Can FICA Replacement plans under Section 3121 have loan and/or hardship provisions? I can see that if the plan is a money purchase plan that hardships would not be allowed but what about loans?

Help!

We have just discovered that one of our deductions, a spousal surcharge for employees who choose to cover a spouse who is employed and eligible for coverage elsewhere, was set up incorrectly in the payroll system. It was set up as a post-tax deduction, while our plan docs indicate that this should be a pretax deduction. The issue spans several plan years and affects 40-50 employees.

Obviously, this needs to be corrected because the affected employees are due the taxes that they incorrectly paid on these deductions. My question is, is there any way I can do the entire correction "upon discovery" in 2010, or am I really looking at going back and amending 941s, 940s, W2s, etc. for several years for each of these employees? I fear I know the answer, but given that the impact to each employee is maybe $200 in taxes, the idea of paying thousands to amend all of those tax forms is something we'd like to avoid if there is any provision that would permit us to do so.

Thanks in advance for any advice!

If a retroactive change under VCP changes the information that would have been reported on Form 5500, must the plan sponsor go back and amend the 5500? And redo the audit for the accountant's opinion?

I have a situation where a participant went out on an approved medical leave for a few months, came back to work and made several payments but is now back on an approved medical leave. My question is this - is the suspension a one time event or cumulative to total not more than a year during the five year loan repayment period?

I just got back from vacation to find a message on my answering machine about a dec'd participant in one of my plans. We always tell the client to obtain an original copy of the death certificate when processing the distribution(s) for a participant's beneficiary(ies). this participant died earlier this year and apparently her bene is not a family member. The clerk of courts won't give this person an original death certificate, and the family is upset ~ apparently they are not happy with who the named bene is....

The client has a copy of the death certificate, but not an original. Under these circumstances, and assuming that the dec'd enrollment form (on file with the client, not us) states that this person is the bene of this unmarried participant, do you think we could proceed with the distribution - or would you just advise the client to speak to an erisa atty?

A client received a $16,000 penalty notice from the IRS today for a plan that ceased to exist around 1994. Apparantly the Form 5500 actuarial information for this profit sharing plan was not signed by an actuary.

We are a small employer and have an employee that was out on maternity leave (unpaid leave). Since the leave was unpaid, there was no pay for us to withhold FSA contributions from. Now that she has returned to work, can we have her pay in the missed deductions? If so, over what time period? Do we have discretion? We don't want to make it hard on her by taking it all from her first paycheck back. We would rather space it out over several pay periods if possible.

Thanks.

Our client sponsors a non-PBGC client DB plan that is very underfunded. There are two owner and two non-owner participants in the plan. Their business is doing very poorly and they cannot come up with any money to make this year's contribution of $80,000. They would like to terminate the plan as soon as possible and have the owners waive a portion of their benefits to the extent funded, but since we're already in 2010, they will have another contribution for this year as well of about $80,000 again.

I told them that they are required to make the contribution even though they don't have the money, and they're wondering what happens if they just close it, make their payouts and file 5500's showing the unfunded contributions.

I realize that they can't take the waiver into account for funding, so:

1) What options (if any) do they have?

2) What happens if they don't make the contribution and just close everything out?

Hello all,

Starting in a couple of months, stand-alone Health Reimbursement Arrangements (HRAs) have to report coverage information to the Centers for Medicare and Medicare Services (CMS). It doesn't matter whether it's managed by a TPA or an employer, it all has to get reported (with some small exceptions). The reporting includes SSNs, names, birth dates, and whether the employee is "covered" by the HRA. Reporting does not include whether the employee has exhausted the HRA nor the amount remaining in the HRA.

Reporting is a pain, but the bigger issue is how the coordination of benefits (COB) would work between a HRA, the medical provider, and CMS. CMS has declared that HRAs are a primary payer, but most HRAs only provide reimbursement to the employee for an eligible medical expense. So, will CMS start sending claims made by the employee's providers to employers and TPAs since they are technically listed as "primary payers"?

You can think of a system where CMS requires the provider to send the bills first to the employer or TPA as the listed-primary-payer only to have the TPA or employer deny every "claim" since its being requested by someone other than the HRA plan participant. Similarly in the case where a employee has exhausted his or her HRA dollars, is CMS going to come back to the employer and TPA and demand payment even though the HRA is already maxed out?

Does anyone have any experience with how an employer or TPA might deal with the onslaught of CMS COB issues?

Regards,

RT Moore

An employer reviews a new DB plan design proposal and agrees with everything, except, during the discussion with the plan consultant, they decide they want to include one year of past service for a larger deduction limit. They signed an agreement with the consultant to have a new design done and to have them prepare the plan document.

The provider prepared the new design and the plan document. The employer signed the plan document. The plan's effective date is January 1, 2010.

After a few days of reviewing the revised plan design, the owner-employees question the mechanics of the plan. It shows a beginning of the year accrued benefit. It also shows an end-of-year accrued benefit, which is basically 2x the beginning of the year accrued benefit for all employees. All employees that is, except for the owner-employees who are up against the 415 limit on January 1, 2010, so their 12/31/2010 accrued benefit is shown to be no bigger than their 1/1/2010 accrued benefit.

They now want to change the plan to not provide a past service credit. The higher deduction is no longer a priority. However, they signed the plan about a week ago.

Since the employees have already worked 1,000 hours, is there anyway such a change could be made?

Code Section 415(n)(3) allows trustee-to-trustee transfers from 403(b) or 457(b) plans for the purchase of permissive service credits under the state defined benefit plan.

However, can the same type of tax free transfer be made from a governmental 401(a) plan to the state defined benefit plan?

Many thanks!

If under VCP the IRS requires a retroactive change to a plan that would have, had the change actually been in place at the previous time, affected the information reported on the 5500 and the plan sponsor's employer tax return, must amended 5500s and tax returns be filed as a consequence of the retroactive VCP correction? What if the retroactive change is beyond the 3 year and 6 year statute of limitations? EPCRS does not address this issue - is there another source that does?

Has anyone found a Roth conversion calculator they trust??? Most of them seem to leave out at least one important assumption.

Thanks.

James

I have a very complex question. I hope someone can answer it. Here is the situation:

* Through my employer, I have an FSA. During my employment, I have never elected that money be voluntarily withheld from my pay and placed into this FSA. In other words, there is no "salary reduction agreement."

* The employer places money each year in the FSA. Here is where that money comes from:

- Employer contributes a certain amount of money towards my health care. However, the cost of the health care does not consume that entire amount.

-Therefore, employer places the left over amount—about $730 for 2010—in the FSA.

* Employer has been sold to another company. The existing FSA will continue through the end of 2010, then cease to exist.

* Employer now says it will pay only part of the $730 for 2010. This amounts to about $410. Employer states that I will be forced to personally pay the remaining $320 through the end of 2010.

Question: Is this legal? To me, it sounds like I am being asked to fund what is essentially an employer contribution. If the employer agreed as of January 1, 2010 to place $730 in that FSA, I believe it is obligated to do so.

Thank you for your comments.

Participant had a self-directed account for 401(k) money at Vanguard, became disillusioned for a lot of reasons that I won't get into, and somehow just took the money out; probably with the plan sponsor signing off without our knowledge or input...actually in direct contradiction to our input, but anyway...

I don't believe there was any withholding, and I'm going to assume for now that the participant has the money.

I'm being completely lazy and not even trying to find a fix in VCP; is there one that anyone knows of? Does it matter if the participant is able or unable to repay the money? It's a 5/31 fiscal year and the transaction occurred before the end of the year so it's an open item.

A plan with many Life and CC options (some are Life and below 10 years CC and some are Life and over 10 years CC) would like to simplify things. They want to eliminate as many options as possible, without running afoul of 411(d)(6). The plan also has a lump sum option (which almost all particpants take when there's no restriction otherwise stopping them).

Under 1.411(d)(3)©(4), all of the Life and 10 or less is grouped separately from Life and more than 10 forms. Does this mean the plan must keep at least two Life and CC options, such as Life&10 and Life&15?

Are terms governing ability to withdrawal from plan typically included in trust or participation agreements? Or are those rules governed entirely by the CBA?

Any reason why a plan's attorney who received in excess of $5,000 of direct compensation from the plan would NOT be identified on Schedule C?

While it is clear that rolling a governmental 457(b) to an Rollover IRA will "taint" the money for the 10% excise tax. Can this money be cleaned of that problem by rolling it back into another existing governmental 457(b) plan or are the previous 457(b) funds forever tainted? Can there be a "tracing" of the funds?

I practice in NY and am am familiar with using the State's 3 year statute of limitations period for a COBRA notice violation claim. But, I haven't been able to determine whether such a claim is subject to the notice of claim requirements to sue a municipality/School District? Does anyone know off-hand whether a COBRA notice violation is exempt from the notice of claim requirement? Thank you.