Health, Accident & Retirement

Darcy Borelli, PHR, CPP Health, Accident & Retirement

From Knowledge Assessment Calculator (KAS)

Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) • Requires health plan sponsors to provide employees and their beneficiaries with the opportunity to elect continued group health coverage for a given period should their coverage be lost due to “qualifying event” • Applies to employers with 20 or more employees (FTEs) on typical business day. • Coverage period generally is 18 to 36 months • Coverage same as provided to similarly situated beneficiaries who have not suffered the qualifying event. • Employees who purchased health care coverage under a cafeteria plan (including flexible spending) are eligible for COBRA continuation at level of coverage before event • Long Term Care Insurance is not included in COBRA

Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) Cont. Qualifying events- an event that results in the loss of group health coverage. To be eligible, your employees and their dependents must be covered by your group health plan the day before one of these qualifying events. Examples of Qualifying events Employer Responsible to ReportEmployee Responsible to Report Voluntary Termination Divorce/Legal Separation Involuntary Termination Dependent child ceasing to be dependent Reduction of Hours Social Security Disability Benefits Medicare Entitlements Secondary events Employees of Bankruptcy* (* Bankruptcy of the employer-affects Retirees only and their dependents)

Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) Cont. • FMLA/COBRA Interaction • Date employee is to return to work at end of FMLA Leave (or date employee notifies employer he/she is not returning if before end of FMLA Leave) is qualifying date • Unpaid required premium while on FMLA Leave does not eliminate the employees right to COBRA continuation coverage

How long does COBRA coverage last? 18- months These qualifying events provide for 18 months of coverage for all qualified beneficiaries from the date of the qualifying event: -Voluntary Termination -Involuntary Termination (gross misconduct exception) -Reduction of hours (strike, layoff, leave of absence) Exceptions the 18-month time frame can be extended : -to 36 months due to an additional event -to 29 months due to a disability determination within 60 days of the qualifying event. -to 24 months if the employee goes out on Military leave -Lifetime for bankruptcy of retired covered employee and their spouse. However, once the retiree passes away, the spouse is only offered 36 more month of coverage from the date of the employees death date. Rule of thumb: 18 months of coverage for events that happen directly to the employee.

How long does COBRA coverage last? (con’t) 36 months These qualifying events provide for 36 months of covered spouse and/or covered dependent child of the employee from the date of the qualifying event: -Death of the employee -Medicare entitlement* -Divorce or legal separation -Dependent child ceasing to be a dependent (*Medicare entitlement is an original qualifying event in a limited number of circumstances. ) Rule of thumb: 36 months of coverage for dependents of the employee

Remember: 18 months –events to employee 36 months—events to dependents 24 months—if employee is going out on military leave 29 months – for employee on disability Lifetime for retirees of bankrupt company and their spouse

Knowledge check Debbie never enrolled in her employer’s health plan and has been laid off from her 40 hour a week job. Does Debbie qualify for COBRA? No, there has been no COBRA qualifying event. She had a reduction in hours, but no loss of coverage as she never enrolled in health care with her employer. If John tenders his resignation effective two months from today, has he experienced a qualifying event? No, because John is still at work. Employment must be terminated in order for an event to occur. Qualifying events always need to happen, you can not future date them.

COBRA coverage ends when: • -Employer stops providing group health coverage to employee • -The premium for the coverage is not paid within 30 days of due date • -Employee or dependent becomes covered under another group health plan • The employee or dependent becomes entitled to Medicare benefits • (children added to coverage do to birth or adoption, there coverage ends at the same time as the other family members)

Premiums for COBRA- COBRA is NOT cheap • You pay the full cost of the coverage, plus a 2% administrative fee. • Full premium means any amount you contributed, PLUS what your employer contributed, PLUS the 2% fee. • Example: Employer Sponsored while employed vs. COBRA • While EmployedEnrolled In COBRA • Family of four, age 30-39 Family of four, age 30-39 • PPO, $250 deductible PPO, $250 deductible • Monthly premium: $756.00 Monthly premium: $756.00 • Employer pays 90%: $680.40 • You pay 10%: $75.60 You pay 102%: $771.12

Premium exception: If a qualified beneficiary becomes disabled, their premium may increase to 150% of the premium on the 18th month of coverage. So months 1-17 they would pay 102% of the premium Months 18-29 they would pay 150% of the premium

Why would some one take COBRA? • Things to consider when deciding if the COBRA coverage you have been offered are your best option: • -Whether or not you prefer the comprehensive benefits and don’t mind the added cost • -Whether you are willing to exchange continual, guaranteed coverage for an added cost. • -If you have had recent health problems. • -If you have had ongoing health problems. • -If you require expensive medications. • -Whether or not you have been declined for private insurance recently. • -If you are currently pregnant. • -If you found a new job and your new employer does not offer a health plan.

COBRA Timeline • With in 90 days being covered under the health plan, the COBRA continuation coverage right notice must be sent (COBRA Rights) • Employers have 30 days to notify the COBRA plan administrator of an employee's termination, work-hour reduction, death, entitlement to Medicare or employer’s bankruptcy (retirees only). • Employees have 60 days to notify the COBRA plan administrator of a divorce, legal separation or a loss of dependent child status. • A COBRA plan administrator has 14 days from the date of a notification to send a COBRA election notice to employee and all dependents. • (must include contact information on the plan and the COBRA administrator. How to elect coverage, premium payment requirements, what happens if you don’t elect coverage and any extensions for coverage) • An eligible individual has 60 days to decide whether to elect COBRA continuation coverage

COBRA timeline(con’t) • Once COBRA is elected, qualified beneficiary has 45 days to make their first payment • If they fail to make the first payment their coverage end date will be the date of the qualifying event. • If everyone waits to the last day to in every step of the process, first bill could be for up to 5 months of back coverage. • 60days to notify the COBRA plan administrator + • 14days to send the notification to elect COBRA notice + • 60days to decide whether to elect COBRA continuation coverage • First bill would be for 134 days of back coverage= 5 months

What is the cost of COBRA non-compliance? • COBRA is jointly enforced by the Internal Revenue Service, the U.S. Department of Labor and the Department of Health and Human Services. Penalties for COBRA violations include: • Excise tax penalties of $100 per day ($200 if more than one family member is affected) • Statutory penalties of up to $110 per day under the Employee Retirement Income Security Act (ERISA) • Civil lawsuits • Attorneys' fees and interest • The minimum tax levied by the IRS for noncompliance discovered after a notice of examination is generally $2,500. • The maximum tax for "unintentional failures" is the lesser of 10 percent of the amount paid during the preceding tax year by the employer for group health plans, or $500,000. • The IRS places the burden of proof of compliance on the company.

Family Medical Leave Act (FMLA) • Allows employees to take up to 12 weeks of unpaid leave in any 12 month period • Newborn or newly adopted child • Take care of seriously ill child, spouse, or parent • Care for themselves if they are seriously ill • Employee’s spouse, child or parent is a covered military member on active duty, OR has been notified of an impending call to active duty in support of a contingency operation (can take up to 26 wks in a 12 month period to care for covered military service member with a serious injury or illness) • Guarantees continuation of employees’ health benefits while on leave

Family Medical Leave Act (FMLA) Cont ‘d • Applies to private sector employers and public sector employees with 50 or more employees with in a 75 mile radius (including part-time and employees on leave or suspension, but not laid-off employees) • For public sector (government) employees and public elementary and secondary schools – no limit on employees or distance between locations • Employee must have been employed by employer for at least 12 months and have worked at least 1,250 hours within the previous 12-month period • the 12 months of employment need not be consecutive • Employment prior to a continuous break in service of 7 years or more does not need to be counted, unless: • For fulfillment of National Guard or Reserve • Period of approved absence or unpaid leave

Family Medical Leave Act (FMLA) Cont ‘d • Expatriates are not covered • Employer decides what constitutes a 12 mo period – must be consistent; if employer policy is not clear, what favors employee • CA & NJ require FMLA • Employer can require employee to take leave • “Serious Health Condition” defined in FMLA regulations • Intermittent leave • Can be several days or weeks at a time or by working reduced hours • Reduced hours can be deducted from an exempt employee’s salary without jeopardizing exempt status • If employee would be required to work overtime if not for FMLA leave, hours employee would have been required to work may be counted against FMLA entitlement

Family Medical Leave Act (FMLA) Cont ‘d • Designation as paid or unpaid leave • Employer an require employee to use paid leave available to the employee • Employer must designate leave as paid or unpaid FMLA leave within 5 days of receiving notice from employee a leave will be taken. • Notice must be in writing. • Must inform employee of number of hours, days, or weeks that will be counted against the employee’s FMLA leave entitlement • Employer must notify employee of eligibility to take FMLA leave within 5 business days after either employee requests leave or employer learns employee’s leave may be for an FMLA qualifying reason. If employee is not eligible for FMLA, notice must indicate at least one reason why employee is not eligible or has no FMLA leave available.

Family Medical Leave Act (FMLA) Cont ‘d • Regulations provide for a notice of FMLA rights and responsibilities of the employer separate from the eligibility notice. Notice must include the following information: • FMLA leave designations • How 12 mo period and “single 12-mo period” are determined • Employee certification requirements • Substitution of paid leave for unpaid leave • Premium payment requirements to maintain health benefits • Job restoration rights, including effect of a “key employee” designation • Potential liability for health insurance premiums if employee does not return to work

Family Medical Leave Act (FMLA) Cont ‘d • Consequences exist for employer’s failure to follow FMLA notice requirements • There is a notice requirement for employees • If medical treatment is foreseeable, a 30 day notice (or as much as can be given under the circumstances) • Medical or military certification can be required by employer • Health insurance benefits employee enjoyed before the leave must be continued during FMLA leave on the same basis • Employer can require any employee premiums • If employee fails to pay, employee can lose coverage after 30 days, but coverage must be restored when employee returns to work without employee having to meet any additional qualifications for coverage

Family Medical Leave Act (FMLA) Cont ‘d • Job guarantee upon return from leave – either previous job or one that is “equivalent” with no loss of pay or benefits • Employer may deny reinstatement to “key employees” if it’s necessary to prevent “substantial and grievous” economic injury to the employer’s operations • Key employee = paid on a salary basis; among the highest paid 10% of all employees within 75 miles of employee’s worksite when FMLA leave was requested • Recordkeeping Requirements • Basic payroll records – hours worked, rate of pay, deductions from wages • Records detailing dates and amount of FMLA leave taken • Copies of notices and documents related to FMLA leave

Family Medical Leave Act (FMLA) Cont ‘d • Enforcement administered and enforced by Department of Labor’s Wage & Hour Division • Retaliation for exercise of FMLA rights is prohibited by law • Employers covered by both FMLA and state law must comply with the law that provides the greatest benefits and protection to the employee requesting leave • Interaction of FMLA and cafeteria plans • Employee is responsible for their share of premiums of group health plan during leave • Cafeteria plan may offer one or more of the following 3 payment options • Pre-Pay • Pay-As-You-Go • Catch-up

Sick Pay • Sick Leave Pay • Paid by employer from regular payroll account • Taxable as regular income • Worker’s Compensation is different! • Sick Leave Pay under a Separate plan (STD, LTD) • Premiums paid by employee on after tax basis – benefits are not taxable • Premiums paid by employer or on pre-tax basis – benefits are fully taxable • Premiums paid by employer and employee (after-tax) – portion of benefits attributable to employer-funded portion is taxable

Sick Pay Cont ‘d • Responsibility for income withholding and employment taxes • Employer pays and is self-insured • Employer withholds taxes based on employee’s most recent W-4 • Employer withholds and pays employer share of Social Security, Medicare, and FUTA taxes for all payments made within 6 calendar months after the end of the last month during which the employee worked. • If employee returns to work, new six-month period begins if employee is later on disability

Sick Pay Cont ‘d • Responsibility for income withholding and employment taxes • Payments made by employer’s agent OR employer is self insured. • Agent may withhold FIT at 25% in 2010 • Employer retains responsibility for Social Security, Medicare, and FUTA unless agreement with agent to take on this responsibility. • Payments are made by an insurance company (3rd party) who receives premiums for disability coverage. • Third party not required to withhold FIT from payments unless requested by disabled employee (W-4S) • IRS allows for fixed amount or percentage (W-4S has no provision for percentage) • Third party withholds and remits Social Security and Medicare taxes or advises employer who pays the taxes and includes in 941.

Sick Pay Cont ‘d • Reporting Responsibilities • Employer makes payments • Report taxable amounts on Form 941 • Report income tax withheld on Form 941 • Report taxable amounts to employee on Form W-2 • Report payments on Form 940 • Employer’s agent makes payments • Usually employer retains reporting responsibilities • Third-party insurer makes payments • Both the employer and the 3rd party have reporting responsibilities; if 3rd party does not properly transfer liability to employer, 3rd party is required to report on Form 941, Form W2, and Form 940

Sick Pay Cont ‘d • Permanent Disability benefits • Payments subject to income tax when premiums were paid • by employer or • with pre-tax dollars • Payments are not subject to Social Security, Medicare, or FUTA • On or after employment relationship has terminated because of death or disability retirement • Employee receiving disability insurance benefits under the Social Security Act – still subject to FUTA

Workers Compensation Insurance • Form of insurance employers are required to buy to insulate them from lawsuits brought by employees who are hurt or become ill while working. • Benefit payments – not included in gross income or subject to • any employment taxes • Premium payments – paid by employer based on specific • earnings and classifications • Each state has its own Workers Compensation Insurance law. There are 4 categories: • National Council States (38 states plus District of Columbia) • Non-National Council States (7 states) • Monopolistic States (5 states) • Competitive State Funds (12 National Council States)

Workers Compensation Insurance Cont’d • Employers are assigned Classification Codes based on the type of business • There are classification code exceptions for employees who work exclusively in an office, outside salespeople, and drivers & their helpers • Certain types of compensation can be excluded when determining total payroll figure • The “half” portion of overtime premium • Reimbursed travel expenses • Third-party sick pay • Reimbursed moving expenses • Tips • Personal use of company-provided vehicle • Group Term Life Insurance over $50,000. • Severance Pay • Education Assistance Payments • Employer contributions to pension or insurance plans

Cafeteria Plans • Cafeteria Plans provide employees a choice from a “menu” of cash compensation and nontaxable benefits authorized by Section 125 of the Internal Revenue Code • A qualified Cafeteria Plan must contain at least one taxable (cash) and one nontaxable (qualified) benefit • Examples of qualified benefits: • Coverage under accident & health insurance plans • Coverage under dependent care assistance plans • Group Term Life insurance on lives of employees • Qualified adoption assistance • Premiums for COBRA continuation coverage • Accidental death & dismemberment insurance • Long-term and short-term disability coverage • A 401(k) plan • Contributions to HSA

Cafeteria Plans Cont’d • Exceptions to qualified non-taxable benefits would be: • Scholarships and fellowships • Nontaxable fringe benefits under IRC Section 132 • Educational Assistance • Meals and lodging furnished for the benefit of the employer • Employer contributions to Archer MSAs • Long-term care insurance (unless purchased with funds from a HSA offered as a qualified benefit) • Group-term life insurance on the life of anyone other than an employee • Health Reimbursement Arrangements that allow any unused amount to be carried over to the next coverage period to increase the maximum reimbursement amount • Elective deferrals to a Section 403(b) plan

Cafeteria Plans Cont’d • Reasons a plan would fail to satisfy Section 125 requirements: • Offering nonqualified benefits • Not offering an election between at least one permitted taxable benefit and at least one qualified benefit • Deferring compensation • Failing to comply with the uniform coverage rule or use-or-lose rule • Allowing employees to revoke elections or make new elections during a plan year (except as allowed by law) • Failing to comply with substantiation requirements • Paying or reimbursing expenses incurred for qualified benefits before the effective date of the cafeteria plan or before a period of coverage • Allocating experience gains other than expressly allowed by law • Failing to comply with grace period rules

Cafeteria Plans Cont’d • Premium-only plan – known as POP’s or premium conversion plans. Used by employers who require their employees to contribute towards benefits (usually health insurance) • Deferred Compensation is prohibited under the rules governing cafeteria plans • EXCEPTIONS • 401(k) • Educational institution contributions for postretirement group-term life insurance • Amounts remaining in a HSA at end of calendar year • Benefits under a long-term disability policy relating to more than one year • Mandatory two-year election for vision or dental • Using salary reduction amounts to pay premiums for the 1st month of the next plan year • Purchase of additional time off carried over to next year

Cafeteria Plans Cont’d • Cafeteria plans are usually funded by either or both of the following: • “Flex dollars” or “flex credits” • Salary reduction – pre-tax contributions by the employee result in a higher take-home pay for the employee • Automatic deferrals (i.e., “negative elections”) are OK • After-tax employee contributions also are part of a cafeteria plan • A Cafeteria Plan must have a written document laying out the particulars of the plan and it must be intended to be a permanent plan. There are certain items the plan must contain to be considered a Cafeteria Plan according to IRC Section 125. • (See page 4-70)

Cafeteria Plans Cont’d • Benefit Elections • Usually irrevocable before the benefit becomes available or the plan year begins. Changes or revocations during the plan year are only allowed under limited circumstances. • IRS Regulations clarify employees’ right to revoke or change an election during a plan year based on a change in status • Marital status changes • Changes in the number of dependents • Employment status changes (applies to employee, spouse, or dependent) • Change in dependent status • Residence change • Adoptions • An election change can be made only if the status change results in the employee, spouse, or dependent gaining or losing eligibility for coverage under the plan

Cafeteria Plans Cont’d • Special Exceptions • COBRA • Medical Support orders • Medicare or Medicaid eligibility • Special enrollment rights under HIPPA • Elective deferrals under a CODA • FMLA leave changes • Election changes may also be made to reflect significant cost or coverage changes for all types of qualified benefits provided under a Cafeteria Plan during the plan year. • Contributions may be made to a HSA through a cafeteria plan, with specific rules surrounding the pre-tax qualification • Option election for new employees – 30 days after hire date to elect coverage

Cafeteria Plans Cont’d • Participation in a Cafeteria Plan must be restricted to employees and the plan must be maintained for their benefit. • Nondiscrimination testing • Plan cannot discriminate in terms of eligibility, contributions, or benefits in favor of highly compensated individuals, or participants, or key employees • Three main nondiscrimination tests • Eligibility test • Contributions and benefits test • Concentration test • Special health benefits test • Separate tests allowed for new employees • Testing must be performed at year-end

Cafeteria Plans Cont’d • Flexible Spending Arrangements (FSA’s) • Employees can elect a pre-tax salary deduction to pay for certain covered health care, dependent care, and adoption expenses. • There are specific requirements that FSA’s must meet • Elections cover a full plan year • Limit of $2,500. beginning in 2013 • No deferred compensation – “use it or lose it” • Plan can allow a “grace period” up to 2 ½ months • Unused balances can be distributed to reservists – • “qualified reservist distributions” allowable if employer decides to include it in the cafeteria plan • Uniform coverage throughout coverage period • 12 month period of coverage • Prohibited reimbursements; claim substantiation; claims incurred • Limiting health FSA enrollment to health plan participants

Cafeteria Plans Cont’d • Flexible Spending Arrangements (FSA’s) (cont’d) • Specific Requirements (continued): • Reimbursements must be for medical expenses – health care reform legislation has changed the definition of medical expenses – only cost of medicines prescribed by a doctor and insulin (for over-the-counter drugs, doctor must provide a prescription to qualify for FSA) • Coordination with HIPAA requirements • FSA benefits followed transferred employees after asset sale • Can be set up to use debit and credit cards for payments and reimbursements with specific requirements • After 1/15/11, FSA debit cards may not be used to purchase over-the-counter medicines or drugs unless specific IRS rules are followed • Special dependent care assistance rules

Cafeteria Plans Cont’d • Tax Treatment of Cafeteria Plans • Employer contributions are excluded from employee’s income – not subject to federal withholding or employment taxes • Pre-Tax contributions made by employee are excluded from employee’s income – not subject to federal withholding, Social Security, Medicare and FUTA taxes (401(k) plan pre-tax contributions are subject to Social Security, Medicare, and FUTA taxes) • Group-term life insurance – first $50,000. is not taxable • After-tax contributions – totally taxable • W-2 Reporting • 401(k) – does not reduce Social Security or Medicare taxable wages; report amount of 401(k) deferral in Box 12, Code “D” • Dependent care assistance – report amount in Box 10

Retirement and Deferred Compensation Plans • Qualified Pension and Profit Sharing Plans IRC 401(a) • Cash or Deferred Arrangements IRC 401(k) • Tax-Sheltered Annuities IRC 403(b) • Deferred Comp Plans for Public Sector and Tax-Exempt Groups IRC 457 • Employee-Funded Plans IRC 501(c)(18)(D) • Individual Retirement Accounts (IRA) • Simplified Employee Pensions IRC 408(k) • Savings Incentive Match Plans for Employees of Small Employers (SIMPLE Plans) • Employee Stock Ownership Plans • Nonqualified Deferred Compensation Plans

Retirement and Deferred Compensation Plans Cont’d Qualified Pension and Profit Sharing Plans – 401(a) • Defined Benefit Plans • Benefit to employee based on age, compensation level and length of service • Employer required to make contributions to plan sufficient to provide level of benefits earned by employee • Defined Contribution Plans • Account for each employee, with set amount being contributed. Employee’s retirement benefit depends on the amount of money in the account at retirement. • Payroll maintains records of hours worked, compensation earned, dates of birth and hire date

Qualified Pension and Profit Sharing Plans 401 (a) Retirement and Deferred Compensation Plans Cont’d • Types of Defined Contribution Plans • Money Purchase Pension Plan - Employer makes contributions each year based on employee’s compensation. • Profit Sharing Plan – Employer contributions are substantial and recurring, although they may be discretionary to some degree

Qualified Pension and Profit Sharing Plans 401 (a) • Annual Compensation and Contribution Limits • Set by Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) • For 2012 annual compensation limit is $250,000 (indexed annually to the next lowest multiple of $5,000). • Annual contributions and other “additions” to defined contribution plans is limited under IRC 415 to the lesser of $50,000 in 2012 (indexed annually) or 100% of employee’s annual compensation. • Pre-tax elective deferrals to 401(k), 403(b), 457, 125, 132(f)(4) are included in employee’s contribution to determine the limit. • Tax Treatment of Pension and Profit Sharing Plans • Qualified Plan – meets certain requirements under IRC 401(a) regarding participation, vesting, contribution limits, benefit limits, and nondiscrimination in favor of highly compensated employees. • Employer contributions are excluded from wages and are not subject to federal income tax withholding, or Employment taxes. • Employee after-tax contributions are included in income and taxable whether voluntary or required.

Cash or Deferred Arrangements (CODA) • Voluntary Salary Reduction Plan – 401(k) • Pension Protection Act of 2006 put ability to automatically enroll employees in 401(k) plan into the law for plan years starting after 12/31/07 • Must provide specific schedule of automatic contribution. It must be at least 3% at hire and may stay at that level until the beginning of the second year after hire. • Increases must be at least 1% each year up to 6% for fourth. The arrangement can specify larger percents up to 10% of compensation. • If employer matches contributions, the plan must provide 100% match for first 1%; plus 50% for contributions between 2% and 6% or non-elective contribution of at least 3% of compensation – cannot contribute at high percent for highly compensated employees and cannot match contributions over 6%. • When hired employees must have 90 days to withdraw from automatic elections and recover contributions from the plan. Employees can change or stop future contributions at any time.

Cash or Deferred Arrangements (CODA) • Contribution Limits for 401(k) • 2012 contribution limit is $17,000 • Adjusted for inflation in $500 increments • Tax Treatment of 401(k) contributions • Not taxable for Federal Income Tax (and most states) • Taxable for Employment Taxes • Reporting for 401(k) contributions on W-2 • Not in box 1, but in boxes 3 & 5 • In box 12 with a “D” • Retirement box is checked if any deductions in the tax year. • Catch-up” contribution began in 2002 • Under EGTRRA –plans 401(k), 403(b), SEP, Simple, and 457 plans • Employee must be at least 50 years old in the current year • Limits of “catch-up” for all but SIMPLE • 2012 catch-up limit is $5,500 • Adjusted for inflation in $500 increments • SIMPLE “catch-up” • limit is $2,500 in 2012 • Adjusted for inflation in $500 increments

Cash or Deferred Arrangements (CODA) • Non Discrimination Testing • Must not discriminate in favor of highly compensated employees • 5% owner of stock or capital • Annual compensation over $115,000 in 2012 or top paid 20% of employees • Other Contributions can be included • “Catch-up” Contributions are not counted. • At least 70% of non-highly compensated employees must be eligible or the % of non-highly compensated eligible employees is at least 70% of the percentage of eligible highly compensated employees.

Cash or Deferred Arrangements (CODA) • Other ways to meet non-discrimination testing • Employer matches 100% of elective deferrals for not highly compensative employees up to 3% and 50% up to 5% • Employer is required to contribute at least 3% of salary for non highly compensated employees regardless of the employee’s participation in 401(k) • Failure of ADP (Actual Deferral Percentage) Test • Must distribute some elective deferrals and earnings to highly compensated employees within certain period and report on 1099-R • Holding period for 401k contributions • In 1996 the Labor Dept. shortened the maximum holding period for 401(k) contributions from 90 days to the 15th business day of the month following the month during which the amount would have been paid to the employee. • Employers who cannot meet the deadline can have an extra 10 business days, but must provide reasons for the delay.

Health, Accident & Retirement