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SteveK, it sounds like you ought to hire firm #3, Mike Preston.

You have an unfortunate situation here, my sympathies. I am not an attorney, but do have 35+ years of self-funding experience. I have some thoughts for you. You should collect all the plan documents, this is where some of your questions can be answered, and your attorney will ask for them too. It is quite possible that Anthem is acting as an administrator here and not the fiduciary or Plan administrator. Because this is a self-Funded plan the employer can design benefits as they want, so it may be possible that Anthem covers these expenses in their fully insured plans, but not for this group. There is at least one other person on here who could be of help, on the legal aspect, and that is Chaz, hopefully you will get a reply. Good luck.

IRS does not recognize benefit waivers for plan funding purposes - even for owners. This is a long-standing position, unlikely you will find an actuary who would sign the Schedule SB with the funding requirements calculated on the basis of a waiver.

Revenue Ruling 2002-45 [http://www.irs.gov/pub/irs-drop/rr02-45.pdf] describes a restorative payment (the ruling’s antidote against counting an amount as a contribution) as a payment “made to restore losses to the plan resulting from actions by a fiduciary for which there is a reasonable risk of liability for breach of a fiduciary duty under title I of the Employee Retirement Income Security of 1974 (ERISA)[.]” Beyond the examples given in the ruling, the IRS in practice has treated a payment as restoration if the employer made a written finding that the selection or negotiation of the insurance or investment contract was (or might have been) a breach of the employer’s fiduciary responsibility, whether under ERISA or other law, and the finding is plausible. The Treasury department’s interpretation requires also that “participants who are similarly situated are treated similarly with respect to the [restorative] payment.” For a limitation year that began or begins on or after July 1, 2007, the ruling’s principle is included in the annual-additions-limit rule. 26 C.F.R. § 1.415(c)-1(b)(2)(ii)(C). https://www.ecfr.gov/cgi-bin/text-idx?SID=9ee62d943d4b498039cba586af9d3fc9&mc=true&node=se26.7.1_1415_2c_3_61&rgn=div8 The Treasury adopted my suggestion about looking beyond ERISA to other Federal law, and to State law. The key driver is that there is “a reasonable risk of liability”.

One of the guiding principles of the correction program is to put the plan in the position it would have otherwise been in had the failure not occurred. If his election was in place at the time that the failure occurred, then the employer is obligated to honor that election. There is no basis for allowing him to retroactively waive his election merely because the correction is being done now. Another way to think about it is that the correction is simply fixing an operational defect in the plan. It is not some benefit or right that is available to individual participants. Therefore there is nothing to waive because the correction is not adding anything new to the plan.

This made me giggle. Where is this administration firm? North Korea or something?