Comp Reduced by 125

[austin3515]

This is ridiculous.  I am reading that employee deferrals under a 125 plan are supposed to be excluded from the definition of compensation.  So Johnny makes $100,000 and his insurance premiums are $5,000 so his eligible comp is just $95,000.  Is anyone in the country doing THAT right??

I'm renaming these things to "COMPLEX's"  I don't know what it stands for yet...

[Belgarath]

Doubtful. We've had some VCP filings to correct other issues where this was corrected simultaneously.

I agree that SIMPLE's are not! So many ways for errors to occur, and they almost never have any professional oversight (of course, they aren't supposed to need it, but they do).

How about Convoluted Operations Moronic Prototype Employer eXacerbation plans?

[austin3515]

So you treated as ineligible deferrals and forfeited the match?

Also, I don't think severance is ineligible for a SIMPLE, is that right?  415 doesn't apply...

[Belgarath]

Nope - filings (which were all  approved) proposed leaving excess amounts in the plan, in the participants' accounts. Relatively small amounts, and mostly NHC employees. The IRS is pretty reasonable about this - but VCP fee is increased if excess amounts retained in plan. Employer generally prefers to do this, however, as opposed to trying to take away amounts and earnings going back several years! Plus, our fee to figure all that out would likely have been as much as the additional IRS fee...

I wasn't sure if you meant "eligible" or "ineligible" on the severance? Either way, without doing any research, I'd say true severance pay was ineligible.