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Coverage testing that Failed w/excluded Amish


Bridget Buzard

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I have a plan that does not pass coverage due to the Amish being eligible but does not benefit due to religious and moral beliefs. How can I give a contribution to an Amish employee when he will not accept any contributions from a retirement and or profit sharing plan?

Will the plan, if audited, be safe if we keep them out of the benefited number?

 

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if eligible, how are Amish not benefiting? Did they timely execute a permitted participation waiver? They can't just say don't give me PS and the employer comply contrary to plan provisions. if they are employees and paid a wage, this is really just deferred wages - they are part of their total compensation - so how are they morally obligated to forego? (is not OASDI withheld from their pay?) It should be explained they must be included by law, I'd hope their moral beliefs include following the law of the land. Of course, this might be a "kick the can down the road" solution as you still have to get them to take the distributions

if plan was set up to exclude them, that's another issue.

Kenneth M. Prell, CEBS, ERPA

Vice President, BPAS Actuarial & Pension Services

kprell@bpas.com

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I agree with Cuse....  If they are eligible, they should be benefiting.  If they later choose NOT to claim a benefit, so be it, but currently, make the contribution.  Who knows, maybe a bene will make the claim after death, or the spouse, or they can give the money to their Chruch - BUT the plan is the plan, and if it requires a benefit for an eligible employee (regardless of how reluctant they may be), make the contribution.

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Last I looked, the 410 rules concerning excludable employees (for coverage testing) did not treat individuals for whom pension benefits were contrary to their religion as excludable.

Prior to benefit commencement date, the contributions would be to the plan, and not the individual, so the individual would not be receiving pension contributions (and how do those differ from wages?).  Agreed, it may just be "kicking the can down the road", but sometimes people spurn receipt for all sorts of reasons, not just religious. 

Would it be acceptable for plan provisions to explicitly exclude Amish people?  It doesn't seem to me that the plan should be able to.

Always check with your actuary first!

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1 hour ago, My 2 cents said:

Would it be acceptable for plan provisions to explicitly exclude Amish people?  It doesn't seem to me that the plan should be able to.

Would that not be illegal discrimination based on religion?

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1 hour ago, K2retire said:

Would that not be illegal discrimination based on religion?

You would need to be a bit more creative and draft the exclusion in a way that excludes the people you need to exclude while not being discriminatory.  You could probably exclude a class of employees who in writing disclaimed to the employer that their religious beliefs would preclude them from accepting employer contributions.  You still have to pass testing though.

 

 

 

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I haven't seen any Amish examples before but I have heard several examples of Muslim participants who refuse participation and/or refuse to accept contributions based on the theory that the plan itself or the investment options are not halal.  In each of those cases the problem was not discovered until the employee was already a participant.  

I agree with the comments above.  Absent a timely executed waiver, you have to follow the terms of the plan.  If you can exclude them from the allocation and pass, great.  If not, you follow the terms of the plan and contribute to a participant who will most likely refuse to accept it when it is time to distribute the benefits.

 

 

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So the key going forward is when hiring an Amish employee is to get a timely written waiver of participation.  These need to be done right so I would get guidance from an ERISA attorney on how to do them.  They can maybe even help you come up with a way to communicate to the person this decision is permanent. 

But as people say for those in the plan you are stuck. 

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I don't see why it is a lack of respect for someone's religious beliefs to make no-cost plan contributions for him or her (it certainly wouldn't be a civil rights law violation).  Please explain.  I understand the concern of Muslims with plans that don't have an investment option that meets their needs, but that's a different issue.

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I knew the Amish didn't believe is Social Security and are one of the groups exempt from paying and collecting if they seek a religious exemption.  There are exceptions to this rule like any government rule.

I didn't realize this extended to private retirement plans.  Learned something new today. 

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15 minutes ago, jpod said:

I don't see why it is a lack of respect for someone's religious beliefs to make no-cost plan contributions for him or her (it certainly wouldn't be a civil rights law violation).  Please explain.  I understand the concern of Muslims with plans that don't have an investment option that meets their needs, but that's a different issue.

I will start by saying that this simply my understanding (right or wrong) of the issue.  

investment options are not necessarily disconnected from the issue of a retirement plan in general.  The objection on religious grounds isn't a one size fits all.

Some may object because there are no investments that meets their needs, like a sharia compliant fund.  

Some may object because no matter what the fund options are, investments are designed earn dividends or interest which some interpret as running afoul of prohibitions of usury.  

Some (including some Amish apparently) may object because their religion requires them to be self sufficient  which means that they may not object to savings but would object to ER contributions.

 

 

 

 

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Quote

 

RBG, as to your last paragraph, do they object to being paid wages for their work?  I think not.  The employer contributions are just deferred wages for their work, possibly subject to vesting conditions, but deferred wages nonetheless.  

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12 minutes ago, jpod said:

RBG, as to your last paragraph, do they object to being paid wages for their work?  I think not.  The employer contributions are just deferred wages for their work, possibly subject to vesting conditions, but deferred wages nonetheless.  

When it comes to religious objections, I think you can always make counter arguments like "how can you object to X but not Y?"

The old "would you pull an ox out of a pit on the Sabbath" comes to mind as a perfect example.

What it comes down to is that religious interpretation is an individual thing.  

 

 

 

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Well, not to get all legal here, but waiving participation or writing the plan document to exclude them from participation is not a reasonable accommodation if it puts the qualified status of the plan at risk or overly complicates plan administration, or both.  The fact is, they don't need to be accommodated because it has no impact on their working conditions and when the time comes to take a distribution they can give it all to charity, or to Uncle Sam.  Now, if it is just a question of being respectful and not a legal question, I get it, but still they shouldn't expect the employer to do something that could present tax problems for the employer and the other employees in the plan, or that would overly complicate plan administration.  The sharia issue is completely different, and in fact there are sharia-compliant mutual funds available in the marketplace.  

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35 minutes ago, jpod said:

Well, not to get all legal here, but waiving participation or writing the plan document to exclude them from participation is not a reasonable accommodation if it puts the qualified status of the plan at risk or overly complicates plan administration, or both. 

I agree 100%.  I only offered an explanation of the issue and the objection as I understand them.  The plan and its admins are under no obligation to act on it. 

 

35 minutes ago, jpod said:

 The sharia issue is completely different, and in fact there are sharia-compliant mutual funds available in the marketplace.  

I disagree to a degree.  I don't think the Sharia issue is all that different.  Some Muslims see any vehicle that earns interest or dividends as haram, even if a so called sharia compliant mutual fund is available.  Others don't care about the usury aspect as long as the underlying investments are "sharia compliant", and others don't care at all.

But just like the Amish example, the plan is under no obligation to make special considerations such as a sharia compliant fund that may appease a subset of believers.  They may make the decision to do so if it is otherwise prudent and reasonable, but I don't think it is any different from the Amish exclusion.

EDIT:  There is an excellent article on Sharia and ERISA in the JPB that was written by Asrar Ahmed at the DOL (at least at the DOL at the time of the article).  It goes into many more issues than I noted above.  JPB Vol 20 Number 4 if you have access to it.  At least I found it very interesting as a non-Muslim pension geek :)

 

 

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2 hours ago, jpod said:

RBG, as to your last paragraph, do they object to being paid wages for their work?  I think not.  The employer contributions are just deferred wages for their work, possibly subject to vesting conditions, but deferred wages nonetheless.  

At risk of pointing out the obvious one's faith doesn't have to make sense to you or me. 

I am not being flippant but I live near some Amish communities and they are at times splitting hairs I don't get but it makes sense to them.

They will own a restaurant and want to be able to take credit cards and have access to modern cash management.  So they will buy a modern cash registrar and hire a non-Amish person to always be the person who takes the customers payments.  This might be the only non-Amish person in the whole place.  Some how in their views they are not using forbidden technology.  To me it is a difference without a meaning. 

My brother in-law worked at an HVAC/plumbing supply wholesaler.  One of their regular customers was an Amish plumber.  He pretty much had a non-Amish driver take him around in a pickup truck everyone assumes the Amish guy owned.  This allowed him to get to appointments all over the county and comply with the faith's ban on driving cars.  I don't get it but they all seemed happy and right with God. 

As pointed out they will save money and bring lots a cash to land auction but some how 401(k) match isn't saving or wages to them.  I don't get it like the other examples but it does to them and I am not sure one will be able to fully explain it more.  If someone here can I would enjoy reading it even if it is off topic. 

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If the following article is any guideline I suspect they might treat profit sharing plan similar to soc security - as a type of 'insurance' (and as part of their beliefs, they take care of their own so they don't need or want that)

I get a kick out of the following line in the article about the Amish and soc sec

 

"Byler explained that his religion forbid paying insurance. When he was told that this was a mere technicality and that it was indeed a tax, he apparently replied, "Doesn’t the title say Old Age, Survivors and Disability Insurance?"

http://www.amishnews.com/amisharticles/amishss.htm

 

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To me the distinction here is obvious.  In the examples cited the Amish are being asked to do something which they feel would be inconsistent with their faith.  In this case they aren't being asked to do anything.

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If the Plan is New Comparability and each participant is in their own group, couldn't you suppress giving them an allocation? I assume they would still fail ratio - but might pass ABT. You might have to increase the allocation to NHCE's - but there would be a savings by not providing the allocation to the Amish participants.

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