rocknrolls2

You have not explained who owns which percentages of ABC Company. That would be needed to make a determination.

Brian and Peter, You have raised some pretty good points, I agree.

Following up on this, in the responses citing state wage payment laws, I have seen a number of cases holding that such laws are preempted by ERISA (even applying the more narrow view of preemption that the courts now seem to be following). I know that refunding the overcharge (versus overpayment) is the right thing to do and that it is also the right an ethical thing to include interest, but I am not convinced that reliance on state wage payment laws, in itself, is something compelling the employer or trustee to do so. Any thoughts on that point would be especially welcomed.

The group health plan is self-funded. The participant contributions are deposited into a trust. The employer also contributes for a portion of the premiums.

Employee A works for Company X. For 2025, A elected family medical coverage under X's health plan. Family coverage costs the employee $275 in monthly premium payments. Employee A was actually charged $300 per month for such coverage. X's health plan discovers the error in the third quarter of 2025. Is X required to repay A the amount of the extra premium amount? Is X required to include interest on the reimbursed premium amount?

From my experience, there was a lot of discussion of creating a correction program akin to EPCRS, to deal with 409A violations. That appears to have fallen by the wayside. Unless there is pressure to rekindle the idea, I think it is likely to go nowhere for the foreseeable future. What complicates this further is that the prospect of top execs facing significant tax exposure does not necessarily tear at the heart strings of many of the key policymakers in Washington.

Thanks David and Peter, One thing that likely also played a factor at the time Manhart and Norris were decided was that the "glass ceiling" was substantially lower than it is today. I know from the experience of two brilliant highly-motivated adult daughters, who have moved rapidly up the corporate ladders of their respective careers, only to run smack into the glass ceiling as it currently stands.

I am working with a client with a defined benefit plan for collectively bargained employees. The overwhelming majority of the participants are male. The plan uses the RP-2014 blue collar male table for actuarial equivalence for participants and the RP-2014 blue collar female table for beneficiaries. In 1983, the US Supreme Court decided Arizona Governing Committee v. Norris, which held that the use of sec-based tables violated Title VII of the Civil Rights Act. Has anything developed which has changed this result in the interim? Or can this be justified by using a table for a single gender for all participants, regardless of actual gender? Thanks!

Although I am an attorney, this is not legal advice to anyone. Consult with the plan's legal counsel. They will tell you to do one of two things: (1) file a lawsuit in federal court called an interpleader in which the plan offers to pay the money to the party determined to be entitled to it by the court -- you may need to deposit the account balance with the court. The court will decide --and your client avoids the worry of paying twice and of having to fight to get the money back from the party who was determined not to be entitled to the account; or (2) decide the claim with counsel's advice and pay the person to whom it is properly payable. As far as disclosing materials submitted by the spouse, I know that the ERISA requirements do not compel the plan to share that information with the other person, with two exceptions: (1) if you grant the wife's appeal and inform the daughter that she is not entitled to the benefit, the claims procedure regulations require you to share the information with the claimant; and (2) if someone sues, the mother and daughter will be parties to the lawsuit and their attorneys will be entitled to relevant documents during discovery in the litigation. To short-circuit the process and maybe resolve this short of litigation, I would suggest that you share the information with the daughter and that you propose interpleader as an amicable way to resolve the issue. But Remember, I am not the plan's lawyer -- you will need to defer to him or her for the final recommenation.

IMHO, in addition to the inevitable failure of the coverage test, this is no way for the owners to be running a business. It is basically saying, if we like you, you're in, if we don't like you, you're out and if we don't like you, we can keep you out by paying a few thousand bucks more to keep you out. It is bound to cause resentment, mistrust and ill-feeling for the employer and among the employees. Moreover, to discourage this chicanery, you should be charging a nuisance fee for putting up with the inconvenience of constructing all kinds of crazy hoops to try to squeak their inanely complex structure squeak through compliance testing.

Thank you, Brian, for your thorough and detailed answer. However, while I agree that the personal benefit account should be considered a group health plan for ERISA purposes, what causes me to lean on the opposite side of this fence are the following: (1) the account can pay other types of benefits including severance and supplemental unemployment, and, in some cases, disability benefits; and (2) the personal benefit account is not a primary payor. Do these facts, in any way, change your conclusion?

A client maintains a separate 401(k) plan for its collectively bargained employees. In some cases, non-bargained employees participate in the plan. My questions are: (1) does the portion of the plan benefiting non-collectively bargained employees need to satisfy coverage and does that portion of the plan have to either satisfy ADP testing or have a safe harbor design? As a corollary to the question, does the plan need to provide that this portion will be required to satisfy the ADP test or have a safe harbor design? (2) If the sponsor elects to permissively aggregate the portions of the plan benefiting collectively bargained employees with the portion benefiting non-collectively bargained employees, must the plan provide in all cases that the ADP test or a design-based safe harbor must be satisfied with respect to both collectively bargained employees and non-collectively bargained employees? If so, can the application to collectively bargained employees be made conditional upon the sponsor's election to permissively aggregate both groups? IRS regulations at 1.410(b)-2(b)(7) provide that a plan benefiting solely collectively bargained employees is treated as satisfying minimum coverage requirements. If a plan benefits both collectively bargained employees and non-collectively bargained employees, the portion of the plan benefiting collectively bargained employees is treated as a separate plan from that portion of the plan benefiting non-collectively bargained employees. The portion benefiting collectively bargained employees automatically is treated as automatically satisfying the coverage requirements. Turning to IRS nondiscrimination requirements, Reg. Section 1.401(a)(4)-1(c)(5) provides that the nondiscrimination requirements are treated as satisfied by a collectively bargained plan that automatically satisfies the minimum coverage requirements. As applied to 401(k) plans, generally the regulations follow the rules applicable to the minimum coverage requirements. Specifically, with respect to collectively bargained employees, the regulations permit the portion of a plan benefiting collectively bargained employees to be permissively aggregated with the portion of a plan benefiting non-collectively bargained employees. See Reg. Section 1.401(k)-1(b)(4).

A client has a VEBA that provides for certain benefits including a personal benefit, which is an individual account that is funded exclusively by employer contributions. The assets in the account can be applied to pay for medical benefits to the extent not otherwise covered under the primary medical plan, severance benefits, supplemental unemployment benefits, disability benefits, scholarship benefits for dependent children for post-secondary education or for payment of premiums for COBRA Coverage or retiree medical coverage. The questions is whether the personal benefit account is an HRA It walks like a duck in that it is totally employer funded, quacks like a duck in that it can be applied to reimburse medical expenses and pay certain medical premiums, but, if it goes into the pond for a swim, its feathers are all wet and it cannot fly for at least 30 minutes after it emerges from the pond -- to the extent that it pays more than eligible medical benefits. IMHO this is NOT an HRA and would not have to do Section 111 filing with CMS. Thoughts?

Responding to Peter's earlier post on regulations, one thing that I am very concerned about is that the eCFR portal and Tax Notes do not provide ready access to Proposed Regulations. Does anyone have any good websites with the formatting we desire and have come to expect?

Thanks, Brian. I had done more research and discovered the FAQ Part 39 pertaining to the mental health parity concerns. Where American Academy of Pediatrics' recommendations to make behavioral screening preventive formally adopted by Health Resources Services Administration, so as to formally enshrine it as a preventive medical item as applied to children? I found your argument for applying uniformity for the age 26 mandate to be quite interesting. I am not at all optimistic that the people running CMS or the Office of Civil Rights would likely be persuaded by it, however.

A client has proposed to limit reimbursement for advanced behavioral analysis therapy to individuals who are age 16 or older. This therapy is intended to benefit individuals with autism. This proposed action thereby prompts the following questions: (1) Is advanced behavioral analysis considered a preventive type of therapy or procedure which is required to reimbursement in full under the ACA? (2) Is this therapy considered a mental health procedure subject to protection under the mental health parity requirements? (3) Is there any other reason that prohibits or precludes the client from adopting a minimum age requirement as a condition to being eligible for reimbursement for advanced behavioral analysis, whether or not required under the ACA? Thanks in advance.

I agree with CuseFan that the checks should be returned. Inform the participant that s/he needs to have the RMD paid out before there are any eligible rollover distributions that are permitted. Once the RMD has been satisfied, then s/he can make the rollover. Two other questions: why are Roth 401(k) amounts being rolled over? and (2) question for the 403(b) plan: if the participant cannot contribute to the 403(b), why is it willing to accept a rollover from himher?

I wanted to clarify a couple of things about my original question: (1) we are in the midst of delving into the facts surrounding the timing of when the distribution was directed by the plan sponsor and when the actual distribution was made. Therefore, it is likely that the interval between the date the distribution was directed and the date that the distribution was actually made could be much less than a few months. I recall that earlier in 2025, there were some wide swings in the securities markets resulting from a great deal of uncertainty and complete confusion about the short-term and possibly long-term direction of the global economy which likely caused dramatic swings in value. Luckily, for those not taking distributions, history has shown that, over the long haul, investing in the equity markets not only evens out any short-term spikes in losses but far exceeds the rate of return over any other investment vehicle, notwithstanding the Great Depression. However, it is a frequent occurrence that the timing of a participant's decision to request a distributions when the market is at a high point and the time it takes to process the payment could include very sharp downward swings. It is hoped that if there are substantial upward swings during the period between the initiation of a distributions and the participant's receipt of the payment, in an involuntary cash-out scenario, that the fact that the value of the account balance upon receipt of the distribution being in excess of the involuntary cash-out threshold would not be considered an operational failure. Regarding correction, Rev. Proc. 2021-30, Appendix A, .07 deals with situations in which the distribution is made without the participant's (and, where applicable, spouse's) consent. However, it is not helpful as applied to a 401(k) plan in which the only distribution option is a lump sum. The prescribed correction method is an after-the-fact consent, an election to receive distribution as a QJSA or the distribution of a single sum equal to the present value of the survivor annuity payable upon the participant's death. The problem is that annuities are not an allowable form of distribution under the plan and the participant has received his/her entire account balance. It would be hoped that when the IRS ever gets around to superseding the Rev. Proc. in light of SECURE 2.0 and other recent developments, it would allow the plan to merely seek an after-the-fact consent from the participant. The reason I said tender is that the participant may decide that since s/he got the money, it is a useless gesture to sign the consent form. I apologize for being overly wordy here, but I felt that these points were important to add.

CuseFan, assume for this purpose that it was not elected by the participant and also that the amount of the distribution was the gross amount before the 20% mandatory withholding.

Company X sponsors a 401(k) plan. Participant A terminates employment in 2025 with an account balance of $6,985. X directs X's account balance to be cashed out. A couple months later, based on favorable investment performance, a check is issued to A for $7,055. Has the 401(k) plan committed an operational failure by issuing a check to a former employee for more than the cashout threshold?

Thanks for all of the very helpful answers. My practice and experience has always dictated that I check the plan document first. In this case, the document did not address whether or not earnings were to be credited. I was reviewing a draft amendment which proposed to state that earnings were not to be credited. I know that with the EPCRS program (I know that this is not a qualification issue in this context), the IRS generally requires amounts to be restored with earnings. I just wanted to get a second set of eyes around the issue of whether it was appropriate for a draft plan amendment to state that earnings would not be credited.

Plan X, is a profit-sharing plan which provides that if a participant cannot be located after a diligent search has been made, his/her account balance shall be forfeited, subject to restoration upon the making of a claim. If a participant's beneficiary makes a claim for the participant's account balance, does the plan need to restore earnings that would have been credited to the account?

Building on what Peter has said, given the small amount in the account, if the estate is the dfault beneficiary, many states have a procedure where estates with a very low dollar amount can have an administrator file an affidavit with the probate dept and avoid probate entirely. The dollar amount differs from one state to the next.

A client maintains, as part of its health plan, a healthy lifestyles program. This program provides reimbursements to participants and their dependents for vitamins, non-medical nutritional counseling, gym memberships, massage therapy and weight management, among others. The program's administrative services provider was recently changed and it has been issuing reimbursements of expenses incurred by adult dependent children directly to the children rather than the participant. When questioned about their rationale for this practice, the provider claims that Affordable Care Act regulations require that the reimbursements to such individuals must be made payable to adult dependents instead of to the member participant. My understanding is that the ACA mandate merely requires a group health plan to extend coverage to a child until s/he attains age 26. There is no requirement stated in the provisions of the Code, ERISA or the PHSA that was amended by ACA (or their underlying regulations) requiring that such reimbursements be paid directly to the adult dependent child. As an analogy, for a married couple, if the spouse of a participant incurs medical expenses, the reimbursements are paid to the participant and not to the spouse. Do you agree with my understanding? Thanks in advance.

Remember that for coverage with respect to deferrals and match, you consider the employees who are eligible to defer and get match as benefiting, even if they opt out or elect not to enroll.