KJohnson

FWIW below is what the ACA regulations say with regard to the W-2 safe harbor on affordability. They disallow some end of the year "true up" but they seem to contemplate a periodic contribution that is based on a consistent percentage of all Form W-2 wages but is subject to a cap. Therefore, at least for the ACA affordability W-2 safe harbor you could have something like 9.2% (assuming you want some cushion) of W-2 wages for the pay period subject to a cap of $X per pay period. Of course just because it is contemplated under the ACA W-2 safe harbor, does not mean they have thought out all other legal constraints. In addition, to qualify for this safe harbor, the employee's required contribution must remain a consistent amount or percentage of all Form W-2 wages during the calendar year (or during the plan year for plans with non-calendar year plan years) so that an applicable large employer member is not permitted to make discretionary adjustments to the required employee contribution for a pay period. A periodic contribution that is based on a consistent percentage of all Form W-2 wages may be subject to a dollar limit specified by the employer.

DOL's position has always been that 408(b)(2) works as an exemption for 406(a) prohibited transaction but not 406(b). The question then becomes whether the relationship affects the exercise o exercise of such fiduciary's best judgment as a fiduciary Department of Labor Regulation 29 CFR §2550.408b-2(e). (e) Transactions with fiduciaries—(1) In general. If the furnishing of office space or a service involves an act described in section 406(b) of the Act (relating to acts involving conflicts of interest by fiduciaries), such an act constitutes a separate transaction which is not exempt under section 408(b)(2) of the Act. The prohibitions of section 406(b) supplement the other prohibitions of section 406(a) of the Act by imposing on parties in interest who are fiduciaries a duty of undivided loyalty to the plans for which they act. These prohibitions are imposed upon fiduciaries to deter them from exercising the authority, control, or responsibility which makes such persons fiduciaries when they have interests which may conflict with the interests of the plans for which they act. In such cases, the fiduciaries have interests in the transactions which may affect the exercise of their best judgment as fiduciaries. Thus, a fiduciary may not use the authority, control, or responsibility which makes such person a fiduciary to cause a plan to pay an additional fee to such fiduciary (or to a person in which such fiduciary has an interest which may affect the exercise of such fiduciary's best judgment as a fiduciary) to provide a service. Nor may a fiduciary use such authority, control, or responsibility to cause a plan to enter into a transaction involving plan assets whereby such fiduciary (or a person in which such fiduciary has an interest which may affect the exercise of such fiduciary's best judgment as a fiduciary) will receive consideration from a third party in connection with such transaction. A person in which a fiduciary has an interest which may affect the exercise of such fiduciary's best judgment as a fiduciary includes, for example, a person who is a party in interest by reason of a relationship to such fiduciary described in section 3(14)(E), (F), (G), (H), or (I

Might want to look at this case from earlier this year, it collects cases from other Circuits. http://law.justia.com/cases/federal/district-courts/new-jersey/njdce/3:2012cv07618/282676/17/

This link has a reference to the grey book in a DB context http://benefitslink.com/boards/index.php?/topic/47444-merger-effective-112010/#.VE54ahbD8Y0

Although you might be a MEWA for certain purposes, there are exceptions from Federal reporting if you have 25% common ownership among the entities, the entities were once related and there was a change in control and the arrangement does not extent beyond the year following the change in control. There is also this exception: "A MEWA or ECE licensed or authorized to operate as a health insurance issuer in every State in which it offers or provides coverage for medical care to employees;" But I read this as the MEWA itself being licensed and not an exemption for fully insured MEWAs. The federal reporting might be a nuisance but the real issue is state law. In many states, however, their MEWA statutes don't apply to fully insured MEWAs. Also be careful with what you represented to the insurers. In some instances when multiple employers apply for a single policy the insurer wants representation that there is a controlled group/common control. Also you can't use the ASG rules to avoid MEWA status.

I think they should go back and look at 411(a)(10)(A) and (B). If they elect the old schedule then they can have all contributions past and future calculated at the old schedule. There is no language of "(determined as of the later of the date such amendment is adopted, or the date such amendment becomes effective)" in (B) that is only in (A). So I think his conclusion that the protection under the election of the old schedule only applies to "benefits accrued at the time of the amendment" is not correct. Even the language in (A) is open to some debate. Look at Sal Chapter 4, Section 3 Part F. Where the debate is whether the phrase in parenthesis modifies "nonforfeitable percentage" or the "accrued benefit derived from employer contributions" t (10) Changes in vesting schedule (A) General rule A plan amendment changing any vesting schedule under the plan shall be treated as not satisfying the requirements of paragraph (2)if the nonforfeitable percentage of the accrued benefit derived from employer contributions (determined as of the later of the date such amendment is adopted, or the date such amendment becomes effective) of any employee who is a participant in the plan is less than such nonforfeitable percentage computed under the plan without regard to such amendment. (B) Election of former schedule A plan amendment changing any vesting schedule under the plan shall be treated as not satisfying the requirements of paragraph (2) unless each participant having not less than 3 years of service is permitted to elect, within a reasonable period after the adoption of such amendment, to have his nonforfeitable percentage computed under the plan without regard to such amendment.

http://www.dol.gov/ebsa/regs/AOs/ao2013-03a.html

http://www.irs.gov/pub/irs-tege/qab_021406.pdf

I think the majority of plans out there use a W-2 definition or a 3041(a) definition because that is what employers seem to understand. Under that definition I think it is included. My point on the post-severance language is that there would be no need to specifically exclude it for post-severance periods if it could never be 415 compensation to begin with.

I guess I wonder that if severance is never 415 comp why would they have the caveat in the regs that severance is excluded if paid after severance from employment. That part would be unnecessary if it was never included to begin with. Maybe it is to take into account that severance paid before severance from employment is included under at least some of the 415 definitions (maybe W-2 or 3401(a)) and not others?. But then again, when I have seen the charts comparing the various definitions of 415 comp I have never seen a line for severance pay before termination of employment as included in some definitions and excluded in others. **************************** (iv) Other post-severance payments. Any payment that is not described in paragraph (e)(3)(ii) or (iii) of this section is not considered compensation under paragraph (e)(3)(i) of this section if paid after severance from employment with the employer maintaining the plan, even if it is paid within the time period described in paragraph (e)(3)(i) of this section. Thus, compensation does not include severance pay, or parachute payments within the meaning of section 280G(b)(2), if they are paid after severance from employment with the employer maintaining the plan, and does not include post-severance payments under a nonqualified unfunded deferred compensation plan unless the payments would have been paid at that time without regard to the severance from employment.

I am not so sure on that. First, it is not post-severance compensation as defined in the 415 regs. Of course severance paid after termination would not be included if you plan's definition of compensation mirrors the 415 post-severance mandatory exclusion. But, since it is not post-severance then it is a question of whether it fits into your plan's normal definition of compensation. If you use a W-2 or a 3401(a) definition similar to what is pasted at the end of this email then in both you are using the 3401(a) definition of wages. If you track over to the 3401(a) regulations at 31.3401(a)-1(b)(4) you will find (4) Dismissal payments. Any payments made by an employer to an employee on account of dismissal, that is, involuntary separation from the service of the employer, constitute wages regardless of whether the employer is legally bound by contract, statute, or otherwise to make such payments. ************************************************ 1) Information required to be reported under Code §§6041, 6051 and 6052 (Wages, tips and other compensation as reported on Form W-2). Compensation means wages, within the meaning of Code §3401(a), and all other payments of compensation to an Employee by the Employer (in the course of the Employer's trade or business) for which the Employer is required to furnish the Employee a written statement under Code §§6041(d), 6051(a)(3) and 6052. Compensation must be determined without regard to any rules under Code §3401(a) that limit the remuneration included in wages based on the nature or location of the employment or the services performed (such as the exception for agricultural labor in Code §3401(a)(2)). (2) Code §3401(a) Wages. Compensation means an Employee's wages within the meaning of Code §3401(a) for the purposes of income tax withholding at the source but determined without regard to any rules that limit the remuneration included in wages based on the nature or location of the employment or the services performed (such as the exception for agricultural labor in Code §3401(a)(2)).

Why do you want to aggregate? Don't all sources pass if tested separately? For 401(k) I get: Plan A (173/227) / (53/53) = 0.762 or 76.2% Plan B 54/277) / (0/53) = N/A test passes, no HCEs For Match I get: (54/277) / (0/53) = N/A test passes, no HCEs For PS I get: (173/227) / (53/53) = 0.762 or 76.2%

In the preamble and Treasury sure seems to "conflate the two." Under this same reasoning, if certain conditions are met, an offer of coverage to an employee performing services for an employer that is a client of a professional employer organization or other staffing firm (in the typical case in which the professional employer organization or staffing firm is not the common law employer of the individual) (referred to in this section IX.B of the preamble as a ‘‘staffing firm’’) made by the staffing firm on behalf of the client employer under a plan established or maintained by the staffing firm, is treated as an offer of coverage made by the client employer for purposes of section 4980H. For this purpose, an offer of coverage is treated as made on behalf of a client employer only if the fee the client employer would pay to the staffing firm for an employee enrolled in health coverage under the plan is higher than the fee the client employer would pay to the staffing firm for the same employee if the employee did not enroll in health coverage under the plan.

I think it is enrollment and I think to take advantage of the offer the PEO has to have two rates--one for employees that enroll in the offered coverage and one for those that do not. Here is the condition from the regulations "only if the fee the client employer would pay to the staffing firm for an employee enrolled in health coverage under the plan is higher than the fee the client employer would pay the staffing firm for the same employee if that employee did not enroll in health coverage under the plan."

The key is taking each plan in the group and passing the eligibility test in 1.105-11©(2). You drill down and you can use the reasonable classification test under 410(b) to do this. Once you pass eligibility testing then the test for nondiscriminatory benefits only applies to participants in that particular plan and not all plans. Further if you have discriminatory benefits in the same plan then the last sentence of 1.105-11©(4) lets you provide in the document that those separate benefits will actually be considered separate plans. Then if you pass eligibility when treated as separate plans you should be ok with separate benefits.

Although this is for determination letters, the IRS did issue this QAB with regard to verification of prior documents. http://www.irs.gov/pub/irs-tege/qab_102411.pdf

I also listened to the Webinarl. When I heard your question I went back and looked at the ERISA Outline. Sal reads 2003-85 like you to indicate that 100% can go over with no excise tax. He then states that he believes that the IRS' position is that the entire amount can then be allocated under the 7-year allocation rule. He cites PLR 201147032 but I didn't go back and look at this. Apparently there were prior positions in PLRs that anything in excess of the 25% had to be immediately allocated.

My 2 Cents, can you give more detail regarding the instance that you saw the 100% excise tax with the majority owner waiver. Did the IRS take the position that you can't take the waiver into consideration for minimum funding so even though the Plan was sufficient on a termination basis they imposed the excise tax for funding in the year of termination?

So I guess there is two questions does it work under 11(g) and does it work under the test you are trying to satisfy. Is the upshot that, as to non-discriminatory classification, it works for cross-testing and not for BRF? Under general testing it appears that §1.401(a)(4)-2©(3)(ii) provides that the reasonable classification test is automatically satisfied under §1.410(b)-4(b) if the ratio percentage satisfies the mid-point. No such automatic pass in BRF. So by naming only NHCE by name you automatically satisfy any 410(b) aspect of 11(g). They can then be used in: 1) Coverage only if you use ratio percentage. 2) BRF only if you use ratio percentage. 3)Cross-testing/general testing--ratio percentage or average benefits.

It depends on how you are trying to pass. I think you can pass BRF either by ratio percentage (which does not prohibit naming names)or non-discriminatory classification under 1.410-(b)(4) (which prohibits naming names). So if you named names in your 11(g) it wouldn't do you any good if you were trying to pass BRF by the non-discriminatory classification test. On the other hand, if you could pass BRF on the ratio percentage with the amendment then I think you would be fine in naming names both under the BRF testing rules and under 11(g). But, again this is just thinking aloud and I didn't go back and look.

I think that you don't include any amendment after the 2010 cumulative list on which the PPA restatement is based. For the PPA interim amendment it is interesting. They say don't include: "Any amendment to a pre-approved plan that was adopted by the sponsor or practitioner on behalf of the employer and considered by the IRS in issuing an opinion or advisory letter for the plan" For the Corbel document, the volume submitter practitioner for the interim amendments (like PPA) would elect some defaults and then adopt the amendment. If the employer accepted the defaults they did not have to sign the amendment. If they wanted to change the defaults they did. At least to those accepting the defaults they would clearly meet the first part of the sentence above. But what about the second "considered by the IRS in issuing an advisory letter for the Plan".

It didn't seem all that remarkable. If you use an 11(g) amendment to pass coverage I always thought you could add by name if you were passing coverage on ratio percentage. Of course if you were passing coverage by average benefits you couldn't. It would seem to be the same if you are using the 11(g) to pass 401(a)(4). The requirement of the 11(g) is that the additional corrective contribution also pass coverage standing on its own. And, if you are giving it only to NHCEs you will always pass on ratio percentage--therefore you can name names. All that said, I couldn't find the TAM either.

I think you have an issue...What is below is from the determination letter check sheet. http://www.irs.gov/pub/irs-pdf/p6389.pdf b. If any part of the employee's account balance may be forfeited before the participant incurs five consecutive one year breaks in service, does the forfeiture occur as the result of a distribution on termination with opportunity for restoration as required by regulations? [0290]

Is there a chance that the Plan does not provide for forfeitures upon a complete distribution of the vested account balance so that the only forfeitures are based on five one year breaks in service? If so, you may not need the "buy back".

MWeddell, why do you think it is aggressive? Most adoption agreements, like Corbel, have an election for additional matching contributions. Why couldn't you just elect this, not fund the pay period match and fund the annual match.