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5500 Preparer's Manual for 2012 Plan Years
The premier resource in the field of Form 5500 preparation, 5500 Preparer's Manual will help you handle the required annual Form 5500 filings for both pension benefits and welfare benefit plans.
from Spencer’s Benefits Reports: For the next few weeks, Spencer's Benefits Reports will highlight specific provisions in the new health reform law which affect employer-sponsored plans.
Sec. 9022 of the Affordable Care Act concerns simple cafeteria plans.
In years beginning after Dec. 31, 2010, certain small employers’ cafeteria plans can qualify as simple cafeteria plans and thus avoid the nondiscrimination requirements of a classic cafeteria plan under IRC Sec. 125(b).
Through the establishment of a simple cafeteria plan, without worrying about running afoul of the nondiscrimination requirements of a classic cafeteria plan, employers can retain potentially discriminatory benefits for highly compensated and key employees (subject to some restrictions relating to contributions, as discussed below) while allowing other employees to enjoy the benefits of a cafeteria plan.
An employer eligible to establish a simple cafeteria plan is any employer that, during either of the two preceding years, employed an average of 100 or fewer employees on business days.
If an employer has 100 or fewer employees for any year and establishes a simple cafeteria plan for that year, then it can be treated as meeting the requirement for any subsequent year even if the employer employs more than 100 employees in the subsequent year. However, this exception does not apply if the employer employs an average of 200 or more employees during the subsequent year.
This provision allows small but growing employers to continue to offer simple cafeteria plan benefits to employees without the concern of having to meet the discrimination requirements of a classic cafeteria plan. Without this exception, the establishment of simple cafeteria plans could create a disincentive to increased hiring.
Contribution Requirements
Under the contribution requirements, a simple cafeteria plan must make a contribution to provide qualified benefits on behalf of each qualified employee, in an amount equal to:
If the employer bases the satisfaction of the contribution requirements on the second option, it will not be in compliance if the rate of contributions to any salary reduction contribution of a highly compensated or key employee is greater than to the rate of contribution for any other employee.
For purposes of the contribution requirements, a salary reduction contribution is any amount contributed to the plan at the election of the employee and not includable in the employee’s gross income under the Sec. 125 cafeteria plan provisions. The terms “highly compensated employee” and “key employee” retain their definitions under the classic cafeteria plan provisions. A “qualified employee” is any employee who is not a highly compensated or key employee.
Eligibility, Participation Requirements
A simple cafeteria plan also must satisfy minimum eligibility and participation requirements. The requirements are met if all employees who had at least 1,000 hours of service for the preceding plan year are eligible to participate, and if all employees have the same electon rights under the plan.
An employer may elect to exclude from the plan employees who have not attained the age of 21 before the close of the plan year, who have less than one year of service with the employer as of any day during the plan year, who are covered under a collective bargaining agreement if there is evidence that the benefits covered under the plan were the subject of good faith bargaining between employee representatives and the employer, or are nonresident aliens working outside the United States whose income did not come from a U.S. source.
Effective date. The provision applies to years beginning after December 31, 2010.
CCH Law, Explanation And Analysis Of Health Reform Act Available
CCH's Law, Explanation And Analysis of the Patient Protection and Affordable Care Act of 2010 provides the most comprehensive and practical guidance available to professionals needing to make sense of this historic legislation. Included in the online version is the complete text of the law, integrating both the Affordable Care Act and the Health and Education Reconciliation Act. A hard-copy version of the book is available for $149.
For more information or to order the hard-copy version of the book, please call (800) 248-3248 or click http://hr.cch.com/Products/ProductID-7127.asp. Discounts are available for multiple copies.
For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.
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