DataPath 132

ELIGLIBLE PARTICIPANTS

An eligible participant is any individual considered to be in a legal employer-employee relationship with the Employer for Federal withholding tax purposes. This excludes:

• Any leased employee (as that term is defined in Code Section 414(n)),
• Any self-employed individual receiving from the Employer net earnings from self employment within the meaning of Code Section 401(c)(2) unless such individual is also an Employee, and
• Individuals covered under a collective bargaining agreement unless the collective bargaining agreement specifically provides for participation in the Plan.

The following are considered self-employed and therefore ineligible under Code §132(f); however, a Section 132(f) Tax-Free Transportation Plan may be set up for their employees.

• Sole Proprietorship,
• Partners in a partnership,
• 2% or more Shareholder in a Subchapter S Corporation (including children, grandchildren, and parents of the 2% or more Shareholder),
• Outside Directors (non-employees),
• Limited Partners, and
• Member in LLCs (if treated as a partner in a partnership or a self-employed person).

The employer can further limit who can participate in the Plan by entering the information through the Plan Design screen.

BENEFIT ELECTION FORM

An eligible employee must sign and submit a Benefit Election Form (also known as a Salary Reduction Agreement) to enroll in a Section 132(f) Tax-Free Transportation Plan, to change election amounts for the upcoming Coverage Period (see below), or to terminate contributions to the Plan.

COVERAGE PERIOD

The coverage period is the period that the election is in effect and irrevocable. This can be as short as one pay period or as long as one year.

If the coverage period is for one pay period, the monthly limits for contributions will be determined by multiplying the election amount for one pay period by the number of pay periods within the upcoming 12 months beginning with the first pay period the deduction is withheld (to get an annual amount) and dividing by twelve (to get a monthly amount). The result cannot exceed the monthly limit.

DPI132 uses the following formula to verify that the monthly limits are not exceeded:

  (pay period deduction)(number of pay periods in upcoming 12 months)
  -------------------------------------------------------------------
                                 12

IRREVOCABILITY

An election is irrevocable during a Coverage period, or in other words, an election cannot be changed during the Coverage Period. Unlike § 125 cafeteria plans, §132(f) does not permit any status changes during the Coverage Period. The employee must submit another Benefit Election Form to change elections for the next coverage period.

Evergreen Clause

When the coverage period is as short as one pay period, it is not feasible for the employee to have to submit a Benefit Election Form each coverage period. Consequently, DataPath included an "evergreen" clause (An "evergreen" clause is a stipulation in the Plan Document that when a participant fails to submit a Benefit Election Form for the upcoming coverage period, it is assumed the participant wants to continue elections on the same basis as the current coverage period.) in the DataPath132 plan documents. This way, the employee can submit a Benefit Election Form once, and not have to submit another one until the employee wants to change the election amount.

SPOUSES EMPLOYED BY SAME EMPLOYER

If spouses work for the same employer, they are entitled to the same limits and benefits as if they were not spouses. The monthly limits will apply separately to each one's elections and claims.

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