Leaderboard

You need a classification of employees to exclude, like a division or a location or a job category.

Part-time/temporary/seasonal is a class of employees. Once an employee works completes a year of service (1000 hours), they are no longer part of this class. The basic plan document should clarify this in addition to the IRC Code and Treas Regs mentioned by Griswold and rocknrolls2.

This has always been an issue when the markets are down significantly. The few non-daily plans we have left will pay our a percentage of the last valuation (usually 60-70%) with the remaining after the next valuation. This is fair to the remaining participants.

The IRS position on this is crystal clear. They regard it as a violation of Code Section 410 (a) which permits a maximum eligibility condition due to plan eligibility of one year. There are a lot IRS Revenue Rulings from the 1970s and 1980s clariifyng how this rule works.

See IRC 410(a)(3)(A) and Treas. Reg. 1.410(a)-3(e), Example 3.

For the very few we have remaining, we wrote into the document for the plans to be quarterly valued. So they get earnings through the end of last quarter AND Trustee/Administrator has the option to request a special valuation which which we charge of course. I don't think the regular employee would think this way - oh I can get my March 2022 value out since that was the last quarter so I will request distribution now and avoid loss allocation. If it's an immaterial balance prior quarter is fine. But a large balance then if Trustee doesn't elect special valuation we may reach out and advise that they do request one. Most of out plans are 3% nonelective safe harbor and so the final contribution for the year of termination plus potential gateway and PS, means another distribution process a year later!

I also have seen a lot of LSAs veer into ERISA group health plan status by including medical expenses that need to be removed. But yoga and meditation are not problematic. Those aren't §213(d) expenses. And LSAs aren't designed as incentives or rewards that implicate the HIPAA/ACA/ADA wellness program regulations. They're just straight reimbursements. I did a webinar on this topic a couple weeks ago. Here's a highlight of the main concern you're raising: Newfront Office Hours Webinar: Fringe Benefits for Employers

I doubt you would find anything on the 5500 search site. Plans that cover only owners (and spouses) sometimes file a 5500-EZ and those aren't open to public inspection. And many times, I would think, the financial adviser to the plan would be the FA for the owner or one of the partners. Either that, or they are using one of the big-box plans and have a generic adviser (a la Fidelity).

I think you are OK. Doesn't DC TH-min require employment on last day of the year? So you shouldn't have a 411 cutback issue.

okay, I cannot believe I typed HCE and NHCE instead of Key and Nonkey when I know better. This is not an odd top heavy/HCE provision, it is a standard provision of trying to change it from allocating the top heavy minimum to both Key and Non Key to only Non Key during the plan year. I think it's a yes.

It would be inappropriate to attempt even a general answer without seeing much more information, including information that might be improper or unwise to communicate without a lawyer-client relationship. If your friend the ERISA lawyer wants my suggestions about how to sort the issues, that person is welcome to call me. Lawyers’ professional-conduct rules allow ways for a lawyer to reveal her client’s confidential information to get another lawyer’s advice about the client’s matter or the lawyer’s conduct. I often help as a lawyer’s lawyer.

And your firm might want your lawyer’s advice about when and how to end your services while managing risks of your exposures to, if not liabilities, at least defense and other expenses.

And are you also dealing with securities law violations, just to make it more interesting?

You need to make sure the problem remains the client's and does not become yours. If I were in your situation, I would explain that there are lots of penalties associated with not doing the things you recommend and you're not an attorney (I'm assuming). If they want to terminate without doing what you recommend, they need legal counsel and you'll follow counsel's advice.

I'm not familiar with Virta, but it certainly sounds like a medical expense. If so, the employer's coverage of the expense creates a group health plan subject to COBRA. Excepted benefits avoid the HIPAA portability provisions and ACA market reforms--but they don't avoid COBRA.

I'm thinking back to a Relius seminar I went to led by Robert Richter (whose voice is like a friendly version of Belichick!), who mentioned that any -11g amendments typically don't get you the extra deductibility - you have to use the rules of the plan as they were in effect on actual 12/31 (not including anything adopted retroactively). So while the overall dollar amount might be under the 404 cap for the plan, I suppose the hangup is whether or not making a contribution for someone beyond what they would have had in the first place, then becomes a qualifying ordinary business expense like it would be for the original plan layout as of that date.

I thought the consensus was that -11g amendments could be used even without any sort of failure.