Hi,

If someone goes out on their own to get dental insurance because the employer does not offer dental, can they pay for the dental insurance premium out of their HSA?

Our HSA allowable expenditure sheet only says "Dental Treatment". It does specify that COBRA premiums are allowed, so this makes me think that dental premiums are not allowable expenses. Any thoughts?

Thanks!

I got discrimination testing results back from my company's 3rd party testing service.

I thought I understood that "otherwise excludable" employees were determined by looking at actual plan entry dates compared to a mid year plan entry date.

When I questioned why some employees were in this group of employees not meeting the IRS statutory minimum I was told that based on census data the statutory minimum calculation goes back 18 months from the end of the plan year. This is not anything I have read about before and I don't understand it. Could someone help me with a reading reference or explanation about this rule and process?

Examples:

Fiscal year plan, May08 to Apr09. Mid year would be Nov08.

Employees with plan entry dates of Nov 1, 2006 and Aug 1, 2008 and Sep 1, 2008 are being placed in the otherwise excludables of NHCEs who do not meet the statutory minimums. I am trying to make sense of that because it does not match the procedure described in this testers written testing steps.

Under the 409A regs, if an employee must include deferred comp in income because 409A rules are not met, and later the account balance is permanently lost (employer becomes bankrupt, for example), an income tax deduction equal to the lost deferred comp is allowed. The regs. don't say whether it's an above the line deduction or misc. itemized deduction. Any insight on which it is would be appreciated.

Second question. Suppose the 409A rules are met, but the deferred comp must be included in income under 457(f). Does the employee get a deduction under 457(f) if the deferred comp is later permanently lost?

Thanks,

Ken Davis

Client deposited more into the salary deferral account than what the employees actually deferred (as reflected on their W-2s, and salary deferral elections). Because the deferral was overstated, the safe harbor match was also overstated. How do you correct this?

In 2008, calendar year plan was 99% funded so quarterly contributions apply for 2009. 2008 minimum was $400,000. Plan sponsor indicated will make contribution on 9/15/2009. FT on 2009 is $3 million; Assets on 1/1/2009 are $3 million, excluding $400,000 accrued contribution. TNC 2009 = $360,000. 2009 contribution is $0 when discounted 9/15/2009 contribution is included in assets.

Minimum quarterly contribution is lesser of $400,000 and $0, so quarterly contribution is $0. Or is it? For purposes of determining quarterly contribution, can you include contributions that have been accrued but not yet made? That is, should quarterly contribution due 4/15/2009 be $90,000 rather than $0?

How would the cushion benefit be calculated under a cash balance plan?

I understand the funding for the funding target (the benefit accrued at the beginning of the year - assuming a BOY valuation) and the increase in the benefit is the target normal cost. However, assume the cash balance plan has been in effect for a couple of years and now the owner starts taking a very large compensation. Does this affect the cushion benefit as it is the accrued benefit recognizing compensation increases??

Any help would be appreciated.

This is probably more of a question on the process of true-ups than it is a question on the safe harbor aspect.

Employer overcontributed for one of the participants. It's my understanding that a true-up can only result in an additional contribution for participants, and not the distribution on any excess contributions. Is that correct? If so, should we just leave the overage as a safe harbor contribution or change the source to discretionary and run ACP?

DB Plan terminated in late 2008. Assets distributed early in 2009, so final filing would normally be due August 31, 2009. Can I use the 2008 Forms to file the final 5500? Or must I wait for the EFAST2 system to come out? I should mention also this is a one-man plan, EZ filer.

The employee was enrolled in the employer's HDHP and made contributions to his HSA for himself and children through March 09. As of 4/1/09 his wife met the eligibility requirements to participate in her employer's family Non-HDHP. The husband dropped his coverage with his employer and went to her plan. I know that a change in insurance does not warrant a change in the FSA Medical account, but what about the FSA Limited Medical. That account was created as a means to allow employees to keep their HSA eligibility, but what happens when they do not need to worry about their eligibility anymore? Can the cafe plan documents be written to allow such changes? Has anyone found any informal or formal comments from the IRS on such a change? Any help is much appreciated.

thanks!

This is new area for us:

it appears to us a church plan is not exempt from erisa;but just title I of Erisa.

Is this correct?

Does this mean no 5500 is done?

Is actuarial valuation done?

Is there any 401a4 and 410b testing?

Stan

We have a client who purchased an annuity contract as part of his 401(a) plan in 2006 and signed off that a qualified plan was in place beginning that year. In 2009, it has been determined that the client's accountant never actually had him adopt a plan. So for a couple of years he has been funding a plan and taking deductions accordingly, but with no plan document in place. Does anyone know if there any way to remedy this situation through any of the correction programs? Any help would be appreciated. Thanks.

I have a plan sponsor (with many, many loans) changing the frequency of payroll from weekly to bi-weekly. I'm trying to determine if I should be reamortizing all of these loans. From a technical perspective, I lean towards yes. The loan note and amortization schedule no longer apply. Also, what would an auditor say if looking at the loans? I'm just having trouble doing all of this work for a probable repayment change of pennies each payroll period.

As a secondary idea, what do you think of doing a generic plan sponsor initiated amendment to the note and amortization schedule? It would basically say that the payment schedule changed and that payments would be twice the payment listed on the original note (ignoring the minute payment difference). Each participant with a loan could sign the form. That way both parties agree to the change of terms without having to customize a form for each loan.

Anyone have any experience with this issue?

Thanks!

The regulations under 401(a)(4) state that a component plan is deemed to pass the ABPT if the plan of which it is a part satisfies the ABPT. I have a plan that satisfies the ABPT on a cross-tested basis. If I can restructure the plan into component plans and somehow satisfy the general test on a contributions basis for each of the component plans, am I all set? Satisfying the ABPT on a cross-tested basis doesn't throw me into a gateway contribution requirement, does it?

I am seeing some insurance companies offering groups a step rate increase based on previous claims experience. For instance, if a fully insured plan for Company A is given a 19% increase, the carrier is offering to only increase 8% the first 6 months of the plan year (the plan year is also the COBRA determination period), they will review claims after the first 6 months and at that time determine how much (if any) of the remaining 19% to pass on (could be an additional 11%). My research has confirmed that the COBRA rates can only be increased to QBs one time during 12 month determination period so we advised client of that (we administer their COBRA). Insurance carrier came back and offered to send client 12 month Final Underwriting Approval Form that shows the 19% increase as the amount the client is charging employees off of and to be used to calculate the COBRA rates.

If the carrier is only requiring the client to pay the rates with the 8% increase for the first 6 months, can the COBRA rates be determined based on the 19% rate increase per the Underwriting Form?

Earlier this year, Seller's 401(k) plan was terminated prior to the closing of a stock deal. Seller incorrectly calculated the match made on final elective deferrals b/c it failed to pro-rate the comp limit for the short year. Consequently, a handful of participants each got several thousand dollars too much match. Most of these accounts have been rolled over -- some to Buyer's plan. EPCRS says Seller should send a letter to participants letting them know the extra match was not an eligible rollover distribution. Questions are as follows:

(1) To whom should participants be instructed to send the money? Seller's terminated plan has no need/use for it -- the trust is in the process of being zeroed out. Has there been a mistake in fact here such that participants could be instructed to send the money back to Seller (which is now a sub of Buyer)?

(2) Buyer's plan now holds some of the extra match in rollover accounts. Does Buyer have the authority to unilaterally reverse these amounts out of these accounts (like Seller could have if the $ were still in Seller's plan)? If so, what should Buyer do with the money? Put it in an unallocated account in its own plan and use it to pay expenses and reduce contributions? Send it to Seller (now its sub) under the mistake-in-fact theory above?

A calendar year plan with over 100 participants (last year, this year, every year) failed to make its 2009 quarterly contribution due 4/15/2009. It did not correct by 5/15/2009. On June 22, plan sponsor indicated they didn't make the quarterly contribution but not for financial reasons.

Instructions to PBGC Form 10 states "A reportable event must be filed within 30 days after a plan administrator or contributing sponsor knows or has reason to know that a reportable event has occurred." The instructions indicate the PBGC may assess penalities of up to $1,100/day.

Question: Is PBGC Form 10 due (a) May 15 (b) June 14 or © July 22 ?

Has anyone experience in dealing with the PBGC regarding similar circumstances? My inclination is to have the plan sponsor make the contribution post haste so that this can be include in the Form 10 filing.

I received no responses in March but the issue has resurfaced so i will inquire again. Any response would be appreciated. Thanks.

The Form 990 includes a section where Officers, Directors, Trustees, Key EEs and HCEs need to be listed disclosing compensation amounts. One of the items includes "The annual increase in actuarial value of a qualified defined benefit plan, whether or not funded or vested". Has anyone seen this and does anyone know what actually needs to be reported?? Thanks.

I have a very small 501C3 ( not a church or religious ) that had an employee contribution only 403B plan in the past with a few different insurance and fund companies. THere are only 6 participants. They stopped all contributions in the Fall of 2008 with concern over the new rules.

Now I am considering low cost options for them to start a new "plan ".

Oppenheimer and Metlife both have a Non Erisa Plan Document for use. THey also suggest that the employer really does not need a TPA as their enrollment and distribution forms and procedures will comply with the new rules.

Your thoughts and recommendations would be appreciated.

Employer 1 is selling assets to (newly created) Employer 2. Employer 1 and Employer 2 are unrelated.

Certain employees will terminate employment with Employer 1 and become employees of Employer 2 performing the same tasks for Employer 2 that they performed for Employer 1.

Employer 1's plan provides for a distribution upon "termination of employment." It does not appear to have adopted the "severance from employment" standard.

Employer 2 will adopt its own 401(k) plan.

My questions are:

1. Does the same desk rule continue to apply to plans that do not adopt "severance from employment" as a distribution option?

2. If the answer to #1 is yes, does the rule set forth in Rev Rul 2000-27 (which states that the same desk rule does not apply when the former employer sells less than 85% of its assets) still apply?

We have a new plan effective 3/1/2008. This will be the first 5500 filed. 12/31/2008 the participant count was 216, but since it is a new plan there were no participants on the first day. Correct? There is an audit being doing, but should we be filing a Schedule I or H. Relius 5500 software keeps giving me an error when I try to file an I. I just assumed since the company is doing an audit, it would require the more detailed schedule.

Thanks