hr for me

I think it is a prudent idea to consider consistent conditions under which there would be an interim valuation performed that could be shown to be done without discrimination. I think a plan could get into very big trouble making the decision based on specific individuals or specific market events/conditions unless those are put forth before they happen. Because instead the trustee/plan admin are going to make the decision based on a specific current set of events and may not be consistent with that at other times. That said and kind of off-tangent, I am kind of surprised that there are any DC plans out there that still have an annual valuation with all the access to other choices. Even back when daily valuation first came out in the 90s, we didn't have that many annual valuations, most were either monthly or quarterly. I suppose it is a plan cost issue. But have to wonder if it is a prudent one these days with all the access to other choices.

I don't want to get too personal, but he is wrong for me. I was one that did "aftertax contributions" back in the late 1980s after I hit the basic pretax matched levels because I truly don't believe our taxes at our level will ever go down. And honestly they haven't since then. Maybe they will if either DH or I quit work/retire someday. And I have things to save for that are expenses before 55/59 1/2 etc where I wouldn't be able to pull tax-advantaged money out easily when and as I needed it-- too many strings/penalties/etc .

But if they are paying out severance over time, I suspect they might also be continuing other benefits. Are 401k deferrals coming out of the severance payments? What about other employee deductions like health insurance premiums? It might truly depend on how the severance is structured if he had to sign some type of document/release of claims that states that he is considered active while in severance pay status. And often severance is paid out over time such that other benefits (especially health insurance) can be continued prior to COBRA coverage where the employee might have to pay 100% of the premium alone. In reality, it is more like suspending an employee with pay and benefits than terminating him/her for some companies/employers. You would need to follow your plan document on whether severance/this situation is considered compensation or not. If not, depending on the distribution rules, the participant might have a case.. I am not so sure there would be a one-size-fits-all answer because you have a plan document and a severance agreement -- both with their own stipulations. I would think the plan doc would override any severance agreement and would hope HR would have considered that in setting up the severance package.

From a payroll side, yes it does matter. You might have to consider your order since Roths/Deferrals can often be a percentage. Yes it is a percentage of a certain income, but if that % is too high, you might not be able to take out other deductions (health insurance premiums for example). What is the max % a person can defer/contribute? Is it so high that other deductions could be a problem? If not, order might not be as important. If so, I would communicate to employees for example that required taxes, then other Section 125 deductions (that they can't change throughout the year without a change in status) and possibly garnishments (depending on your state law) would come first and then Roth contributions and then voluntary deductions (that aren't Section 125) such as a legal defense fund, charity donations, etc. But they would need to understand what would happen if they stop paying voluntary deductions because they don't have enough income. For those in this situation, I would consider putting together a worksheet where they can input their wages, deductions, taxes, etc and see what % they would be able to contribute without going negative (if they are trying to stash as much as possible) if that many employees are having some voluntary deductions cut due to the Roth % or having to cut their % if that is last on the list.

Agreed that employers separately account for all of the listed ones above because the money is (usually) coming from separate places. Participant contributions are coming from wages/payroll, etc. I also wonder if you have to consider HOW the employer came up with the participant amount to pay. Did they take into account admin expenses on top of claims? Did they take into account the cost of the stop loss policy (and any amount that was a deposit on that)? If so, I would especially agree they should get a rebate % back. But honestly I can't imagine an employer who didn't take the full expected cost into account when setting the rates.

Kind of off topic, but when I was a (financial) POA for my husband during a home refinancing while he was overseas on business, the law office/mortgage company had to call and make sure he was alive at the time of signing because once you pass away the POA we had goes away. Yes, they had to try to call him in Japan at the very time of refinancing. (I don't suggest this to anyone...signing each document 3 times is not fun) I'd be curious as to what type of POA it was. Did plan admin verify with her at any point that the POA was valld? Are you sure the POA is still valid at this time? A notary signature is only verifying that the signature on whatever form matches back to some ID provided NOT that the POA itself holds any validity. I would do a lot more research and consult legal counsel prior to issuing any benefits to the POA.

Based on admin procedures and the fact that the client can prove that the employee needed to fill out a new form every year, I agree that the mistake is only on 2012. Can't really answer the rest.

Isn't this the same question you asked in the other post a few days ago? You got some really good answers on that one. Again, you will have issues in nondiscrimination testing, since there is no safe harbor/employer contributions. You will have issues if any of these new hires are HCEs. This Is NOT a good idea...if this already happened and there was no plan amendment, you might be looking at some kind of correction -- either refunding those who should not have become eligible or making them all eligible but choosing not to participate. I would suggest running your ADP test with all of those as 0% but eligible and see where you stand. This might require some excess contribution distributions to HCEs (which is why I am thinking this question is being posed since about now would be when someone would notice the nondiscrimination test is wrong and they are now trying to exclude the noncontributing claiming they aren't eligible) You need to look at anti-parity(?) rules and whether eligibility can be given and then taken away based on contribution choices. Your best bet would have been to make everyone eligible then have those hired after x date have to following the age 21/1 year service. Again I will ask WHY you want to do this (or why it was already done)? That might help some of us help you with where to go from here.

Actually we are both partially correct...here is what I found after more searching and it does depend on whether the employer sets it up as a 125 and whether they put the employer contributions through the 125 plan also: "Setting Up HSA Contributions Properly Employer and employee HSA contributions can be made in one of two ways: 1) Direct Contributions An employer may make a direct contribution to an employee's HSA on a "pre-tax" basis. This means that the contribution is not subject to federal income tax or FUTA or FICA taxes. An employee may make direct contributions to his or her HSA via payroll deduction or by writing a separate check using post-tax dollars, which also have tax advantages. Employee direct contributions are subject to FICA and FUTA taxes. 2)Contributions Through a Section 125 Cafeteria Plan Employee contributions to an HSA through a Section 125 Cafeteria Plan are voluntary salary reductions and are not subject to federal income tax or FICA or FUTA taxes. For employee contributions to be treated in this manner, the employer must formally establish a Section 125 Cafeteria Plan. Generally, employee elections to an HSA under a Section 125 plan can be revoked or changed at any time on a prospective basis. Employers may also make pre-tax contributions to an HSA through a Section 125 Cafeteria Plan, which involves a choice between contributions to the HSA or other employer provided benefits. All Section 125 Cafeteria plans must comply with federal regulations regarding non-discrimination, elections, qualifying events and other requirements. As a result, such plans are often more complex than all but the largest employers may want to contemplate."

Or they can be a combination.....Since the employee part is taxed under FICA, they would be part of Box 5 as Soc Sec/Medicare wages, but employer HSA contributions are NOT FICA taxable and would not be part of Box 5. But generally the employer portion would not be considered wages or a deferral and generally would not be a part of 401k compensation definitions since it is not a deferral. You might think of the employer-contributed part more like benefits paid directly by the employer (401k match, employer part of health insurance, etc) Your box12 would have BOTH employee HSA deferrals and any HSA employer contributions.

I think you have some problems because the plan document was not followed (nor does it sound like it was amended) and there was no break in service that would make them ineligible again (ex. rule of parity). Now if there were no entry dates possible beyond that one and the next one where they would have gained eligibility you might not be on such shaky ground. It sounds like though with quarterly, you might have 2-3 entry dates in between. Honestly I wouldn't want to argue their case before any legal/regulatory body and would expect that the employer will have to retroactively make them all eligible and possibly make up some missed deferrals/match for those that might have wanted to join at the following entry dates OR return the contributions/earnings and forfeit match on those that really weren't eligible. And I am still interested in WHY they chose this? The times I have heard something similar are because a newly hired HCE didn't want to wait to gain the service needed to be eligible. If it was that kind of reasoning that that ground is not only shaky, it is quaking. This was not a great move, but I suspect you already know that and are trying to dig them/yourself out of a sticky pit. I suggest getting some good legal/HR consulting that can help you solve this with the minimum amount of cost to the employer. eta: I sincerely hope I am wrong and someone else will pipe in with a better solution for you!

I too think you are on sticky ground. How will you classify those employees later? They were temporarily eligible and now aren't? Do you have to satisfy nondiscrimination testing? If so, wouldn't they be considered eligible (since there was a special eligibility window) but not participating. If they are NHCEs that decline and HCEs that don't decline, you are going to skew your ADP/ACP testing. I do agree it would be better to change enrollment so that all are immediately eligible and then have a new eligibility for new hires. But to switch back and forth on the same employee, I just don't think is a smart move, even if available. Maybe if you expand on the why the employer wants to do this, it will help bring out the good/bad of it all.

Is there anything in the loan procedure paperwork or signed loan documents that addresses non-payment and/or balance at termination? It sounds like the recordkeeper defaulted it as they should. I don't see how you can correct back almost 2 years of no payments/default now... Just an opinion -- these types of situations always have me shaking my head....I always wonder why the participant didn't notice the absence of the loan payment deductions from his paychecks and say something at the time? I guess they are just hoping it will go away, be the employer's fault and somehow miraculously there will be no bad consequences for them and it will be a $30K bonus? And who on the employer/payroll side misses a years worth of loan payments? I would be doing a large scale audit of all loans to figure out where and how this was missed.

Your main issue is that her employer backdated the coverage to January 1st, so that is when you had other coverage and your change in status date (marriage) was 12/28. So neither of those dates will allow you to wait until March 10th under Section 125 qualifying events.and the time period allowed. You do need to ask for that section of the plan document/summary plan description to see what the plan allows. Not all plans allow for the same thing.

It might partially depend on whether a minimum wage/OT exemption is being used and if the person is truly an "outside salesman" and gets that exemption or retail sales using the FLSA section 7(I) exemption. Otherwise Min wage/OT are required (but can be offset by commission earned). So yes, there are some states that require it if the person doesn't fall under the exemption. But that is more of a payroll issue. I honestly think the definition is wonky if you have commissioned employees where commission is a large part of their pay....and they can defer but not get match? Might think of fixing the situation by lowering their commission rates to net the match in their compensation budgeting -- might be easier than trying to figure it out through the 401k plan.

Can they pay/take just enough income to defer almost 100% (minus what will be owed for employee part of FICA)? What % limit does the plan allow and will it affect nondiscrimination testing (or is it a safe harbor already)?

Maybe a stupid question -- > Is the person actually eligible to participate in the plan? Are they truly an employee of the company? I am trying to figure out how you have an employee whose only W-2 income is an auto reimbursement? How else are they paying wages/commission? Or is he/she deferring 100% to a non-qualified compensation plan? I also work on the payroll side and don't see how this could happen since the reimbursement usually is not an eligible wage code, but rather more like imputed income.

While there are some limits on wage deductions, those limits are generally for non-voluntary deductions (such as child support and tax liens and other garnishments). A 401(k) loan is a voluntary deduction that the employee voluntarily signed for. So those limits would not apply. Is he also have deferrals deducted or has he stopped those? Which order are deductions calculated? Can your payroll system hold a negative owed and add it to the next payment/next paycheck to cover the difference? Such that he might be late one payroll but catchup the next? I agree with your "most appropriate" response. However, has this issue been communicated to the employee and does he still want to try to keep making the payment or would he rather default? Does he even want to try to write a personal check each pay period? I supposed he could remove his voluntary deduction with a revocation....and then the loan would default at the appropriate time. Whatever you do, make sure the payroll department can actually process it! So many times they aren't considered in the solution.

Don't know that the IRS would, but honestly don't totally trust they wouldn't somehow find a way around the SOL. And the SOL is 3 years from the 4/15 that the tax return was due. I've heard to keep all documents 7 years because there are times when the IRS can go back 6 years if they find it to be substantive. But then again I don't really want to find out!

I suspect that the employer-paid portion of the employee's FICA would be considered income taxable in the year it is paid for the (ex)employee. It usually is if the employee is still employed and the employer is grossing up any type of payment for taxes. And if so, yes you would need to correct W-2s and tax returns. Is there any chance they already met the Soc Sec part of the FICA Limit in the years of the mistakes? Is there any way you could argue the amount is de minimus? I guess I am asking about how large of an issue it is? How many employees are you having to correct. I wonder if you correct too many if that won't send a huge red flag to the IRS based on your EIN such that they might go back and audit the individual employees for more than the 3 years. How many years are you talking in total? But I have to agree that this goes beyond this board. And I wouldn't personally rely on anonymous advice such as I have given above.

I had this happen in 2008 and luckily was able to go back to the recordkeeper and they did have records of the distribution in archives, but the difference in time was only 10 years or so. And was glad we were able to prove the distribution happened. Back before daily recordkeeping (early to mid 90s), the HR consulting firm I worked for in the 401k dept always did paper reports (quarterly and then an annual bound report) that we instructed plan sponsors to keep forever. I always surprises me the sponsors now don't do the same thing -- that is some type of printed annual document of plan activity (at least contributions/distributions/loans and loan payments). As the consulting firm, we only kept records for 7-8 years and even then getting back to "electronic records" on the old magnetic tapes sometimes was virtually impossible. And electronic storage has changed so much since then. But now I personally think we rely too heavily on It and sometimes wish for the days of paper. (If I were a betting man and this case actually made it to court and the employer could prove no documentation of payment, I suspect a jury would side with the participant -- especially with so many plans going to paperless where you get no regular account statement... but I don't gamble and am not an attorney nor do I play one on TV)

@My2cents -- I suspect the "requirement" is acceptable to the husband/wife because the wife has terrible credit and if they use both names, they have to take into account both credit histories which could mean a much higher interest rate or no mortgage at all. I know lots of people who do it this way to keep the "bad credit" spouse off the mortgage which keeps them off the deed. In a way it is their way of playing the system, not some legal requirement of the bank.

Most plans I worked on in the past made up any shortchange from the 401k plan into the NQDC plan.

It's like this CPA doesn't even know what questions to ask and doesn't seem to understand even the basics of a TPA business. It's like me saying I am a TPA wanting to be a CPA, what should I do, how should I hire, how much should I pay, etc? Such a very large open ended question. The OP really needs to do some due diligence//get some basic knowledge and then ask more specific questions.

I highly suggest looking into the CEBS certification through IFEBP/Wharton, even if you only do the retirement plan DC/DB courses. At least they used to have a really good overview of pension and qualified plans. They also had one course for executive benefits which at the time had non-qualified plan information. But it has been a few decades and I am not a TPA. That's where I would start if I were trying to jump into it. (There also might be other groups out there..>CEBS is just the one I am most familiar with)