I'd love some feedback on the following scenario to see if I'm thinking about this correctly.   

Company A (which maintains a 401k plan) and Company B (which maintains a SIMPLE IRA) intend to create a JV.  Company A will hold less than 80% interest in the JV after the transaction.  Company B's employees will be transferred to Company A in connection with the transaction and become employees of Company A.  The intent is to offer Company A's 401k plan to the former employees of Company B (who participated in the SIMPLE IRA) immediately after close.  Post-closing the SIMPLE IRA will continue to be maintained by the JV or Company B.  I'd appreciate any thoughts on the following:

• Do you see any issue with offering former Company B's employees who become employees of Company A in connection with the transaction the ability to participate in Company A's 401k plan immediately after close?  Post-closing Company A will not be in a controlled group of corporations that includes the JV or Company B.  I'm assuming that the transaction will trigger a separation from service for former Company B's employees that come over to Company A.
• Will the entity that maintains the SIMPLE IRA (either Company B or the JV) have an obligation to fund elective deferrals and employer contributions through the end of the calendar year for the employees who terminate with Company B and transfer employment to Company A? 
• If the JV/Company B do not have any employees post-closing would they be able to dissolve the SIMPLE IRA mid year?

    Thanks for any guidance you can provide.  I'm not fluent in SIMPLE IRAs/408(p) and want to ensure I'm not missing something.

I'm hoping someone can help me solve a disconnect I'm encountering (or at least I think I'm encountering).

Many off-the-shelf cafeteria plan documents that I see from vendors restrict eligible employees to those eligible for the employer's major medical plan. I understand that for certain components (e.g., pre-taxing medical premiums, health FSA, HSA) initial and continuing cafeteria plan eligibility should be tied to medical plan eligibility. 

However, many of those cafeteria plans also cover other benefits, like pre-taxing dental, vision, and other insurance premiums, dependent care FSAs, etc. where the underlying eligibility rules are often different from major medical. This would seem to cause a problem if, for example, an ongoing employee goes from part-time to full-time during an ACA stability period. They may not be eligible for major medical for several more months (or longer), but would often become eligible for other benefits upon converting to full-time status. While the special enrollment rights allow participants to make or change elections, in most documents I have reviewed, the underlying eligibility rules themselves remain the same. In other words, even though the employee would otherwise be allowed to enroll in the other benefits upon converting to full-time, they technically would not be eligible for cafeteria plan participation until they became eligible for major medical. 

Am I missing something that would otherwise make a blanket eligibility statement like this appropriate in these situations?

Thanks in advance. 

Can anyone out there share their experiences with a 211 whistleblower filing regarding Employee Plans, specifically the timeline.

I am born on 12/30/1950 and am more than 5% owner.

Is my RBD 4/1/2023?

Is my second RMD due 12/31/2023?

Thanks

I retired in May after 26 years in a public school system. I had taken one 6,000 loan out in 2016 due to hardship  and then another loan for covid hardship in  2020. They made no mention of an outstanding defaulted loan in 2020. in fact, all of my annuity was with metlife and they split it into two when they sold out to Brighthouse. now they treated these annuity as two separate annuities. It took them months and an OCI involvement to attempt to have my Annuity roll over to another 403B with another company. It took them so long that in fact, a close my account due to no activity. I took an early withdrawal from one account that had the hardship Covid loan.. I was told that Brighthouse account had $28,000 in it. Several times I was told that there was no loan attached to it when I was no longer able to roll over and it had been 10 months of fighting. I asked them to just take a whole lump sum out. The amount I got was $4600, they took out for taxes on the defaulted loan as they used it as a gross amount and they took $17,000 in interest I have more than enough money in both accounts to cover the loan. Once during this entire 10 months, they mention the 17th interest in fact on my quarterly statements the 17,000 is stated as collateral and no interest is written on the metlife. There was collateral of $892.00 and 1100.00 interest. To be the collateral with the over 50% that you needed in order to take out alone in the first place.

I started a new job in 2023.  I have never had an HSA before and that was all that my employer offered.  My wife has always had an FSA.  Later in 2023, I realized there was an issue with me having HSA and her FSA.  I spoke with the custodian (Bank of America) and they keep telling me that since we are on individual plans, then our current arrangement is not an issue.  However, everything I see says that her FSA is allowed to be used for a spouse even if they are not on the health care plan.  This, by default, means I am not allowed to have an HSA.  Is Bank of America just not understanding the situation?  I would think they should know, but I am nervous to leave things as is if that means I am stuck with a penalty at tax time.

Thanks for any feedback!

Does anyone know if there is a time frame in which it needs to be signed?  for example even though there is a one year waiting period can this form be provided when the person starts employment or does it need to be within 90 days of their enrollment.

Hello, just a quick question:

The Basic Plan Document has pretty much all iterations of things regarding a plan (in reference: Non-Standardized, Pre-Approved), but the Adoption Agreement is obviously the document that the Plan Sponsor adopts their elected provisions. We came across a nuanced issue today that wasn't outlined in the adoption agreement, but had reference/justification in the Basic Plan Document. Is said-issue able to be permitted by being outlined in the Basic Plan Document, but not the Adoption Agreement? Or does the Adoption Agreement have to explicitly permit every action the Plan Sponsor makes because the Basic Plan Document is "all encompassing"? 

Thanks! 

An ASG has two entities, one very large with few HCEs and many NHCEs, the other very small with a high percentage of HCEs. Each entity sponsors its own 401(k)/401(m) plan (no non-elective contributions). The plans have different testing methods (one prior year, one current year). The high percentage of HCEs means the small plan can’t pass coverage alone, it must be aggregated with the large plan. But aggregation is precluded because the plans have different testing methods. My thought is to file a VCP asking to change the testing year of the small plan to allow aggregation (SECURE 2.0 doesn't allow this demographic failure to be corrected through SCP). If we do that, each plan on its own, and in the aggregate, passes ADP/ACP.

Under those circumstances:

1. Does anyone have any experience with such a correction through VCP? Anything I should be aware of that might come up?
2. Does the IRS readily grant corrections in that manner?
3. Is there any risk the IRS will require QNECs to be made to NHCEs in the large company? (QNECs are the usual way to correct coverage failures. Here, QNECs don't do any good, because even if QNECs are made to NHCEs in the large company, the plans still can't be aggregated unless they have the same testing methods. So it doesn't seem like the IRS would require QNECs as a solution. But given the large number of NHCEs, possibly having to make a QNEC is concerning. Under the circumstances, does it seem unlikely the IRS would require QNECs?)
4. Assuming the IRS allows the testing year to be changed and the plans are tested on an aggregated basis, will the IRS require the plans to pass a benefits, rights, and features test?

Employee incorrectly made 401k contributions during year and had a balance at eoy.

This was found after year end and returned timely.

For 5500 count purposes -they are not a participant but they have a balance. But count with balances can't exceed eoy participant count.

So I'm guessing, treat them as a participant for 5500 count purposes.

We are a large employer (over 200 employees but only 35 who are medical eligible- most employees are part time). Getting fully insured insurance with BCBS. Got quotes from BCBS for employees and they gave “non Medicare eligible” ratea and “Medicare eligible” rates on the same quote. Medicare eligible were much higher. I thought for large employers they couldn’t charge employees or employers more for being Medicare eligible? If they can charge employer more, does employer eat the cost difference since the employee can’t be charged differently based on age?

If employer pays difference, if employee who is Medicare eligible chooses a buy up plan that would cost employer $500 a month for non Medicare employee but is $1200 above that for Medicare eligible employee does employer have to cover that extra $700 of the buy up plan option also?

What about if middle of year employee turns 65 but they signed up for 1/1 annual coverage under non Medicare eligible rate? Will bcbs flag it at that point and bill employer for the difference?

I can’t figure out why BCBS is quoting the Medicare eligible rate separately when everything online says employer and insurance has to offer same benefits at same price if employer has more than 20 employees.

Thanks in advance for any insight!

I have a QDRO and Supplemental Journal Entry that the court ordered my ex to keep a life insurance policy in the amount of 200k. When he died I found out not only that he didn't have the insurance, but that he also used DROP to move part of his retirement funds and I was not notified. His estate executor has denied my claim for the estate funds because the administrator of OP&F says no benefits are payable to me. Only his named beneficiary. What are my recourses?  I have not been able to identify an attorney skilled in this space. (Only a few that don't work in Cuyahoga County)

"

If your welfare plan (medical, dental, life insurance, disability, etc) has under 100 participants at the beginning of the year, you are exempt from filing Form 5500 if it is (a) unfunded, (b) fully insured, or (c) a combination of insured and unfunded. But wait, there’s more. 

The instructions to the 5500 toss in the following: "see 29CFR 2520.104-20."

If you whip out your copy of the CFR, you will see an "and", as in

"and for which, in the case of an insured plan——

(i) Refunds, to which contributing participants are entitled, are returned to them within three months of receipt by the employer or employee organization, and

(ii) Contributing participants are informed upon entry into the plan of the provisions of the plan concerning the allocation of refunds."

Based on the above rules for insured plans with under 100 participants being exempt from 5500 filing - has anyone run into someone getting fine for failure to file it they failed to address refund allocations?  Did MLR requirements from the ACA address this enough that having the refund allocation detail in the SPD is unnecessary to still have the 5500 exemption?

Has anyone ever had this issue come up post MLR/ACA as a road block to small fully insured plan exemption?  I ask because I see many small insured plans that are not filing and do NOT have any reference to refunds or refund allocations.  Some are claiming the MLR rules negate this since they dictate the refunds. 

A prospect we have been working with is in the software industry and uses a third-party Employer of Record for a worker that they have in the United Kingdom.  This Employer of Record is the legal employer of this worker.  Our plans typically use the Non Resident alien exclusion.  I'm trying to determine if this arrangement would meet the Non Resident Alien with no US Source income exclusion and the question stops there.  If it doesn't, has it been anyone's experience that the arrangement holds up to the IRS standard that this worker is not actually the employee of the plan sponsor?

Plan sponsor inquiry:

Scenario 1: We learned of a qualified FSA expense incurred and made to a participant after date of employment separation due to lag time between the weekly file feed to FSA TPA with employment status changes and TPA updating their records. While we may sometimes know in advance of upcoming employment separations, that is not always the case. Our TPA is telling us that this is not necessarily a violation of FSA regulations and is comparing it to situations where participants use all their FSA funds prior to separation of employment and complete funding of their election. That doesn't sound right to me. Assuming it's not right, are we required to include the improper payment in the former employee's taxable income subject to withholding and payroll taxes in these scenarios? If yes, how is this done when there are no additional wages to take the withholding/payroll taxes from?

Scenario 2: FSA TPA fails to terminate FSA account upon receipt of file feed with separation date (error is caught several weeks later). TPA will refund us for any improper reimbursements, and is advising that because it is their error, we have no obligation to include improper reimbursements in the former employee's taxable income. Given our understanding that the plan sponsor has ultimate fiduciary responsibility for proper FSA administration, including monitoring the TPA, this, too, doesn't sound right to me. 

I have a new client coming on that has been doing a simple 401(k) but are now transitioning to a full 401(k) Plan.  My question is for startup purposes, when I'm filing a Form 5500 would the start date be now (when it's transitioning to a traditional 401(k)) or would it be the date the Simple 401(k) started?

Thanks in advance!

I have been presented with a 457(f) plan that relies on a noncompete provision to satisfy the SROF requirement.  I understand that unlike the 409A rules, the 457(f) rules do permit the use of a non-compete as a SROF.  This particular plan's SROF restricts the participant from working for a competing business while employed with the sponsor of the 47(f) plan.  But the participant vests upon a separation from service for any reason.  The participant is  not subject to a post-employment non-compete obligation.  As such, the participant is only subject to a forfeiture if they work for a competing business prior to separating from service from the sponsor of the 457(f) plan.  I am also troubled by the fact that the payment is to be made "within 3 months after separation from service and the appropriate distribution paperwork is submitted to the employer."  This would not appear to be exempt from Section 409A as a short term deferral and it lacks the required specified time for distribution.   

I just wanted to share a WTF moment that I think many of you can understand. Mostly rhetorical - but feel free to chime in, especially if you think my indignation is unfounded. 

This week in reviewing an existing 401(k) plan document there was a written in class exclusion for Non-Highly Compensated Employees. In the Other line option in the adoption agreement. I could not believe a service provider, and and large national one at that, would let a sponsor include it. But it is a lower cost one, so I really shouldn't be surprised. It is a small plan, likely owner only, but still. 

A few weeks earlier I saw a similar exclusion in a defined benefit plan for a small employer. Though that class exclusion did not use the term Non-Highly Compensated Employee. It was something like 'everyone except two of the owners, Jack Smith and Jill Smith are excluded'  that employer definitely had plenty of employees that are NHCE that have plenty of service and cause the testing to fail. And no, there did not seem to be any other plan with this one combined for testing and benefits. 

Setting up a plan that on its face fails non-discrimination before any benefit accruals or contributions are even considered is terrible! Even if those exclusions are ultimately considered void, there were document providers, service providers, financial advisors, and probably a TPA or recordkeeper involved in setting those plans up! They never should be there in the first place! 

Two in such a short time, from two different places, I just felt like was worth sharing. Maybe these exclusions are written in more than I realize and I've just been fortunate enough to not see them up until now. 

Hello everyone,

I have a case in which the Wife had a 401K account.  Husband was awarded a 50% interest in the 401K in the divorce decree entered on 2/26/21.  Husband then died on 10/5/21 before a QDRO was entered.  The state court then entered a DRO on 1/5/24 designating the Husband's estate as the alternate payee.  The plan administrator determined that the DRO was not qualified, because a spouse's estate is not among the list of acceptable alternate payees under IRC § 414(p)(8).  A second DRO was then entered by the state court on 2/29/24, this time designating the parties' adult daughter as the alternate payee.  (The adult daughter was appointed as administrator of Husband's estate on 3/24/23 and is the sole heir).  The plan administrator again found that the DRO was not qualified, because the DRO indicated that the child could not be listed as alternate payee based on marital property rights, only based on child support obligations.

I have seen posts here indicating that a DRO is not unqualified merely because the Participant died before entry of the DRO, but I cannot find any information on whether a DRO entered after the alternate payee's death is qualified.

I suppose I could just get an order from the state court requiring Wife to liquidate the portion of the 401K awarded to the Husband and pay the proceeds net of taxes to the adult daughter, but the daughter would rather not liquidate the entire account at one time, to reduce tax liability.

Any thoughts would be greatly appreciated!

Roger Madison

Olympia, Washington

start-up Combo (CB and PS) Plans with 1/1/2023 effective date.  Owner started his business back in 2017.  Employees have been hired in 2021 and 2022.  Whar are the issues to rely on Accrued-To-Date testing method for this situation to pass 2023 tests?