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The few situations I’ve heard about use a service provider to confirm to an employer its employee’s student-loan repayments. I have not seen a form, whether website app or paper, for a participant’s self-certification.

Does the plan provide a § 72(t)(2)(I) emergency personal expense distribution? If not, might the plan sponsor consider an in-operation amendment (to be included in a SECURE 2019 & 2022 restatement)? The standard for an “emergency personal expense” is wider than for a hardship. A participant may certify that the claimed distribution is “for purposes of meeting unforeseeable or immediate financial needs relating to necessary personal or family emergency expenses.” I.R.C. (26 U.S.C.) § 72(t)(2)(I)(iv). Although the $1,000 an emergency personal expense distribution might provide might meet only a portion of a tree-removal expense, $1,000 might be more useful than $0.

Chaz, might an element be missing from your simplified example? What is the fair-market value of the health coverage? Using your example, let’s put an illustrative amount on the value of the health coverage: Imagine $30,000. An employee who’s not offered an extra opt-out payment chooses health coverage, has $10,000 taken from her pay, and gets another $20,000 in value provided by the employer. (Assume this layer of choice is a proper § 125 plan, and does not discriminate.) Her Federal income tax wages is $90,000. (Her total compensation is $120,000.) The employee who is offered an extra opt-out chooses against health coverage, has $0 taken from her pay, and gets the $15,000 opt-out payment. If what I’ll describe as the “second” § 125 plan (the choice offered only to the one specified individual) discriminates, the offeree, if highly-compensated, is not relieved of constructive receipt of whatever she could have chosen. Looking to the greater-of, the $20,000 value of employer-provided health coverage counts in her gross income; it is $120,000, not $115,000. Might an employer’s or employee’s tax practitioner analyze it this way? If § 125 does not apply to the extra opt-out choice, must an employer recognize constructive receipt in its Form W-2 wage reporting?

I agree - I believe it's not a preventive hardship w/d option, but only for actual damage. Your last sentence, though, was the key.

Thank you, ESOP guy!

And the plan must have the safe harbor provisions. It is not considered safe harbor if the plan does not say it is safe harbor.

I'm hearing different things from TPA's regarding whether or not they are making a Student Loan Matching Certification Form available to participants. Has anyone seen TPA's putting anything together? I'm also surprised I haven't seen anything from document providers?

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No. A match of 100% on the first 6% satisfies the ADP and ACP safe harbor (assuming no allocation conditions, vesting rules, notice requirements, etc. are satisfied). The 4% rule you reference comes into play when a discretionary match is funded in addition to a safe harbor formula. If there is a discretionary match in addition to a safe harbor match, then to satisfy ACP safe harbor, the match cannot take into account more than 6% of pay and the match contribution cannot exceed 4% of pay.

You also need to check how the plan document defines After Tax Contributions. Many I have seen say that After Tax Contributions are made from Gross Wages paid to the employee during that tax year and withheld from pay, not submitted from other funds the participant may have access to.

Can it be created on 12/31 such that no accrual occurs until the next year?

I have found it most practical to create the document closer to the time the client is ready to fund. I can't tell you how many plans were created in December when the client had tons of money, only to find out later when it was time to fund in September that circumstances had changed, and they did not have the needed funds.

Isn't one advantage signing after 12/31 not filing 5500 form? Actuarial certifications still need to be done For example (extreme one): S-corp (with employees) decides to start one on 9/14, signs and funds on 9/15. If wanted to file 5500 form, has to file on 9/15 (special extension) as no 5558 to extend to 10/15. Of course, it is assumed that s-corp tax filing is on extension. Full disclosure, not a fan of above but happened once or twice😁 CuseFan has made good points. But more and more I think and encourage, the clients should start the plans after year end as the census data would be final and available and also allow a better design than making one up during the year as census changes all the time. Just saying it.

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A plan has a 100% match on the first 6% of comp. If I recall correctly, a formula can be considered safe harbor if you contribute a match only based on the first 6% of comp, but only if that amount is less than 100% of the first 4% of comp. That would make this match on the first 4% of comp safe harbor, and the match on the next 2% a fixed non-SH match. Since there's a portion that's non-SH, the plan would be subject to ADP and ACP testing - do I have all of this correct? Would the ACP testing be done using the entire match or only the non-SH portion, i.e., the amount based on the 4% - 6% of comp? Thanks in advance for any assistance.

IMO it would not qualify as a casualty loss.

Yeah if there's only one HCP involved I think you're right. Still wouldn't want that structure in place in case another HCP comes along who wants to enroll in the plan someday, but until then I think there's no practical consequence of the discriminatory arrangement. As you noted, that HCP is already being taxed on the full amount anyway via the cash opt-out credit.

Depends on the circumstances. I don't think you want someone signing a plan on 4/14 expecting to fund a trust (that can't be set up earlier) on 4/15 so they can file on time. The advantage is for clients who don't want to extend their returns (and for those doing the work, fitting these new plans into their busy Q1 schedules). Also, some clients may want to begin funding sooner rather than later given market conditions at the time. And what's your guard against doing all the work up front so can accommodate, including the valuation, only to get hit with a late change of mind/chickening out and stiffing you on payment for work done? Personally, the earlier a plan gets implemented the more time we provide our actuarial teams to do their work and I do not like to commit staff to aggressive unrealistic timing - been on the other side of that, it's unfair and bad for morale, IMHO.

You can parse otherwise excludable employees but must test that group separately and you don't get a free pass because that group has HCEs. You may want to try restructuring and parse the young HCEs with older NHCEs and test that group on contributions. The question then is whether your restructured plans can pass using ratio percentage or if you can pass average benefits with those young HCEs (might need to calculate AB% on contributions as well).

Just as many BenefitsLink neighbors remind us to Read The Fabulous Document, if a question involves an annuity contract one might read Read The F*** Contract. Even if a contract is a group annuity contract, a contract might provide fewer or narrower rights than one imagines.

I'll grant you that the arrangement does likely violate the cafeteria plan nondiscrimination tests. What I am struggling with is the consequences to the HCE. The arrangement just applies to ONE HCE; all other employees including other HCEs can opt of medical coverage but are not eligible to receive the opt-out payment. Medical insurance is the only benefit offered that participants pay a portion of the premium. The opt out arrangement for the one HCE is reduced to writing, which is included as part of the cafeteria plan and is specific enough to be clear that the other HCEs are ineligible for it. A simplified example with round numbers: HCE earns $100,000 per year. Participants' share of the cost of coverage equals $10,000 per year. The opt out payment is $15,000. So, if the HCE participated in the health plan, the HCE's taxable income would be $90,000 but because the HCE opted out, the HCEs taxable income is $115,000 (whereas other HCEs who opted out would have taxable income of $100,000). What would the tax consequences be to our lucky HCE friend in this scenario? It seems to me that the HCE is already being taxed on the value of the highest benefit he could receive. (The actual situation I am facing is somewhat similar to what EBECatty runs in to periodically. I have suggested virtually exactly the same design to the client as EBECatty suggests but the client is resisting.) Thanks!

A plan came on with us earlier this year, this is our first time doing testing for them. Owner wants a projection of what it'd look like to max out profit sharing with new comp (they've never done profit sharing before). Right now their plan doc has 3 month wait, no hours or age requirement, and monthly entry for all sources, including safe harbor. Owner has two kids, 12 and 14, which get a small paycheck, defer some, and get safe harbor money. This causes some wild numbers in 401(a)(4) testing because of their age; the $330 of safe harbor received by one kid means I'd need to get 5 NHCEs up to ~27 EBAR. Essentially, there's no way to max out the owner without giving wild contributions to everyone else because of those two kids. Our plan is to amend their document for next year to either have an age requirement or exclude HCEs from the safe harbor contribution, along with some allocation conditions and other small provision changes to make this much smoother next year. That said, is there anything at all we can do for this year to make this spread better? I've seen conflicting information about the use of statutory exclusions for 401(a) rate group testing & struggling a bit to wrap my head around if there's any way we can make this work. Any input would be much appreciated!

Can someone point me to annual participant notice requirements for 457(b) and 457(f) requirements? Thank you.

The contributions are funded by the employer, the r/k doesn't front any money. The R/K pulls the funds via ACH they day they receive the contribution file. Sometimes that is before the participants get paid. I thought deferrals to the trust had to be from current, not future income.

Like group annuities?