Belgarath

At this point, I've given the only details I have. Obviously, not much! I speculate that perhaps they are changing from unincorporated to incorporated, but that is purely a guess. So in a general way, I'm just trying to determine if the employer can "assume" a prior employer's Section 125 plan, similar to the qualified plan world. Thanks.

So, suppose you have entity "A" which sponsors a Section 125 Plan. Entity "A" is now changing their name, and will become entity "B." Same employees, but new name, EIN, and management roles. Can the new entity simply adopt the existing plan assets and liabilities, via a resolution and amendment, similar to what happens in a 401(k) plan, or are there different requirements for this situation for the 125 plan? I have no details whatsoever, other than that they do have an FSA - don't know if there are other types of benefits as well. Assuming they have premiums paid through this plan, do you have any experience with whether the insurance carriers just allow the policies to "transfer" to the new entity, or will they have to re-apply, etc.?

Have used it. Worked fine.

Thanks Patricia. Yes, I just took a look at 1.403(b)(10) and it is quite clear.

Well, anything "works" if it is never questioned. While I think it is unlikely to cause a big problem, there are penalties for intentionally filing an incorrect return. https://www.irs.gov/government-entities/federal-state-local-governments/increase-in-information-return-penalties Anyway, since you now aren't going to do it incorrectly, no worries!

If I understand what you are saying: suppose ACP refund is $5,000, and he is withdrawing $10,000. The entire $10,000 is going to be coded as an eligible rollover distribution, and you are going to withhold $2,000 in taxes, (even though 20% withholding not required on the ACP refund amount) and consider the ACP refund requirement satisfied? Seems doable... P.S. - is this an audited plan? Auditor might have a problem with it. As to the IRS, I have a hard time seeing why IRS would care - it is taxable either way, and as long as he doesn't roll it over, seems like no harm, no foul. I certainly wouldn't recommend this approach as SOP, however.

Also, (without checking) I think the successor plan rules don't apply to a 403(b) anyway.

I know nothing about it, but this might be helpful as a starting point. https://www.medicaidplanningassistance.org/medicaid-eligibility-401k-ira

Even if you can come up with an exclusion that only keeps him out, and doesn't exclude anyone else who should otherwise benefit and will now get shafted, is there any possibility that such a move will trigger some Medicare fraud thing, or violate the ADA, or something crazy like that? I have no idea whatsoever - I just wondered... What an unfortunate situation. Keep us posted if you can find a way around it.

FWIW, virtually none of our plans allow rollovers into the plan by terminated employees. Our employers generally want nothing to do with potential problems/questions/issues with, for example, ineligible rollover money coming into the plan, etc., etc... On a personal level, if I were an employer, I certainly wouldn't allow it.

Thank you both.

1.72(p)-1, Q&A 19(b)(2)

The 125 plans I've seen use disability insurance, and disability is determined by the insurance company, so the "new" DOL disability procedures wouldn't apply. Are there 125 plans out there where the situation is otherwise, so that the plan/SPD must be modified to take these procedures into account?

I've seen wrap documents for Section 125 plans, that allow you to file just one 5500 form for all of the benefits that fall under the 125 plan. I've also just seen reference to a "Mega Wrap" document, which incorporates the cafeteria plan and underlying benefits, in addition to certain health/welfare benefits that are NOT under the cafeteria plan. Is this a viable technique for doing only one 5500 form? Ignoring document issues, for now anyway - just interested in the 5500 question. Thanks.

How sad for you. Just kidding. I root for the Dolphins, so I'm familiar with losing and frustration, and in no position to make fun of any other teams...

Kevin, good point. I forgot about that.

Under 6.06(4), unlikely, generally, that the participant would be willing to return the "overpayment" - so then the employer or "another person" would need to contribute a "make whole" contribution. I doubt the employer would be too thrilled with this solution unless it was a VERY small distribution. Otherwise, it requires a corrective amendment under 4.04(5) such as discussed above. So while it is a viable solution, I'm dubious that it will generally be the solution of choice.

I agree. You might be able to get away with a "one time irrevocable election" where an employee initially elects NEVER to contribute to the HSA and to always have the full amount contributed to the 403(b) (subject to applicable limitation) but that's the only way I can see to get around it.

Another question on this. The corrective amendments to conform plan language to actual operation - I'm guessing that this will not override the normal timing requirements for advance notice in a safe harbor plan? Or, is it meant to allow self-correction n such a situation?

No takers? How about if I change the question a bit - given that the IRS specifically added (and then subsequently removed) in the proposed regs that this requirement would apply to nondiscrimination testing, might you reasonably infer that it does apply to coverage testing? Since no apparent guidance, just looking for opinions now. Thanks!

If you consider it an "erroneous failure to allocate" in a prior limitation year, then yes, I think it applies. If you consider it something else, then maybe not. Personally, for a situation like this with only one small NHC participant contribution, I'd take the chance.

"Q2: Also, wouldn't depositing it now for 2018 PY count towards the 2019 Annual Additions LY for each participant who shares in the allocation of it because outside the 30 day window? If so, one participant terminated in 2018 therefore 2019 Annual Addition limit is zero for him - is there any correction available for this? The other staff member terminated at end Q1 2019... may be okay with 2019 Annual Addition limit. Will this ultimately make it impossible for the employer to contribute any PS for 2018 because of this Annual Addition issue, limiting the employer to only the SH for 2018?" The "30 day" rule doesn't always apply. For the terminated participant, see 1.415(c)(1)(b)(6)(ii)(A) - I think this will cover you on that piece.

Interesting. Auditor may have a point, depending upon the specific plan language and interpretation of that language. If I were doing a document in this situation, I'd do a specific exclusion for compensation paid for hours/work performed for division C, or whatever works to appropriately specify the excluded comp.

P.S. I just found this very helpful resource on the internet re 5500 filings: https://www.ebcflex.com/portals/8/PDF/webinars/ERISA-Compliance-Wrap-and-5500-QA.pdf

Well, yes and no. If the 125 plan is done as a "wrap" document, then there is only one 5500 form filed, which encompasses all of the underlying "plans."