We hire lots of young people helping collate packets and get out mailings – does this make us more than a “micro-sized” biz, since they number almost 100 different people over the years? Will we have to include them in our Flexible Employee Benefit Plan? : FAQ/Blog/Solutions
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We hire lots of young people helping collate packets and get out mailings – does this make us more than a “micro-sized” biz, since they number almost 100 different people over the years? Will we have to include them in our Flexible Employee Benefit Plan?

by Tom Luker on 05/01/15

There are different ways to establish your MERP/HRA with the legally required eligibility rules.

  • In 1980, the IRS established special “non-discrimination” rules, based on ERISA concepts that were originally established in 1974 and further expanded in 1978 as part of the “Cafeteria Plan”/”Flex Plan” legislation.
  • The 1980 rules were specific to Section 105 MERPs, which until that time, the eligibility rules could be limited to “groups” such as “all executive officers” or “all managers and higher.” Very discriminatory, right?
    • The rules of “non-eligibility” now consist of the following:
      • [1] Part-time employees working less than [____] hours per week average up to 25 hours per week;
      • [2] Seasonal employees completing less than [____] months per year up to a “safe harbor” seven months;
      • [3] Employees less than [____] years of age up to age 25;
      • [4] Current employees completing less than [____] months up to a maximum of 36 months; and
      • [5] Future employees completing less than [____] months up to a maximum of 36 months.
    • You can see with this legal arrangement, you could limit your plan participation to ONLY those who are:
      • [1] More than your definition of “part-time” or,
      • [2] More your definition of “seasonal” or,
      • [3] More than your definition of “minimum” age or,
      • [4] and [5] have been employed less than your definition of “loyal” employees.
    • In your case you could LIMIT your MERP just to:
      • Those employees who work MORE THAN seven months per year, or;
      • Those who AVERAGE more than 25 hours per week or,
      • Those who are AT LEAST age 25 or,
      • Those who have been employed by you for at least 36 months.
    • You must remember, that if you have not yet FORMALLY employed your spouse at all in the past [with a W-2 income], you can’t start with CURRENT EEs’ definition of more than 36 months, because your spouse would have to wait for three years to come into the plan. But you could use 36 months for FUTURE EEs before they’re eligible.

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