Belgarath

Yes. No. See 1.416-1, T-24.

Thanks Kevin. Especially for a relatively large employer with a lot of part-time employees, I think this offers nearly unlimited opportunities for screw-ups, and I certainly wouldn't recommend it!

Can you add a "less than 20 hour" exclusion prospectively, to eliminate people who have been deferring already? So for example, everyone is eligible to defer. But, (pick a number - say 20 out of 200) of these employees have NEVER worked 1,000 hours. Can the plan be amended prospectively to add the <20 hour exclusion, and therefore exclude these employees? Arguably this wouldn't violate the provision that if ANY employee in this exclusion category (<20 hours) is allowed to defer, then no one else in this exclusion can be prevented from deferring. Mind you, I fully agree that this whole thing is typically a disaster waiting to happen...

Well, plans MUST provide for the RMD distribution, (for the more than 5% owner) regardless of other distribution provisions. That doesn't require anything special. An in-service distribution doesn't even need to be an "option." If a plan sponsor insists on an annuity option, etc., while we would attempt to persuade the sponsor otherwise, we certainly would amend the plan. We wouldn't lose a plan over this! After all, we get paid by the hour - if the plan sponsor wants to engage in what we perceive as foolishness, it is ultimately not our problem, and their choice. We try to guide and counsel them, but sometimes they ignore our advice for their own reasons.

We always recommend lump sum only, but a few plans choose to allow periodic payments of some sort. In defense of the IRS, they did allow us to remove all the periodic payment options without an anti-cutback problem, as long as lump sum is available. 99% of the clients follow our recommendation, but we do allow the option for something other than lump sum.

That was my assumption as well. But I do enjoy asking crazy questions sometimes.

Do you have a citation for that? I'd have said (absent additional research) that this rule applied to deferrals, but NOT to employer contributions. Thanks.

Basically a ridiculous academic question, although I suppose it might have some applicability in the future for some sort of required amendment that pertains to all plans. In these days of mostly pre-approved DC plans, suppose there is a required amendment, let's say something like the DOL disability regs or whatever, that is adopted by the document sponsor on behalf of all clients. It requires an SMM. Is an SMM legally required to list the Plan and Employer name? Clearly the SPD must do this as per the DOL regs, under 2520.102-3. But I'm not certain that this specific requirement pertains to the SMM, as this information isn't changing - I didn't find, on a mid-level look, where it is specifically stated. Didn't use the fine-toothed comb. If not legally required, it could facilitate a "generic" mailing to all clients. At best, I think it is foolish not to include plan and employer information, but is it ever an option not to? Curious as to any opinions on this.

Working through this - getting there, but still some basic questions. For purposes of Cafeteria plan Contributions and Benefits (C&B) testing, let's say you have a plan that includes several types of benefits, one of them being health insurance. While the plan was amended to allow for owners to elect pre-tax salary deductions for health insurance, NONE of them have elected to do so. So it appears that there are three potential tests. First, the "safe harbor for health plans" test under 1.125-7. It appears that this automatically passes, as no HC is paying premiums through the plan. Correct? And the fact that there are other benefits (FSA, dental, vision, whatever) doesn't affect this? Second - the "availability standard" test. Since the plan has no "employer contributions" and all benefits are available on a nondiscriminatory basis, this passes. Question - does this often fail? Seems like most plan designs would typically pass with no trouble, but I have little experience in this, so I'm curious. Third - the "utilization standard" - this is just mathematical testing, and will require salary data, etc... Thanks in advance, and any observations are most welcome! P.S. When there are HSA "catch-up" contributions, are these included in the testing? In the qualified plan arena, catch-up deferrals are excluded for 415, etc., but I don't know that there is any such dispensation in the 125 world?

I suspect you will get different opinions on this. I've heard at least one ERISA attorney describe the process as a "get out of jail free" card where such errors can be retroactively corrected via the restatement. Not necessarily sure the IRS would agree. Did the SPD correctly describe the matching provision, as well as any other employee communications?

Thank you both. I don't have the hard numbers at my fingertips, but let's assume the plan would pass both the "3 years of service" test and the "entry date" requirement test. (Entry and eligibility are immediate if you are hired to work 30 hours per week.) However, if you have 40 NHC's, and only 4 of them are 30+ hours per week, and all 4 Highly Compensated Individuals participate, then there is no way you will pass even the unsafe harbor percentage of the facts and circumstances test, correct? As I said, there has been NO prior testing on eligibility. Now, since the plan doesn't have 3-year eligibility, it appears that the plan could be tested on a disaggregated basis - one plan benefiting employees with less than 3 years of service, and one plan benefiting employees with 3 or more years of service, correct? And therefore, if NO HC in the "less than 3 year" category then the disaggregated plan for the "less than 3 years" would automatically pass, and you'd then just have to pass for the "more than 3 year" plan? Similar to the "Otherwise Excludable Employee" rule in 401(k) plans... Also, am I correct that "years of service" has no minimum numbers of hours - just elapsed time? I'm not even yet getting to the C&B test - just trying to wrap my head around this first part, and what I think is a potential problem, although actual testing, if performed, may be fine. Thanks so much for your assistance!

I apologize if this seems like a basic question, but since I'm far from expert in these cafeteria plans, I frequently question myself. I've run across a block of plans, where eligibility for the cafeteria plan is identical to the eligibility for the health plans. There has been no eligibility testing on the cafeteria plans, because the TPA says that since eligibility is the same for all participants, they automatically pass. I would not have said this was true, depending upon the eligibility requirements for the health insurance. For example, first plan I looked at (which raised this question) provides that anyone working less than 30 hours per week is not eligible for the health insurance. Consequently, they are not eligible for the cafeteria plan. Well, all 4 HCE/Keys are naturally eligible for the health insurance, but many employees are <30 hours per week and therefore ineligible. Isn't this a potential problem? Or am I missing something obvious? Now, I understand that they might very possibly pass if testing is done, but it doesn't seem like it is automatic. Thanks!

Thanks Kevin.

Yes, thanks. I had considered that, but it doesn't apply in this plan. I appreciate your taking this extra step.

Thanks. Shot - I'm not entirely sure what I meant, as the question posed to me wasn't all that specific. So if we term it a "deposit" which is then used to all or a portion of the exempt loan payment that is due in 2019, this is then NOT a "contribution" for 415 or 404 purposes, and therefore a "normal" contribution/deduction could still be made? Maybe I'm completely mixing things up, for which a apologize in advance!

S-corp is paying a dividend payment to the ESOP. As I understand it, this can be used towards the repayment of the exempt loan. According to IRC 4975(f)(7), this isn't a prohibited transaction. Agree? If so, another question - for tax purposes, they S-corp is apparently considering this dividend as 2018. But, it is being contributed to the ESOP within a few days. Is this considered an ESOP contribution for 2018, or 2019, or can they choose either? Thanks!

Thanks Kevin - that's the same answer I had come up with. Ran across a plan that has this, so wondered if I was missing something... Pam, it is a 501(c)(3).

Thanks. What's the goal? No idea whatsoever at this point - it was just an inquiry if it was possible.

Maybe I'm missing something - can a 403(b) plan allow a certain class of employees to defer, but exclude them from the safe harbor match? I didn't think so...

Thanks.

If you follow the guidelines, you clearly can have any two out of the three at the same time. If your FSA is limited purpose, and your HRA is set up to only pay after reaching the deductible of $1350/$2700, is there any reason you can't have all three? IRS publication 969 seems to indicate that you can - says you can have one or more of the following. Mind you, I have no idea how this would work in practical terms, or whether there is any advantage to it. Perhaps there is - if you meet the $1350/$2700 deductible, and then your other plan(s) kick in, you could theoretically contribute the maximum to the HSA? Other employee health plans. (p4) An employee covered by an HDHP and a health FSA or an HRA that pays or reimburses qualified medical expenses generally can’t make contributions to an HSA. Health FSAs and HRAs are discussed later. However, an employee can make contributions to an HSA while covered under an HDHP and one or more of the following arrangements. Limited-purpose health FSA or HRA. These arrangements can pay or reimburse the items listed earlier under Other health coverage except long-term care. Also, these arrangements can pay or reimburse preventive care expenses because they can be paid without having to satisfy the deductible. Suspended HRA. Before the beginning of an HRA coverage period, you can elect to suspend the HRA. The HRA doesn’t pay or reimburse, at any time, the medical expenses incurred during the suspension period except preventive care and items listed under Other health coverage. When the suspension period ends, you are no longer eligible to make contributions to an HSA. Post-deductible health FSA or HRA. These arrangements don’t pay or reimburse any medical expenses incurred before the minimum annual deductible amount is met. The deductible for these arrangements doesn’t have to be the same as the deductible for the HDHP, but benefits may not be provided before the minimum annual deductible amount is met. Retirement HRA. This arrangement pays or reimburses only those medical expenses incurred after retirement. After retirement you are no longer eligible to make contributions to an HSA.

Just curious about something. Situation is this: A non-profit has an ERISA 403(b) plan. They came to us a couple of years ago - plan was a mess. Document out of compliance, no 5500 forms EVER filed, ACP testing was never done, etc., etc. - huge clean-up VCP project, and 5500 forms (audited) filed under DFVCP, etc., etc. They just got notified that they are going to have the plan audited by the DOL. I'm curious as to whether this is purely random, or if the DFVCP filing triggered this audit - not that it matters. Any thoughts on this?

I don't equate the ability to amend eligibility in general to the ability to amend eligibility on the last day of the year that would allow a previously eligible employee to be excluded for THAT YEAR. SEP's are supposed to be SIMPLIFIED plans, and as such, don't always have the voluminous guidance that is available for plans under 401(a). I'm using, as I said, a conservative approach, that can't get a sponsor in trouble. Your way, the IRS might disagree - I don't know. I reject the argument that just because the IRS didn't post this specific question on their FAQ list that it means that they approve of an amendment such as you propose. I might ask if you think an auditor who disagrees with your interpretation would accept your argument that, "Well, since you didn't post it on your FAQ's, it must be ok." Anyway, I'm not saying you are wrong, just saying that I wouldn't do it myself, and would never advise a client to do it. Again, just an "agree to disagree."

I'm very conservative on this issue. Bird, since there is no "last day" requirement for a SEP contribution if one is made, I'd still argue that a contribution is due and you can't amend that person or persons out of getting it. Just your basic agree to disagree issue here. By the way, being back at work sucks...

FWIW - I would never counsel amending now for 2018. IF a contribution is made, the eligibility requirements to receive that contribution have already been satisfied. Amend it today for 2019, yes. Amend today for 2018, NO! Just my humble opinion.