vanders2240

(I originally posted this topic in the VEBA message board, but was not able to get much input. I'm hoping someone will see it here, and provide advice/guidance) I have a WRAP document that lists the following plans in Exhibit A as being part of the WRAP: Group Health Plan - A Group Health Plan - B Group Health Plan - C Group Dental Plan Group Basic Life Plan Group Voluntary Life Plan Group AD&D Plan Group LTD Plan This is a large plan (10,000+ participants). The Group Health Plans are funded through a VEBA trust. This results in the plan needing to file Schedule H and have an IQPA audit the plan. The other plans (Dental, Life, etc.) do not flow through the VEBA (but they are part of the WRAP). The employee portion of the premium is withheld and remitted to the applicable insurance companies as would be done in a fully insured plan. As far back as I can see (10+ years), the Form 5500 Schedule H and the auditor's financial statements have only reported assets and activity related to the VEBA trust. My understanding is that they audit the plan as a whole, but the financials only cover the Trust. The question has come up this year as to whether or not that is the correct way to prepare the Schedule H and Financials. Should the other plans be included too? I do not believe it would affect the "balance sheet" portion of the Schedule H because the fully-insured benefits would have a net-zero affect, but it would affect the "income statement". Any help or advice is greatly appreciated.

Thanks for your input, ERISAAPPLE. I think that is the logic that has been used in the past, but I cannot seem to find anything that supports this position. On the other side, I think the argument would be that the amounts withheld from participant pay checks (contributions) are assets, and then those assets are used to pay insurance premiums. That is why I am thinking it would not affect the balance sheet of Schedule H (Part I), but it would affect the Income Statement (Part II).

I have a WRAP document that lists the following plans in Exhibit A as being part of the WRAP: Group Health Plan - A Group Health Plan - B Group Health Plan - C Group Dental Plan Group Basic Life Plan Group Voluntary Life Plan Group AD&D Plan Group LTD Plan This is a large plan (10,000+ participants). The Group Health Plans are funded through a VEBA trust. This results in the plan needing to file Schedule H and have an IQPA audit the plan. The other plans (Dental, Life, etc.) do not flow through the VEBA (but they are part of the WRAP). The employee portion of the premium is withheld and remitted to the applicable insurance companies as would be done in a fully insured plan. As far back as I can see (10+ years), the Form 5500 Schedule H and the auditor's financial statements have only reported assets and activity related to the VEBA trust. My understanding is that they audit the plan as a whole, but the financials only cover the Trust. The question has come up this year as to whether or not that is the correct way to prepare the Schedule H and Financials. Should the other plans be included too? I do not believe it would affect the "balance sheet" portion of the Schedule H because the fully-insured benefits would have a net-zero affect, but it would potentially affect the "income statement". Any help or advice is greatly appreciated.

Thank you, MWeddell. That makes sense.

Thank you for your replies, Tom. This will be my last follow up! Correct me if I am wrong, but I think the "uniform basis for all participants" line is referring to the deferral % to be matched; which in the original case above was 6% for all participants. If that sentence is also applicable to the matching %, then I agree that this way of allocating the match is obviously not allowed, and we can put this issue to bed! I have read the matching and ACP test/failure sections of the document and there is no option for the administrator to prevent a projected failure. The closest thing I can find in the document is this portion below, but I do not think this would allow them to allocate the Match as described above. Do you agree? 10.18 PLAN CORRECTION The Administrator in conjunction with the Employer may undertake such correction of Plan errors as the Administrator deems necessary, including correction to preserve tax qualification of the Plan under Code Section 401(a) or to correct a fiduciary breach under the Act. Without limiting the Administrator's authority under the prior sentence, the Administrator, as it determines to be reasonable and appropriate, may undertake correction of Plan document, operational, demographic and employer eligibility failures under a method described in the Plan or under the IRS Employee Plans Compliance Resolution System ("EPCRS") or any successor program to EPCRS. The Administrator, as it determines to be reasonable and appropriate, also may undertake or assist the appropriate fiduciary or plan official in undertaking correction of a fiduciary breach, including correction under the DOL Voluntary Fiduciary Correction Program ("VFC") or any successor program to VFC. If the Plan is a 401(k) Plan, to correct an operational error, the Plan Administrator may require the Trustee (or Insurer) to distribute from the Plan Elective Deferrals or Vested matching contributions, including earnings, where such amounts result from an operational error other than a failure of Code Section 415, Code Section 402(g), or a failure of the ADP or ACP tests.

Thank you all for your helpful responses! The document is an EGTRRA Corbel Volume Submitter. The adoption agreement says... A. Matching Formula. b.[x] 1.[x] The Employer may make matching contributions equal to a discretionary percentage, to be determined by the Employer, of the Participant's Elective Deferrals. And, in determining the Employer matching contribution above, only Elective Deferrals up to the percentage or dollar amount specified below will be matched: 5.[x] a discretionary percentage of a Participant's Compensation or a discretionary dollar amount, the percentage or dollar amount to be determined by the Employer on a uniform basis for all Participants. I do not see in the basic plan document an option to limit matching contributions to prevent the excess. The corrective procedures seem pretty standard to me - Corrective Distribution/Forfeiture or Corrective Contributions, or a combination thereof. Can someone help me understand the definitely determinable formula requirement? Could the Employer claim that the different HCEs were different classes of employees, so that it would be okay to give each class a different match formula? They could then state in their corporate resolution when they declare the match, the different formulas used for each class? I do not believe this is what happened in my original case above, but I am trying to figure out the logic of why a TPA (with an ERPA designation) would think this is okay.

I am currently assisting an auditor in reviewing another TPAs ACP testing for a large 401(k) plan with a discretionary match. The employer decided to give a match for the 2014 plan year after 3/15/15. They told the TPA what they would like to do (100% match on up to 6% deferrals), but also said they did not want to have a failed test with refunds. This original formula was failing ACP by a long shot, so they then told the TPA that they wanted to spend a total of $200,000, and they wanted the TPA to figure out a match formula that would pass ACP testing. Through what the TPA called "trial and error" they ended up giving all eligible NHCEs a match of 95.4% on deferrals up to 6%. The 10 HCEs on the other hand received various matching percentages from as low as 37.5% up to 82.5% on deferrals up to 6%. Does anyone see a problem with this? We have never done anything like this at our firm before. As long as you give the NHCEs a better matching rate, is it okay to adjust individual HCEs in whatever way the TPA... oh, wait, I mean "plan sponsor" decides, and then declare that as their discretionary match?