Belgarath

'Cause you can't do it?

Thank you. Yes, I'm just doing some preliminary checking. Although I have little involvement with 125/HRA plans, I see way more "weirdness" per square inch than in the qualified plan market. Just saw one today where the employees take the unused FSA funds out of the plan at the end of the year and put them in IRA's...

Any bright ideas on this one? A very small governmental employer (app. 7 or 8 employees) thinks they want to set up an HRA for one person. Well, this won't fly, as the one person is a "Highly Compensated Individual" under the testing rules (is in the top 25% by compensation). I don't know why they want to do this anyway, (apparently something to do with Medicare, but that's unclear) - since they can't do that, they wanted to make everyone eligible and pay their group health premiums with HRA funds. That can't be done either. And a QSEHRA isn't available if the employer provides group insurance. I think they can't have their cake and eat it to, but wondering if there is something obvious that I'm missing?

Yes, I'd also like to see some other opinions. As I said, they may all agree with you. Ciao. P.S. - somewhat terrifying if you can follow my thought process - I'm not sure that I can even follow it. It may be an indication of a deeply disturbed individual...

I agree that excluding TFB is a 414(s) safe harbor compensation exclusion. But I don't think that alters the premise that this amendment favors predominantly HCE's, and it seems to me that isn't allowable under 1.401(a)(4)-1(c)(2), or possibly other sections as well - I'd have to look, I dunno offhand. Excluding elective deferrals is a 414(s) safe harbor as well - suppose all the HCE's defer 18%, and the NHCE's defer 2% on average. Is it ok to allocate the profit sharing contribution on a retroactive correction to include TFB's and elective deferrals, such that the PS allocation now substantially benefits the HCE's far more than without the retroactive amendment? I'm just saying I wouldn't do this as SCP. Perhaps a VCP would be successful, and then no worries! But everyone else may think I'm nuts, overly cautious, or just plain wrong. Enjoy the weekend! I expect that what passes for my brain will be going on strike before too much longer...

Would you feel the same way if it were bonuses, rather than TFB's, and it was predominantly HCE's who got the bonuses? Perhaps I'm being overly conservative on this, but I wouldn't do what you are suggesting. However, we can certainly agree to disagree on this subject! I'm always easier to get along with on Fridays...

Yes, and this is precisely what I envision as being acceptable. I have seen a couple of other opinions that the "multiple employer" option is viable, but I wouldn't do it... The situation I describe above is very definitely a situation where unrelated employers (related only by belonging to an association of some sort) can sign on to the lead employer's document as a "participating employer." Thanks for the input.

Not sure I agree. Section 4.05(2)(a)(iii) provides that the increase in the benefit, right, or feature to participants is permitted only if among other things, it satisfies the requirements of 401(a)(4), 410(b), 411(d)(6), and 403(b)(12), as applicable in addition to the 6.02 correction principles, etc... Seems to me that such an amendment would fail to satisfy the requirements if it benefits predominantly HCE's.

Agree. We always know - if it isn't obvious from the statements, then we inquire further until it is nailed down.

Has anyone ever seen this penalty imposed? I haven't...https://www.federalregister.gov/documents/2007/12/19/E7-24386/civil-penalties-under-erisa-section-502c4

No. And your answers were very helpful.

If the plan termination date is a date other than the last day of the plan's limitation year, then yes, the 415 limit is prorated. So if the official termination date had been March 31, then the 415 limit would be the lesser of 100% of comp or 3/12 of the 415 dollar limit. If instead you change the termination date to July 31, then yes, the 415 dollar limit will increase to 7/12. Now, if they ceased contributions in March without any amendment, I'm assuming they were solely discretionary contributions, otherwise, they have problems...

Thank you both. I happened to see a proposal to an association that presented this as an option, and I was rather taken aback - not my problem, but for my own information, I did want to see if such a thing was even possible/feasible.

Yes, and thanks. But to try to simplify - suppose the local Chamber of Commerce or some similar organization sponsors a Section 125 plan for its employees. Can member businesses simply adopt that plan as "participating employers" when those employers are not part of a controlled group or affiliated services group? I think your answer is no?

Can you have Multiple Employer Plans in the Section 125 plan arena, similar to qualified plans? In other words, could an Association (of some sort) sponsor their own plan, and have unrelated (and by that, I mean not part of a controlled group or ASG) member businesses adopt the plan as Participating Employers, and have all testing, administration, 5500's if required, etc., done separately for each business, but there is no "MEWA" where contributions, etc. are being pooled? I'd have said not - and any "unrelated" business would just adopt a plan on their own. But perhaps this is a normal and common arrangement?

There isn't necessarily any "problem" - this used to be quite common in the "old days" but not so much any longer. Is the DC plan self-directed or trustee directed? One big issue is fiduciary prudence, and whether the life insurance is a "good" or "prudent" investment, particularly in a DC plan. You are likely to find some strong opinions on this subject on these boards. Personally, I'm not a fan of insurance in DC plans, and that's putting it mildly. In a DB plan that doesn't require employee contributions, where the employer has to fund the full plan benefit, then to me it is less of an issue, although in a 412(e)(3) plan, a participant's benefit is usually lower at all ages until NRD if life insurance is used, rather than all annuity. The other problem is the taxable term cost, which is currently payable by the participants. Particularly as they get older, they may not enjoy getting currently taxed on life insurance that they might not want or need. Other folks may have other opinions.

Agree with the Cat. I didn't actually read the original post (careless of me) so didn't realize deferrals were to two different plans.

Can be corrected (including self correction) under EPCRS. See Appendix A, .04 of RP 2019-19.

There's no "indication" - you just apply. This should get you started. https://www.dol.gov/agencies/ebsa/employers-and-advisers/plan-administration-and-compliance/correction-programs/vfcp/model-application-form This link gets you to more of the nuts and bolts. https://www.dol.gov/agencies/ebsa/employers-and-advisers/plan-administration-and-compliance/correction-programs

https://www.pbgc.gov/prac/missing-p-defined-contribution P.S. - this is only for terminated plans at this time. But there are things in the works to extend this to active plans, I recall seeing something on it, but didn't investigate further yet... P.S. - here's what I was remembering...https://www.asppa.org/news/browse-topics/what’s-plan-sponsor-do-about-missing-participants

Seems like I recall that in the distant past, that some prototype documents automatically included any member of a controlled group/ASG? Is this still a possibility, and if so, does this document have any such provisions? I may be misremembering this - haven't used a standardized prototype for at least 15 years, I think...

https://benefitslink.com/boards/index.php?/topic/64080-vcp-processing-grinding-to-a-halt/&tab=comments#comment-292040

These audits are ridiculous. After the initial document/information request, the answers to which were properly and timely submitted to the DOL, they then came back some months later with a list of over 70 different requests - and any many of those questions have several sub-parts. All this for a nice, clean little non-audited 401(k) plan. Our tax dollars at work... Edited for typo.

Thanks for the discussion. We already referred them to ERISA counsel, so we'll see where it goes. Probably nowhere...

This area is constantly evolving (for us, anyway) largely due to fraud/privacy concerns. We used to have more direct dealings with the participants, but in many situations we now won't talk to the participants without first checking with the client. In a couple of these situations recently, the "participant" turned out NOT to be the participant, even though they somehow had all the right information/identifiers at their fingertips. This added caution is particularly true when we are talking about account balances/distributions. As I said, this is evolving, and we are sometimes forced to provide service that is less immediately prompt and helpful to a legitimate participant. This is difficult, as with a lifetime of providing fast and helpful answers, it goes against our conditioning to not provide an answer immediately - but that's the world we live in. The crooks are always getting more sophisticated, and we have to protect our clients, even when it means the speed of the service sometimes suffers.