Leaderboard

Section 409A applies only if it is a deferred compensation arrangement. A short-term deferral is defined as not being a deferred compensation arrangement. And the short-term deferral rule applies so long as the amount under a 457(f) arrangement is paid within 2½ months following the year of vesting. So a normal 457(f) arrangement in which amounts are paid on vesting isn't a deferred compensation arrangement, and can follow just the 457(f) rules, not the 409A rules. The only time you have to worry about the 409A rules in the context of a 457(f) arrangement is if there is deferral beyond the year of vesting. I have seen this most commonly in situations in which the employer wants to provide an annuity payment. What you'd typically do in that situation is to provide that only an amount necessary to pay the 457(f) tax (which is the tax on the present value of the annuity) is paid in the year of vesting. Thereafter, the person receives the annuity payment each year. The annuity is taxable under section 72, meaning that most of each payment is nontaxable (the tax already having been paid in the year of vesting). In that situation, you have a deferred compensation arrangement. So if, for example, you wanted to delay the start of the annuity payments, you'd have to follow the 409A rules. But if you're just talking about delaying vesting (and still paying out in the year the amount finally vests), you don't need to worry about the 409A rules.

With the range certification by 9/30, the actual AFTAP needs to be certified by 12/31. Don't even need to certify 100% or higher, the range certification of 80% or higher should be sufficient.

For context, the 2018 limits were announced by IRS on or about November 15.

There is a lot of information in the annual notices going out to calendar year plans by December 1 that needs to be communicated to participants, so those will go out as scheduled. If a communication typically includes the annual limits, we will use the current limits with a comment that the limits will be adjusted when the updated limits are available. Probably the bigger headache will be if there is a change in the High Paid Individual compensation level that does not get released until very late in December or later. This would be an issue particularly for a plan that gathers separate affirmative elections for Catch-Up Contributions. Granted, it won't affect the vast majority of participants, but it will affect enough to consume precious time.

We will delay as long as we can, but will timely deliver notices with the current limits if the new limits are not available. We will then update as needed. Its not ideal but manageable for us. I don't like the idea of estimates in notices.

Now that you have filed a claim, make sure you stay on top of deadlines under the plan's claims procedures (which are usually included in the SPD, which you haven't received yet) and this regulation: 29 CFR 2560.503-1. The employer's unresponsiveness (and especially their failure to provide a copy of the SPD) may lead a judge to excuse your failure to follow the claims procedures, but just in case, I would dot your Is and cross your Ts. When you receive a copy of the plan document and/or SPD, check to see if there is a provision that says that a lawsuit must be brought in a particular district court within a particular period of time (usually 1 or 2 years). The employer should give you the following documents upon request within 30 days, otherwise statutory penalties can kick in (at the discretion of the judge), although you may have to request certain documents specifically, and there is some disagreement among courts about whether certain types of documents are included in this list: (4) The administrator shall, upon written request of any participant or beneficiary, furnish a copy of the latest updated summary,[2] plan description, and the latest annual report, any terminal report, the bargaining agreement, trust agreement, contract, or other instruments under which the plan is established or operated. The administrator may make a reasonable charge to cover the cost of furnishing such complete copies. The Secretary may by regulation prescribe the maximum amount which will constitute a reasonable charge under the preceding sentence. A lawsuit is probably not worth it, but the threat of a lawsuit gives you some leverage, assuming you have followed the claims procedures. If you were to sue, you could sue to recover your benefit with interest, collect statutory penalties for the plan's failure to provide the requested SPD (and possibly certain other documents, depending on what you have requested) within 30 days after receiving your request, and possibly obtain other relief. If you were terminated because the employer did not want to pay you some kind of enhanced benefit that kicked in at age 55, then you might have a claim for wrongful interference with protected ERISA rights under ERISA section 510 (29 USC section 1140). We have VCPs that have been outstanding at the IRS for a year or more without being assigned to an agent yet, and I expect the delays will only grow with all of the layoffs and resignations.

The reason for my suggestion to use the current limits along with a comment that the limits will be adjusted when the updated limits are available is to decrease the possibility of operational errors. None of the limits are going down without some legislative action. All of the limits currently announced late in each year are effective in the next year. Almost every participant will have an effective opportunity in that next year to take advantage of any increase in limits. If, in the very unlikely event an estimated limit is used and it turns out that limit is not adjusted upwards, then there is the possibility for having excess amounts/benefits in the plan which would require a correction. There is a distinction between predicting the limits in communications (which is fine if they are labeled as estimates) and using predicted limits in operating the plan (which can cause problems).

Coverage testing isn't hurt because an eligible person contributed 0 and got no match specifically because the match calculates to zero, though.

Is there a definition of "official inflation-adjusted amount"? Since citizens/taxpayers are entitled to interpret the Internal Revenue Code on their own, would a statute-defined increase not apply solely because the IRS has not made any identifying statement? What if the IRS never issues any "official" statement? Can such failure to issue a notice be equivalent to "no increase applies"? Is it reasonable to not increase the 402g limit merely because the IRS ignored/failed to issue some "official" document, especially since you know it should be increased? Similarly, what about an increase in the 415(b) limit, knowing that some participant purposely waited for that increase before taking a LS distribution from his/her DB plan? IMHO, issuing EE communication that ignores an increase (i.e., using the prior year amounts) or failing to apply a statute-defined increase seems to abdicate reasonableness and common sense. In case you cannot determine from my rhetoric, my suggestion would be to calculate any applicable limit as best you can. (There is at least one publicly available calculation spreadsheet here on BenefitsLink. Several private parties, actuarial consulting firms, CPA firms, attorneys, etc. also do the same.)

You need to contact the client about the differences and ask to see their payroll records so you can reconcile the deposits. If there are late deposits they go on the Form 5500 and earnings should be calculated.

I'm not a fan as a plan design/strategy matter. It's a bit like enrolling employees into dual PPO/HMO coverage. I'd pick one and use that vehicle to accomplish the carrot incentive you're aiming for through the degree to which supports your goals/budget. In other words, instead of doing both, I would recommend increasing the amount available under either (preferably the SIHRA) as being more effective and understandable for employees. From a compliance standpoint, I think it works fine. The opt-out credit is a creature of the cafeteria plan, and the SIHRA is by definition not tied to the cafeteria plan. Each would operate independently from the other and not interfere with the other. But again, why? If they're at the point where a SIHRA is on the table, I view the SIHRA as the evolved (and superior) version of an opt-out credit. I don't see a good argument for keeping the opt-out credit at that point. Take the opt-out credit budget and put it into the SIHRA allocation for maximum effect/benefit. As Yogi Berra famously said: "When you come to a fork in the road, take it." Here's some more discussion if helpful: https://www.newfront.com/blog/ten-spousal-incentive-hra-compliance-considerations

I question whether it is possible for a plan to fail coverage the way you have described. Show the numbers for the test.

From ERISApedias text book (which I highly recommend--I found this in no time using their AI feature!). Corrective Distributions After April 15. If excess deferrals (and income) for a taxable year are not distributed by April 15, the taxation and distribution rules change drastically. First, distribution of the excess deferrals is not permitted after April 15 unless a normal distributable event under Code 401(k)(2)(B) (i.e., age 59-1/2, hardship, termination of employment, or disability) occurs. Second, for tax purposes, undistributed excess deferrals are treated as if they were proper elective deferrals when contributed. This means that they are taxable income to the participant when they are distributed. The effect of these rules is that uncorrected excess deferrals are taxed twice: first in the year of deferral and then when distributed. Excess deferrals that are not distributed by April 15 also are treated as employer contributions for purposes of Code section 415 when they are contributed to the plan. [Treas. Reg. section 1.402(g)-1(e)(8)(iii)] Example: Suppose that Roberta (from the prior example) did not receive a distribution of her excess deferrals before April 15, 2018. The excess deferrals would remain nonexcludable in 2017, and would be part of Roberta’s taxable income in that year. The $2,500 excess that was already taxed may not be distributed from the plan to Roberta until she experiences a normal distributable event under Code section 401(k)(2)(B). In 2022, Roberta attains age 59½ and can take a distribution of elective deferrals from the plan. If she removes the $2,500 at that time, it is taxable income in 2022. (The exemption from including the distribution of excess deferrals in income that existed if the distribution is taken by the following April 15 evaporated when the distribution was not timely made.) As a result, Roberta is effectively taxed twice on this amount – once in 2017 and once in 2022.

The reg does not refer to small or large plan. The safe harbor is available to plans with fewer than 100 participants. The methodology for counting participants for audit threshold purposes does not impact the availability of the 7 day safe harbor. Your plan does not qualify for the safe harbor.