hr for me

Yes, the money is theirs to spend on any covered medical expenses. We actually had this same issue.when my husband changed jobs. As a matter of fact we still have a rather good balance and we are 2 years out of the HDHP.

I have to agree about looking to eligibility. Does the plan have a lower end age limit? Then I would ask if the compensation earned meets the definition of plan compensation? I've never heard of being able to exclude directly due to a minimum amount of compensation. That is usually covered by eligibility/age limits.

I read it as telling the participant how the fees are allocated and disclose there are fees- that is the plan will pay the distribution cost out of the plan but the ex-participant will be responsible for any fees associated with the auto-rollover-IRA. Not so much what they specifically are. However, I do think best business practice (and the ability to not have to field the phone calls) would be to put in as much information to the notice as you can.

I have to agree that it might help the recalcitrant former employee to do something (of their own choice) with their money if they understand that they will also be charged a fee by the auto-rollover IRA. Especially since many banks will open free IRA accounts. At minimum, I would put in the possibility of IRA fees being charged in the auto-rollover notice. Maybe not an exact amount, but the fact that a fee COULD be charged. Of course, that may prompt some calls asking how much the fee is. But as a participant, I would want to know and be unhappy if I wasn't at least told there was a possible fee. Again, it goes back to best business practice and information to the participant. I would also put it into the SPD if you talk about auto-rollovers.

I could see where you might have ACP nondiscrimination testing issues if your lowest paid aren't putting in the 5-10% range. This might affect how much your HCEs can contribute (and be matched). Just because everyone is highly paid doesn't mean they will all contribute the higher %s. I can honestly say I have never seen a match that doesn't start at the first percent put in by the employee, no matter how bad or rich the match formula might be. I guess I would wonder what goal the employer is trying to accomplish that couldn't be accomplished another way?

Well a person can be employed and terminated on the same day. A person can be working and disabled on the same day. A person can be employed and dead on the same day. Not sure why that same person can't be employed and retired on the same day, using the same logic. Unless you want to go with the "first day the person is fully whatevered (not working, dead, disabled. retired). If you do, I would spell that out in all plan documents. Yes, if the person actually worked on 1/1, FLSA would require payment to the employee for whatever time period is worked (and possibly the whole day if exempt).

from an HR side (rather than benefits) : (1) disparate impact/discrimination if the group picked happens to all be on gender/race etc compared to those no longer eligible (even if not direct) (2) PR/employee morale side when those who don't get to stay eligible find out that others did (and they will I can guarantee it) (3) the carrier's assumptions on the group and who is eligible...they are making assumptions in underwriting and if they find out you are allowing ineligible employees onto the plan (for whatever reason), it is possible they could cancel your coverage due to fraud.

agree with BG5150 on the correction questions.....on the earnings question -->It is so much harder to do an earnings formula on dailys! Because some how, you have to take into account the mid-year transactions (contributions and loan payments in and distributions and loans out over time). When we used to do quarterlies and most plans added in 1/2 the contributions and loan payments and subtracted out all distributions and loans due to those transactions happening at different times of the quarter. Earnings from last year are based on more than the beginning balance at the beginning of this year -- those include the contributions over the whole year and don't include loans/distributions throughout the year. Are you able to get amounts for specific periods of time? If so I would tend to do an analysis (at least for each quarter but I would probably do it monthly) and pull an annual from that. And honestly that is a number I'd love to see on a consistent basis anyway to see how the overall plan is performing regardless of funds.

We had this argument years ago, but it was for date of death. When SAP first came out, it made the DOD the first day the person was "fully dead" rather than the actual date of death. SAP at the time at least was programmed by Germans(?) and that was what worked for them. We had to re-program it to get the correct DOD as stated in our plan documents (both 401k and pension). Your last day of work is your termination date. I am not sure you could distinguish termination from retirement date as both are your last day of work. From the employer standpoint, they track start to end date (not day before start and day after end). From the employee standpoint, I could see how it could be confusing as that is the first day they are "retired and not working at all". I can see where communication in plan docs/spds/etc should be very careful to define the retirement date one way or the other. But if I did a straw poll, I think it would suggest the viewpoint of last day worked.

I have to agree that I don't see where it is a distributable event. We were able to pull out of our PEO without going to another PEO (brought everything back in-house) and we setup a basic 401k plan that the assets were transferred into. Our new recordkeeper/TPA worked with the PEO to do the transfer of assets. We viewed it the same as the employer changing recordkeepers. I might have a different answer if the employer wasn't planning on continuing the 401k plan. But definitely it will depend on the plan documents and distribution provisions.

My answer would just be no and I would be even more concerned if it was an HCE who got a benefit. While IRAs do allow for late contributions up until tax filing time, 401k's do not.

If I read the following right (IRS 2013 CPE Compensation), it leads me to believe that under Section 415 comp using the W-2 definition (on page 17 it talks of imputed income for life insurance) and under safe harbor modifications to Section 415 comp (page 23), it subtracts out imputed income on both. The first example specifically does it whereas the 2nd just talks about overall imputed income. © If I remember correctly from when we had our last 401k plan, we didn't take any deferrals off of any imputed income. But our comp definition was not W-2. (irs.gov/pub/irs-tege/2013cpe_compensation.pdf) eta: but this is not something I would expect the payroll provider to decide and would expect when the deduction codes were set up that the HR/Plan sponsor reviewed whether or not deferrals came off of imputed income/deduction codes. (Our payroll system had both an income code and a deduction code to get the taxes to work correctly)

Agree with Austin. Many are misclassified as ICs just because the employer confuses short term employment with IC. One of the main criteria is whether that person could also do consulting on other projects for other employers (even a competitor) at the same time. Another is that person doing a job that normally would be done by an employee and do you have any other employees doing that specific job? If you created the job for that consultant and it didn't exist before and you had no former employee in the position, it is less gray. While TX is just one state, I have found that their online explanation is one of the best. If you search TWC Independent Contractor test (for some reason I can't paste the direct link), it goes into much more detail about the questions posed by the IRS' three pronged approach (financial, behavioral and type of relationship) It is not a simple yes/no question about who pays the FICA taxes and whether the person is eligible for benefits unfortunately. Again, hopefully the OP's client got good advice before they set up the relationship.

The auto mechanic example does work because he had an auto repair business on the side. He had other customers and a true business. So yes, I agree with Belgarath it can work. Another question to ask (that will be asked at WC audit time) is does this work done by this employee paid by 1099 have their own Workers Compensation coverage? Unless they are in TX where the employer can still opt out, it is my understanding that he would have needed it and the main employer's WC auditor is going to want to see proof of insurance for that 11099 business. If not, the main employer is going to get charged premiums for that 1099 income. Just another small piece of the whole employee vs IC equation. I've done a whole lot of research over time (and a lot of WC audits) due to our businesses and tend to be very vigilant on what is and is not a legitimate situation. Hopefully for the OP this one is. {benefits is just a small part of my full HR role that includes these types of issues. Oftentimes a decision is made from a benefits and/or taxation point of view without looking at the full scope of HR decisions}

Years ago, I helped on a correction to nondiscrimination ADP/ACP refunds. I was able to argue de minimus overall in the total refunds (and I was in the place where it was much worse than this....that is HCEs were calculated wrong -- some got refunds they never should have and others who should have didn't) through the correction process and in the end did pay the penalties for filing but didn't in the end have to make the actual corrections. It took a while to do all the work and prove de minimus though. As the TPA, we ended up eating a large bill for my time that was then non-billable but in the end the client didn't have to redo W-2s or ask for $ back or do a second refund. So the client was not out any money. If I remember correctly it was through EPCRS, under VCP as we hadn't been audited yet. This was back before there were general correction principles though.

I'd be very concerned about an audit and the IRS considering the 1099 income W-2 wages personally. I know this is not the question you asked. But unless he also brokers other projects outside of work for other clients, I would not have made that call. In the IRS' eyes a person is usually either an employee OR an IC but not both at the same time. They could start as one and change to the other mid-year so that is one out they might have if he wasn't doing both at the same time. I hope they got legal advice on this prior to making the decision and there are some facts not in evidence. your answer on HCE is going to depend on the definition of plan compensation, especially if it is "gross income". I am assuming deferrals did NOT come out of the 1099 income. I think their problem is larger than whether he is an HCE in this plan or not. You might have to solve that one first especially if he was participating as an employee while earning IC income.

yes, I think that would satisfy the requirement, because the employee wouldn't control the circumstances of payout and could lose it through bad performance/behavior/etc. if he choses to go that way to get the employer to terminate him. Right now, they want him to stay bad enough to give on that point. But I think if it just states "termination" that gives the employee control of when payment is made and there is not a real risk of forfeiture. He gets it no matter when or why he chooses to terminate. (And I will admit to getting cynical jaded over the years from an HR standpoint.) I suppose you could use "employer-activated termination" and leave out cause altogether, but I don't think that properly protects the employer from a different perspective, but if they are okay with it and trust this employee then they only have themselves to blame if something goes bad and they have to pay out and don't want to at the time due to cause. I think that still leaves some risk of forfeiture if he doesn't stay as long as they want him to stay.

How about "employer-activated termination without cause"? If the employer has cause, do they really want him to become vested? Because he could show up everyday, read the newspaper, go to an early lunch, workout, take a coffee break and leave early and still meet the "substantially full time basis" and get absolutely no work done. I can see many ways for the employee to get the employer to do the termination by becoming a large pita. I am not sure they want that either. If he gives them cause, I would think they would want to be able to have it forfeited rather than vested.

Kind of off topic -- I know that balances aren't kept in daily plans on a daily basis since the units they are based on are valued differently each day, but do daily recordkeepers not do snapshots that are archived on a periodic basis? (I know I do this on my and my spouse's own 401k and other mutual accounts). I can't imagine not having backups at least quarterly or monthly if not weekly or daily such that you could go back to a period of time that is close to the date needed and iterate from there. Participant statements are usually generated quarterly and I would think there would be at least a backup of those to both the client and the plan administrator. The HR consulting firm I worked with kept the records for 7 years and counseled clients to keep them forever or at least until the plan terminated, everyone was paid out and the 7 year SOL passed. That was probably based on Section 209. I remember transferring huge historical files to new recordkeepers right as quarterly processed plans started to go daily with Merrill Lynch and Fidelity. It was my job to produce those transaction files so they had the history. Are recordkeeping companies/clients not doing so any more? Is it because of the fact that earnings are now calculated more often/differently? I would still think you would need to keep some type of snapshot of units over time if not balances. It was my understanding years ago that as long as a participant had a benefit payable to them, the backup to that benefit should include all activity (contributions, earnings, distributions) over time that could be added up to make back that balance if needed to be proven for any reason. But it's been years since I have been practicing directly in the 401k field. Obviously once money is distributed or rolled out of the plan, the lump sum amount is just passed on to the new recordkeeper/investment firm. But is this the general rule now when a whole plan switches recordkeepers? Just curious!

Any plan will have timing issues between payroll dates and hire/entry/term dates. And honestly depending on the termination date, there may not have been time to get that information to payroll to stop the deferral on that compensation -- most require a 3-5 day notice. Even if you amend the plan compensation definition to not include post termination pay, you still have to decide if that is the day they terminate or the day of payroll that includes that last day. Most I have seen include the last check and have a deferral from that last check for the percentage of the days worked. Honestly I could see this one argued two ways (1) not eligible for participation because terminated prior to the entry date or (2) eligible because they had compensation on a paydate after their term date. Since compensation post termination is included in the definition of plan compensation, it seems that you have two plan specifics and recordkeeping sequences that do not match. What does your plan state about conflicting plan issues? Or is it silent?

And depending on how many currently contribute vs how many would with a safe harbor match on the nonelective 3%, you could be looking at larger administrative fees -- especially terminated employees who leave very small balances in the plan over time. What is the current match formula? If they go with participating and the safe harbor match formula versus the straight 3%, how much more would that increase the cost to the company? You should be able to use the current average deferral percentage to see if those participating under the minimum safe harbor match formula. If they have a bad match right now, the cost would be higher than if you already have a rich match. In the case of a rich match, have you looked at better communication, auto-enrollment with increasing %s each year, etc to increase participation by NHCEs? Of course that in the end will also increase the employer cost of match. That said, I agree with the others that this is not something I would leave the employer over, especially if other compensation is better than you can find elsewhere. What you are losing is the pretax benefit of that money. You should probably sit down and see what that difference truly is before jumping ship. Unfortunately there are a lot of tax deductions that get lost as you make more money and this is one of them. I can name several more as I am doing my taxes today....but I wouldn't give up the income to get the deduction!

It's been years since I worked on QDRO's but that is pretty much how we always saw them in TX. Contributions/balance for a certain period of time (usually marriage date to divorce date) and then earnings on that amount until the end of the certain period until distribution to the AP. I am not sure why you think it is cooky. The distribution isn't 50% at any specific time unless the distribution happened the last day of that certain period (which is pretty much impossible) and that assumes they were married the whole time the employee was participating which many are not. If there were distributions during that certain period of time, you would have to decide if the AP got docked for 50% of the distribution at the time. Was it during the marriage? and yes, these were buckets of fun back in the day of quarterly recordkeeping with no specific contribution dates (just quarterly sums) and on mainframes..... we had some pretty hefty spreadsheets to do to get to the amount that was either segregated to another account OR distributed. I think you are over-thinking it...

Is it possible you actually overpaid the loan with pretax money and they were refunding the overpayment? Because otherwise I agree you shouldn't have gotten any real money from a loan default and usually they would not default after a 5 week leave of absence. It sounds like someone miscalculated the repayment amount when you came back and that you overpaid yourself. Therefore it had to be refunded. What is the distribution code on the 1099R? I wouldn't think you would owe the 10% early withdrawal penalty on a refund.

I don't post often, but would agree that his amount available would be the $3000 in non-defaulted deferrals. Back in the olden-days, we had buckets for certain calculations (post-86, pre-87 aftertax,hardship amounts available etc). That bucket would have decreased when the loan was taken and then increased over loan payment time as deferrals plus earnings were paid back. Since he defaulted on the loan, those loaned deferrals would never have made it back into the bucket to be available later for another loan or hardship (especially if the plan do specifically stated only deferrals for those) Don't know if 401k recordkeeping system still keeps those kinds of buckets or not, but I agree with your reasoning.

We have an HDHP ($5k deductible) and honestly $1100 a month sounds about right for family coverage. I do agree that the PEO could have easily low-balled the medical amount at sign-up to get the business and rolled that cost in elsewhere. I think someone snowed you on the "details from the PEO for their allocation for each service" honestly. (Much like a car salesman who has the ability to shift prices through interest rates, trade-ins etc).