Does anyone know if workers in a Puerto Rican division of a US based company can participate in a Section 125 Plan?

Sources seem to say no, but need some quotable language.

I'm looking for a software solution and would like some input. We're a smaller brokerage looking to administer COBRA for our clients. I'm leaning towards Travisoft so far and was wondering if anyone had any experience with the company that they'd like to share, or an opinion on another vendor to explore. Travisoft seems to have kept abreast of the recent ARRA changes and has updated their software accordingly, as well as posted a blog on the changes to keep their clients up-to-date. I also like that they are set up to handle state continuation of coverage as well as federal COBRA, a feature lacking in other solutions I've explored.

Any and all feedback would be tremendously helpful.

Thanks in advance!

We are almost ready to send our annual funding notice for the defined benefit plan. However, we cannot locate addresses for a handful of participants. We are searching. If we cannot locate them, what should we do? What is our responsibility regarding these participants?

A money purchase plan was merged into a PS/401(k) plan several years ago. The MP plan did not allow for in-service distributions. The PS/401(k) plan was recently amended to permit in-service distributions after age 59 1/2. Will the participant be permitted to take an in-service distribution from the entire vested balance?

What is the best way to correct this issue? Payroll failed to start loan payments for participant in June 2004. First payment was received 2/13/05 instead. Now 5 year period is about to be up and participant still owes a few hundred dollars more on the loan. Other than asking for participant to pay in full, what are the other options? I saw in ASPPA presentation slides from a recent webinar that if payroll does not start deductions on time there is an EPCRS solution - sited Leonard vs. IRS. I can't find this case by just a google search right now. Anyone know how this can be corrected?

Company X buys the assets of the Z division of Company Y. Company Y maintains a profit sharing plan for its employees. Assume that Company X is willing to accept a spinoff of the portion of the assets of the Company Y profit sharing plan attributable to the Z division employees. Company Y proposes to transfer only the vested portion of the affected participants' acccount balances. Does this result in a violation of a qualification requirement?

Many states are mandating coverage for dependents at older ages, or plans are making the changes on their own. How are you supposed to handle the premiums when you might have some dependents that qualify under IRS rules and some that don't?

For example:

EE elects coverage for Self & a qualifying child. Let's say the premium is $300 a month. This is paid pretax. At open enrollment, they add another child to the plan. This child does not qualify under IRS rules, but does under other rules. Premium is still $300, because it's one price regardless of the number of dependents. Can you still pretax the whole $300, or does part of it now need to become after tax?

(Note, no ER contribution to the dependent coverage, so we don't need to get into imputed income.)

Thanks for any thoughts.

Employer is instituting a severance program. Terminating employees will receive six months of coverage at the active employee rate. After that time, the employees may elect COBRA for the full statutory period. (For various reasons, the employer does NOT want to have the COBRA period run concurrent with the six-month subsidized continuation period.

Can the employees pay for the six months of coverage on a pre-tax basis from their severance pay? Section 1.125-1(a)(3)© state that "Premiums for COBRA Continuation" are qualified benefits under Code Section 125. Does that logic apply to "Premiums for NON-COBRA Continuation"?

(The COBRA subsidy is not a concern or at issue.)

Could somebody please point me to the most recent regulation on electronic distribution of SPDs? It's a typical Monday and I'm just not finding it. Thanks much!

I have just discovered that a client's 401(k) (with matching contribtion) provides:

1. A basic matching formula (up to 2% of employee's comp per year, if they are deferring at least 4% into plan), and

2. (for certain employees who transferred in under a reorganization): an Enhanced Matching formula that works on a graded schedule so that the maximum match amount is obtained after nine (9) years. The first year percentage is 0%, however, and the amounts increase thereafter.

I have found a problem with the terms that relate to rehired employees. Specifically, whoever drafted this Enhanced Matching formula also provided that "a Participant's period of service prior to his or her reimployment commencement date will not count for purposes of determining the Participant's employer matching contruction under the enhanced foumula (only such Particpant's period of service following his or her reemployment commencement date will count for puposes of determining the participant's employer matching contribution under the enhanced formula)."

(Plan uses elapsed time method of counting service).

The way I read IRC 410(a)(1)(A), so long as a rehired employee previously completed at least one year of service, then when rehired (unless they were 0% vested, made no elective deferrals, and at least five years have passed), they are immediately eligible to participate again.

Employer's practice has been to reenter rehires at the 0% match level - although rehires are immediately eligible for elective deferrals.

Having to reenter the 'enhanced match formula' and earn 0% for the first year of rehire seems a problem to me. I've told client that they can't do this, and that a rehired employee must at least qualify for the next highest level of match that is not zero.

Although it seems to me that the rehired person should be credited with to appropriate years of service (five, for example) and earn the corresponding (i.e. five-year level) match amount on rehire, do you all agree that there could, alternately, be a separate, less rich match formula only for rehires so long as they pass if they pass ACP testing, and as long as the rehires with at least one year of prior service get more than a "0% match" in the first year after rehire?

Thank you in advance for any guidance. This one has had me stumped. (I also realize that we may need to correct and make up for any rehire who should have gotten a higher match and didn't, after we identify who those people are).

Thanks!

Having researched this topic, I still find myself without a "good answer". Any comments or suggestions would be greatly appreciated.

Participant in his 30's decides he wants to take his salary deferral money out of the plan and invest in an IRA that has no connection to the Plan, which is a 401(k) Plan. This is not a Hardship, or any other legitimate distributable event. The person just wanted the money, and the plan administrator allowed the payment because "it was the person's money".

Subsequent to this payment, another person (30 something) decides that getting her money out would be wise, given the investment results being realized. Again, no valid distributable event. Since the guy got his money, why not her?

Unlike distribution #1, the plan administrator came to us to request election paperwork for this distribution #2. After hearing the details, and the "justification" created by distribution #1, we explain that the distribution is not allowed. While distribution #2 was stopped, we still have the problem of distribution #1.

Now the problem is how do you fix distribution #1?

Can someone explain to me how "testing periods" work in Roth IRAs?

I have never heard of them but on the MSN tax board they were mentioned by someone named Alan who posted:

"With respect to the "testing period" rules here, they can be tricky:

1) If you request a return of contribution, then an earnings calculation is required to be made, and the 1099R is coded accordingly. If you request this, the original contribution DOES NOT COUNT for the Savers Credit, but neither will the distribution count in the testing period for this or other years.

2) If you request an early distribution that is NOT a return of your original contribution, then there is NO earnings calculation required, and the 1099R is coded differently from the above. If you do this, your contribution DOES count toward the credit, BUT also counts as a reduction for the entire 3.25 year testing period surrounding the contribution year. This impairs future ability to take the credit.

But you can request just a distribution taken from other Roth balances beside your current contribution if you wish to. 2) above then applies."

For further context the original thread can be found here: Link

I am wondering what the consequences are for removing a 2008 contribution down the road. I want to remove the contribution only, not any earnings.

Thanks for any help you can give!

I am looking at a Sungard Relius Plan Workshop outline. One of the topics included in the outline is titled new IRS guidance on early entry and the otherwise excludable rule. Does anyone know what this is referring to?

Pre-PPA, a plan had routinely a minimum contribution requirement in the $100K area. In 2008, Plan dumped in about 70K extra 2007 to get 2008 AFTAP to 80%. In 2008, PPA contribution was about $65K, which employer made. Then, when WRERA came along, contribution was revised to about $48K. So, Plan had excess contributions that were cheerfully added to PFB. Since 2008 funded at least 80%, PFB will be used to reduce 2009 minimum even though assets tanked in 2008. Use of PFBh will be reduce minimum to about $50K because of asset smoothing and switching the segment rate basis.

What has happened? My fees have increased, the amount of paper has increased, the confusion has increased, but contributions have decreased at a time when the intention of PPA was for them to be stepped up.

But there is some comfort that the valuation process now reflects continuallly up-to-date mortality tables -- that is, provided the general health of the participants follows the government prescribed one-size-fits all law of mortality.

I am trying to figure out how far you can go with operational delays and other similar operational defects for a grandfathered plan before you risk the plan being treated as having had a material modification. i.e., if the plan is unable to locate a participant for whatever reason and the money has to stay in the plan for a period of time. In that case would it make a differeence if you make up the lost payments. Also, would these operational errors adversely affect only the participant whose paymetns were late, or possibly causes all of the other participants to lose their grandfathered status.

Any suggestions/thoughts on this matter are welcomed. Also, please advise if you know of any articles discussing this issue.

Who exaclty is an "eligible" participant for catch up contributions? I know the participant has to be over the age of 50, and, I thought, the participant would have had to exceed the 402(g) limits, ADP Limit, or plan deferral limit.

In the following example, is this participant elgible to do cath-up contributions:

The plan is a 401(k) Profit Sharing - for 2008 the owner receives a profit sharing contribution of $46,000, and is over the age of 50. Can he also defer $5,000 as catch up contributions to reach the $51,000 limit?

DCAP. Now is eligible for state assistance that pays for day care. Qualifying event for change of election?

Thanks

The Children's Health Insurance Program Reauthorization Act (CHIPRA) of 2009 took effect on April 1, 2009. The law provides that the DOL and HHS will work with state Medicaid and CHIP agencies to produce model notices by April 1, 2010. And employers are required to provide employees with the initial notice beginning with the first plan year that begins after the date the initial notices are issued.

I am confused. I thought that employers needed to issue notices now to employees. Is that true? Or can employers wait until the model notices are issued? If they have to notify now, what is the deadline to issue the notice? And are they left to draft their own notices?

Thanks.

This is unrelated to the 2009 suspension of RMD's.

Can a active participants (a non-5% owner) who previously elected to and has been receiving annual RMDs stop taking these payments? The participant wants to now suspend all future RMD's until he actually retires.

The plan is written to say that a non-5% owner can defer payments. The plan is silent on whether a participant who previously elected payments can at anytime recind that election.

Any input is appreciated.

Plan has 1 YOS (12 months/1,000 hours) requirement with entry on 1/1 or 7/1 (dual entry)

EE was hired 6/5/07, left 4/15/08 (after working 1k hours from 6/5/07-4/15/08) and then is rehired 11/21/08.

Document says any employee who terminates prior to entry date but after satisfying eligibility requirements, enters the plan upon later of reemployment date or next entry date.

Since the EE quit before 12 months, does he have to now wait until 1/1/10 to enter plan?

This circumstance has always confused me.

Thanks