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very similar to this error and correction - same correction and analysis principles under EPCRS https://www.irs.gov/retirement-plans/simple-ira-plan-fix-it-guide-you-excluded-an-eligible-employee-from-participating

https://www.irs.gov/retirement-plans/simple-ira-plan-fix-it-guide-you-used-the-wrong-compensation-definition-to-calculate-deferrals-and-contribution-to-participants-simple-iras

We have discovered that, due to a payroll setup issue, employee deferrals to our SIMPLE IRA plan were calculated on an after-tax basis instead of a pre-tax basis from January to July 2025. Can we fix this by adjusting the remaining payrolls in 2025 to ensure each participant's total annual deferral matches their elected percentage of compensation for the remainder of the year? What would be the appropriate correction method?

For the vesting - anything accrued prior to the change to the 3 year cliff would have to be on the 6 year graded or better. The amended could be written such that only new accruals are subject to the three year cliff. One simpler method is to amend so all old accruals are on a modified 3 year that is the combined better of the two (perhaps 0%, 20%, 100%) , and then new accruals are on a regular 3 year cliff. Another is to just use a modified 3 year schedule for old and new for everyone for all purposes. Lots of different ways to slice and dice, just make sure there is no cut-back.

For non-FMLA leave situations where health FSA coverage continues, you would generally use the standard pre-pay, pay-as-you-go, or catch-up contribution options set forth in the cafeteria plan FMLA rules. I understand you're talking about a non-FMLA leave, but that's really all we have to go with. More details: https://www.newfront.com/blog/health-fsa-for-employees-on-leave How to Collect Health FSA Contributions for the Leave Period The Section 125 rules provide three ways for employers to collect the employee’s health FSA (or any other group health plan) contributions during the leave: 1. Pre-Pay: Under the pre-pay option, the employee is given the opportunity to pay for the continued coverage in advance (i.e., before commencing the leave). Employees can elect to reduce their final pre-leave paycheck(s) with pre-tax salary reduction contributions for all or a part of the expected leave period. Pre-Pay Limitations: The pre-pay option cannot be the sole option offered. Employers offering this approach must offer at least one of the other two options to employees. Pre-pay cannot be used to pay for coverage in a subsequent plan year on a pre-tax basis. If the leave is expected to spill over into a subsequent plan year, the employee can only make pre-tax contributions for the part of the leave that occurs during the initial plan year. 2. Pay-As-You-Go: Under this approach, employees pay their contribution in installments during the leave. If it is a paid leave, the employee can continue to use the Section 125 cafeteria plan to contribute on a pre-tax basis from the stream of compensation through payroll. Otherwise, these contributions would have to be made by the employee on an after-tax basis (e.g., by check). 3. Catch-Up: With the catch-up approach, employees agree in advance to pay their contributions upon returning from leave. These catch-up contributions will reduce their initial return paycheck(s) by the contribution amount missed during the leave period. Although not entirely clear, it appears that employees may make catch-up contributions on a pre-tax basis even if the leave straddles two plan years. In general, employees on a paid leave will prefer the pay-as-you-go option because it facilitates pre-tax contributions in a consistent manner without any disruption. Employees on unpaid leave will generally prefer the pre-pay or catch-up options to avoid having to make contributions on an after-tax basis outside of payroll. Although the cafeteria plan regulations explicitly address these three payment options only in the context of FMLA leaves, employers are generally comfortable following the same approach for any other form of leave (e.g., state protected leave) where the employee will continue health FSA or other group health plan coverage. Slide summary: 2025 Newfront Health Benefits While on Leave Guide

There are different options you could take for how to handle. There's no right answer here--just what you find to be the most appropriate for your situation. The employee already authorized the deductions via the Sections 125 cafeteria plan election, so that's not an issue. The options are: Spread Repayment Over Multiple Pay Periods: Take the missed contribution amount in intervals over the remainder of the year. Lump Sum Repayment: Take the missed contribution amount in a lump sum. Convert Missed Amounts to Employer Contributions: Forgive the employee contributions and not require the employees to repay. I posted a full walkthrough on all these options (including template employee communications) here-- https://www.newfront.com/blog/correcting-missed-cafeteria-plan-contributions Slide summary: Newfront Office Hours Webinar: Section 125 Cafeteria Plans

Happy Thanksgiving to all my BenefitsLink cohorts! We’re closed for the week (but I did help a few clients with some amendments—don’t tell on me), so this is a week to recharge. Hope everyone enjoys family, food, and football!

Cuse is correct. If your client needs proof, you can point them to IRC sec. 401(k)(12) which requires that the contribution be made to "each employee who is not a highly compensated employee and who is eligible to participate in the arrangement." Also see Example 4 in 1.401(k)-3(c)(7) of the regulations which is exactly on point that you can not impose a last day requirement on a safe harbor contribution.

Thanks Paul I and RatherBeGolfing. As it is, we like our current IT provider because of the strength of the data security. Yes there is no question paying extra for that is worth it, and really is there even a question about it? I don't think geographic location matters for this anymore. I was indeed hoping to find a provider that assists in the TPA industry. I first reached out to NIPA, our cybersecurity insurance agent, our cybersecurity insurance provider, and none of them could point me in a good direction.

Happy Thanksgiving everyone! I hope you all get to enjoy time with family, a good meal, and of course, some football! I'm not working tomorrow, but we have a lot of people out on Friday so that is my day to catch up on stuff without too much interruption.

During a review of payroll deductions and benefits records, I discovered that one of our employees had a missed HCFSA deduction earlier this the year (system/timing issue from when the employee started his employment). If no corrective action is taken, the employee will be about $120 short of his elected annual goal. When I reached out to the employee to make him aware of the situation, he stated he does not want additional money to be taken out of an upcoming paycheck as a correction - he wants to leave things alone. What are my options? Are we required to take the additional $120 before the end of year to ensure that money deferred equals his annual election? If the employee objects, what regulation/statute/article am I pointing him to so that he understands that this is required? Related but separate, If someone misses FSA contributions because they are on unpaid medical leave (not FMLA, but state mandated leave) and underfunds an FSA for the annually elected amount, how should that be addressed? TIA

I hope you all have a great Thanksgiving, unsullied by productive thought. (We are having our meal on Saturday, as many family members can't make it tomorrow, so I'll be working tomorrow - great time to catch up on stuff with no phone/e-mails!)

In addition to what @Paul I said, I don't think the provider has to be local unless you actually require local services. Data security should be at the top of the list for your provider requirements. Its a plus if they have other TPA clients and understand industry needs. For example, what type of support they provide outside of standard hours, and how could this impact you during busy season / filing deadlines.

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I'm frequently surprised at the litany of reasons why some people may not want to be found (or accept payment). Divorce, separation, child support, legal or illegal debt, avoiding a stalker, it goes on and on... we had one where the former employee was collecting disability, and getting a payment from the plan would have reduced or eliminated her disability payment. It'll probably get worse now with the ICE crackdowns.

Stating something obvious.... Is this Highly Paid Individuals determination for 2026 plan centric at $150,000 (indexed) in 2025? In other words is does not matter on other outside interests and it does not matter what a new hire made with a previous employer.

If they don't want to change their address, change it to mine. I'll gladly accept the check...

If we find what we think is a correct address for a missing participant (former employee with a balance), isn't it correct that the participant must take personal action to change their address? It seems the employer, TPA, or other party, should not change a lost participant's address unless there is clear documented direction from that missing individual, right? Even though they have money in the plan, some lost participants won't respond, login, or call to correct an old address.

@Peter Gulia Lots of discussion these days about whether the retirement plan fiduciary committee model should be adopted on the health plan side. I assume that's the reference from @QDROphile. I've set out some thoughts on that issue if you're interested here: https://www.newfront.com/blog/the-pros-and-cons-of-a-health-and-welfare-plan-fiduciary-committee

Thankfully, no. I do draft some SPDs and plan docs, but not a large volume. I see these when clients send me what I ask clients what they have been using so I have a reference. So many don't know the difference between a plan doc, an SPD, or an SBC.

QDROphile, since I so often am largely in harmony with your clear-minded observations about ways to administer employee-benefit plans, I hope you’ll teach me your reasons about why it’s unwise to name “the employer” as an employee-benefit plan’s administrator. Assuming a typical situation in which no outside service provider will serve, is your suggestion that the governing documents ought to name a particular human or set of humans? Or is your idea more than that? Is limiting the oversight responsibility of the employer’s governing body a part of your reasoning? Is an element of your reasons that naming “the employer” could set up a claimant’s argument that she reasonably believed the person she received a written (including emailed or texted) or oral statement from was someone with implied authority to act for “the employer” as the plan’s administrator? Do you have further or different reasons about why it’s unwise to name the employer as the plan’s administrator? I’m seeking to learn (likely about situations I have not experienced).

No. If initial eligibility is satisfied for 3% SHNE and someone enters the plan they get the 3% SHNE for however long they were employed and in the plan, whether a day, a week or through year-end.

I doubt this is possible but I wanted to be 100%. We've always provided the 3% nonelective safe harbor to all eligible regardless of employment condition on last day or hours worked. A large client does not want the terminated employees to get 3% as the cost is fairly high. A 3% profit sharing plan to those still employed does pass coverage but the plan will not pass ADP and the client is firm - no corrective distributions. Is it possible to test the terminated employees ADP (there are no HCEs in that group) and only give the safe harbor to those still employed? The plan is not top heavy. Just taking a wild shot on this. Thank you, Tom

The ACA aspect is a really tricky one here. It can easily subsume the whole wrap plan document/SPD if you really go into the details. Here's my take on how to handle: https://www.newfront.com/blog/compliance-fast-where-to-define-eligibility-for-health-plans Four Eligibility-Related Areas Typically Addressed Outside Wrap SPD There are a few areas that deserve additional attention when determining if and how to address eligibility in the wrap SPD: 1) ACA Employer Mandate Applicable Large Employers (ALEs) need to offer minimum essential coverage that is affordable and provides minimum value to full-time employees (and their children to age 26) to avoid potential ACA employer mandate penalties. There are two different measurement methods available to determine whether employees are full-time (i.e., averaging a least 30 hours of service per week) for purposes of the ACA: the monthly measurement method and the look-back measurement method. The ACA full-time status determination methodology is unendingly complex, particularly with respect to the look-back measurement method. Attempting to fully explain the many intricate details of the measurement, administrative, and stability periods, for example, would be so lengthy that it would likely overwhelm all other content in the wrap SPD. Accordingly, best practice will typically be to include a “fail safe” type provision in the wrap SPD addressing the employer’s ALE status and that certain aspects of the applicable measurement method may qualify the employee for eligibility. Employers wishing to provide a more comprehensive description of the ACA full-time employee definition should generally refer to a separate company policy that is not restricted by the confines and multiple competing objectives of the wrap SPD.

And if you haven't been current year testing (SHM or otherwise) for five years, I think you need to stay current year on the change to discretionary match until you hit five years. Unless there is some exception to that requirement when moving away from SH plans of which a more knowledgeable contributor to this forum may be aware.