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Dying?

We have an employee who used to be full time and qualified for and took our employer sponsored group health, dental and vision insurance. Those premiums were run through the cafeteria plan as pre-tax. He is now part time and no longer qualifies for our employer-sponsored insurance. He wants to know if we can run his outside individual insurance premiums through the plan. We only have one other part time employee. She does not qualify for our group insurance either, but she is covered under her spouse's plan and has no interest in additional insurance. Can we do this? how do we do this?

To quote one of my favorites; "Sometimes a cigar is just a cigar". Sometimes caps are just caps!

No need to yell at ESOP guy!

Agreed.

Rev. Proc. 2019 explains everything you have to do, including providing a notice to affected participants. Also, there are 3 classes which require different actions. Within 3 Months, More Than 3 Month, and After the Close of the Following Year. Since JackS was kind enough to provide you with a copy, I leave out additional details.

Get paid in advance!

In my experience, most 457(f) plans are structured as short-term deferrals that are exempt from 409A and its plan termination/liquidation rules. Generally 457(f) on its own does not prohibit an acceleration of vesting and payment (again, as long as the plan is exempt from 409A). I would think applying the 409A 12-24 month payment delay may actually subject the plan to 409A where it otherwise may not be and potentially cause early taxation upon the date of accelerated vesting under 457(f). If the existing plan is a short-term deferral, I think you can terminate the plan, accelerate the vesting terms to require continued employment only until the plan termination date, and make full payment immediately thereafter. I believe that would also continue the substantial risk of forfeiture until the plan termination date (assuming the plan has been in place for a few years).

Start with the average NHCE ADP for the year in which the deferral opportunity was missed plus the match if one was made. A copy of Rev Proc 2019-19 is attached. Rev Proc 2019-19 Expanded SCP.pdf

Not true; he will just ignore it.... ?

There will have to be some relief issued for such situations. It is simply not possible for plan sponsors to modify all their programs, administrative procedures, etc., for a piece of legislation passed with little warning like this. The plan sponsor obviously reasonably complied as soon as possible based upon what you say. I would be very inclined to ignore reporting it as a taxable distribution, but I'll be interested to see what others think. And tax/legal counsel should be used before a decision to ignore is made.