Agenda Packets - 1989/02/06 - Laserfiche WebLink

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El 4) D. • 90%-50% Test At least 90% of All nonhighly compensated employees are eligible in participate in a plan whose benefits equal at least 50% of the largest benefit available in any highly compensated employee in any plan of the same type • Facts and Circumstances Test A plan may not contain any eligibility provision which discriminates in favor of the highly com• pensawd employee - in addition to the .ligibibri trsu, a plan must pass the foL'owing benefits test The average employer provided benerir received by nonhighly, compensated employees under all plans of the same type must equal at :ea:. 75 % of the avenge emp:oyer provided benefit received by highly compensated employees under all plans of the same type. As an alternative to the eligibliry and benefits ten the special 80% Coverage Test may be met. If it least 80 % of the nonhighly compensated employees are covered by a group health or group term life plan, that plan will be considered to have met the eligibility and benefits rears. An employer will be considered as having suer the Sec. 89 non• discrimination tests if the 8096 Coverage Test and die Faces and Circumstances Test are met. Failure to pan the nomffurimir ire test will result in the highly mrsspemated employees bating the 6criminarory exceu irulwded in grow fnmmt. In addition to the nondiscrimination provisions, Sec. con 89 sho provides defininons for several terms. Some of the :yrms which are of,ig:ificance o employees arc: • Highly Compensated Employees 5 % s.wncn • Comeensation over 175,000 • Compensation Duet 350,000 and in top paid 20% • Offices who received corn persatioo over 150% of defined contribution both under Sec. 415(c) • Excluded Employees • dmployed less thin 6 months for health plans • Employed less thin one year fnr other plans • Expected no work less than 6 months Work less than 17 �h hours per week Under age 21 Collectively bargained employees Nonresident aliens In general, nary plan offered by an employer that is either not of the same type or does no: ptov:de a[ least 959E of the employer provided benefit m all employees is considered a separate plan and must in. dividually meet the Section 89 requiremen¢ Er temples of pimp features which may caused the plan in be considered separate plans arc different levels of pmrnitrms, coimcanc-, deductibles, tmpbnee coverage (employee Lid sponge or family), and plans for former employees (retired) separate from current employees. �e the regulations have not yet been published, there are many open issues. For sample, lime guidance is given in valuing the employer provided benefi: for testing purposes a well as determining the amount of discriminatory excess. There arc, hoveeve5 sesetal a: con steps which employees can take to prepare for the January 1, 1989, or earlier effecrive date Employees should review their existing plans m analyze their compliance with Sec. 89 and make changes now, if appropriate. Second, employees should begin to gather the required dim no prepare for compliance with the Sec. g9 rules. Some of die steps which should be cur rendy mkcn arc: • Identify highly and nonhighly compensated emploees. • Define potential upstate lines of business. • Define and collect dam or. employees by categories such as eligible, excluded, Former, nary tire-, refired. • Determine employee and family participants by plan. • Identify each upmrare plan and begin to collect data on each plan. • Prepare models in rest for both the nondiscrimi- na..:_; rules and for the discriminatory excess. G,wenr;�tir6Mefm /liJ7Tu), aJsy is, G./,nueem L lbg6i Grr). Arbx Itu,ay 277 PA Arran. M.- W. NY. for,?. R,JB A. RP4 EAw 012) 407.2181 T6eaa t Tilghwe. E4w 012) 407.186) zin Arthur Young A MEMBER OF ARTHUR NOUNG INTERNATIONAL