"I'm hoping I can get information regarding the following scenario: Large government employer (~550 employees) currently offers a cafeteria plan under which employees can pay premiums for medical, dental, life, and to make contributions to FSA and HSA. Employees must elect one of the medical policies offered, but otherwise they can take the rest as cash if they make no other elections/contributions. Employer is considering allowing employees to opt out of medical coverage if they can show that they are covered under their spouse's medical. This would mean that employees may get all the cash from the cafeteria plan if they make no elections/contributions. Depending on which union the employee belongs to, the employee will have a different total cap on his/her cafeteria plan. What issues do you see?"

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"I have a client who historically has been a 5500 SF filer, consisting of a husband, wife, and one employee. The employee left the firm in 2017 (and was not replaced) and moved their money out of the plan in early 2018. In 2018, they filed a 5500-SF as a 'Single Employer plan' because the terminated employee still had money in the plan for a portion of the year, and the plan was still covered by a fidelity bond. For 2019, should they file the Form 5500-SF as a 'One-Participant plan' (in order to drop the bond requirement) or should the form continue to report them as a Single Employer plan? Also, I think it's easiest to have them continue to file an SF as opposed to switching to an EZ."

"Would everyone agree that, in the case of a VEBA maintained by a tax-exempt entity, 419A(d) does not require the entity to establish separate accounts for key employees? Because 419A(d)(1) states that it applies to the first taxable year for which a reserve is taken into account under 419A(c)(2), I assume that no separate accounts would be required. Obviously, these employers aren't concerned with the general deduction limitations of 419 and 419A. However, I want to make sure these amounts don't need to be taken into account for 415(c) purposes under 419A(d)(2) and that no excise tax is triggered under 4976(b)(1)(A)."

"Participant takes a $50,000 loan in April of 2020. Participant, because of COVID, wants to pay it off in order to take out $100,000 COVID loan. Participant pays off the loan, requests $100,000. Asset Custodian rejects the loan, saying the maximum loan amount is $50,000 -- $100,000 reduced by the highest outstanding loan balance in the last 12 months ($50,000). I agree with this calculation. Is the loan limit calculation a safe-harbor calculation? Could the plan sponsor decide to ignore the limitations and give the person the whole $100,000 loan? I think not, but wouldn't mind seeing if anybody has run into this before."

"We're seeing more stale dated checks being re-deposited by recordkeepers into plans--typically to an unallocated cash account or the forfeiture account. How are others reporting these on the 5500 filings? Obviously the checks have been shown as distributions in prior years."

"This relates to health FSAs. Notice 2020-29 allows employers to treat the dollar amount of year-to-date reimbursed claims as a floor, below which participants may not reduce deferrals. However does the uniform coverage rule still apply to claims incurred before the change in coverage? This would seem to result in rewarding participants who delay submitting requests for reimbursements.

Example 1 -- Late Reimbursement Request

• For the 2020 plan year, Lucy elected to contribute $1,200 to a health FSA, or $100 per month. She has contributed $600 for Jan-June 2020.
• On May 1, Lucy incurs a claim for $1,200.
• On July 1, Lucy reduces her 2020 election to $10 per month for the remainder of the plan year. She expects to contribute $60 for July-Dec 2020 ($660 in total).
• The employer can limit Lucy's ability to reduce her annual election if she had received more than $660 in total reimbursements before July 1, under Notice 2020-29.
• But the uniform coverage rule in the section 125 regulations arguably still allows Lucy to submit her May-incurred claim for $1,200 for reimbursement.

Example 2 -- Prompt Reimbursement Request.

Same facts as above, but Lucy submits her claim for reimbursement in June 2020. On July 1, Notice 2020-29 allows the employer to prevent Lucy from reducing her deferrals because her May claim was $1,200, her full deferral budget. A discussion at suggests scenario 1 can be avoided 'by carefully defining the period of coverage for 2020.' I am not sure how that would work but would welcome comments."

 

 

"Employees with under 20 hours per week were excluded from participation, but the document did so specify. Have people tried to do VCP for this (to amend retroactively to exclude)?"

"Company sponsors a safe harbor 401(k) plan. Plan uses the basic safe harbor formula. Plan also allows for profit sharing, each participant being their own allocation class (with last day requirement). The Plan Sponsor would like to encourage more participation from lower paid participants. They are thinking of making an additional profit sharing contribution to non-HCEs who hit certain deferral limits during the year. For example, if they defer half of the 402(g) limit they would receive $500. If they defer the full 402(g) limit they would receive $1,000. Has anyone had a plan that had such a program? If yes, how did you communicate the program to the participants? I'm thinking at the very least one would have to be crystal clear about who is eligible each plan year and exactly how much they would have to defer to reach a profit sharing contribution level."