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Q. How many people work at your company. A. About half.

Yes you can file the 5558 now There is really no reason to NOT file it now if you know you will need the extension. I know TPA firms who submit all their calendar year 5558's in early February. No, it will not create a flag in the IRS system, other than extending your form to 8/15/17. you are correct. You mark the 5558 if no 5500 has ever been filed, you mark the 5500 when no further 5500 will be filed.

The plan says what the plan says and either interpretation is legal. Although I bristle at the idea of the payroll service rather than the plan administrator determining the meaning of plan terms, conformity with the payroll practices is often a necessary evil. The solution is to amend the plan so the terms clearly fit the practice. Oh, wait. I forgot. Nobody has plans that they can amend for language any more. The solution is for the plan administrator to adopt a written interpretation that reconciles the plan language with the payroll practice.

There is nothing preventing you from establishing compliance with 410(b) by way of the Average Benefits Test. [Full disclosure: This response was plagiarized].

There's always going to be some lag time between eligibility date and the first paycheck where money is deferred. Personally I would expect the employee to be able to fill out a form/sign up online at the 1 month eligibility date and it would hit the next payroll processing cycle dependent on how long it takes the input/feed to get to payroll and what timelags exist in that process. It's going to be different for every employee since every employee's eligibility date will be different under the 1 month of service definition rather than something like the first of the month after 1 month of service or something that limits a bit more. Payroll may be telling them that based upon that processing cycle. That's often not something the payroll dept can control (direct deposit timelines for example add 2-3 days) How quickly do other deferral changes take effect? To me, they should flow the same way.

My document (and I presume almost all pre-approved documents) include this provision in the ADP testing language. Are you sure the basic plan document doesn't include this language? On mine it is buried in the Basic Plan Document.

Bad platform! They should be able to amend the plan and make any system changes between now and 12/31. Put more pressure on them, up to and including terminating services

I agree that it CAN be done but isn't usually recommended. I liken the SH distribution timing to the deferral deposit timing. If we meet the 30 or 7 day limits, then we must prove nothing further. If we don't, then we have to show facts and circumstances as to why the timing was different.

Bill, this is [[[Generally]]] my take, but each case is different There are situations where HCEs should be limited around the beginning of the year from Maximizing their deferrals (e.g. deferring $18,000 on the first $25,000 in salary). In few instances, a couple of those HCEs may end up deferring $3,000 on the first $4,000 in salary and then leaving the company in January. Mathematically, you'd have $6000 in deferrals that sent two 75% deferral rates for HCEs in the ADP test; and the failures will cause those who deferred at $18,000 to receive distributions. I just say this to re-emphasize that each case is different. So, the demographics of the employees should be studied and the clients should be made aware of the different possibilities and then counseled into avoiding these types of pit falls. But, I do agree that most of the time it's not worth it. It does get challenging when you have HCEs who have low Compensation during the year but high (percentage of salary) deferrals. Good Luck!

I've always been opposed to limiting HCE deferrals in the document and I don't understand why. If a plan isn't safe harbor and it passes the ADP test, that means the HCEs could have deferred more.

I've set up a few of these for clients who have already been persuaded by their brokers, but only for 1-3 employees at a time. I would avoid setting them up for anywhere close to 150 employees. There are some open issues, but to my knowledge they have never been a high priority for enforcement. The biggest open issue in my view is whether these plans are: (1) annual bonus plans not subject to ERISA at all (2) ERISA welfare benefit plans in which the company is helping the employee buy life insurance (3) ERISA pension plans If you don't have any restrictions, i.e., company pays premiums each year and employee can do whatever he/she wants with the policy, I think you fall closer to (1) or possibly (2). The more "retirement-like" restrictions you add, e.g., restrictions lapse only upon termination of employment following age 65 or 10 years of service, the more likely you are to fall under category (3). Retirement-based restrictions on 150 employees starts to look an awful lot like category (3). If they are pension plans, and paying into the policy makes them "funded," they violate a number of ERISA requirements. I've never seen an official pronouncement on their status, but the insurance marketing materials always include a disclaimer saying "talk to your tax and legal advisers to ensure you are not creating an ERISA pension plan, etc." That risk will always be inherent in the REBA plan design, but they are sold nonetheless. With regard to vesting, the materials I've seen label the process as "vesting" but are really gradually reduced repayment obligations if you leave prematurely. The company also won't be able to deduct any premiums if the company's repayment right can be enforced against the policy (and arguably if the repayment obligation is based on the cash value of the policy). If you can stomach the risk, they are useful plan designs.