Controlled Group Coverage

[justatester]

This one goes into the category....just doesn't seem correct.

2 plans:

Plan A:  Age 21, no service requirement: Excludes all EEs except Pharmacists and Managers

Plan B:  Age 21, 1 YOS no exclusions

Both plans are safe harbor.

After 1 YOS, the pharmacist/managers move over to plan B (at least in payrolls eyes). 

I am not sure of several things.  1) what provisions makes the Pharmacists and   manager "no longer" eligible for Plan A.  I believe there are still eligible 2) What about coverage? Can the plans be aggregated for coverage purposes? If so, are they still safe harbor since less than 1 YOS ee except Pharmacists and mangers are not eligible.  How do I count those non manager/pharmacist ees in combined coverage?

I think that the manager/pharmacists are still eligible for Plan A and therefore they will not pass coverage..  It just seems a bit fishy to me.

 

[Larry Starr]

20 hours ago, justatester said:

This one goes into the category....just doesn't seem correct.

2 plans:

Plan A:  Age 21, no service requirement: Excludes all EEs except Pharmacists and Managers

Plan B:  Age 21, 1 YOS no exclusions

Both plans are safe harbor.

After 1 YOS, the pharmacist/managers move over to plan B (at least in payrolls eyes). 

I am not sure of several things.  1) what provisions makes the Pharmacists and   manager "no longer" eligible for Plan A.  I believe there are still eligible 2) What about coverage? Can the plans be aggregated for coverage purposes? If so, are they still safe harbor since less than 1 YOS ee except Pharmacists and mangers are not eligible.  How do I count those non manager/pharmacist ees in combined coverage?

I think that the manager/pharmacists are still eligible for Plan A and therefore they will not pass coverage..  It just seems a bit fishy to me.

 

I don't even want to go beyond the initial big problem (but I will, at least somewhat). As you have outlined the plan language, those pharmacists and managers who become eligible for plan B are now in BOTH plans absent a provision in plan A that says otherwise. 

First, why on earth did they do this?  Maybe there is a good reason; maybe (probably?) not.  In any case, if I really wanted to do what you say they are doing, we would have a provision in Plan A that excludes any employee who participates in another plan of the employer, so when a P or M enters plan B, he/she is no longer an active participant in plan A. We would also have decided in advance if we want language that would automatically move any money they have in Plan A to Plan B upon that occurrence (which is how I would handle it) or leave their one year of contributions in Plan A.  

No, no matter what, I'm pretty confident that we could have accomplished all of this in one plan; why are there two plans in the first place?

Oh, and the plans ARE aggregated for coverage purposes; that's why we can, theoretically, have every participant in their own plan (just salivating over the fees) and still be ok with coverage.

And of course, you haven't spelled out WHICH safe harbor the plans are?  There are several types of safe harbor rules that we deal with, including the standard SH 401(k) that has employer contributions and the SH plan that avoids employer contributions and thus, also avoids top heavy.

Your last comment is: "I think that the manager/pharmacists are still eligible for Plan A and therefore they will not pass coverage..  It just seems a bit fishy to me."

I would suggest that you certainly pass coverage since ALL the employees are in Plan A and a smaller subset are also in Plan B (because the P and M's did not get excluded from Plan A when they met the requirements to also be in Plan B). 

CORRECTING LAST PARAGRAPH:

I would suggest that you certainly pass coverage since ALL the employees (who have met the 1 year requirement) are in Plan B and a smaller subset are also in Plan A (because the P and M's did not get excluded from Plan A when they met the requirements to also be in Plan B). 

[justatester]

Safe harbor  for ADP/ACP via SH match.

Oh, and the plans ARE aggregated for coverage purposes; that's why we can, theoretically, have every participant in their own plan (just salivating over the fees) and still be ok with coverage.   When aggregated for coverage, are you saying treated as one plan? Or treating each plan separately, but taking the entire group in the denominator?  BTW...the only HCES are the Pharmacists and the mangers.  No other ee, meets the HCE definition.  Does this make a difference?

[CuseFan]

Clearly the design is to allow Pharmacists and Managers into a plan early while keeping everyone else out for a year. Unless a P or an M is hired in as an owner, they would not be HCE for their first year of employment, so why not have one plan where that subset of defined employees (still NHCE at the time) is allowed immediate entry?

If you have to aggregate for coverage and NDT, because the Ps and Ms are HCEs, isn't there then a BRF problem?

Fishy is an understatement.

[Larry Starr]

19 hours ago, justatester said:

Safe harbor  for ADP/ACP via SH match.

Oh, and the plans ARE aggregated for coverage purposes; that's why we can, theoretically, have every participant in their own plan (just salivating over the fees) and still be ok with coverage.   When aggregated for coverage, are you saying treated as one plan? Or treating each plan separately, but taking the entire group in the denominator?  BTW...the only HCES are the Pharmacists and the mangers.  No other ee, meets the HCE definition.  Does this make a difference?

I don't understand the option you present of treating it as one plan or treating each plan separately but taking the entire group in the denominator. What does that mean?  Yes, you aggregate for coverage.  But plan A covers only NHCEs (they can't be HCEs in their first year of employment unless they are owners, which I assume is not the case), and plan B covers everyone who meets the service requirement.  So where is there a coverage issue? So when you say the only HCEs are the P and M, you have to be careful to make sure that you treat them NOT as HCEs for the first year.

But, in the second year, you will have HCEs in plan A and you will have to pass non-discrimination taking into account both plans.