Belgarath

Caveat - I am not a Section 125 expert. I would respectfully disagree. Prop. Reg. 1.125-2 regarding cafeteria plan elections, and Revenue Ruling 2002-27, provide for automatic elections and carryover (I've also seen the carryover elections referred to as "Rolling" or "Evergreen" elections. Although the regulation gives an example utilizing health insurance, it doesn't preclude using this for FSA's. The phrase in the IRS wording, "...must make this choice again for 2019..." is misleading, I think. The employer must certainly allow for the employee to REVOKE the otherwise automatic election, and simply not revoking it also constitutes a "choice." Having said that, I would not think that utilizing it for an FSA is a good idea. It isn't that hard to get a new election, and FSA usage is FAR more likely to change year by year, and it seems to me to create an enormous potential for problems. In addition, STATE payroll deduction laws may require an annual written election. So again, I wouldn't do it... And I have no idea on the other two questions, either.

In my very limited contact with ESOPs, most participants do not diversify. Many of them have regretted it. Other folks here who deal more with ESOPs will undoubtedly chime in.

To be clear, I'm not questioning it either - I fully agree. I'm just saying that in many real-life situations, it isn't that clean. What SHOULD happen and what DOES are often different.

Thanks. Your response re the FFCRA is very helpful. (I was under the impression that FMLA leave can be either paid or unpaid, but if unpaid, this question is moot).

It is a potentially messy situation, and sometimes with no good answer. The non-governmental entity keeps its hands off to the greatest extent possible, yet some vendors require a sign-off before processing distributions, etc. - the employer is then left with the choice of having a needy employee being unable to get a hardship distribution, or to "cross the line" and make certain determinations or give approval. Rock - Employer - Hard Place.

Re the definition of compensation for PLAN purposes (for a plan that uses W-2) - as I understand it, absent a specific exclusion in the plan, FMLA wages, even if under a "special" category for employer SS payroll taxes or whatever, would still be considered as wages for purposes of calculating employer match, whatever. Did anything override this that I missed? Thanks.

Agreed, and thanks. I already told them that step one, regardless of any special program that might be offered, is to adopt the updated plan!

Hmmm- I also do not recall seeing this. But I can see a reasonable basis for it. Suppose a plan does allow only core investments. A participant could still reasonably want an investment advisor (whom they know and trust) to advise them on which core investments to use, asset allocation strategy, etc., etc... Administratively, I haven't considered what might be involved.

You may find this useful. https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-seps-establish-a-sep

So, a situation has been brought up where a public school has a 403(b) plan, elective deferral only. They utilize the 20 hour exclusion (which I'm sure they are botching, but that's a separate item). The PLAN does not exclude any compensation from elective deferrals. On the other hand, the collective bargaining agreement states that elective deferrals will not be withheld from "Summer paychecks." I'm paraphrasing here, because I have no documentation on this - only a phone call from the school's business office. Assuming this is correct, how could one reconcile this? Could the collective bargaining agreement be deemed to be an "election" by all members to stop deferrals for Summer pay, and to restart them again when school resumes in the Fall? Failing that, or some similar interpretation, it seems like an operational violation (which has apparently been going on for anywhere from 10 to 25 years). Going forward, since they didn't restate their document, could this "piece" of compensation simply be excluded for purposes of elective deferrals, without violating the universal availability requirement? I'm not sure that 1.403(b)-5(b)(2) prohibits such an exclusion, but it also seems as though it could be read that it DOES prohibit such an exclusion. Sort of a gray facts an circumstances issue. Has anyone ever dealt with this issue? As an ancillary issue, has anyone ever seen a situation where the collective bargaining agreement prohibits union members from deferring in the plan? What happens then - you apparently have a legal collective bargaining agreement that is presumably enforceable, yet this is a plan disqualification issue?

It has already started!! Just got the first panic call from someone who ignored the June 30 deadline. So, anyone have any "pipeline" to the IRS re some sort of special offer for reduced VCP filing fee for a nonamender if they submit within, say, the next year or whatever, similar to what they did for PPA nonamenders?

Ignoring any special Covid rules for a Covid distribution to "Qualified Individuals" If it is a "Qualified Loan Offset" (and you can look at the 1099-R instructions for a definition) then it can be rolled over as late as the tax filing due date (including extensions) for the year of the offset.

I would feel very comfortable relying on the clear intent and spirit of the guidance and I'd allow it. Hard to imaging the IRS trying to argue this point, given the circumstances. On another tangent, In "normal" circumstances I'd imagine that this direct trustee-to-trustee requirement is sometimes missed, and the payment is made to the participant and the 60-day period is used to roll into another plan. Anyone seen this, and if so, can it even be corrected or are you stuck after the 60 days has passed?

Thanks. Austin, I like this - simple and practical.

Any reason why the SMM can't function as the Notice, as long as it is given at least 30 days in advance, and the procedures for changing a deferral election are included?

Not Covid related. Just eliminating a small unit/division, many of whom are HCE's, and the real goal here is to benefit the HCE's. They have never done this before when eliminating employees...

Were the deferral elections completed for the correct plans, and employer then just sent funds to the incorrect plans? Or were they given deferral elections for the improper plans? If the former, I'd consider it a mistake of fact. If the latter, then I'm not so sure, I've had no direct experience with that specific situation. Under the facts and circumstances, is this either insignificant or significant within the SCP period? If you have to (or choose to) go through VCP, I'd certainly try for a reasonable fix - in that respect, I've found the IRS to generally be very reasonable. I personally wouldn't get too hung up on the fix-it guides - they are handy, but by no means the only allowable solutions. Possibly some re-do of ADP/ACP testing might be necessary - results could be very different. I'll be interested to see if anyone has direct experience with an identical situation - maybe it is more common than I think.

Thanks Mike, this helps. Yeah, the smell test on this seems bad - I was just wondering if there was a more definitive item I was missing.

Wow, suffering from terminal brain cramp. Suppose an employer has a Money Purchase plan with standard last day/1,000 hour requirement. Employer is terminating a group of employees, many of who are HCE's. Employer wants to amend the plan to waive the 1,000 hour/last day requirement for THIS GROUP OF EMPLOYEES ONLY. Contribution level will be the same as for everyone else. This shouldn't inherently cause a coverage testing problem, right? They will just all be included in the coverage test, and the plan will pass or fail as usual. But it'll have to be tested for nondiscrimination? Something is bothering me here, but I can't put my finger on the correct citation. Maybe what's bothering me is 1.401(a)(4)-2(b)(4)(iii). This amendment would take you out of design-based safe harbor status, and then you'd have to general test?

AMEN!!!

Thanks all. We'll probably never get such a request from a client, but it is good to keep this in the back of the head if it ever does occur.

Thanks Bill. I beg your pardon, I should have included a little more detail re our conversation. Your specific concern was discussed, and one possible option was to amend retroactively to the beginning of the year. The other was to have the amendment prospective, but still do a "true up" on deferrals/compensation up to the effective date of the amendment (say, August 1, for example). Again, this was just theoretical conversation (we TPA's sure do have some nerdy conversations) so please don't waste any time, but interested in any thoughts you might care to toss out.

Please don't waste any research time on this, as it is an academic question that came up tangentially during a general conversation. SH match plan calculates SH match per plan year. Can it be amended mid-year to change to per payroll calculation/deposit?

A long time ago, we switched from Relius to FTW JUST for 5500 forms. I find the FTW 5500 system very easy to use. We did some fairly extensive testing on the document system, and determined that we preferred the Relius document system. Of course, to a certain extent, there's a lot of inertia involved; switching over to new documents is a challenging project, and the error ratio usually gets higher until everyone is comfortable with a new document/system, which often takes quite a long time. I can't comment on the Datair SYSTEM, but I just don't like their documents. I think they are very confusing - I always hate a takeover on a Datair plan.

Yeah, that was me. I was out late last week, and posted my question before I caught up on reading posts from Thursday and Friday.