Waiving participation

[Mark Cavazos]

A client is equating forgoing additional benefit increases with waiving continued participation.

Where in the code does it say that an employee can only waive participation prior to becoming a participant?

[Duffer]

Treas. Reg. §1.401(k)-1(a)(3)(v)

[Mark Cavazos]

Treas. Reg. §1.401(k)-1(a)(3)(v)

I am fairly certain that he would say that this refers to 401(k) plans and his is DB plan.

It would be humorous if he did. I basically walked him through the English of the document and the waiver. His response was to say he disagreed, but he offered no reasoning.

[Duffer]

Did he take action as the plan sponsor to freeze his benefit before accrual occurred?
Does he have the authority to make such an amendment?

[Mark Cavazos]

Did he take action as the plan sponsor to freeze his benefit before accrual occurred?
Does he have the authority to make such an amendment?

Our client is the TPA. But the email that walked him through the English went to the client.

The plan says that an employee can waive participation only prior to becoming a participant.

The plan says that an employee can forego future benefit accruals prior to making such accrual.

I pointed out that particpation and benefit accrual are two separate concepts.

Another HCE has signed a waiver of future benefit accruals. (Until a couple of weeks ago, I did not know that the IRS is picky between "waiver" and "forego".) This waiver makes no mention of participation.

The HCE in question signed a waiver of participation. There is no mention of benefit accrual.

Unfortunately, one sentence contains both the text of waiving participation and the text about foregoing future benefit accrual. Perhaps this is why the TPA is confusing the two. Of course, the TPA may just be using anything to justify his interpretation.