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I don't see why not if that's an election she makes and the plan can process 100% tax withholding.

I would recommend against that approach. This would be what I refer to as a "taxable HRA". That's basically an oxymoron, but I don't know what else to call it. Any employer reimbursement of medical expenses with an ongoing administrative scheme is a group health plan. Other than for purposes of determining whether the §105(h) rules apply, it doesn't matter whether those reimbursements take advantage of the otherwise available §105 exclusion from income. That means this arrangement still needs to deal with: ERISA ACA COBRA HIPAA HSA (eligibility issues) So I would recommend you create an HRA to address this since a) it's already a group health plan, and therefore b) might as well get the tax advantage. If it's employees moving to a spouse's plan, this is what generally is referred to as a Spousal Incentive HRA (SIHRA). Here's an overview of the SIHRA compliance considerations: https://www.newfront.com/blog/ten-spousal-incentive-hra-compliance-considerations Outside of that, here's my more general take: https://www.newfront.com/blog/addressing-employee-health-plan-exception-requests-part-vi Solution #2: Avoid Creating a Group Health Plan The employer can always provide additional taxable cash compensation to employees that is not conditioned in any way on the employee’s actual medical expenses incurred. For example, the employer can provide an employee experiencing unexpected medical expenses with a standard raise/bonus/stipend that is taxable and subject to withholding and payroll taxes. These payments cannot be a direct or indirect reimbursement of any medical expenses incurred (taxable or non-taxable). In other words, the employer could not determine the amount of the payment based on the actual medical expenses incurred by the employee, nor could the employer condition the additional payment on the employee’s submission of medical receipts. Any such form of reimbursement would trigger a group health plan and the issues outlined above. Note: Employers often question why they cannot simply reimburse medical benefits on a taxable basis to avoid application of the group health plan legal restrictions. However, reimbursement of medical expenses on a taxable basis would still be a group health plan subject to all the group health plan laws described above (with the exception of the §105(h) nondiscrimination testing requirements), and therefore it is also not a viable solution. That taxable reimbursement approach would no longer be an HRA because it would not be designed as a tax-advantaged vehicle under IRC §105 and §106, although some refer to the approach as a “taxable HRA” because it would still be a (non-tax advantaged) defined contribution group health plan arrangement. ... Relevant Cites: ERISA §733(a): (a) Group health plan.
For purposes of this part— 
 (1) In general. The term “group health plan” means an employee welfare benefit plan to the extent that the plan provides medical care (as defined in paragraph (2) and including items and services paid for as medical care) to employees or their dependents (as defined under the terms of the plan) directly or through insurance, reimbursement, or otherwise. Such term shall not include any qualified small employer health reimbursement arrangement (as defined in section 9831(d)(2) of the Internal Revenue Code of 1986).
 Slide summary: 2024 Newfront Fringe Benefits for Employers Guide

For an example, here's one I looked at recently with this issue: PREMIUM RATE CHANGES FOR MEDICAL PLANS The premium rates in effect on the Policy Effective Date are shown in the policy’s Premium Rate Schedule. [redacted] has the right to change the premium rates as of any of these dates: The Policy Effective Date, or if later, any subsequent Policy Anniversary Date, if: It is discovered that the group is offering employees alternate health care benefits with an insurance company(ies) and/or health care service plan(s) other than [redacted] without the written concurrence of [redacted]; … Any date that [redacted] determines that the group is modifying, or has modified, plan benefits, by changing an insured person’s financial liability under the plan, by it paying a part of the insured person’s deductibles, coinsurance, co-payments, out-of-pocket maximums, or for non-participating providers, the balance-billed charges, if any. The group may not partially pay, reimburse, or otherwise reduce, the insured person’s financial responsibility under the plan without first notifying [redacted] in writing in at least 30-days advance of implementing such a practice and [redacted] agreeing, in writing, to that practice. In the absence of [redacted] agreeing to such a practice, the group must communicate the plan benefits to the insured employees without modification.

Hi Peter, it's not really an opt-out that could be an underwriting issue--or at least I've never seen it. But any form of cost-sharing vehicle paired with the plan (e.g., a cost-sharing HRA for deductible/copay/coinsurance) would be subject to an underwriting review in many agreements. Every once in a blue moon I'll see a carrier or stop-loss push back on that. So I agree it would be a good idea to get their prior approval.

If he has funds in his account to process the refund, I would just do it. That's the path of least resistance. Though you may find yourself in the same place when you do 2024 testing. I was assuming he was a former participant who withdrew all his funds.

In my experience, software for payroll and retirement-services systems to apply § 402(g) and § 414(v) limits and opportunities is coded assuming every individual’s tax year is the December 31 year (and not attempting to ask whether an individual has a different tax year). Yet, it can be useful to have some way to allow a variation for the rare situation in which an individual has a noncalendar tax year.

This may help. https://www.irs.gov/publications/p538 Whoops - I see Peter already posted it! P.S. - I've never seen it either. I'd hazard a guess that most of us haven't.

Here’s IRS Publication 538 with some explanations about Accounting Periods. https://www.irs.gov/pub/irs-pdf/p538.pdf Example: Although Jack is a W-2 employee with no business interests, he follows his wife’s taxable year so he can fit their joint income tax returns. Jill owns a farm and its businesses. Based on when Jill’s businesses harvest and sell the crops, the businesses and Jill end their accounting years as at October 31. Example: Mary is an employee of a charity, and participates in its § 403(b) plan. Yet, almost all of the income that supports Mary’s life comes from a trust her great-grandfather created. That trust’s accounting year ends with February 28 or 29. Mary chooses to align her taxable year with that of the trust that is her primary source of income. Example: Charlie is the chief executive of a business that ends its accounting year with June 30, issues its financial statements by late July, and pays Charlie’s bonus in early August. Charlie established August 31 as the end of her tax-accounting year.

I have never seen this, can you give us an example of when an individual's taxable year is not calendar year?

In North Carolina, probation officers are employed by the Department of Adult Correction. They are covered by the state retirement plan. It will be important to get an attorney familiar with the plan, as well as to determine if suicide has any bearing on what benefit(s) are (or are not) payable.

The § 402(g) elective-deferral limit, and the § 414(v) age-based catch-ups relate to the INDIVIDUAL’s tax year, which can be a year other than the calendar year. Under Federal income tax law, a taxpayer computes one’s taxable income “on the basis of the taxpayer’s taxable year.” I.R.C. § 441(a). Ordinarily, a taxable year is a yearly accounting period. I.R.C. § 441(b). Most (but not all) people use a calendar year. See I.R.C. § 441(c). A “calendar year” is “a period of 12 months ending on December 31.” I.R.C. § 441(d). Further, the Internal Revenue Code’s general definitions include “taxable year” and “fiscal year”: “The term ‘taxable year’ means the calendar year, or the fiscal year [defined in the next paragraph] ending during such calendar year, upon the basis of which the taxable income is computed under subtitle A. ‘Taxable year’ means, in the case of a return made for a fractional part of a year under the provisions of subtitle A or under regulations prescribed by the Secretary, the period for which such return is made.” I.R.C. § 7701(a)(23). “The term ‘fiscal year’ means an accounting period of 12 months ending on the last day of any month other than December.” I.R.C. § 7701(a)(24). For § 402(g), “the elective deferrals of any individual for any taxable year shall be included in such individual’s gross income to the extent the amount of such deferrals for the taxable year exceeds the applicable dollar amount.” I.R.C. § 402(g)(1)(A). For an age-based catch-up deferral amount that might be permitted because the participant is age 50 or older, the Internal Revenue Code defines an “eligible participant” as “a participant in a plan who would attain age 50 by the end of the taxable year[.]” I.R.C. § 414(v)(5)(A). A Treasury rule confirms this: “An employee is a catch-up eligible participant for a taxable year if [t]he employee’s 50th or higher birthday would occur before the end of the employee’s taxable year.” 26 C.F.R. § 1.414(v)-1(g)(3)(ii). For a greater age-based catch-up deferral amount that might be permitted because the participant is age 60, 61, 62, or 63, the Internal Revenue Code refers to “an eligible participant who would attain age 60 but would not attain age 64 before the close of the taxable year[.]”I.R.C. § 414(v)(2)(B)(i). While unusual, I’ve seen situations in which an individual’s taxable year is not the calendar year. This is not advice to anyone.

Peter I don't think it matters because I'm pretty sure both the 401(K) limit and catch-up limits are calendar year limits tied to a single individual and plan year or number of plans does not matter.

Don't take it as a slam on my part. I was just pointing out how to find it. Please don't be shy to ask questions here. That wasn't the point of my reply.

This is definitely an area where we could use some additional guidance. It comes up reasonably often, and the existing guidance is frustrating. On the one hand, the regulation C.B. Zeller cites above very clearly addresses the handling for 415 purposes and provides that the back pay is generally taken into account with respect to the year to which it relates. However, make sure to also look at the plan document's definition of plan compensation for allocation purposes. For example, many plans use W-2 comp. These back-pay amounts won't be picked up on the employees' W-2 until the year of payment. Depending upon the exact facts presented, this mismatch can lead to bizarre outcomes and can sometimes mean that the individual is not permitted any deferrals or employer contributions on the back-pay. (It gets extra fun when the back-pay award explicitly states that the employee is entitled to them.)

I think as soon as you mention to a CPA that you're inclined to reduce K-1 income by splitting by the total cost by the partnership ratio (rather than along the lines of who actually got what among those partners), they tend to indicate the partners have something along those lines in place to better align the deductions for each. Like their DC plan would.

“A partner’s distributive share of any item or class of items of income, gain, loss, deduction, or credit of the partnership shall be determined by the partnership agreement, unless otherwise provided by section 704 and paragraphs (b) through (e) of this section.” 26 C.F.R. § 1.704-1(a) https://www.ecfr.gov/current/title-26/part-1/section-1.704-1#p-1.704-1(a). A partnership agreement of a professional-services firm, especially an accounting or law firm, often includes allocations with formulas designed so an allocation regarding the firm’s pension expense approximates the expense attributable to each individual partner. For pension expense attributable to people other than partners and their beneficiaries, an allocation might be general regarding a whole firm or a whole department of a firm, or might be particular regarding those associates and other employees accounted for in the partner’s cost structure.

It doesn't answer your question, but if Main LLC can elect to be taxed as a C corp, you might be able to avoid an ASG.

yo creo que si, it requires modifications on the partnership agreement level.

This might be back pay within the meaning of 1.415(c)-2(g)(8). If so, it's considered compensation for the year to which the back pay relates, so 2022 or 2023 in your case. Does the document address back pay at all?