Irrevocable Opt-Out and the Top Heavy calculation

[ldr]

Good afternoon to all,

A plan of ours has a 3 doctors plus staff.  While all docs are HCEs, only one is also Key - the 100% owner.  The other 2 doctors have signed irrevocable waivers of participation and are not part of the plan.

They are in the census in our software program, classified as being in an ineligible class of employees.  When we run the Top Heavy calculation, we get error messages saying that we have failed to meet the TH requirements because these two doctors are not getting a TH minimum contribution.

If they have signed the irrevocable waiver, it is our understanding that they are not eligible for any portion of the plan at any time, including the TH minimum.  Are we correct on this?

Yes we have read the plan document and yes we have a call in to the software provider to see if we are coding things incorrectly.  But in the meantime we wanted to ask the experts if these two doctors are supposed to be counted for any purposes in anything in the plan, Top Heavy or anything else?

Thanks for any advice and don't shoot the messenger.  Per usual I am being asked to resolve something on a plan that is not mine.

 

[Lou S.]

You are correct. Non-participants are not eligible for the Top-Heavy Minimum.

[Larry Starr]

8 hours ago, ldr said:

Good afternoon to all,

A plan of ours has a 3 doctors plus staff.  While all docs are HCEs, only one is also Key - the 100% owner.  The other 2 doctors have signed irrevocable waivers of participation and are not part of the plan.

They are in the census in our software program, classified as being in an ineligible class of employees.  When we run the Top Heavy calculation, we get error messages saying that we have failed to meet the TH requirements because these two doctors are not getting a TH minimum contribution.

If they have signed the irrevocable waiver, it is our understanding that they are not eligible for any portion of the plan at any time, including the TH minimum.  Are we correct on this?

Yes we have read the plan document and yes we have a call in to the software provider to see if we are coding things incorrectly.  But in the meantime we wanted to ask the experts if these two doctors are supposed to be counted for any purposes in anything in the plan, Top Heavy or anything else?

Thanks for any advice and don't shoot the messenger.  Per usual I am being asked to resolve something on a plan that is not mine.

 

And for what it's worth, we NEVER use irrevocable waivers for this purposes.  A simple amendment that excludes these HCEs from the plan accomplishes the same thing and is reversible which often becomes an issue.

[BG5150]

15 hours ago, ldr said:

 But in the meantime we wanted to ask the experts if these two doctors are supposed to be counted for any purposes in anything in the plan, Top Heavy or anything else?

 

They are counted as eligible but not benefiting for coverage.  If they are HCE doctors, then that's probably good.

[imchipbrown]

Keep them out of the software.

[BG5150]

15 hours ago, imchipbrown said:

Keep them out of the software.

It may or may not be material, but if you are using the software to calculate your coverage testing it will be off by 1 non-benefiting employee.