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The new company's formation mid-year by itself will be a limiting factor since service and compensation will be earned during the less-than-full calendar year of the new company's existence. This narrows down the question to whether the plan can use full applicable calendar year limits - by defining the first plan year as the calendar year - even though the company and the plan existed for less than the full calendar year. There are other analogous situations that support the notion that this is acceptable. For example, the relatively new rules that allow a company to create a new plan retroactive to the beginning of the prior year (and use the prior year limits for that year) seem to support it. As you noted, adopting a new plan mid-year with a calendar year plan year effective as of January 1st of the year of adoption is common. Similarly, 402(g) limits are always based on calendar years and are not pro-rated. One nice feature about the first plan year for a new plan for a new company is, other than more-than 5% owners, there are no HCEs. Unlike the rules for the first determination date for top-heavy testing, the IRS did not go out of its way to define a special rule to determine HCEs in a new plan based on compensation earned in the company's first year of existence. I take this as an example where the IRS could have created a special rule if it wanted to, but they didn't. Sometimes (or should I say often), when we see a situation where the IRS could have created a rule but didn't, we wonder "Did we miss something?!?"

No, matching contributions do not count towards (or "trigger") gateway minimums.

Agree with Paul and seem to remember a similar discussion on this topic not that long ago that came to the same consensus.

while most of the plans (especially small ones) are using PY as stability period, the choice of the lookback is really a consulting issue. For example month of September has a tendency to be the "lowest rates" month, if you want to be able to time/plan "things" better, August gives the most flexibility, if you have to process distirbutions in January the month of December is not a good choice, etc.

A plan can exclude employees by classification, and an employee scheduled to work at least 20 hours a week is a classification. The plan will have to pass 410(b) coverage testing. Without getting too technical, there are multiple ways to conduct coverage testing, and most plans start out running the Ratio Test. At the most fundamental level, the plan would need to allow at least 70% of the NHCEs to participate in the match. So, yes, it is possible, and it adds another layer of compliance to test. This is a very high level response, and the details will matter significantly.

You need to have it fixed now and not wait for some distribution later.

Yeah I think that's the wrong way to structure the surrogacy program. I agree that direct reimbursement of a surrogate's medical expenses likely creates a MEWA with all the standard MEWA risks (Form M-1 requirements/penalties, state prohibitions on self-insured MEWAs, other state mandates not preempted by ERISA, etc.). On the other hand, a more typical surrogacy program generally provides a flat, taxable amount for an employee’s surrogacy costs. In that approach, any amount that the employee uses to assist in the cost of the surrogate’s medical expenses does not create a GHP for the employer because the payment was not tied in any way to the amount of the surrogate's medical expenses. With that appropriate approach, the argument there is that you can't have a MEWA if you don't have an ERISA plan in the first place. Those surrogacy benefits are taxable, non-medical (not 213(d)) expenses. In other words, the benefit is not one of the listed welfare plan benefits in ERISA §3. So you can't create a MEWA through the benefit. Here's my position with the standard surrogacy benefit approach-- https://www.newfront.com/blog/common-infertility-hra-expenses Common Expenses that are NOT HRA-Eligible Expenses Available IRS guidance suggest that common fertility-related expenses that are not §213(d) medical expenses include: Surrogacy Non-temporary sperm/egg freezing (generally cryopreservation beyond one year) Egg or sperm donor expenses where neither the donor nor the carrier is the employee or spouse Same-sex couples with IUI, IVF, or similar expenses but no medical diagnosis of infertility Important Note: Many employers still provide reimbursement for these types of expenses on a taxable basis through a broadly defined infertility program that includes coverage for non-medical expenses outside the HRA. Therefore, although these expenses cannot be reimbursed tax-free by an infertility HRA, the employer may still cover all or a portion of these costs through a broadly defined infertility program. Consult the program materials to determine which non-medical expenses are covered on a taxable basis. ... Morrissey v. United States, 119 AFTR 2d 2017-401 (M.D. Fla. 2016) Section 213 does not permit any taxpayer, regardless of sex, sexual orientation, or gender to deduct the kinds of IVF expenditures Plaintiff claims here. The parties have stipulated that the IRS has interpreted § 213 to deny taxpayers deductions for the kinds of costs associated with surrogacy, without respect to a taxpayer’s sexual orientation. As Defendant correctly points out, a single, heterosexual female who was medically infertile and incapable of carrying a child to term, or who simply chose to have children in the same way as Plaintiff — albeit with the additional need for a third-party sperm donor — would not be able to deduct IVF expenses she paid for treatment of a donor and/or gestational surrogate who was neither her spouse, or her dependent. Likewise, a heterosexual couple in which the wife was medically infertile and medically incapable of carrying a child to term, or who chose not to carry the child herself, who used a similar method as Plaintiff, would not be entitled to deduct the expenses of contracting with and having the necessary procedures for a third-party gestational carrier, or any egg donor if the donated egg is not implanted in the taxpayer, spouse, or dependent. The same result would hold for a lesbian couple in which neither partner could, or wanted to, carry a child to term and who utilized a third-party surrogate to carry their child. IRS information Letter 2002-0291: https://www.irs.gov/pub/irs-wd/02-0291.pdf A surrogate mother is, of course, neither the taxpayer nor the taxpayer’s spouse, and typically is not a dependent of the taxpayers. Nor is an unborn child a dependent. Cassman v. United States, 31 Fed. Cl. 121 (1994). Thus, medical expenses paid for a surrogate mother and her unborn child would not qualify for deduction under § 213(a). IRS Information Letter 2004-0187: https://www.irs.gov/pub/irs-wd/04-0187.pdf A surrogate mother is not the taxpayer or the taxpayer’s spouse, and typically is not the type of relative listed in § 152(a). The surrogate mother usually is neither a member of the taxpayer’s household for the entire taxable year, nor receives over half her support from the taxpayer for that year, and thus does not qualify as a non-relative dependent. Nor is an unborn child a dependent. Cassman v. United States, 31 Fed. Cl. 121 (1994). Thus, medical expenses paid for a surrogate mother and her unborn child generally would not qualify for deduction under §213(a). Slide summary: 2024 Newfront Fringe Benefits for Employers Guide