As I understand it under the recent health care law enacted this year, beginning 2013 the FSA exclusion will be limited to $2500. What I am not clear on is whether the $2500 applies only to the out of pocket portion of employee medical expeses such as co pays and deductible amounts or whether it also includes the employee pre tax payments for health and dental insurance. If the $2500 limit includes health insurance payments then most employees with health insurance who itemize deductions will not be able to deduct the cost of the health care premiums because the threshold for itemized deduction of medical expenses will increase from 7.5% of AGI to 10% inb 2013.

Please let me know if the $2500 FSA limit includes health insurance premiums.

Employer uses $5,000 in Forfeiture money to fund the $20,000 Profit Sharing contribution. How is this contribution handled relative to 5500 reporting? Since the $5,000 is already in the Forfeiture account and is part of the Beginning of the Year balance, would we report the Employer contribution as $15,000?

The owner in a 1 person DB plan reached age 70 1/2 in 2010. He has to start his MRD (payable as monthly annuity payments) no later than April 1, 2011. Since he can start in 2010 when would be the start date if he wanted to start on the earliest date. I wouldn't think he couldn't get 12 payments in 2010. We will probably start him either 1/1/2011 or 4/1/2011 but I'm wondering what the earliest start date would be in this case.

Any thoughts?

A prospect wants to adopt a new 2010 calendar year 401(k) plan effective 1/1/2010. Instead of a Safe Harbor, she would use the first year rule under which she can defer 5% of full year comp. Is anyone aware of a specific citation that says it's too late to implement the plan on December 15, 2010; assuming there is at least one paycheck remaining in the year and notice is given to all employees at least one week prior to the last paycheck?

Thanks & Merry Christmas.

I was reviewing my first end of plan year valuation date valuation and Q 19:110.1 of the defined benefit answer book states that for a valuation date that is not the first day of the plan year the segment rates must be based on the month that contains the valuation date. So for example if a valuation date is 12/31/2010 then the December 2010 segment rates must be used.

Is that correct?

There is no cite for this position, presumably can be found in the regs.

Thanks.

In general, an asset sale will trigger withdrawal liability, while a stock sale will not. What if Company A sells certain assets (in this case real estate) to Company B, prior to Company B purchasing all of Company A's stock?

My feeling is that this would still be a stock sale and would not trigger withdrawal liability, particularly where Company A's remaining assets at the time of the stock sale are more than sufficient to cover any potential future withdrawal liability. Of course, at some point the assets transferred in the initial transaction could be so extensive that this structure is being abused, but that seems to be where ERISA 4212© would come into play.

However, I have not been able to find any example of a court or arbitrator going through such an analysis. Any thoughts?

A client called who has a number of leased employees working for their company. They have excluded the leased employees from their insurance coverage for many years. However, they, in getting quotes to set up a 401(k) program, found that leased employees have to be covered under the plan. Now they are worried that they should have been offering insurance coverage to the leased employees as well.

I am not very versed in healthcare rules, so I thought I'd throw this out hear and see what opinions are. Thanks for any replies.

I am aware of the option for a plan sponsor to elect the full yield curve instead of the segment rate, but don't know how it is applied.

Is it the average rate for a particular month for maturity periods from 0.5 to 100 years or is it done another way, such as creating three rates?

And my understanding is that the plan sponsor must sign an election to use this method?

An example for say a 1/1/2010 valuation may be the best way to provide an explanation.

Thanks.

Gary

Line 13n of Form 5300 indicates that "all aggregated plans should be filed concurrently." Does that mean that two permissively aggregated plans - - - one a Cycle C filer and one a Cycle E filer - - - had to elect the same Cycle, or does it merely mean that a copy of both documents should be included in the submission package? Revenue Procedure 2007-44 nowhere states or implies that permissively aggregated plans must be simultaneously filed.

Thanks.

The not-for-profit agency is willing to pay interest on late deposits, but I can't believe that they would be expected to go back more than 3 years to correct the problem. I suppose we could include only 2009 and 2010 in our VFCP filing and see if the DOL asks for more. The actual time period could go back to the beginning of the plan (20 years or so). I'm sure this has come up a zillion times. I would be interested to hear how others have handled this.

I apologize if this has been asked-I'm processing a QDRO and the QDRO states: 50% of account balance with interest/loss until the date of segregation-even through the particpant has continued to contribute, the alternate payee is still entitled to 50%? I've never seen this before-I usually see: 50% of account balance from xxx date and interest until date of segregation.."

Thanks!

I apologize if this has been asked-I'm processing a QDRO and the DRO states: 50% of account balance with interest/loss until the date of segregation-even through the particpant has continued to contribute, the alternate payee is still entitled to 50%? I've never seen this before-I usually see: 50% of account balance from xxx date and interest until date of segregation.."

Thanks!

An existing 401(k) profit sharing plan defines its normal retirement age as 65. They want to add a Defined Benefit plan, and its retirement age would be 62 or if later 5 years. The plans are tested together for 401(a)(4) testing.

Can the testing age be age 62 (or if later 5 years)? Or is an amendment needed first to the 401(k) plan's NRD?

My lost participant has been lost for several years. I have looked for him using a service for $50 and used the IRS letter forwarding several times with no luck. His investments are $2,300 and his outstanding loan is $3,400. I have been unable to default the loan because the platform will not allow us to unless his address is known. Penchecks will accept a default IRA rollover with a loan balance, but the total balance is over $5,000. Any ideas on how to proceed?

I have read lots of guidance regarding amending cafeteria plans for the health care reform act.

The amendments I have seen all have to do with amending the definition of dependent in the cafeteria plan to include children under the age of 27 and adding such an adult child's change in status as an event allowing for an election change.

My question is: are the changes predicated upon the underlying health insurance plan not being grandfathered?

In other words, if an employer's plan is grandfathered must these changes be made to their cafeteria plan?

i am wondering if anyone has tried

to have their client create a s-corp

to improve db deductions where there has been

a depletion in plan assets and the client

is now a low to modest earning schedule C. Client is close to

or beyond NRA. No employees.

Is it possible to have the s-corp adopt

the plan and assume the plan

assets and liabilities. The client could then

lend money to the s-corp to fund the plan

back to higher levels. S-corp losses due to the pension

contributions could then be passed

through to the client. Does this make any sense??

I've probably either asked this or opined on it, but here goes (again)...

Partners in LLCs are commonly taking W-2 comp so they can have withholding handled through the company's payroll system and not have to make quarterly tax deposits. But then they also have profits (or losses) and I guess we have to net the two; it's just not quite as simple as adding draw and profits and then applying the SE tax deduction, I think we should do the SE deduction on the profits only, then reduce the profit further by the contribution to get compensation. And if there's a loss, then I suppose we subtract that from their paid salary, and reduce further for the contribution. But can you take a contribution deduction on a 1040 if you have a loss?

If they wind up with a loss then I think they will have overpaid on SE taxes; not my problem.

And of course some accountants are taking the salaried partners' plan deductions on the partnership return, which means we do NOT pull it out when determining comp since it's already reducing profits.

Any disagreement or comments?

CPA called to ask a question.....

An individual is receiving payments from his former employer as part of severance package. The CPA is interested in running these payments through a corporation and having the corporation pay the individual a salary so that it can adopt a plan. His concern is that this employer doesn't really have a purpose, and therefore may not be considered an employer for qualified plan purposes.

The definition of Employer in the ERISA Outline Book talks about an being an employer under common law principles.

Can anyone give me some details on what "common law principles" refers to, and how this relates to 401(a) and ERISA?

Company A is purchasing Company B. Company B employs a 5-mo. pregnant woman on ST disabilty. Company A offers no ST disability policy and LT disability benefits require a 30-day wait period. Has anyone run into this issue and if so, how have you addressed it? TY in advance for any suggestions.

I have a 401(k) plan where the Plan Administrator got divorced and paid $50,000 to her spouse as part of a divorce settlement. There were all sorts of divorce documentation, but, no QDRO. I brought this up to the client who referred me to her attorney (a rather nasty individual). I mentioned that it was necessary to have a QDRO for the plan to avoid potential problems in the future. A tentative Retroactive QDRO has been sent to me for my review and I have the following comments:

1. The only verbiage in the document making it retroactive is:

"This Order is entered pursuant to the authority granted in the applicable domestic relations laws and the marital property laws of the State of Texas and IT IS ORDERED that this order is retroactive to December 28, 2009."

Question: I am not that familiar with these things and I am wondering if this simple reference is sufficient to make this attempt at a retroactive QDRO, in fact, a retroactive QDRO?

2. Remembering that this payment has already been made and rolled into an IRA, I question the following section:

"Commencement Date and Form of Benefit

Alternate Payee shall be paid Alternate Payee's benefits as soon as administratively feasible or, if the Alternate Payee so elects, at the earliest date permitted under the terms of the Plan."

Question: Given the fact that the Alternate Payee was already paid out and rolled the proceeds into an IRA, this section makes no sence. In fact, it appears to me, that this probably was a boilerplate section inserted into the document on the assumption that when this DRO is approved, a payment will be made subsequently. It just seems inconsistent with what has actually happened. Do you agree with my opinion on this or am I being too picky?

3. Finally, with regard to the tax treatment on this distribution, the document indicates that the "...Alternate Payee under the terms of this Order...will be required to pay the appropriate federal income taxes on this distribution." Again, it appears to me that this wording would be more appropriate if the distribution was to be made in the future and not already rolled into a tax sheltered environment.

Question: Again, am I being too picky with this wording?

Thanks for the help,

Rick