A new client is a sole practicing MD with 11 employees. He has a side business that provides some sort of medical assessment and referral services, but does not treat patients. He is by independent contact with the side business the 'medical consultant' that answers questions as they arise and reviews all notes generated by the two very young staffers (24 and 27). His wife manages the side business.

The MD would like to transfer all ownership in the side business to his wife, and then beginning the next year implement a DB plan for just the side business. If the medical practice employees come into play, the plan would not meet minimum coverage. That's the reason for transferring to her the ownership of the side business.

In looking over section 1563(e)(5) and regulation 1.414©-4(b)(5), one of the requirements for no spousal attribution is that neither spouse be 'a member of the board of directors, a fiduciary, or an employee' of the entity owned by the other, and not participate in the management of the entity owned by the other.

The client has an opinion letter from a noted ERISA attorney to the effect that she is unaware of any case law or IRS ruling that clarifies what is meant by management, and would not therefore opine on whether the medical consulting would be 'management' except to say that if tried, the medical consulting should be reduced to a written agreement and closely limit what specifically the MD is doing, avoiding any business management involvement or decisions.

My first question is whether anyone knows of any IRS or court pronouncements that defines or clarifies what is mean by "management" in this rule? Would it extend to this situation?

The other issue is whether the noninvolvement exception to the spouse being deemed an owner of the other spouse's busniness woul be possible in light of the fact that the MD and wife have a son who is just 16 years old. Derrin Watson has cautioned here (see ##3 and 4, and sentence after 4, in particular) that by single family attribution of the medical practice from the MD to his son, and single family attribution of the side business from the wife to her son, the son is deemed to own 100% of both the sole proprietorship and the side business and then the two would be a control group. The ERISA attorney's opinion letter cited Derrin's comments, noting in the opinion letter that Derrin is renowned as THE expert on this issue, but that the ERISA attorney could find no court or IRS ruling on point and that this seemingly thwarts the noninvolved spouse exception to attribution between spouses.

My second question is whether anyone knows of any IRS or court rulings that define or clarify whether the parent-to-child attribution could be done simultaneously from both the father to the under-age-21 child and the mother to the under-age-21 child where this would prevent the purpose of the noninvolved spouse exception?

Plan has immediate entry for deferrals, YOS for ER. Past years only owner and son were employed and contributing. In 2010, they hired four employees (all employed on last day), two employees deferred, however, so did owner and son at a much higher rate.

Since only the owner and son were participants in 2009, the plan would be TH for 2010. I am thinking that there is a TH requirement for the new EE's since they are participants on DOH for deferrals, am I correct? Or is there some rule out there I am not seeing...

Thanks for the help,

My employer claims to have lost the health insurance enrollment form that I completed when I started a new job in Feb. They had me fill out a new enrollment form at the end of April. A few days later I received my insurance card with an effective date of March 17. The effective date was apparently back dated after my employer received the second enrollment form. I was planning to cancel health coverage that I have through my spouse's employer when I obtained my new coverage. Both employers agree that my new job is a qualifying event. Because I did not notify my spouse's employer within 30 days of the effective date they are saying that I will have to wait until the next open enrollment period to cancel. I did not receive proof of the effective date until about 35 days after the effective date. My new employer admits that losing the paperwork is the reason that it took so long for me to receive my insurance card and proof of the effective date. They apologize profusely but say that there is nothing they can do which will allow me to withdraw from my spouse's plan. Do I have any options?

If a VEBA, which was previously funded to pay for retiree medical benefits, is amended to pay for current employee medical benefits, does the company have to recapture the "front-loaded" deductions for the prior contributions that were made to fund the future retiree medical benefits under the tax benefit rule.

If a participant designates a trust as his beneficiary and the participant dies. Can the trustee (i.e., one of the beneficiaries of the trust) rollover/transfer the trust to an IRA?

Under the no good deed goes unpunished, here is what we have.

Employer has about 150 employees with about 130 eligible. Now eligibility is one year and 1,000 hours and age 21. When they started the Plan 2years ago, they allowed anyone with 6 months and age 21. This made eligible a department where most people work about 5 hours a week. None of them defer. If we make that department ineligible it would get us under 100 eligible employees. I think this would mean no audit requirement for 5500.

Am I correct? Am I missing anything?

As a cost saving measure, my company is pondering canceling our company paid life insurance policy and perhaps doing something like a self insured arrangement. What things do we need to consider to do this in accordance with ERISA and IRS regs?

I have a prospect plan that has a 401k plan which has been in place for 10+ years. The plan document currently excludes union members. When the current TPA requested census data for the 2010 plan year, the employer sent in all employees W2's. Upon reviewing the W2's, it was noticed that 5 HCE's that have been contributing for 10+ years were UNION MEMBERS and 20+ employees who were never included on a previous census were also UNION MEMBERS. I know this is an operational failure, but I can not find any documenation on correction methods. How does the employer correct this operational failure?

I loved this...

http://www.xtranormal.com/watch/11544914/p...tration-meeting

PAL

I have a Safe Harbor 401k Plan with a 90 day eligibility. However, my client wants to carve out the warehouse employees because of the high turnover in that department and have a 1 year eligibility for them. We can pass the coverage tests by excluding this group all together, but they want to give this group an incentive to stay. Can you have one plan with different eligibility specs for different employee classes? Any feedback would be appreciated. Thanks Susan

The ABC Company drafted there new plan which includes hardship withdrawals. The attorneys have included an added hardship reason which I have known as facts and circumstances. In addition to the safe harbor reasons this plan states "any other contingency determined by the IRS to constitute an "immediate and heavy financial need" within the meaning of the Treasury Regulation Section 1.401(k)-1(d)". When I questioned the client about this addition the attorney told ABC Company that this is now standard practice.

Is this true?

This may be in the wrong forum, so my apologies in advance. We are gearing up for the fee disclosure requirements under the new 408(b)(2) requirements, and a question has popped up about defined benefit plans. The final interim regulations specifically apply to DB plans, but what about the situation where the service provider/actuary sends the invoice to the plan sponsor who in turn sends it to the trustee for payment from the plan. The service provider is receiving compensation from the plan so the 408(b)(2) rules kick in. Is the invoice adequate disclosure for the fiduciary? Would some other disclosure need to be made? Seems logical if the fiduciary approves the invoice then the fiduciary had received the requisite disclosure...but as we all know, logic and ERISA are not always mentioned in the same breath! Thanks for your thoughts.

I don't work on many true age-weighted plans, so i'm a little unsure of myself when it comes to testing requirements. I have an age-weighted PS plan with 1000 hour requirement for allocation. I have several participants who terminated with more than 500 hours but less than 1000 hours. I know for those who get an allocation ebars are equivalent due to nature of age weighted plan. Does true age weighted plan need to be tested in the same way as a new comparability plan?? Thanks.

We have an employee who contributed in excess of the 402(g) limit in 2010, all into the same 401(k) plan. This errored-out after the deferrals had already been funded in the participant's account.

The plan administrator moved not only the associated match, but also the excess elective deferrals into the plan's forfeiture account, then refunded the employee's excess deferrals through company payroll.

So now the question arose, is this a prohibited transacation (or other issue), and if so how do we fix it? Ideally we'd like to justify the action, or at least determine a painless way to fix it.

I was not at the company at the time, so this is a post-mortem.

Thanks

An employer in the state of Texas has asked all covered employees to fill out a heath questionnaire. This is a GENERIC paper form that asks detailed information regarding diagnosis (including mental health) and presciption drugs taken (in my opinion far exceeding "minimum necessary"). They do not state the reason, the audience, nor do they mention the information being given is protected health information. The covered individual asks for clarification and first gets a call from the broker who states they have exhausted their request under HB 2015 and the information is being used for underwriting. After requesting further clarification regarding the form the individual gets an e-mail threatening to cancel COBRA coverage if the form is not filled out. The covered individual has been covered under the current plan for at least 4 years (COBRA FOR 11 months).

Do any of the above scenarios constitute a vioaltion of HIPAA and/or COBRA laws.

Any input would be greatly appreciated.

OK, so I know the 5500 instrucitons say "don't reprot aything on Schedule A that is already reported on Schedule C as indirect compensation." But am I correct that if I'm doing an S-F, I should include on line 10e (payments made by insurance companies) the indirect expenses paid by the insurance company (in this case Great West?).

I need a little help with this one!

A company currently has a MERP that pays the first $750 of the participant's $1000 deductible in the health plan. They want to keep the deductible at $1,000, but now require the participant to pay his $250 first and then the MERP will pay the remaining $750. There is no change in the deductible or the amount that the employer pays through the MERP, so does the health plan (and the MERP) keep its grandfathered status? Or do you have to consider the possibility that some participants may now be paying more (since they may not have incurred more than $750 in deductibles in the past)?

Employee is terminating soon and is pregnant. She has incurred some expenses related to the pregnancy such as doctor visits but the doctor wants to bill all at once after the birth and apparently is refusing to separate out a small portion of the bill so this employee can make a claim. The baby is due after the claims grace period of this plan.

Is there any rule that the doctor has to abide by to get him to bill (provide evidence for) for incurred expenses? Any other method or recourse whereby the employee can recoup some of the money she already contributed besides COBRA?

Thanks

Has anyone considered whether an attorney needs to have a PTIN in order to prepare an 83(b) election for a client's employees?

I currently have an accountant and a tax attorney at odds on taking a 162 bonus on K1 income.

The accountant says you cant do it, the tax attorney says you can...

The attorney claims that the bonus is basically deducted from the taxable K1 income. (I have doubts that its that simple to figure)

Does anyone have experience taking a 162 bonus with K1 income?