Looking for thoughts on whether the Virta diabetic add on program would be subject to COBRA.  I'm inclined to say no, that it is an independent, non-coordinated benefit (disease-specific, excepted benefit, but wanted to see what everyone else's thoughts are.

Thank you!

This may be a good year to consider an in-plan Roth conversion within one's 401(k), provided the plan document allows.   If someone converts now and the market drops a lot further, can they reverse their conversion before the end of the year?  I recall this was possible a few years ago.  If it is allowable, it may also depend on the record keeper.

Thank you,

Tom

Do employers generally track hours separately from pay, ie W-2 pay?

So W-2 reports pay for pay date 12/31 of the prior year, paid on 1/5.

Employee had 970 actual hours worked in the current year, but when hours are reported alongside payroll, there were 1010 hours worked. 

Say the 12/31 hours reported on the 1/5 payroll are not included, but the terminee has 40 hours of vacation pay.

In both those situations, what do companies generally do, count the hours?

A governmental employer sponsors a 401(a) defined contribution plan, a 401(K) plan, and a 457 (b) plan.  For purposes of the annual contribution limits under 415 (c), are the 457 (b) plan contributions treated separately, or are they combined with the 401(k) and 401(a) contributions?

A 401(k) plan operates on a fiscal year - July 1st through June 30th. The plan document defines the limitation year as the plan year for everything (except for the deferral limit). For the plan year ending June 30, 2022, an employee under the age of 50 has contributed $25,000 in 401(k) deferrals during the plan year (though never exceeding the calendar year limit). The annual additions limit is $58,000. The deferral limit is $19,500.

Had the employee deferred only $19,500 during the plan year, he would receive an employer contribution of $38,500. By deferring $25,000 during the plan year, is this employee limited to $33,000 of employer contributions for the plan year ending June 30, 2022?

This small CPA firm has 6 employees.  A receptionist is leaving and is 80% vested at best.  The owner wants her to receive her full account balance.  The 2/20 TH vesting leaves her just short.  I suggested with the Cycle 3 restatement requirement change to a 3 year cliff which would also be TH compliant.  He want's to just give her the full account balance (her money is segregated, all segregated investment accounts).  He asked me "what if we call it a mistake, we paid her out everything by mistake, what harm would there be?"  I said it would be an operational failure, you didn't follow the document as it stands.  Would the IRS come down on them if by chance there is an audit? He wants to just do it.  

Wrap plan with 12/1 - 11/30 plan year.  Employer wants to change to a calendar year.  Can the effective date of the amendment be 12/1/21 (resulting in a short plan year of 12/1/21-12/31/21 and new plan year of 1/1/22 - 12/31/22) or do we have to use a 12/1/22 effective date?  I have seen references in articles that an amendment to change the plan year cannot be effective until the first day of the next plan year, but they do not provide any citations.  I guess technically if we use a 12/1/21 effective date the amendment will be retroactive since it will be adopted after the end of the new short plan year...  Any help/citations either way would be appreciated!

401k plan excludes post-severance compensation from definition of compensation for purposes of deferrals and matching contributions.  Employer improperly withheld deferrals and made matching contributions on last paycheck received after participants terminated.  What is the correction?  Does it depend on whether the participant has received a distribution of their plan account?  I initially assumed the correction would be to return the improper deferrals to the participant (and issue a 1099?) and forfeit the matching contribution.  That works if the participant has not yet received their distribution.  If they have already received their distribution, then they have received those improper deferrals - is the correction then to issue a 1099 for the matching contribution only (assuming they have already received a 1099 for the distribution of their plan account)?

SH 401(k) plan (SH NEC), two entry dates (Jan-July), eligibility is age 21, 1,000 hours; plan is top heavy.
Employee hired 6/8/2020, worked 986 hours in 2020. Employee worked 300 hours in 2021 before stopping full-time work 5/21/2021 (so over 1,000 hours in first 11 months).
Employee was then available on as-needed basis.  Employee worked 156 hours between 8/5/21 and end of year. (total hours worked in 2021 was 456 hours)
Did this employee enter the plan? She had 1,000 hours in first 12 months but was not there on the entry date although she was available "as needed".

Is she entitled to any contribution for 2021 (such as SH)? What about top heavy?

Thanks!

I've got a calendar-year pooled 401k/PS plan where the trustee has asked for an interim valuation because the assets have (of course) dropped by a significant percentage since 12/31/21 and participants with a significant total of the plan's assets are looking to take a distribution.  I've already gone over the pros and cons, the "if you do it when it's down, you should make sure you consider doing it when it's up" speech, etc.

My Q is... obviously, the terminated participants who are looking for a distribution should get updated statements to reflect the updated amounts that are going to be distributed to them.  But what about the active participants (who are not eligible for a termination distribution)?  Is there any reason to give them statements as of 5/31/22 that show this ~20% drop in value?  Since it's not EOY, do they need to get this interim valuation statement?  The plan allows no ISWs or hardships (except RMDs, which wouldn't be affected by this interim valuation).  Thanks.

Is it legal for an employer to mandate a minimum annual HSA contribution from its HDHP-participating employees? Employee HSA contributions are deducted from employee paychecks on a pre-tax basis via a cafeteria plan.

Hoping someone can share their knowledge as to the deadline for adopting an amendment to a preapproved governmental 401(a) plan to update the plan document for the final hardship regs/BBA '18.  Thanks!

I have a plan sponsor that wants to amend the eligibility requirements and entry dates to allow a specific employee to enter the plan.  After that employee enters the plan, the plan sponsor wants to amend the eligibility requirements and entry dates back to what they were.

Is this allowed? If not, why?

We have a client (A) that purchased a division of another company (B) and wants the employees of that division to "merge" into A's existing 401(k) plan. B's TPA told our client (A) that they could do a spin-off. 

Our general understanding of a spin-off is that it results in a new company and a new 401(k) plan. Neither of those things are happening.

Additionally, company (B) currently sponsors a 401(k) plan and since only one division was sold to our client they will not be terminating their plan. 

We don't see how this could be treated as a spin-off or a merger. Can anyone give insight as to when a spin-off is an appropriate measure and if there is anyway that this would not be a distributable event for the participants of Company (B)?

Thank you!

One of the accounts has inquired about a QACA SHNE 401(K) for a huge home health care agency, composed of office staff, home health care workers, and nurses.

From what I'm reading from ERISA Outline Book, but possibly incorrectly, each group can either be in  one plan or 3 separate plans - as long as each class has a uniform percentage, with a minimum of 3%.  All requirements for safe harbor status will be met. Each plan would need to pass 410(b)?

I do not believe the plan could be effective mid-year as the 30 day notice was not met, but to be effective for 2022, as long as the plan is set-up, doc prepared and signed by 9/30.

No profit sharing.

Have a client who is a physician who is paid as an independent contractor by a hospital and two medical clinics. He has his own corporation that sponsors a defined benefit pension plan and he is the only participant.

He just got hired as an employee at a VA Hospital. They have their own 401(k) plan. However, he will continue to do work for the two non-related medical clinics that pay his corporation. Since he has no ownership in the VA Hospital, no ownership in the medical clinics I would think no controlled group or affiliated service group exists and there should be no required aggregation for testing purposes.

Does anyone disagree?

Thank you.

Sole proprietors with an existing plan can make 2021 401(k) as well as profit sharing contributions up to their extended tax filing date in 2022.

Sole proprietors can adopt a new 401(k) plan in 2022 for 2021 (up to extended tax filing date in 2022).

Can they make both 401(k) and profit sharing contributions to the new plan in 2022?

This statement was recently made by a TPA. related to PCORI fees in 2022: 

Generally, health care Flexible Spending Accounts (FSAs) are not required to file a Form 720 unless the employer (and not just the employee) makes contributions to it that exceed the lesser of $500 annually or a dollar-for-dollar match of the employee's contribution. 

I did look as the IRS Chart chart summary. and FAQs Related Item: Patient-Centered Outcomes Research Trust Fund Fee: Questions and Answer and  the final regulations , but do not see the above exception.  Does anyone have insight to the above bold exception??

I did see the follow exceptions for FSAs:

Special rule for coverage under multiple applicable self-insured health plans:

• Generally, separate fees apply for lives covered by each specified health insurance policy or applicable self-insured health plan.
• However, two or more applicable self-insured health plans may be combined and treated as a single applicable self-insured health plan for purposes of calculating the PCORI fee but only if the plans have:
  • The same plan sponsor; and
  • The same plan year.

Special counting rule for HRAs and FSAs: 

• Plan sponsors are permitted to assume one covered life for each employee with an HRA.
• Plan sponsors are permitted to assume one covered life for each employee with an FSA.

Q5. Which individuals are taken into account for determining the lives covered under a specified health insurance policy or applicable self-insured health plan?

A5. Generally, all individuals who are covered during the policy year or plan year must be counted in computing the average number of lives covered for that year. Thus, for example, an applicable self-insured health plan must count an employee and his dependent child as two separate covered lives unless the plan is a health reimbursement arrangement (HRA) or flexible spending arrangement (FSA).

Thanks for you review and reply in advance!

Plan terminates effective 5/2022.  After testing is completed it is determined that there are 415 excess amounts.  The plan removed them  from the pretax source.  How does this impact the 402g limit for 2022?

Participant deferred $8000. 

415 excess is $3000.  ($2500 is distributed due to losses).

What can the participant contributed on a pretax basis for the remainder of 2022 (assume not catchup eligible)?

I administer a plan that provides employer contributions for employees working less than 1000 hours but more than 500.  When do the vesting provisions of the Secure act take effect?  I have two participants that would be 100% vested under the new law.