Some employers and administrators use a dependent eligibility verification to find people not eligible for coverage under a health plan.

These find participants who enrolled as a spouse someone who was not the participant’s spouse.

But how often does this find participants who enrolled as one’s child someone who was not the participant’s child?

BenefitsLink neighbors, any experiences you can describe (with anonymity)?

All of my clients have less than 50 employees, so the idea of an audit is not something I'm too familiar with. But I will be pitching my services to a new client soon (will be a takeover plan for me), and they have about 144 employees, 81 of whom are active (401(k) with match only, so if someone doesn't make deferral, they have $0 balance).

Does someone have a checklist or yes/no flowchart they would share with me about determining whether or not an audit is necessary?  I've started my own, and compiled 6 pages of my own typed notes, and I now feel like I may be over-complicating the matter.  Reinventing the wheel, as it were.  I started with "5500 vs 5500SF", and gone through Sch H & I of the 5500 further down in my flow chart.  

I appreciate any direction you can give - but please dumb it down 🤯  Thank you!

Participant X is a participant in A's profit-sharing plan. After completing a few years of service, X quits when he is 40% vested and takes a distribution of his vested account balance. For simplicity's sake, let's say that the X's account balance is $10,000 and that his vested portion is $4,000. A's profit-sharing plan provides for the immediate forfeiture of the non-vested account balance upon distribution of the vested portion, subject to a repayment provision. Two years later, A rehires X. Let's say that X repays his $4,000 distribution and has the previously forfeited $6,000 portion restored. A few years later, X terminates his employment with A and receives a distribution of his fully vested account balance, which was then $20,000.

A couple of questions: (1) in the year when X repaid the $4,000 to A's profit sharing plan, was the repayment made with after-tax money or was it made with pre-tax money? Was the repayment amount treated as a rollover? (2) when X took a distribution of his then fully vested account balance, was the taxable portion limited to $16,000 or was it the full $20,000?

A form 5500-SF was inadvertently submitted, when a Form 5500 should have been submitted.  Does anyone know the amendment procedure for this issue?

Hi, 

We received a DC 401k plan for termination in 2020, since they had filed for 5310 the termination was on HOLD.  In 2022 they received a determination letter and was good to start the termination.  The plan has 32 deceased participants the Plan termination notice was sent to the deceased address as well there was no response and since the named beneficiary did not respond with the sponsor's direction the check was cut to the estate.  There was a tax deduction on $90,000 the check was cut in September 2023 and the spouse received the check and responded in Feb 2024.  I'm looking for some guidance how the tax record can be corrected?  also is there a 5 years payoff rule for deceased account? 

Taking over a plan, and the plan sponsor mentions the profit sharing allocation.  "I usually contribute $60K to be split among the participants at location A, and $50K to be split among the participants at location B."

Oh, must be a class-based allocation, right?  I look at the plan document, and the AA language says:
 

Quote

<<this is written in a provided blank space - AC>>The Employer's contribution shall be allocated as an amount taking into consideration amounts contributed
to Social Security using the four-step Excess Integrated Allocation Formula as described in the attached addendum <<this is the standard "3% of comp, then 3% on excess comp, etc." - AC>>.

NOTE: Under Question 30.B.i. <<this response is 30.B.i. - AC>>, the Employer will describe the allocation of Nonelective Contributions from the
elections available under Question 30.B. and/or a combination thereof as to a Participant group or contribution type (e.g., pro rata allocation applies to Collective Bargaining Employees; contributions to other Employees will be allocated in accordance with the classifications allocation provisions of Plan Section 4.3(b)(3) with each Participant constituting a separate classification.) The following four parameters must be met to utilize this section: 1. The formula described must satisfy the definitely determinable requirement under Reg. §1.401-1(b)(1)(ii). 2. The groups cannot be designed in such a manner to where the only NHCEs participating are those NHCEs with the lowest amounts of compensation and/or the shortest periods of service and who may represent the minimum number of these employees necessary to satisfy coverage under IRC §410(b). 3. The language of the formula must require the employer to notify the trustee in writing of the amount of the employer contribution being given to each group. 4. In the case of selfemployed individuals (i.e., sole proprietorships or partnerships), the requirements of Regs. §1.401(k)-1(a)(6) continue to apply and the allocation method should not be such that a cash or deferred election is created for a self-employed individual as a result of the application of the allocation method unless such election has been created for all eligible employees & the full 401(k) requirements have been provided. If the formula is non-uniform, it is not a design-based safe harbor for nondiscrimination purposes.)

OK, I guess this supports a separate integrated allocation for each location (though a review for top heavy is plan-wide, not location-specific).  My real questions are:

1. What about someone who is getting comp in both locations.  I suppose it's not a big deal if the total is less than the SSTWB (or whatever lower amount the integration is based on), but let's say one has $110K in each location?

2. Does this have to be tested in any other way?  Normally, integrated tests are all good if they follow the formula... but since all participants aren't party to the same allocation, it seems additional testing is needed.

I intend on restating this to a class-based individual-level plan ASAP, but that doesn't help me for the Plan Year I'm inheriting.

Thanks.

Can a COBRA participant discontinue coverage for a dependent beneficiary mid-year without a qualifying event and continue their coverage and other dependent beneficiaries. If no, is this specified in the COBRA regulations?

In the 2022 plan year, a plan failed ADP, and 20 HCEs had refunds. Total refunds were around $40,000. 
One participant's distribution was not processed, and this was brought to our attention in 2024.  The distribution form was sent to the record keeper but could not be processed as requested. I don’t know where the communication breakdown happened to let someone know. Participant had requested full distribution amount be withheld for federal taxes so they were not expecting a check. 
The plan has liberal eligibility requirements so testing was done on a separate basis to split excludables from non excludable. 
I am being told that the correction now is VCP if run on separate testing or if using SCP we have to test All Together.  The refunds with All Together are triple the amount that were originally processed. So the participants all would need another distribution and a one-to-one QNEC would need to be made. 
This seems like a huge penalty for one participant's distribution out of 20 not being processed. 
Any advice?  Does this sound correct?

Thank you!

Hi

Owner wants to contribute 50k and borrow 50k from DB. Instead of actually makings the contribution and then taking it out as a participant loan, can he just put the 50k into his account with a memo that there was a contribution and then taken out as a loan? Thank you, as always, for any insights.

A large investment company plan/record keeper initiated a forfeiture in Feb 2024 for a participant who terminated in 2018.  This participant never took a distribution from her account and was 20% vested in her profit sharing source.  The record keeper initiated an 80% forfeiture of her profit sharing.  I know a plan can have a provision to forfeit a zero % vested terminated participant.  This participant also has elective deferral and safe harbor match sources. I did limited research within the plan's basic document but didn't see anything right off.  I assume there is some such provision to allow for this as I highly doubt this record keeper would not do this correctly. Thank you for any comments

Is it required that a profit sharing contribution be deposited before the business tax return is completed?  The same question with form 5500; is it required that the deposit be made before the form is filed?

Thank you

We have 2 plans (A and B - they are part of a Controlled Group) that we are trying to test separately.

They fail Ratio Percentage Test when tested separately.

My question is how should the Average Benefit Test be done? Based on my research, the correct approach is one of these 2 ways:

1) Average Benefit Test is done on an aggregate basis (so, the contributions of all employees in both plans are taken into account). If the ABT is passed this way, then the plans can be tested separately.

2) Average Benefit Test is done by considering all contributions of Company A and $0 and 0% for Company B's participants (since none of the participants of Company B are benefiting under Company A). And, the test is also done for Company B (in which case, all contributions of Company A participants are counted as $0 or 0%).

Which way is the correct way to test Average Benefit Test for a Controlled Group where we would like to test each plan separately for compliance testing?

Thank you!

Generally I know Profit Sharing Plans say that someone needs to be employed on the last day of the Plan Year + work 1,000 hours in order to be eligible.

What happens if it's a combo plan tested together?

1) Still employed but works less than 1,000 hours - My understanding is that they don't get the Cash Balance Contribution (as per the Plan), but they still get the 7.5% gateway.

2) Worked over 1,000 hours but terminated employment - They still get the Cash Balance Plan, but I don't believe they get the Profit Sharing

Am I correct on these two statements?  I'm second guessing myself now.

Thanks!

Does anyone know if an otherwise eligible employee should receive eligibility service for periods on a military leave of absence?  Employee was called to duty shortly after hire date and question is whether such service is disregarded for purposes of calculating 1,000 HOS eligibility requirement. 

Is there information out there about how the long term part time rules inter play with leased employees? a plan sponsor uses a temp staffing agency for their workers and while most never work 1,000 hours in a year to ever meet regular eligibility,  there are probably a number that would be classified as LTPT under the SECURE 2.0 rules. 

Does the sponsor need to offer the plan to the LTPT workers? 

What if the doc excludes leased employees?

What if the doc doesn't exclude lease employees?

Is the answer different? 

Assume the staffing organization does not offer a retirement program. 

I don't think SECURE altered §414(n)(2) but I've been wrong before, so I figured it was worth it to ask since maybe someone else already figured all this out. 

If this has already been discussed, my apologies, please point to the thread and I'm happy to read it. If there are articles, presentations floating around out there that cover this particular point, please let me know as well. 

EDIT to add: what about common law employees? possible similar issues?

Situation

Employee terminates with an underspent HCFSA and is offered FSA COBRA.  Employee pays COBRA premium for 2 months, exhausts the annual FSA balance during this time and wants to terminate COBRA premium after 2 months of COBRA.  Is there anything stopping the employee from doing this?  The COBRA administrator is claiming that if the participant fails to continue payments through the end of the year, any claims paid above what was contributed should be retroactively denied?

Thoughts?

FYI, COBRA admin is different than FSA admin, so I don't think the FSA admin would even find out, but curious to know what is correct.

Hello,

I've been trying to determine if the Seventh Circuit Court of Appeals has "ruled" one way or the other on the validity of post-distribution lawsuits from ERISA covered Plans to recover monies paid to ex-spouse that explicitly "waived" ANY benefits of ANY SORT ,i.e prior to death of the plan participant as well as entitlement to any death benefit(s)?  If so, can someone please provide a case citation? Thanks in advance!

Philip W. 

I would appreciate any thought from the Pension Guru's out there.

Here is a little backgroud information:

I have a somewhat large Profit Sharing 401(k) Plan where everyone has individual accounts.  The Participants all have an investment account (with Advisor X)where their profit sharing and deferral contributions are deposited.  More than 50% of the Participants also have individual advisors with separate accounts at other financial institutions.  Periodically the assets are moved from the Advisor X accounts to their separate individual advisor accounts.  The Plan Sponsor is thinking of doing away with the individual advisors and forcing all Participants to house their assets under a single platform provider.  This will most likely meet with some resistance so they want to allow individuals to periodically take in-servive distributions in order to rollover their assets to an IRA with their individual advisor.   

The biggest issue with In-Service is that about 5 years ago the Plan Sponsor merged their old Money Purchase Plan into the Profit Sharing Plan.  The old Money Purchase accounts have been maintained separately from any of the Profit Sharing Accounts and we have always restricted In-Service to those age 62 and over.

Is there anyway, short of terminating the entire Plan, to get the Money Purchase Accounts out of the Plan?

Can the Profit Sharing 401(k) Plan be terminated and only allow the Profit Sharing and Deferral money sources to be rolled directly into a new 401(k) Plan?

Any ideas would be helpful.