Compliance with CFR 894.505 (retroactive premiums taken pre-tax)

Summary:

How other companies utilize Oracle HCM retro processing to capture retroactive benefit premiums originally withheld on a pre-tax basis

Content (please ensure you mask any confidential information):

Our counsel has recently advised us that per CFR 894.505, retroactive premiums for pre-tax deductions (except for those arising from the birth/adoption of a child) should be withheld on an after-tax basis. I am wondering if any users utilize retro processing in this way, and if so:

• How do you handle refunds calculated through the retro process? If those are taken after-tax, the employee would be avoiding taxable income, so that doesn't seem correct.