Bizarre Allocation Method

[austin3515]

We took over a plan, and here's what they do (and have been doing for several years, and allegedly passed audits):

-Each employee gets $500 to spend on health insurance benefits,

-If people opt out, or if they have lower insurance premiums, the $500 (or the remainder of the $500) is deposited to their account as profit sharing.

We're thinking no CODA b/c the employee never has the option to receive it.

Let's assume they were on a volume submitter document, each in their own group, and therefore no restrictions on the number of allocation groups.

My biggest problem with this is that it seems to fail the requirement that a plan have a definitely determinable allocation method, since the allocation includes these other varaibles (i.e., the insruance premiums and the amount of this stipend).

Do you think a favorable determination letter would ever be granted for a document that includes this allocation method specfically?

[Mike Preston]

I don't see the concern. If it were treated as deferrals, it would be a problem, based on the contingent benefit rules, unless it were part of a 125 plan. But for profit sharing? I know of no restrictions.

[Below Ground]

Each person is their own rate group?