waid10

Hi. While an employee is out on leave and not receiving a paycheck, the employer direct bills the employee for their health insurance premium. The employee pays the premium with after-tax dollars. When the employee returns to work, does the employer have any reporting or other obligation regarding the fact that if the employee had been actively working, the premiums would have been paid with pre-tax dollars?

Hi Brian - I received more clarification. I can better explain this. The employee does not receive any reimbursement for cost sharing. The employee will pay whatever cost sharing they are required under their insurance. After that, if there are PT services that are provided and are not covered by insurance, the employer will only charge a max of $75 per visit. So it is possible that an employee will have deductibles, copays, coinsurance that exceeds $75. The employer won't get involved with that. The only place where the employer will provide a discount is for PT services that are not covered by insurance. I could see where this is a follow up visit, etc. Any ERISA impact?

Hi. A physical therapy practice offers all employees (doesn't matter full-time, part-time, HCE, NCHE) and their families a workplace perk. They have a policy where employees and families receive a discount on any physical therapy services they need. The employee provide insurance information and insurance is then billed. The employee is responsible for paying all cost share amounts. After that, the employee pays no more than $75 per visit. My questions are: 1. Is this structure permissible? 2. Does this policy create an ERISA-covered plan that would require a plan document, 5500, etc.? Thanks.

Hi. My employer subsidizes the premium payments for employee coverage. They pay the greater of 50% or $300. Is this permissible? I would think that for younger employees, the greater would usually be $300. For older employees, the greater would likely be 50%. Thus, there would be a different employer subsidy depending on age. Is this legal?

Thank you @Brian Gilmorethis is very helpful.

Hi. My employer offers multiple health plan options to employees. The employer is considering amending the health plan to prevent employees from making a mid-year change (moving from one plan to another) even if the employee has a Qualifying Event. The employer wants to avoid the opportunity for adverse selection. Is it permissible for an employer to implement a ban like this (where an employee, with a valid QE, is not permitted from moving from say the employer's Gold plan to the Silver plan)?

I really struggle with Affiliated Service Groups. A client asked me about the following scenario: Hospital wants to engage physician practice ("PP"). Hospital offers to hire all of PP's employees. Doctor will be the sole person that will remain behind in his entity. Hospital will then engage Doc as Independent Contractor, where he will provide all of the same services, using his former staff (now employed by the Hospital). Hospital will handle all of the back office functions for doctor (billing, insurance, etc.). The question was whether Doc, in his own entity by himself, can maintain his own retirement plan that provides very rich benefits; and not get lumped into testing that plan with the Hospital retirement plan. It seems to me that this is exactly why the ASG rules were created and that this seems like an A Org situation. But again, I am terrible at ASGs. Any thoughts?

Hi. Our prior retirement plan provider (VALIC) sent us two small checks (one for $1 and another for $17) stating that they charged the wrong interest rate on escrow amounts held under the contracts which were securing outstanding loan amounts under the plan. Thus, they are refunding for the participants that were affected. Does anyone have guidance on what to do with these checks? There is no indication about who these relate to.

Hi. How do you handle the contribution calculation for an HRA when a participant makes a mid-year change in coverage? We (the employer) provide a $1,500 HRA contribution for Employee + 1 (spouse or child) coverage and a $750 contribution for Employee Only coverage. We have a participant that changed from Employee + 1 to Employee Only coverage on April 1st. Is the calculation simply pro rated for the remainder of the year? Here is an illustration of my thought process: $1500 divided by 12 months = $125 per month for January - March = $375.00 For remainder of the year, $750 divided by 12 months = $62.50 per month for April - December = $562.50 $375.00 + $562.50 = $937.50 Is this the correct approach?

So are you saying that it is impermissible to do as Peter Gulia describes above (which is attempt to undue the error for the one participant and credit his 401k account with the amounts that mistakenly went into the 403b)?

I think this is the basis of my question. Can we do as you say and treat this participant different than how we correct the others?

Hi. We mistakenly distributed a lot of 401k plan account balances to participants when there wasn't a distributable event. Our correction plan is to seek return of the distributed amounts, and then use the DOL calculator to adjust for earnings. We have been informed that 1 participant took their mistaken 401k distribution and rolled it into our 403b plan. The 403b plan has the exact same fund lineup, and the participant selected the same age-appropriate target fund where she had had her 401k balance. Our intention had been to use the DOL calculator for all affected participants as it will be impossible to learn of the actual earnings for all impacted (they all did various things with their improper 401k distribution). My question is this: can we use actual earnings for the 1 participant described and the DOL calculator for the rest? Or do we need to use the DOL calculator for everyone so that we treat them the same? For the 1 participant described, if we forfeit her actual earnings in the 403b plan, the DOL calculator will result in less earnings applied to the principal when it is returned to the 401k plan. Thanks.

@RatherBeGolfingYou are right. I should have phrased my question better. Company A's TPA made the mistake in terminated the employees and distributing the accounts. Now Company B is trying to sort out the correction. Company A's plan will merge into Company B's plan. Company A's plan does have a small forfeiture account. Company B's account has a large forfeiture account. Is it permissible for Company B to use forfeitures for the earnings that will need to be contributed? Can they use forfeitures from either plan? Or does it need to be from just the Company A plan? I guess once the plans are merged, the forfeiture accounts will merge as well, so maybe this last question doesn't matter. My guess is that if it isn't permissible to use forfeitures, Company B will make up any difference so that participants don't suffer any losses. Thanks for any thoughts.

Hi. Company A is being acquired by Company B (A's 401k plan is merging into B's). Company A mistakenly terminated its employees and distributed the accounts. My understanding is that this is an improper in-service withdrawal and is treated as an overpayment under EPCRS rules. The correction rules (6.06(4)(b)) provide that the affected participants should be notified and asked to return the distributed amounts, plus earnings. My question is related to the earnings. Is it permissible to have the participant return the distributed principal and use the forfeiture account to fund the earnings? My concern is that the participants will already be upset. To add insult to injury, it is possible that the earnings rate on their 401k plan account outpaced their earnings rate on wherever they put the money after distribution; meaning that they may have to come out of pocket to make up the earnings.

Thanks for the response. The check is for just under $600. The check is made payable to the Plan, but is has a note on that says "FBO" and the name of the terminated participant that I mentioned. I also questioned that this could be related to just one participant. I have asked the Plan Sponsor to call RBS to see if they can get any additional information, but I am not holding out much hope on that.

Plan Sponsor received a check from RBC, payable to the Plan, that was a settlement with the SEC over certain fees involved in a mutual fund. The check says it is for the benefit of a participant that has long since departed from the employer. Plan Sponsor has no address for the participant. How should this be handled?

Thanks Lou. For purposes of my questions, I am ignoring the ownership and top-paid group election. I am just focusing on the compensation part of the test. My follow up question is for the NHCEs. Since we are doing the Prior Year Testing method. We compare the 2020 HCEs to the 2019 NHCEs. To determine the 2019 NHCEs, would they be all of the folks that made less than $120k in 2018?

Hi. I am getting confused on what year's compensation to use in determining HCEs and NHCEs. We are doing the testing for the 2020 Plan Year. We use the Prior Year method. To determine 2020 HCEs, do we look to see who made over $125k in 2019? And ignore 2020 comp altogether?

Hi. Physician practice is wholly - owned by Doctor. The Practice pays for the premium cost for employee-only coverage. If an employee wants to elect family coverage, the employee must pay for the additional cost. The Doctor, however, has family coverage; and the Practice pays for entire cost of his family coverage. Does this create an issue? Thanks.

C and R are owned by the same 4 individuals (25% each). I didn't think for purposes of my question that the ownership level of R and P mattered. I am actually not sure of the shared ownership between R and P. I just know they are in the same ASG. So my question is: does that fact alone, by default pull C into the ASG with R and P? Or would C only be in the ASG with P if a proper analysis was done to see if C is in the ASG on its own merits (i.e., apart from merely being brother-sister with R)?

Can you help with the following scenario: P sponsors a QRP. R and P are related employers, and R's employees participate in P's plan. C and R are brother-sister companies. Just by the nature of C and R being brother-sister, does that by default pull C into the ASG with R and P? Or would C be part of the ASG only if it satisfies the ASG rules on its own? Thanks.

I guess I am just thinking about the situation where a former employee has been receiving his RMD every year. Then this year, he is counting on it because he needs the cash. And if we (the employer) don't provide it in 2020 due to the waiver...

Thank you for all of the replies. If I understand correctly: The Plan can allow for waivers now. This includes our employee that retired on 12/31/2019 and would normally have been required to receive her distribution by 4/1/2020. But even if the Plan allows for waivers, a participant could still insist on receiving his/her RMD in 2020 if they desire (i.e., need the cash, etc.). The Plan would need to be amended to comply with operation, but that doesn't need to be completed until some time in 2022. If the plan sponsor decided, for some reason, to not allow RMD waivers, this is permissible. It would just mean that the employee that retired on 12/31/2019 has an overdue RMD that would need to be addressed. For anyone else that receives an RMD in 2020, they have the option of rolling it over to avoid taxation. Do I have this all correct?

I have a few questions. 1. Is the CARES Act RMD waiver an optional or required provision for plan sponsors? 2. Does the plan sponsor need to amend their plan document to allow the waivers? 3. We have an 80 year old employee that retired on 12/31/2019. My understanding was that she was exempt from the RMD under the "still working" exception until she retired. Now, she should have had her first RMD by 4/1/2020 (which still hasn't occurred). If she had worked on 1/1/2020, her first RMD wouldn't have been required until 4/1/2021 (notwithstanding the CARES Act). So I believe we are late in processing this RMD, correct? Do we need to process this ASAP? Does she have rollover options as part of the CARES Act? Thanks for any thoughts.

wait, is this true? I was aware that a 457 plan is not subject to the 402g limit. But it just happens that the 402g limit is the same $19,500 dollar amount as the 457 limit. But my understanding is that the 457 contributions are taken into account for purposes of 415. It sounds like you are saying this isn't true. If I understand you correctly, you are saying that a participant could defer $19,500 in the 457 plan, and then also receive as much as $57,000 in contributions under the 401a plan. Is that correct?