J Simmons

I agree with WDIK and JanetM. If the QDRO was fraudulent and payout wrong, then the benefits yet belong to the EE. You have a 401a13 violation. The plan has been harmed as WDIK has pointed out because it does not have the assets with which to honor the benefits promised to EE. Get them back into the plan.

401k feature cannot at this time be added to a money purchase pension plan. That ship sailed on 1/1/1974. You need a separate plan, and plan document, for the 401k plan.

If it was done before, as your boss insists, I have one acronym for you: EPCRS (employee plans compliance resolution system) that is embodied currently in Rev Proc 2008-50. Check it out.

That 3%-of-pay SH non-elective cannot do double duty under your integrated allocation formula.

After the amendment, will all service of all EEs (HCE and NHCE alike) be taken into account? The fact pattern suggests that if anyone will yet not have all his or her service count it be the HCE, not the NHCE.

J4KFBC, It looks to me like your situation fits the safe harbor of Treas Reg § 1.401(a)(4)-5(a)(3), provided however the amendment is not "part of a pattern of amendments that has the effect of discriminating significantly in favor of HCEs or former HCEs"--but there is no hint of that from the facts you posit. If this is the only amendment, then there could be no pattern. That would leave the issue of timing of the amendment as the only Treas Reg § 1.401(a)(4)-5 issue. And Treas Reg § 1.401(a)(4)-5(a)(3) provides a safe harbor from the facts-and-circumstances analysis of Treas Reg § 1.401(a)(4)-5(a)(2) for discriminatory timing. Meet that safe harbor and your timing would not of itself be a 401a4 discrimination problem.

Last I noticed, their website was 'Under Construction'

You might want to consider contacting: Burns and Associates Inc Pembroke Pines FL

It won't trigger vesting to make that change. It would not be a prohibited cutback. But you need to address the expected EE pushback issue, and have a plan for how to roll out the change to EEs in a way that minimizes that pushback.

Before anything is disposed of, I would suggest that you review both ERISA section 107 and the court decision in Roarty v AFA Protective Sys, 2008 WL 4455588 (ED NY 2008)

MERP usually connotes a health reimbursement plan under which benefits not used by the end of the year they accrued are forfeited, i.e. they expire at the end of that year. HRA usually connotes a health reimbursement plan under which benefits not used by the end of the year they accrued may carry forward into later years--the unused benefits do not expire/forfeit at the end of the year in which they accrued. The HRA typically spells out when and under what circumstances those carried forward, unused benefits will expire in the future. I don't see the relationship between HRA or MERP usage and so getting "the sick employees off and onto HIPAA" or COBRA--which opens a whole new can of worms. The ER can choose major medical coverage that lowers the lifetime maximum and has a high deductible, with or without an HRA or MERP. If the purpose is to drive sick employees off of the coverage, you want to make sure that there is no HIPAA nondiscrimination violation in your purpose or manner of doing so. You ought to have that vetted by and get a legal opinion about your proposed plan of action before taking steps to implement.

It would, but contractually there would be an info sharing agreement between the ER and that vendor, and they'd each know how to contact the other to coordinate info regarding the 403b contracts that migrate to that vendor.

Hey, Larry, I suspect many ERs with 403b plans so designed and that have an EE that wants to exchange his 403b contract to be with a vendor that the ER does not already have an info sharing agreement will propose an info sharing agreement to that vendor, if for no other reason than to accommodate the EE that wants to exchange his 403b contract to that new vendor--and if signed, then the exchange is made.

If it is the insurance coverage's deductible that you are mentioning, I've never seen a policy that keys into an HRA, much less one that would so increase the deductible. If it did, that would take away some of the incentive to the EE to not use HRA $ now and 'bank' them for the future. If all the EE is doing is increasing the amount of his potential deductible, he's not been rewarded by judiciously spending his HRA $.

Payment of claims under both HRAs and MERPs may be out of the ER's general assets, or as to either, the ER may want to establish a separate trust fund and pay benefits out of that trust fund. There are a variety of reasons that a separate fund may be desired, but if it does, much more complex income tax deduction rules come into play as well as whether the trust fund's earnings are income taxable or tax-exempt. Claims must be made in both cases for reimbursement. There must be proof that the EE has incurred qualifying medical expenses. However, using the two terms, HRAs and MERPs, you usually have different schedules over which benefits accrue, monthly and annually respctively. Also, you have different times at which unused benefits expire (from the employee's perspective, forfeit). Ask her to put in writing the details of her unique, special MERP before you commit to it and then get a second opinion from someone knowledgeable about whether (a) that unique, special MERP works under the regulations, and (b) is the type of health reimbursement plan that best suits your individual situation.

Thanks, Don.

An ER has 25 EEs, has a group health policy for the EEs, and is in the midst of annual renewal of the policy. Unbeknownst to the ER, the agent just found out that an EE laid off last week has been rated as a bad health risk and would spike the group premium considerably. So much so, it would be much less expensive for the ER to pay for an individual policy for the former EE for a year than it would be the extra group premium if that former EE elected COBRA and paid the group rate himself. Is there a prohibition to offering an EE an inducement to forego COBRA, similar to the prohibition against inducing someone to forego ER provided health coverage and go on Medicare primarily?

Some ERs prefer a MERP because the forfeiture of unused benefits at the end of the year limits the amount of the potential liability for paying benefits, although most HRAs put $ caps on the amount of unused benefits that any EE may accrue under the HRA. MERPs are also used in conjunction with higher deductible health insurance plans. For example, suppose that an ER has a group health policy with $500 annual deductibles. The ER chooses to renew the policy with a $3,000 deductible for the premium savings and then provide a "buy down" MERP, one that reimburses EEs for health expenses for the year that exceed $500, up to that $3,000 when the new insurance would kick in. As deductibles work on an annual basis, a buy-down MERP to compliment it would also. The ER may specify in the plan document any $ amount of benefits the ER wants to accrue, and the frequency of accrual. Typically it is monthly with an HRA because of the carry-over feature. As far as 'put away', most HRAs are unfunded and paid out of the ER's general assets. Accruing benefits are tracked as ledger accounts, without a separate fund. Like HRAs, most MERPs are also unfunded as explained above and paid from the ER's general assets--if that is what you mean by 'pay as you go'. Carry over or not matters considerably. The ER's potential liabilities are affected as mentioned above. From the EEs' perspective, carry over offers an incentive to the EEs to use their HRA $ judiciously as the future need of them may be greater than the current need. If there is no carry over (such as in the typical MERP), EEs are actually incentivized to use the MERP $ before they expire at year's end.

Both involve ER $ only. Both require ERISA documents unless there is an exemption. Both are subject to IRC sec 105(h). The term MERP (medical expense reimbursement plan) was coined prior 2002, when the prevailing opinion was that unused amounts did not carry over after the year of accrual. In 2002, a couple of IRS pronouncements set forth situations when the unused amounts may be carried over after the year of accrual, if so specified in the plan documents. In these rulings, the IRS used the term HRA (health reimbursement arrangement). Hence, the colloquial use of the terms is that MERP connotes an ER $ health reimbursement plan that does not carry forward, and HRA is one that does permit carry over of unused benefits.

I think you are correct. It takes a judge's signature.

Thanks, 3-eyes

But since those S Corp earnings from earlier years were treated as dividends and not W-2 compensation, how do you at this time for plan purposes get to recharacterize part or all of such 'dividends' as 'compensation' just because its convenient for plan design purposes to do so?

Since the match throws you into the ERISA arena, wouldn't it be simpler just to have the one ERISA plan that allows deferrals and the match than to have this bifurcated plan approach? Having the second plan doesn't relieve the ER of having to observe ERISA in the matching plan.

Thanks for clearing that up for me, QDROphile. I stewed over that puzzling question quite a bit over the weekend. Google came up with a song I'd never heard of "Dysfunctional Family" by a musical act I'd never hear of, Cinema Bizarre. Larry's suggestion, "ERISA Mash", made me wonder if you were thinking of the theme to the Adams Family TV show from the 60s. Then I simply threw in the towel and gave up. But it is ironic that the song you had in mind on this board was by the Talking Heads.

A health FSA could be limited by type (e.g., just to dental/vision) or to just post-high-deductible. Either way, these limits do not disqualify the EE or spouse from high-deductible status for purposes of making HSA contributions.