A conservative reading is to treat section 6039D as dormant for filing purposes but alive for records. Check the IRS website and your tax adviser each year for any new guidance, and remember that a plan type outside sections 125, 127 and 137, such as a section 105 reimbursement plan, is not named in the notice’s relief language that we reviewed.
Laws And Sources
26 U.S.C. 6039D, Returns and Records for Certain Fringe Benefit Plans — Statutory text for the return, recordkeeping, additional returns and the list of specified fringe benefit plans.
IRS Notice 2002-24 — The IRS notice that relieves employers with cafeteria, educational assistance and adoption assistance plans from filing the annual return, with its limits on future reporting.
26 U.S.C. 125, Cafeteria Plans — The cafeteria plan statute that cross-references the reporting section.
General information, not legal or tax advice.
Quick Answers.
Short replies to what employers ask first on this section. Each leads to a fuller guide.
Do we have to file a section 6039D return?
Notice 2002-24 relieves employers with cafeteria, educational assistance and adoption assistance plans from the annual return, and later reporting would follow further guidance. Ask your tax adviser to confirm nothing has changed.
Does the notice say anything about keeping records?
In the text we reviewed, no. Section 6039D(b) separately requires employers to keep the records needed to show that an exclusion is met, so keep plan documents and testing results.
Were the regulations ever finalized?
We could not confirm this from a primary source, so we do not state it. The statute leaves the time and manner of filing to regulations, and Notice 2002-24 suspends the annual return for the plan types it names.
The Other Code Sections.
Section 106: Coverage Excluded From Income
Why employer-paid premiums stay out of taxable wages, plus the Archer MSA and HSA add-ons.
Sections 105(b) And 105(h)
Medical reimbursements, the 70 and 80 percent eligibility tests and the highly compensated individual definition.
Section 125: Cafeteria Plans
The written plan, the cash-or-benefit choice and the tests that apply to key employees.
Section 132: Fringe Benefit Exclusions
Eight kinds of excluded fringe benefit, with the working condition and commuter rules up close.
Section 223: Health Savings Accounts
Eligible individuals, annual limits, the HDHP definition and what happens to withdrawals.
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