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Model Plan Document

[NAME OF COMPANY]
ADOPTION ASSISTANCE PLAN

 

 

 

 

(Effective Date _____ ____, 2003)

[NAME OF COMPANY]
ADOPTION ASSISTANCE PLAN

 

SECTION 1 -- INTRODUCTION

            1.1       Purpose -- [Name of Company] (the “company”) maintains the [Name of Company] Adoption Assistance Plan (the “plan”) to provide adoption assistance benefits to eligible employees of the employer. It is intended that the plan meet the requirements of Section 137 of the Internal Revenue Code of 1986, as amended (the “Code”) and that benefits paid to each employee under the plan constitute a qualified benefit under Code Section 125 and are excludable from the employee’s gross income to the maximum extent allowable under Code Section 137. The purpose of the plan is to reimburse eligible employees for all or a portion of the cost of certain adoption expenses in conjunction with the eligible employee's salary reduction agreement made under the employer’s Code Section 125 plan.

            1.2       Effective Date, Plan Year -- The “effective date” of this plan is ____________. A “plan year” is the calendar year. The plan will only cover expenses incurred after both the plan’s effective date and after eligible employees have been given reasonable notice of the availability and terms of the plan.

            1.3       Employers -- The “employer” of this plan means the company [or any other corporation or other entity affiliated with the company within the meaning of the controlled group rules of Code Sections 414(b), (c), (m) or (o) that has adopted this plan with the approval of the company’s board of directors.]

            1.4       Administration -- The plan shall be administered by a plan administrator. The plan administrator shall be the company or, as designated by the board of directors of the company, any employee or committee consisting of company employees. The plan administrator, from time to time, may adopt rules and regulations as may be necessary or desirable for the proper and efficient administration of the plan and as are consistent with the plan’s terms. The plan administrator shall have the discretionary authority to construe and interpret the plan and make factual determinations thereunder, including the authority to determine eligibility of employees, to determine the amount of benefits payable under the plan, and to decide claims under the plan’s terms. Any plan interpretation and any decision on any matter within the discretion of the plan administrator made in good faith shall be binding on all persons.

SECTION 2 -- Eligible Individuals

            2.1       Eligible Employees -- Subject to the conditions and limitations of this section, all common law employees who are employed on a substantially full-time [or part-time] basis are eligible to participate in the plan. [An eligible employee [includes/does not include] any leased employees within the meaning of Code Section 414(n). An eligible employee does not include any person who is treated by the company as a leased employee, independent contractor, or employee of a third party other than the company or an employer that has adopted the plan, even if such person is later determined to have been a common law employee of the company.] Dependents of employees are not considered eligible employees for plan purposes.

            2.2       Ineligible Employees -- Notwithstanding anything to the contrary in this section 2, an employee shall not be eligible to participate in the plan during any calendar year in which: (i) the employee's adjusted gross income (as defined in accordance with Code Section 137(b)(3)) for the current or the immediately preceding year exceeds $190,000 as adjusted for inflation under Code Section 137; (ii) the employer is an S corporation in which the employee owns more than 2 percent of the stock or stock with more than 2 percentof the voting power or (iii) the employee is a more than 5 percent owner as described in Section 7.1. Note: Although more restrictive than Code Section 137, these restrictions are necessary to avoid any potential discriminatory benefits that would disqualify the entire plan benefits for the year. For example, 5-percent owners may technically participate in the plan. However, it is recommended that they generally be treated as ineligible due to discrimination concerns.

2.3       Eligible Child -- An eligible child is any individual who, at the time the adoption expenses are incurred, is under the age of 18 or is physically or mentally incapable of caring for himself or herself.

 SECTION 3 -- AMOUNT OF REIMBURSEMENTS

            3.1       Maximum Reimbursement -- Except as otherwise limited in the plan, the plan will provide each eligible employee up to $12,150 in adoption assistance benefits for the adoption of a child. The adoption assistance benefits provided by the plan shall be in the form of reimbursements for qualified adoption expenses. Notwithstanding the above, the reimbursement is limited to the lesser of:

(i)         the employee's actual qualified adoption expenses, or

(ii)        the employee's salary reduction contributions made through the employer’s Code Section 125 plan.

Amounts incurred in an unsuccessful attempt to adopt a child before successfully adopting another child count towards the $12,150 limit.

3.2       Reimbursement Limitation -- Notwithstanding Section 3.1, the $12,150 maximum reimbursement limit under the plan shall be subject to an inflation adjustment under Code Section 137(f) and a reduction under Code Section 137(b)(2) for eligible employees with modified adjusted gross income in excess of $182,180 (as adjusted for inflation under Code Section 137).

            3.3       Funding -- The adoption assistance reimbursement amounts provided herein shall be paid by the company or the adopting employer; provided, however, that the plan payments to or on behalf of an eligible employee shall be limited to such amounts of compensation as the eligible employee elects to forgo pursuant to a salary reduction agreement made in accordance with Code Section 125 and allocated to the provision of adoption assistance reimbursements.

SECTION 4 -- REIMBURSABLE EXPENSES

4.1       Qualified Adoption Expenses -- For purposes of the plan, “qualified adoption expenses” shall include reasonable and necessary adoption fees, court costs, attorneys fees, and other expenses that are: (i) directly related to, and the principal purpose of which is for, the legal adoption of an eligible child by the taxpayer, (ii) not incurred in violation of state or federal law, or in carrying out any surrogate parenting arrangement, (iii) not for the adoption of the child of the taxpayer's spouse, and (iv) not reimbursed by another source (e.g., grants, another employer).

4.2       Special Needs Adoptions – An eligible employee adopting a child with special needs is entitled to the maximum reimbursement regardless of whether the eligible employee actually has any adoption expenses and notwithstanding anything in Section 3.1(i) to the contrary. For this purpose, the employee’s qualified adoption expenses in the year the adoption of a child with special needs is finalized, shall equal the difference between $12,150 (as adjusted for inflation under Code Section 137(f)) and the total actual qualified expenses for the adoption incurred during that year and all prior taxable years. A child with special needs is an eligible child who is a citizen or resident of the United States who a state has determined: (i) cannot or should not be returned to the birth parents' home; and (ii) has a specific factor or condition (such as the child's ethnic background, age, or membership in a minority or sibling group, or the presence of factors such as medical conditions, or physical, mental, or emotional handicaps) because of which the child cannot be placed with adoptive parents without adoption assistance.

4.3       International Adoptions -- In the case of an adoption of a child who is not a citizen or resident of the United States at the time the adoption effort commenced, any such expense which is paid or incurred before the taxable year in which such adoption becomes final shall be taken into account as if such expense were paid or incurred during the year the adoption becomes final. No such expense shall be taken into account in a taxable year before the adoption becomes final.

SECTION 5 -- Reimbursement ProcedureS

No adoption assistance benefits shall be approved by the plan administrator and paid under the plan unless a participant has first submitted a written claim for benefits to the plan administrator on a form specified by the plan administrator and pursuant to procedures established by the plan administrator. The plan administrator will provide notice in writing if a claim for benefits is denied and the plan administrator will provide a review of that claim if requested. Any claim for benefits will be processed in accordance with procedures established by the plan administrator, in its sole discretion.

SECTIONS 6 -- TAX TREATMENT

6.1       Exclusion From Income -- Benefits under this plan are designed to be excludable from gross income under Code Section 137. However, benefits are subject to both the Social Security and Medicare portions of the Federal Insurance Contributions Act (“FICA”) and federal unemployment tax under the Federal Unemployment Tax Act (“FUTA”) and may be subject to state and/or local taxes.

6.2       Tax Withholdings -- The company will withhold any applicable federal, state and local taxes, as required by law, from any payments made under the plan and/or from the participant’s regular or any supplemental compensation from the company. In the case of reimbursed expenses, any FICA taxes required to be withheld from benefits under this plan shall be deducted from those benefits. In the case of any benefits paid directly by the employer, FICA withholding will be deducted from the employee’s other compensation in the same calendar year in which the benefits are paid. However, the company may choose to reimburse incurred expenses only (and not to pay expenses directly) so that all FICA withholding will come out of the benefits paid. If any benefit under this plan becomes subject to federal income taxes (whether as a result of nondiscrimination testing, modified adjusted gross income limitations, payment of benefits in excess of statutory limits or the failure to finalize adoption of an international child when the expenses are reimbursed) any federal income tax withholding attributable to the taxable portion of any benefit may be deducted from the employee’s other compensation in the same calendar year in which the benefit is provided.

            6.3       International Adoptions -- Qualified adoption expenses for the purposes of employer payments or reimbursements in an international adoption are treated as if they are paid in the later of the year in which the adoption becomes final or the year the expenses are actually incurred. Thus, employer payments or reimbursements made in a year prior to the adoption becoming final are taxable income to the employee in the year in which made, but then are taken as an adjustment to the employee’s income in the year in which the adoption becomes final.

6.4       Tax Mitigation -- The plan is intended to provide tax-free adoption assistance benefits to eligible employees pursuant to Code Section 137. However, subject to Section 7 of the plan, the company will provide the benefits described in this plan or an employer’s adoption assistance policy even if such benefits are taxable or are in excess of the amount excludable under Code Section 137; provided, however, that no such benefit will be provided to an individual if the benefit would cause the plan to become discriminatory.

            6.5       Filing Requirements for Married Employees -- Employees who are married must file a joint federal income return to treat the adoption expense reimbursements as excludable from gross income. For purposes of the plan and this income exclusion, an employee who is legally separated under a decree of divorce or separate maintenance is not considered married.

            6.6       Tax Liability -- The tax liability on any payments made under the plan is the sole responsibility of each participating employee.

SECTION 7–DISCRIMINATION

            7.1       Limitation on Benefits for More-Than-5 Percent Owners -- No more than 5 percent of the amounts paid or incurred by the employers under this plan for any plan year may be provided for the class of individuals who are shareholders or owners (or the spouses and dependents of such shareholders or owners), each of whom own more than 5 percent of the stock or capital or profits interest in the employer. For purposes of determining stock ownership, the attribution rules of Code Section 1563(d) and (e) (without regard to Code Section 1563(e)(3)(C)) apply.

            7.2       Nondiscrimination -- The plan is intended not to discriminate in favor of certain highly compensated employees as defined in Code Section 414(q). If in the judgment of the company or the plan administrator, the operation of the plan in any plan year would result in such prohibited discrimination, then the company or the plan administrator shall, in its full discretion, select and exclude from eligibility and/or coverage under the plan such employees as shall be necessary to assure that, in the judgment of the company or the plan administrator, the plan does not discriminate. Alternatively, the company or the plan administrator may, at any time, require any employee to amend the amount of pre-tax salary reduction contributions made through the Code Section 125 plan if the plan administrator determines that such action is necessary or advisable in order to satisfy the Code Section 137 nondiscrimination requirements or maintain the qualified status of benefits received under this plan.

SECTION 8 -- MISCELLANEOUS

            8.1       Information to be Furnished to the Plan Administrator -- Eligible employees must furnish the plan administrator or their employer with such evidence, data or information as the plan administrator or employer considers necessary or desirable to administer the plan. A fraudulent misstatement or omission of fact may be used to deny claims for benefits.

8.2       Uniform Rules -- The plan administrator shall administer the plan on a reasonable and nondiscriminatory basis and shall apply uniform rules to all persons similarly situated.

8.3       Gender and Number -- Where the context permits, words in the masculine gender shall include the feminine and neuter genders, the singular shall include the plural, and the plural shall include the singular.

            8.4       Controlling Law -- Except to the extent superseded by the laws of the United States, the laws of [Insert Applicable State] shall be controlling in all matters relating to the plan.

8.5       Interests Not Transferable -- Except as otherwise expressly permitted by the plan or as may be required by the tax withholding provisions of the Code or any state’s income tax act, benefits under the plan are not in any way subject to the debts or other obligations of the persons entitled thereto and may not be voluntarily or involuntarily sold, transferred, alienated, assigned or encumbered.

            8.6       Severability -- In the event that any provision of the plan is held to contravene the provisions of the Code or the regulations thereunder, or any other applicable federal or state law, the remaining provisions of the plan will nonetheless continue in full force and effect, and this plan will be construed as though any invalid provisions hereunder had not been included herein, as of the earliest date that such invalid provision first came into conflict with the Code or any final regulations issued thereunder, or any other applicable federal or state law.

8.7       Employment Rights -- Employment rights of an employee shall not be deemed to be enlarged or diminished by reason of establishment of the plan, nor shall establishment of the plan confer upon any employee any right to be retained in the service of an employer or promoted by an employer.

8.8       Amendment or Termination -- The company reserves the right to amend the plan at any time for any purpose. The company further reserves the right to terminate the plan at any time in whole or in part for any reason.

IN WITNESS WHEREOF, the company has caused this instrument to be duly executed in is name and on its behalf.

[Company’s Name]

 

By:  ___________________

Name: _________________

Title:  _________________

Date:  _________________

 

 

 

 

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