Belgarath

It is wrong in so many ways that it is hard to even know where to start. ERISA and the Code do not address whether it is un-American or not. On the IRS side, a plan, in order to be "qualified" must satisfy certain requirements in both form and operation. A plan that violates its provisions, such as required top heavy contributions, is subject to disqualification. I'll guarantee that your plan document does not provide for the return of contributions by Key Employees on the off chance that they discover too late that the plan is top heavy, or that they didn't understand or were unaware of the implications of top heavy status. On the ERISA side, you have various anti-alienation provisions. When people are entitled to a benefit (as with non-key employees who are entitled to a top heavy benefit under the terms of the plan) you can't take that away from them. There is no regulation that provides an override to the top heavy requirements such as you would like. So you are stuck with what the Code and Regulations say that you must do, which in this case, would be to contribute any required top heavy contribution. I really recommend that you seek legal counsel first if you are planning to advise your client to treat this as "administrative error" - and review the terms of your E&O policy. You are really getting into some dangerous territory. All this is just my opinion - others may not feel the same. Good luck.

Darn - I think I deleted this before posting, so I'll try again. Let me state at the outset that I know nothing about RSSP's before today, and after a little internet research, I know a bit but still not much! Employer makes matching contributions, and deposited the match "late" for one employee. On this side of the line, a late deposit to a 401(k) could easily be self-corrected with an earnings adjustment. I don't know if an earnings adjustment is required, or even permitted, for an RSSP. Anyone know, or know of a source to find out? Thanks!

First, and this is semantics, but you're talking about a potential management function affiliated services group. No such thing as a management function controlled group. I say this only because when you are looking for formal guidance, which is somewhat sparse on this subject, it (the terminology) matters. Second, impossible to tell from the facts given. And this type of situation is very much driven by facts and circumstances. Have you already ruled out ANY type of attribution - not just family, but options, etc.? What is the precise relationship between the companies, and what functions are being performed, and by whom? You really should take this to an ERISA attorney.

Haven't seen any of the all-day programs - have seen a couple of very detailed 2 -hour programs where they are doing an in-depth presentation on one small subject. Didn't know they did one day (or longer?) courses, but then, I've never looked. Good to know they have them. I no longer have illusions about anything. Well, maybe that our cat really loves me, but he probably just wants food.

I think you are stuck with VCP. But going from memory (dangerous at best) I seem to recall that Rev. Proc. 2015-27 reduced the VCP fee to a very reasonable amount - I think for a single person it would only be perhaps $300, although of course there would be your fee to handle the filing as well.

I know EBIA does some webinars and such, but I think they are generally pretty detailed, and not "crash course" type webinars. I also would recommend caution. Cafeteria plans are not necessarily as simple as many would like to have you believe, and a crash course probably will give you just enough to be dangerous. Kind of like taking a crash course in 401(k)'s and then being told, "OK, now administer 401(k) plans." Not saying you can't do it, but go into it with open eyes. If your intention is to administer just one plan, and not really getting into the cafeteria plan administration business, you may be asking for trouble. Good luck!

Why wouldn't it just be 4A (Health)? But frankly, I see no reason why your solution isn't just fine. I've seen no evidence that anyone really cares about this on Welfare plans, although I know the IRS has been checking the codes on retirement plans.

Nope, they are way past the allowable timeframe for an 11(g) amendment. This was brought to us a couple of months ago, and they have issues going back to 2009 (no 5500's or required plan audits ever done, no ACP testing, etc...) Coverage passes fine at 70% for all years EXCEPT 2013.

Yeah, I wondered about the SOL angle, but honestly, I don't know much about how that really works in real life. I was thinking (just guessing, really) that the IRS would be far more likely to "disqualify" the entire plan if you go with the "sweep it under the rug and do it in 2016 and hope they let it go" approach. Hopefully there is someone out there who has actually dealt with such a situation and can give you some educated opinions. Good luck!

IMHO... 1. Yes, on a W-2. 2. I agree, yes, subject to wage withholding rules. But it appears that perhaps there is an optional flat rate withholding under 31.3402(g)-1(a), which eventually gets you to, I think, (a)(7) in this situation. But this is getting far into the weeds, and is quite old, and I'm not sure how it applies or if it applies to something like this that happened years ago. 3. Honestly don't have an opinion as to whether it places the entire plan at risk. Since the participant owes back taxes, interest, and penalties, it seems unreasonable that the plan would be deemed ineligible, but I have no experience with this situation! I'll be interested to see what people think. I don't think that just doing it in 2016 as if nothing ever went wrong previously is a legitimate option, but I guess I'd leave that to tax/legal counsel.

Employer match is only employer contribution, and it has a 1000 hr/last day requirement. Plan fails coverage (at 69% - grrr!). It's probably going to fail ACP as well, but that's a separate issue. So if using the average benefits test for coverage, you do NOT include elective deferrals as per 1.403(b)-5(a)(2). Agree? Now, assuming it still fails on an allocations basis, the coverage testing can be done by cross testing. As I read it, the same applies even if cross testing - you don't include deferrals. Agree? Imputed disparity won't help, I don't, think, as there is only one HC, who still falls just below the taxable wage base. Am I missing anything? Other thoughts? Thanks!

Thanks.

Thanks. Apparently (and I'm getting this second-hand) the cafeteria plan specifies that eligibility is such that the employee must be eligible for the employer's group health insurance - or something like that. I don't know if this is a regulatory/legal requirement, or a document eligibility provision (or both). So the question is apparently whether a 1-employee plan can be considered "group" health insurance. Does this perhaps vary by State?

Makes sense. That's why I said "usually." I should also warn you in advance that depending upon the funding company(ies) involved, getting distributions done for the 403(b) plan termination can be challenging.

1. Yes. 2. Yes, but you'd typically (in my experience) just amend and restate the MP plan to a 401(k) - usually cheaper and easier than terminating it.

The August and October contributions made in 2015 will be non-deductible contributions, and he'll have to pay a 10% excise tax. He can then use them toward his 2016 contribution. Assuming that those, plus the March 2016 contribution, don't exceed the maximum, then he's all set. But tell him to stop funding in advance! If the total exceeds the 2016 limitation, then he has the same problem for 2016.

This is off topic, but somewhat related. For you attorneys out there, suppose the client files for bankruptcy. Do you think the bankruptcy Trustee would be successful in asserting that it isn't an ERISA plan, at least for the years prior to a document being signed, regardless of whether the IRS accepts a retroactive document for tax/qualification purposes? Just curious...

I respectfully disagree. (I'm assuming the termination is done right...) First, 1.403(b)-10(a)(1) specifically allows for a termination and distribution. Also, for a non-official source, please see following from IRS website. IRC 403(b) Tax-Sheltered Annuity Plans – Terminating a 403(b) Plan If allowed by the terms of the plan, a 403(b) plan sponsor (employer) may terminate the plan and distribute accumulated benefits to the participants and beneficiaries on termination. To terminate a 403(b) plan, the plan sponsor must take the following steps: •Adopt a binding resolution: ◦establishing a plan termination date, ◦ceasing plan contributions, ◦fully vesting all benefits on the termination date, and ◦authorizing the distribution of all benefits as soon as administratively practicable after the termination date; •Generally, stop contributions by the sponsor or any related entity to any other 403(b) plan during the period that begins on the termination date and ends 12 months after all benefits have been distributed from the terminated plan (this requirement may be disregarded if at all times during the period beginning 12 months before the termination and ending 12 months after all benefits have been distributed, fewer than 2% of the employees who were eligible to participate in the terminated plan are eligible to participate in another 403(b) plan of the sponsor); •Notify all plan participants and beneficiaries about the plan’s termination; •Provide a 402(f) rollover notice to participants and beneficiaries; and •Distribute all plan assets within 12 months of the plan’s termination date to participants and beneficiaries in accordance with Rev. Rul. 2011-7. 403(b) plans subject to ERISA may have to comply with additional requirements. Additional Resources Find recent guidance, frequently asked questions, forms and publications, mini-courses and other 403(b) resources.

This one. "or is the first year, from date of hire to 1 year anniversary and then switch to plan year"

While I doubt that this is the case here, sometimes when someone says "merge" the plans they REALLY mean "terminate" and let the participants roll over the money if they wish. It might be worth double checking.

I'm assuming the former. But it could be either... - however, I think if the latter, then it could indeed be considered a "group" - so I guess my question really is about if there is only 1 employee.

Ok - I asked the individual, and here's the actual question: "Section 125/Cafeteria Plan and Health Reimbursement Arrangement eligibility is tied to eligibility for group health insurance; what constitutes group health insurance? Could a C Corporation owner and spouse’s coverage be considered “group” insurance or would that same owner/employee need one or more people (non-family member) to be considered group insurance?" Thanks.

Unless I missed something (very possible) I don't think 2015-27 modified the definition of "Overpayment" found in 2013-12, Section 5.01(3)©. So this is still an "Overpayment." But I do think 2015-27 provides for some possibility of additional flexibility in the correction method available under Section 6.06(4). I think an amendment to conform the terms of the plan to its operation as described in Section 4.05 might well be acceptable, but I haven't really given it a lot of thought - this is just an initial impression.

I probably don't even have enough information to properly ask this question, but I thought I'd give it a shot. I don't know whether this relates specifically to a section 125 Cafeteria plan, or some other form of welfare benefit plan. I THINK the question revolved around whether the 1-person employer could be considered as having a "group" health insurance plan, in order to be eligible for some sort of welfare plan with dependent care benefits, etc... Does anyone know, offhand, what the governing authority is for defining a "group" plan for such purposes? Or any other pertinent items? Thanks.

Let me just play Devil's advocate for a moment. Suppose I perform design of solar powered widgets for the destitute. I do it well, and have a few good employees who also do it well. The Board of our non-profit corporation would like to reward them by contributing to a retirement plan on their behalf. I'm not sure I agree that the employer, who doesn't want to be saddled with investment performance responsibility, and lacks investment expertise just like all or most of the employees, is evil just because they make the employees responsible for their own investment choices. Why should I accept the liability, and the responsibility? In the non-403(b) world, do you think any employer who sponsors a SEP or a SIMPLE-IRA is perpetrating an abomination, since the employee selects the IRA? I'd sure rather have investment choice and have a plan than I would to have my employer choose not to sponsor a plan because they don't want investment liability. I realize the original post is re a 403(b) plan, but it seems to me the issues are the same.