TSA nondiscrim violations and no 5500 filed

[Lori H]

An alzheimer's service group established a TSA plan in 1993. In 1995 they started to offer employees $150 per month for either group health insurance or if they did not need the ins coverage, the company would put it in an annuity in the plan. The $150 is now $250. In addition the employees are allowed to defer funds. There has never been a 5500 prepared since they started employer funding nor non-discrimination testing. Certainly the plan has serious issues. The director is wanting to reverse 2009 employer funding back to the company and make the plan Non-ERISA for 2009. I suspect that is possible, but what about plan years 1995-2008?

[rcline46]

If there is employer funds in the plan, it will ALWAYS be an ERISA plan.

I believe that 401(a)(4) non-discrimination issues only arise starting in 2002 due to EGTRRA. Checking should not be terribly difficult.

5500 issues - will take some time, but the filings are actually quite simplistic and can be done going all the way back using the 2008 forms, and only $1,500 to the feds if the plan is small enough.

[Bill Presson]

An alzheimer's service group...

Am I bad that I chuckled when it was shown that they forgot to file a 5500?

[K2retire]

An alzheimer's service group...

Am I bad that I chuckled when it was shown that they forgot to file a 5500?

You were not alone in that!

[mbozek]

If there is employer funds in the plan, it will ALWAYS be an ERISA plan.

I believe that 401(a)(4) non-discrimination issues only arise starting in 2002 due to EGTRRA. Checking should not be terribly difficult.

5500 issues - will take some time, but the filings are actually quite simplistic and can be done going all the way back using the 2008 forms, and only $1,500 to the feds if the plan is small enough.

Non discrimination for employer contributions to non profit 403b plans became effective in 1989 but only prohibits discrimination in favor of HCEs, i.e., in 2009 employees who earned over $110k in 2008. If the plan had no HCEs beginning in 1993 there is no discrimination. There is no ADP testing for employee contributions to the 403b plan.

Since a 403b plan is not subject to IRS filing requirements the 5500s for prior years can be submitted under a DOL remedial program that used to cost only $1500 regardless of the number of years missed. I once had a client file 5500s back to 1975 and pay only $1500.

You cant reverse the contributions for 09 if they are 100% vested and it doesnt change the plans ERISA status for prior years. The client needs to find a good lawyer.

[Lori H]

If there is employer funds in the plan, it will ALWAYS be an ERISA plan.

I believe that 401(a)(4) non-discrimination issues only arise starting in 2002 due to EGTRRA. Checking should not be terribly difficult.

5500 issues - will take some time, but the filings are actually quite simplistic and can be done going all the way back using the 2008 forms, and only $1,500 to the feds if the plan is small enough.

Non discrimination for employer contributions to non profit 403b plans became effective in 1989 but only prohibits discrimination in favor of HCEs, i.e., in 2009 employees who earned over $110k in 2008. If the plan had no HCEs beginning in 1993 there is no discrimination. There is no ADP testing for employee contributions to the 403b plan.

Since a 403b plan is not subject to IRS filing requirements the 5500s for prior years can be submitted under a DOL remedial program that used to cost only $1500 regardless of the number of years missed. I once had a client file 5500s back to 1975 and pay only $1500.

You cant reverse the contributions for 09 if they are 100% vested and it doesnt change the plans ERISA status for prior years. The client needs to find a good lawyer.

This is a small plan. There is only one participant currently receiving employer contributions. The discrimination issue is not so cut n dry. Participants who defer are not receiving employer contributions. They only receive employer contributions if they do not need insurance, that money goes into the plan. They give all employees the option to take a set amount as funds towards insurance premiums, should they not need it, it goes into the TSA. As far as I know the plan has never had any HCE's.

[Lori H]

I still have an issue with the nature of this plan. There have never been any HCE's, however something seems fishy when one employee receives a employer contribution while others do not. There was never a document in place outlining the benefits, rights and features of the plan, the company just arbitrarily contributed money set aside for health insurance into their TSA if the employee did not need health insurance. This seems discriminatory in nature or is it? The employees could not opt to take the money in cash, therefore it was never subject to W-2.