Message Boards Digest

January 23, 2020

Here are the most recently added topics on the BenefitsLink Message Boards:

austin3515 created a topic in IRAs and Roth IRAs

The Rich Person's Roth

"See 'The Rich Person Roth: For The Most Tax-Free Retirement Income' -

Whenever I read 'backed by life insurance' I think used-car salesman. Is this legit? I have a client who is doing this."

Number of replies posted  9 replies      Number of times viewed  62 views      Add Reply
[Advert.] -- Outstanding Content -- Affordable Pricing

Sponsored by Burrmont Compliance Labs LLC Find out why we are the fastest-growing ERISA Compliance Service in the industry. Outstanding authors, customer satisfaction & support. Contact us to see what we can do for you. or 612-605-2266

401 Chaos created a topic in Health Plans (Including ACA, COBRA, HIPAA)

Small Employer Paying Varying Percentages of Group Health Premiums for Different Employees

"Situation involves a true Mom and Pop employer with husband and wife owners (both highly compensated) and a handful of other employees -- 3 or 4 full-time working more than 30 hours a week and a couple part-time working 15-20 hours per week.

The company offers a fully-insured group health plan for full-time employees. Of those, only the owners and a couple of the full-time employees have elected to participate. The company has always 'covered' 100% of the owners' group health premiums but historically only 60% of the others' premiums with the employees required to contribute the remaining 40%.

Mom and Pop seem confused about the existence of an actual cafeteria plan but it appears they have been deducting the 40% of employees' premiums from pay on a pre-tax basis so seems they likely have a POP whether they realize or not. (Our understanding is the company has just paid 100% of the total premiums over to the insurer, including 100% of the premiums on behalf of the owners, plus the combined 60/40 contributions for employees without considering the premiums paid on behalf of the owners to be salary to them or a deferral from their pay in some way. In other words, it's just been employer-paid fully insured group health insurance coverage.

As I understand the current rules, it does not seem like there is a per se problem with charging varying rates for the fully insured coverage from a group health insurance, HIPAA, ERISA, or other perspective. (The 60% contribution satisfies the 50% minimum employer contribution amount required by the insurer/underwriting so insurer is fine with arrangement.)

Cafeteria Plan discrimination testing would appear to be a potential issue here, however. Even though they presumably only have a POP, my understanding is POPs are still subject to Section 125's 'Eligibility Test' as part of the streamlined safe harbor testing. And based on some less than clear 125 examples and discussion in EBIA, the Eligibility Test arguably includes something of a 'benefits' component that could be construed to prohibit an employer paying a greater percentage of benefits for HCs than NHCs. So that's potentially an issue here.

However, in this situation, the HCs are not actually participating in the Section 125 plan -- because the company is paying their full cost and they have no need of the 125 Plan. In essence, the NHCs are arguably getting more benefit from the Section 125 plan than the HCs because the NHCs are actually getting a benefit. I'm not wild about that argument for obvious reasons. However, what if we took this one step further and actually amended the Section 125 Plan to exclude all HCs from participation. There's no practical impact on the owners (the only HCs now and likely forever) because they are not participating in the Section 125 Plan. Under that approach, it seems impossible for the Section 125 plan to have a discrimination issue since no HCs could participate? But it also seems the company should still be able to pay 100% of the owners' premiums for the fully insured health coverage and not treat that as taxable compensation.

I understand that could all change if and when the new Section 105(h) rules are extended to fully-insured group health coverage but, in the interim, are there nondiscrimination or tax issues with this sort of approach to having the company pay 100% of HCs' premiums and a significantly lower percentage of NHCs' premiums?'

Number of replies posted  0 replies      Number of times viewed  20 views      Add Reply

Lynne Dolan created a topic in Governmental Plans

Can Governmental DC Plan Offer 457(b) Plan Plus Deferrals/Matching Contributions?

"Can a money purchase defined contribution plan maintained by a municipality offer elective salary deferrals and matching contributions in addition to 457(b) plan? Not eligible for 403(b) or 401(k), so I think not. Am I missing something?"

Number of replies posted  2 replies      Number of times viewed  27 views      Add Reply

Dan created a topic in 401(k) Plans

Matching Contributions Using Company Stock: Legal? Worth the Hassle?

"A client is considering beginning to contribute a match. However, they are considering different ways to fund it. They have asked about offering the option of receiving the match in cash or in privately held company stock. The administrative complication is obvious. But would this funding arrangement be permissible?"

Number of replies posted  2 replies      Number of times viewed  35 views      Add Reply

K2 created a topic in 401(k) Plans

Tax Credit for Start-Up Plan if Plan Started in 2019 -- How Much?

"I understand that the new law increased the start-up plan credit for tax years beginning after 12/31/2019. How would this work for a plan started in 2019. Would their maximum credit be $500 on their 2019 tax return, but then $5,000 in the next two years? Or do they stick with the $500 credit for all three years?"

Number of replies posted  3 replies      Number of times viewed  27 views      Add Reply

Hojo created a topic in Defined Benefit Plans, Including Cash Balance

Two Questions on 2020 JBEA Renewal

"[1] Are we expecting a faster response on renewals since they can be submitted through [2] Must we wait until 4/1/2020 to use the 20-prefix or should we start using it as soon as our application is filed (assuming of course that we meet all relevant criteria)?"

Number of replies posted  2 replies      Number of times viewed  24 views      Add Reply, Inc.
1298 Minnesota Avenue, Suite H
Winter Park, Florida 32789
(407) 644-4146

Lois Baker, J.D., President
David Rhett Baker, J.D., Editor and Publisher
Holly Horton, Business Manager

Copyright 2020, Inc. All materials contained in this mailing are protected by United States copyright law and may not be reproduced, distributed, transmitted, displayed, published or broadcast without the prior written permission of, Inc., or in the case of third party materials, the owner of those materials. You may not alter or remove any trademark, copyright or other notices from copies of the content.

Links to web sites other than and are offered as a service to our readers; we were not involved in their production and are not responsible for their content.

Unsubscribe | Privacy Policy