ERISA11 Posted April 24, 2019 Posted April 24, 2019 This may be a dumb question, but does the grace period for SIMPLE employer eligibility apply if an eligible employer started a plan mid-year but then employed over 100 employees with compensation over $5,000 later that same year? For example, the employer had fewer than 100 employees with compensation exceeding $5,000 in 2014, started a SIMPLE in the middle of 2015 (eligible for 2015 based on prior year employee numbers), and by the end of 2015, had over 100 employees with compensation over $5,000. The employer would be ineligible to maintain a SIMPLE for 2016 in the absence of the grace period. Does the grace period not apply because the plan was maintained by an "eligible employer" for less than a 12 months (due to the mid-year start date)? The statute says, with regard to the grace period -- "An eligible employer who establishes and maintains a plan under this subsection for 1 or more years and who fails to be an eligible employer for any subsequent year shall be treated as an eligible employer for the 2 years following the last year the employer was an eligible employer." So in other words, my question is does the requirement to have maintained the plan as an eligible employer for 1 or more years mean that the employer must have maintained the plan as an eligible employer for at least 12 full months, or is it possible that this one-year requirement really refers to more of a "plan year" concept such that maintaining the plan as an eligible employer for a short plan year (as a result of establishing a plan mid-year) would qualify as maintaining it as an eligible employer for "1 year"? Has anyone ever run into this?
Luke Bailey Posted April 25, 2019 Posted April 25, 2019 Agree with Mike. They maintained it for 2016. Luke Bailey Senior Counsel Clark Hill PLC 214-651-4572 (O) | LBailey@clarkhill.com 2600 Dallas Parkway Suite 600 Frisco, TX 75034
ERISA11 Posted April 30, 2019 Author Posted April 30, 2019 Thanks for your responses. It is appreciated.
Recommended Posts
Create an account or sign in to comment
You need to be a member in order to leave a comment
Create an account
Sign up for a new account in our community. It's easy!
Register a new accountSign in
Already have an account? Sign in here.
Sign In Now