I prepare the annual Form 5500 for a Welfare Plan with some of their benefits under a Cafeteria Plan.

A Schedule A was provided from the insurance covering all the benefits that they provide (pre-tax and post tax, less than 100 participants and more than 100 participants).

Some of the benefits listed are post tax and some have more than 100 participants.

Some of the benefits are pre-taxed and covered under a Cafeteria Plan, but these particular benefits have less than 100 participants.

What do I report? Should I report only the pre-tax benefits under the cafeteria plan even though they only have 26 participants? Do I exclude reporting the post tax benefits even though they have more than 100 participants?

The remaining Schedule A from other insurance companies consist of pre-tax benefits under the cafeteria plan and all have more than 100 participants.

I appreciate any guidance in this matter.

Has anyone heard of a PEO that is under a collective bargaining agreement? They say they become the "common law employer" and sign a collective bargaining agreement with a union. And it will allow for the owners to set up a DB plan that excludes the employees that are in the PEO. I have found one. I was wondering if anyone had names of some others out there that I could contact.

I have a plan that froze benefits and service for non-union employees as of a 1/31/2010. Date of Entry is defined as the first of the month coinciding with or after 12 months and 1000 hours. A non-union participant was hired on 9/15/2009. Can he enter the plan on 10/1/2010, although it has been frozen? The amendment freezing the plan states that the only eligible employees after 1/31/2010 are Union Employees. I do not think he is Eligible, whereas there are others in the office that disagree. What do you think?

Thanks ahead of time!

ABC Company has a plan year end of 6/30.

John HCE is over age 50 and has maximum comp of $245,000 for both plan year 7/1/09 to 6/30/10 and 7/1/10 to 6/30/11.

For plan year 7/1/09 to 6/30/10, John HCE made $0 salary deferrals.

During 7/1/10 to 12/31/10, he deferred $5,500.

During 1/1/11 to 6/30/11, he deferred $5,500.

For plan year ending 6/30/10 his PS allocation was $49,000.

For plan year ending 6/30/11 his PS allocation will be $49,000.

Is it possible to treat all $11,000 salary deferred from 7/1/10 to 6/30/11 as catch-up contributions?

Perhaps the only yes answer is if the plan document has a deferral limit for HCEs of $0.

Any other ideas?

generally all of the 401k plans I have done non discrimination testing have been safe harbor 401k profit sharing plans.

I recently observed a non safe harbor 401k plan that did not pass ADP test or the ACP test.

While I am not responsible for correcting the failure I want to have some understanding of what can be done.

For example, if the sponsor makes a QNEC for $1,000 for a given participant is it potentially permissible to divide the $1,000 in any desired way to apply to ADP and ACP tests?

For example can $500 be applied to ADP test and $500 to ACP test or any combination including all $1,000 to ADP test? Of course the $1,000 cannot be double counted for both tests. Curious if that is a way it can be utilized. This way the plan doesn't have to make QMACs potentially and can make contributions for participants who did not defer as well.

Thanks

Owner only DB is frozen. He is considering hiring an employee for 2012. I think this means he will fail minimum participation when you look at prior benefits structure.

How much does he need to give the employee if there is a 401(a)(26) failure based on prior benefit structure? Just the 1/2%? Based on the prior benefit structure?

Thanks!

Employee seeks to add a newly adopted child as an eligible child/dependent under the employee's employer-sponsored health coverage. While the plan covers "legally adopted" children, it is unclear whether the adoption is such that the child can be covered under the plan as an eligible child/dependent.

Facts

The child is a relative of the employee, and the adoption occurred outside the U.S. (in the home country of the child and other members of the employee's extended family). The child is now living with the employee in the U.S., and they are in the process of applying for a green card for the child. The child is also applying to attend college in the U.S.

The employee has not provided an adoption decree or other similar documentation of the non-U.S. adoption, and it is unclear whether the local (non-U.S.) adoption is recognized in the U.S. The employee is pursuing a visa that will allow the child to stay in the U.S. as the employee's child, but the employee has indicated that other avenues (e.g., international adoption process, temporary guardianship or kinship guardianship) will not be pursued.

Plan Provisions

The plan is an employer-sponsored group health plan (self-insured with stop loss), which covers eligible children through age 26. Eligible children include: (i) legally adopted children (from the earlier of the date the child is lawfully placed in the participant's household for adoption or the date of legal adoption), and (ii) any other unmarried children (e.g., grandchild, niece, nephew, etc.) living with a participant who can be claimed as dependents on the participant's tax return and for whom the participant is appointed legal guardian.

Issue/Questions

It is unclear whether the non-U.S. adoption constitutes a "legal adoption" for purposes of the plan. Even if the non-U.S. adoption were not a "legal adoption," it seems that the plan could cover the child if the child were "lawfully placed" in the employee's household for adoption (in anticipation of legal adoption). However, the employee does not intend to pursue further international adoption procedures. The employee is also reluctant to pursue legal guardianship that would qualify the child under clause (ii) above.

• Does the plan run into any issues if it provides coverage on account of the child being "legally adopted" (albeit outside the U.S. and without confirmation of whether the adoption is recognized in the U.S.) or "lawfully placed" for adoption (although the employee is not presently pursuing further international adoption procedures)? For example, could this present any issues with respect to the stop loss carrier?
  

• Under ERISA 609©, employer-sponsored group health plans are required to cover adopted children of plan participants under the same terms and conditions as apply to dependents who are natural children -- irrespective of whether the adoption has become final. The law protects children who are under 18 as of the date of adoption (or placement for adoption). Although the child is college-age and could very well be 18 or older, the plan covers eligible children through age 26. Even if the law protects only protects children adopted prior to age 18, doesn't it seem inconsistent with the intent/spirit of the law to treat adopted children age 18-26 (or, rather, children who were 18-26 at time of adoption/placement) differently from natural children age 18-26 (who would be covered under the plan)? This is probably moot as the plan covers all children 18-26. If this child cannot be covered under the plan, it will not be because the child is over 18 and not protected by ERISA 609© -- it will be because the child is not "legally adopted" and thus not an "eligible child" under the plan.
  

The 2009 Form 5500SF was filed, but one of the assets in the plan did not actually meet the definition of "eligible", so we should have filed 5500. Do we need to amend the 2009 Form? Is there a penalty for this?

A participant affirmatively elects out of an automatic-enrollment 401(k). Nonetheless, the participant is enrolled at the default rate and has been making deferrals for four months. I don't believe there is any "IRS approved" correction for this problem in Rev. Proc. 2008-50. Has anyone attempted to fashion their own correction or have any thoughts on what it would look like? Thanks!

Feeling a little dense here. I can see where the regulations permit a participant to designate whether a plan distributes a Roth or pretax excess contribution due to an ADP or ACP testing failure, but I don't see the same rule for 402(g) violations. If a participant has a 402(g) violation (for example, due to contributions to two or more unrelated plans) and the contributions consist of both pretax and Roth, can he be permitted to designate whether the Roth or pretax contributions are distributed? If not, how is this determined?

If an employer "refuses" to pay the excise taxes for a funding deficiency, can the owners/officers be held personally liable for them?

An employee was divorced back in April (4 months ago) but failed to report the life event to HR within the required timeframe (30 days). He is now bringing it to HR’s attention and wants to drop his ex spouse from some of his pre tax plans (Medical, Dental, etc.).

Technically an ex-spouse is no longer eligible to be covered on the group plan and should be dropped and offered COBRA. The carrier will likely allow the change to go back 60 days, but the question is what should be done with the employees deduction for Medical and Dental. Since the life event was not reported with the required timeframe, should the pre-tax contributions remain as-is until the next annual enrollment period even though the ex spouse will be dropped off of the coverage?

Could not find any information in the regs on this. I assume the same situation would come up if a deceased dependent wasn't reported within the required Section 125 timeframe. Thank you.

Where can I find the 417(e)(3) rate for August, 2011?

I've taken over a SIMPLE (k) Plan and the deferrals for two participants have exceeded the maximum including catch-up contributions for the 2008, 2009 and 2010 plan years.

When the excess deferrals get removed from the plan, are these amounts only subject to taxation in 2011 (if distributed this year)? In other words, is there any other penalty for late removal of the excess deferrals? Thanks.

Hello,

I need some help with interpolating joint and survivor annuity factors manually (In Excel) for fractional ages of both participant and spouse. I have factors for Participant Whole Age/Spouse Whole Age, Participant Whole Age+1/Spouse Age, Participant Whole Age/Spouse Age+1, and Participant Whole Age+1/Spouse Whole Age+1. My problem is, how would the interpolation work simultaneously for the spouse, while I am interpolating the factors for the Participant's Age and Age+1?

I have attempted it, but, I am off from the annuity calculator that I am using, even though I am starting with the same results at whole ages to do my interpolation. I am off by .0007 at the most among the various J&Ss. I do not think it is necessarily a rounding issue. It looks like some special interpolation might be occuring.

Can you provide some insight on how some of you interpolate to derive results at fractional ages for both participant and spouse?

Your help would be greatly appreciated.

Thanks.

A self-insured health plan covers routine physical exams, including the cost of the office visit, and any associated labs, x-rays, immunizations, etc..., but subject to an annual dollar limit of $500. Anyone have any thoughts on whether the annual limit absolutely must be removed under PPACA? This type of service could obviously qualify as a preventive/wellness type service, which is one category of Essential Health Benefits, but I'm curious whether others know of any reasonable argument that the limit would not apply to this type of benefit. (I understand there are no regs yet, and that all of this is subject to reasonable, good faith, consistent interpretation until then).

I am of the opinion you can roll over assets from a terminating psp into a SEP-IRA. If I am right, does the SEP have to have any sort of rollover language incorporated in it? Thank you kindly

I have a Plan Sponsor that set-up a new 401(k) plan (Plan B), effective November 1, 2009, and ceased participation in the old 401(k) plan (Plan A) October 31, 2009. After a DOL review, it was determined they did not properly remit approximately $40k of prevailng wage amounts to Plan A. The sponsor's intent is to merge the plans; however, this hasn't happened yet. The $40k was remitted to Plan B in 2010.

Additionally, there were late deposits on elective deferrals and the 5330 has not been filed. The sponsor intends to deposit the lost earnings from Plan A into Plan B as well.

I have received confflicting information on whether this is proper/allowed. Any insight would be appreciated.

Audit fun........

We have a plan right not that got flagged for audit. It is a cash balance plan that is cross tested with a profit sharing plan that has 5 employees. 2 of the employees are the owners and the other 3 are NHCE staff. The cash balance plan was written to exclude the 3 staff members. The plan passes 401(a) and 410(b) based on it being aggregated with the profit sharing plan.

The auditor and legal analyst is saying that it does not pass 401(a)(26) because "the facts and circumstances in this case show that the plan exists primarily to perserve accrued benefits for a small group of employees for the employer. The groups referred to above are the shareholders, since that is the only group that is allowed to participant/accrue a benefit under the cash balance plan."

He specifically cites a line from 1.401(a)(26)-3(2) which states "A plan does not satisfy this paragraph © if it exists primarily to preserve accrued benefits for a small group of employees and thereby functions more as an individual plan for the small group of employees of for the employer." I think it all comes down to the qualatative word 'small'.

In the past we have used this structure before and been granted d letters upon submission. We still believe because 40% employees recieve a meaningful benefit, the plan passes 401(a)(26). I have been asking local actuaries from my area and they all share this belief and I have seen several posts on benefits link that agree as well.

Has anyone seen this response from an auditor before? What happened? Can we ask for a second opinion?

One more twist, we filed for a d letter pending for this same plan and, coincidently or not, the same legal analyst is performing that review. He stated in a letter to the auditor that because it was too late to correct in accordance with the regulation that our client will have to be dealt with through the auditors closing. Isn't the whole reason for filing for a d letter to allow us to correct these types of infractions?

Any help or opinions would be greatly appreciated.

Is a spouse of ">5% owner" in a QP deemed to also be a ">5% owner" for required minimum distribution purposes - or can she wait until her actual retirement to commence her RMDs a la "non-5% owners"?

Thanks!