Belgarath

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.

You might try looking at 1.415©-1(b)(6)(i)(B), this says that the contribution can be treated as an annual addition for a prior year if it is made no later than the 404(a)(6) period that applies to the taxable year in which the plan year ends. This is the closest thing I know of to giving you a reference that says it is OK.

"What policy goal does that achieve?" I'm not saying this to be sarcastic at all, but I had the good fortune to have my initial mentor in this business, (more years ago than I care to say) tell me, "Don't try to make sense out of it! Just apply the rules, if there are any. If you try to make sense out of it, you'll make yourself crazy." I thought that was good advice, and I've mostly followed it but I'm crazy anyway. Regardless, I have no good answer for what policy goal this achieves, but thankfully for sleeping at night, I honestly don't care. I'm just thankful that the regulations now clearly spell out a rule, which I can show to recalcitrant clients and their advisors who don't believe me!

There was some discussion on this topic just a few weeks ago. http://benefitslink.com/boards/index.php/topic/59219-one-participant-plan-or-not/

I'm shocked, shocked I say, that someone from the IRS would give incorrect information! We could probably all fill volumes about some of these trials and tribulations...

I don't know the answer, but I find the language somewhat puzzling. It appears to say that it is ok to "merge" a DB into a DC, by "converting" the DB to a DC. How does this square with ERISA 4041(e)? I realize you are proposing the opposite, but it makes me wonder...

Agreed. I don't see it in 401(k) plans even for the employer contributions, but I wanted to throw in that possibility...

Ignoring prior service for eligibility purposes under the "rule or parity" would only apply if the rehired employee terminated at zero per cent vesting. Once there is any vesting, all prior service would count upon rehire, and participation would be immediate. Since this person presumably had some level of vesting (?) then entry is immediate. P.S. - I suppose the plan could be using the "one year hold out" rule which would require retroactive re-entry if requirements are satisfied, but I personally never see this in 401(k) plans. (others may have a different opinion) However, you should check your plan document to confirm.

Thanks Bill. Yeah, in addition to just the ownership, Corporation B also gets about 2/3rd of its business from corporation A, so it seems fairly safe.

It depends. If the loan repayment would increase the "hardship" then the loan doesn't have to be taken first. See, for example, 1.401((k)-1(d)(3)(iv)(D).

Thanks. In this case, Corp. A's plan is a large plan requiring audit, so we're also going to ask the auditing firm to see if they have any problem with it.