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I think this would violate the contingent benefit rule of 1.401(k)-1(e)(6)(i) - you would be conditioning the right to make future deferrals on having made deferrals in the past.

While the new rules appear to allow a 125 plan to be used in conjunction with an ICHRA, unfortunately, I'm not sure an ICHRA would work in this specific case since it sounds like there is only one PT employee and FTEs are still offered traditional group health coverage. The new regulations appear to require a minimum class size for some classes including FT & PT when traditional coverage is offered to an applicable class. Since the minimum number of employees in the class (that must be offered) starts at 10, a class size of 1 would not work. Interested if anyone has a different take. The other caveat is that if this employer happened to have 10 PTEs in the PT class, the employees would only be able to use the 125 for off-exchange plans. The 125 cannot be used for on-exchange plans. Also interested if any companies are considering offering an ICHRA in 2020 or 2021.

They could, but why would you want to? It's not that onerous to put one together. It'll probably take you longer to answer all the IRS letters you'll get than to prepare the EZ for the next five years.

I agree with Brady, doubt if it would work in this situation.

From a cutback perspective, there is no protected right to continued participation, only to benefits already accrued. So if you have eligibility that less than the statutory maximum, an amendment could make a current participant ineligible for continued participation until new eligibility is met. Some documents default to grandfathering current participants, others it would depend on the amendment. You would still have to make sure that the amendment itself isn't discriminatory. EOB (Ch 2, Section VI, Part E)

My thoughts are that you either leave all eligible participants in, or "remove" all eligible participants who did not meet the new eligibility... whether the have a balance or not. But, maybe hopefully those with a balance will eventually meet the new eligibility and therefore can then continue participation at that time... but there may be a gap between the amendment and the new eligibility. (my <2 cents on this).

This is a response without doing the research, so from memory and experience. It could be incorrect, but I believe it to be correct. I do not believe you can EVER throw someone out of the plan who has met the eligibility requirements applicable to them at the time just because you change them later. That would include someone who is in the plan but has no account balance for whatever reason. You can change eligibility to exclude certain classes of employees, but I'm not sure you can define the class as those who don't meet the new eligibility requirements AND have a zero balance in the plan. Being the end of December and still working under the "old rule" that the plan has to be adopted by year end, probably won't have time to do the more in depth research needed to confirm my memory/opinion. Would look forward hearing from others on this, especially with specific references if you can.

401(a)(31) is a qualification requirement. While not exactly on point, 1.401(a)(31)-1 A-6(b) notes that "A plan will fail to satisfy section 401(a)(31) if the plan administrator prescribes any unreasonable procedure" for electing a direct rollover. Requiring participants to return their forms in less than 30 days could be considered an unreasonable procedure. What does the plan administrator intend to do with the benefits of participants who do not return a distribution form? Roll them over to an IRA provider (e.g. Penchecks)? Consider this scenario: the employer sends out the 402(f) notice on December 16. No response is received and the account is rolled over to Penchecks on December 30. On January 3 the participant returns a completed distribution form electing a direct rollover to another qualified plan. The plan will have failed to failed to comply with 401(a)(31) by not providing a direct rollover to the plan specified by the participant.