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We have recommended several companies we work with to adopt a priority list for voluntary deductions. The majority of their employees were hourly with health insurance premiums, 401k deferrals, 401k loan payments, and some had court ordered child support payments and garnishments. The link below is from the US Commerce Department and the companies we dealt with used it. https://www.commerce.gov/hr/practitioners/compensation-policies/general-pay/order-of-precedence-from-gross-pay The companies have not had an IRS or DOL audit over 401k deferrals being limited but I would think as long as a company has a procedure in place it would be okay.

It’s easy to put taxes and garnishments ahead of voluntary wage reductions and deductions. And many people put retirement last (or near last) in a triage. The difficult choices are priorities among other employee benefits and some fringe benefits. For example, many employers put health ahead of disability and other welfare benefits. But some employers, especially with workers who don’t drive to the work location, might put a before-tax transportation fringe ahead of other benefits, perhaps even health. Why? A worker who can’t afford her travel expenses to get to the employer’s work location could quit or lose the job. And for those who think about a written procedure for this, does anyone know whether ADP, Paychex, and other big payroll-service providers have designed systems and methods for getting an employer customer’s instructions for dealing with this triage?

Although it would be great if plan documents and/or written procedures dealt with this up front (and many do), I don't think it would be a plan failure to withhold taxes and amounts that had been elected, e.g. health plan contributions, before 401(k). The 401(k) plan is just one claimant among several others with lawful claims on the paycheck, e.g. Uncle Sam for FITW and FICA, state tax withholding, short-term disability, health plan, cafeteria plan. They all have legal claims on the money and the precedence among them should be based on the employer's reasonable triage of these claims, which would probably put the 401(k) plan last. You will probably want to amend the document pronto, however, if it can be read not to allow such flexibility, but I have never seen a plan document that would put deferrals ahead of taxes or other lawful claims. At worst, the wording is simply oblivious to this foreseeable practical issue. To paraphrase someone's statement regarding the Constitution (think if was Marshall), "It's a 401(k) plan, not a suicide pact."

A copay is by definition a flat dollar amount. Coinsurance is the percentage based form of cost-sharing. Either one could be applied in any fashion post-deductible, and both would have to apply to the OOPM. The SBC glossary provides a good uniform set of definitions for health plan purposes: https://www.dol.gov/sites/dolgov/files/EBSA/laws-and-regulations/laws/affordable-care-act/for-employers-and-advisers/sbc-uniform-glossary-of-coverage-and-medical-terms-new.pdf In this example, the IRS specifically recognizes the validity of a HDHP copay structure post-deductible: IRS Notice 2004-50: https://www.irs.gov/pub/irs-drop/n-04-50.pdf Q-21. Are amounts incurred by an individual for medical care before a health plan’s deductible is satisfied included in computing the plan's out-of-pocket expenses under section 223(c)(2)(A)? A-21. A health plan’s out-of-pocket limit includes the deductible, co-payments, and other amounts, but not premiums. Notice 2004-2, Q&A 3. Amounts incurred for noncovered benefits (including amounts in excess of UCR and financial penalties) also are not counted toward the deductible or the out-of-pocket limit. If a plan does not take copayments into account in determining if the deductible is satisfied, the copayments must still be taken into account in determining if the out-of-pocket maximum is exceeded. Example . In 2004, a health plan has a $1,000 deductible for self-only coverage. After the deductible is satisfied, the plan pays 100 percent of UCR for covered benefits. In addition, the plan pays 100 percent for preventive care, minus a $20 copayment per screening. The plan does not take into account copayments in determining if the $1,000 deductible has been satisfied. The copayments must be included in determining if the plan meets the out-of-pocket maximum. Unless the plan includes an express limit on out-of-pocket expenses taking into account the copayments, or limits the copayments to $4,000, the plan is not an HDHP.

You'll always need a Schedule SB for the contribution year, signed and delivered to the Plan Sponsor. If it's an EZ the SB isn't filed with IRS but is maintained and subject to audit. If it's adopted in 2022 for 2021 under the SECURE Act your first required filing is 2022 Plan year (assuming you are over $250K) in which case you attach the 2021 and 2022 SB to the 2022 filing but if it's an EZ you don't attach the SBs. In your last example, it would depend if you are filing on a cash basis or accrual basis whether or not you are over $250,000 for the 2022 plan year for purposes of required EZ.

After satisfying the required statutory minimum HDHP deductible, the plan can impose any form of cost-sharing and still maintain HDHP status. That could be a copay structure for Rx and/or regular services. The only limitation there is that all cost-sharing amounts (including a post-deductible copay) must count toward the HDHP's OOPM. IRS Notice 2004-50: https://www.irs.gov/pub/irs-drop/n-04-50.pdf Q-21. Are amounts incurred by an individual for medical care before a health plan’s deductible is satisfied included in computing the plan's out-of-pocket expenses under section 223(c)(2)(A)? A-21. A health plan’s out-of-pocket limit includes the deductible, co-payments, and other amounts, but not premiums. Notice 2004-2, Q&A 3. Amounts incurred for noncovered benefits (including amounts in excess of UCR and financial penalties) also are not counted toward the deductible or the out-of-pocket limit. If a plan does not take copayments into account in determining if the deductible is satisfied, the copayments must still be taken into account in determining if the out-of-pocket maximum is exceeded. Example . In 2004, a health plan has a $1,000 deductible for self-only coverage. After the deductible is satisfied, the plan pays 100 percent of UCR for covered benefits. In addition, the plan pays 100 percent for preventive care, minus a $20 copayment per screening. The plan does not take into account copayments in determining if the $1,000 deductible has been satisfied. The copayments must be included in determining if the plan meets the out-of-pocket maximum. Unless the plan includes an express limit on out-of-pocket expenses taking into account the copayments, or limits the copayments to $4,000, the plan is not an HDHP. https://www.newfront.com/blog/significant-hsa-contribution-limit-increase-for-2023

It's been awhile since I was on the TPA side, but we used to use the code for Contract Administrator. This may have changed though...

I ran into a similar issue with a union plan. Everything in their Plan Documents confirmed the availability of a "100% QJSA". It turns out that what they meant is the that the Plan would pay a survivor annuity equal to 100% of the maximum survivor annuity that Plan permitted, and that was only 50% of the retirement annuity. This is not unlike FERS where the maximum survivor annuity is 50% of the self only retirement annuity. Or CSRS or the Military where the maximum survivor annuity is 55%. We always use "maximum" if that's what we intend. So what may be happening in your case s that they are using "100%" instead of "maximum" survivor annuity. I had another union case where they argued that 100% QJSA meant that 100% QJSA meant that the Alternate Payee must receive 100% of both the retirement annuity and 100% of the survivor annuity. Let us know what happens.

As an auditor and, as other have alluded to, even if there is no balance there are still certain steps and check lists that need to be completed to comply with the auditing standards. Besides the standard set up of a new client, possible drafting of the financial statement as a nonattest service, drafting of AU-C 260 letter, potential drafting of AU-C 265 letter, drafting management representation letter, reviewing board minutes, all of the required inquiries, reviewing all of the plan documents, etc., I could also see there being some level of testing performed on participant data to ensure those that are eligible are properly included and those that are not included were properly excluded for not meeting the eligibility requirements. Have to remember that it isn't just the balance of assets in the plan that are tested as part of this type of an audit. Also keep in mind that an audit can't be issued without the auditor reviewing a draft of the 5500. Don't be surprised if the auditor also wants to see the previously filed 5500, which it sounds like they never even filed. Note that the items I listed are not all inclusive of the work that would need to be performed and are just an example of some of the items, not to mention the multiple layers of review that the audit likely needs to go through as well.

Great points by all. I have not seem documents with that sort of specificity, do your (BL groupies) preapproved plans have that sort of language? Although document preparers have wised up over the years, I still see adoption agreements out there that list salary deferrals allowable up to 100% of pay even though we all know that is an impossibility. Absent specific document language or an employer's (or payroll company's) governing procedures, how about incorporating the withholding hierarchy or stating where 401(k) sits on the hierarchy (subject to applicable law first and employer desires second) within the friendly confines of the salary reduction agreement?

There was no change in team name. No change in logo. Nope, didn't happen. No. No! There. Reality altered.

Consider using the plan’s and its sponsor’s names as in effect when the administrator approves the Form 5500 report. To show the continuation and avoid a confusion, the Form 5500 Instructions specify a reporting for this: Part II Line 1a: “. . . . If the plan has changed its name from the prior year filing(s), complete line 4 to indicate that the plan was previously identified by a different name.” “Line 4. If the plan sponsor’s or DFE’s name and/or EIN [has or] have changed or the plan name has changed since the last return/report was filed for this plan or DFE, enter the plan sponsor’s or DFE’s name, EIN, the plan name, and the plan number as it appeared on the last return/report filed.” https://www.dol.gov/sites/dolgov/files/EBSA/employers-and-advisers/plan-administration-and-compliance/reporting-and-filing/form-5500/2021-instructions.pdf

The only dumb question is the one we didn’t ask. For a governmental § 457(b) plan, a governmental plan is not governed by ERISA’s title I. For an ERISA-governed plan, an administrator of an unfunded plan of deferred compensation for a select group of management or highly-compensated employees might avoid the ERISA § 105 requirement for a lifetime-income disclosure if the administrator met the conditions of the “alternative method of compliance” for such a select-group plan. ERISA § 110, 29 U.S.C. § 1030 (empowering the Secretary to “prescribe an alternative method for satisfying any requirement of this part [part 1 of subtitle B of title I, ERISA §§ 101-111] with respect to any pension plan, or class of pension plans[.]”). http://uscode.house.gov/view.xhtml?req=(title:29%20section:1030%20edition:prelim)%20OR%20(granuleid:USC-prelim-title29-section1030)&f=treesort&edition=prelim&num=0&jumpTo=true 29 C.F.R. § 2520.104-23 (Alternative method of compliance for pension plans for certain selected employees). https://www.ecfr.gov/current/title-29/subtitle-B/chapter-XXV/subchapter-C/part-2520/subpart-D/section-2520.104-23#p-2520.104-23(a)

How about this: Effective (a) starting as soon as practicable after this [Order] is determined to be a "qualified domestic relations order", Alternate Payee shall be paid directly by the Plan an amount equal to 50% of the amount of each benefit payment scheduled to be paid to Participant, and the amount of each of Participant's actual benefit payments shall be reduced by the amount paid to Alternate Payee, until (b) the earlier of the death of either Participant or Alternate Payee. If Participant dies before Alternate Payee, Alternate Payee shall continue to be entitled to Alternate Payee's 100 percent survivor benefit, starting payment after the death of Participant. I did not try to exclude any future increase in a benefit payment amount. Why would you, unless the participant returns to service and accrues additional benefits, which would be the participant's issue to bring up? The term "shared interest" does not have an established meaning in the statute or the regulations even though it is bandied about in common parlance.

A few cautions: If the plan is a governmental plan, check the plan’s documents and State law. If the plan is a church plan, check the plan’s documents. Even if no external law calls for a particular provision, a sponsor might decide that providing for a participant’s spouse (or, at least, not depriving a spouse of an interest without the spouse’s consent) follows the church’s faith. If a plan is neither a governmental plan nor a church plan and the charitable organization believes it is not a plan within the meaning of ERISA’s title I, consider that a disappointed surviving spouse might assert that the plan is an ERISA-governed plan. A Federal court decides a defendant’s motion to dismiss a complaint for failure to state a claim considering only the complaint’s alleged facts, with no opportunity for a defendant to introduce facts. Because of this, a defendant might not persuade a judge that a complaint is so implausible that it asserts no claim. Even if a plan is unquestionably not ERISA-governed, read the annuity contract or custodial-account agreement. In my experience, some older annuity contracts provide a survivor annuity, absent the spouse’s consent, and provide this even if no plan the contract was purchased under imposes such a provision.

Did any participant receive less under the formula that was used in operation than they should have under the formula in the document? Presumably the answer is no - the 100% up to 3% plus 50% up to 5% formula is equally or more generous at all contribution levels than the 100% up to 1% plus 50% up to 6% formula. Assuming that's the case, then you don't owe anybody any money, but you still have an operational failure for failure to follow the terms of the plan document. This can be corrected in one of two ways: either pull the extra contributions, adjusted for earnings, back from the participants and put it in an unallocated account where it will be used to fund future employer contributions; or adopt a retroactive amendment to increase the matching formula to the formula that was used in operation. Whether either of these options can be done on a self-correction basis or whether it will have to go through VCP depends on how many years is "several" and whether the error is significant or insignificant.

Ha, maybe this "unused" document can go towards some random plan sponsor who never signed a document but had all those board minutes and resolutions intending to set one up! Definitely one for the Upside Down.