Treasury, IRS Issue 2010 Indexed Amounts for Health Savings Accounts

These amounts have been indexed for cost-of-living adjustments for 2010 and are included in Revenue Procedure 2009-29, which announces changes in several indexed amounts for purposes of the federal income tax.

The attached chart shows the limits for 2004 through 2010.

HSA_NewCola_2010_R0509.pdf

HSA_NewCola_2010_R0509_LandscapeView.pdf

If an employer wants to make prevailing wage dollars available for hardship, does that mean those dollars do not go in the ADP test at all? Are they only included in the ADP if they are treated as QNEC? If I don't put them in the ADP, are there really any other testing consequences in a plan where only NHCEs are receiving prevailing wage contributions?

Thanks!

hot off the presses. possible ability to eliminate 3% safe harbor during the year

proposed amendment.

I haven't even looked over it yet it is so hot and out of the oven

On the Schedule of Benefits section of the Datair report there is a Monthly Benefit column and there is an Accrued Benefit column. What is the difference between the two? Is the Monthly Benefit the benefit if the participant works until NRD? And the accrued benefit is the benefit accrued to date?

As I understand it, former employees who receive a taxable cash payment or "bonus" or "subsidy" from their employers as part of a severance package are generally free to take advantage of the full ARRA COBRA subsidy provided the employer payment can be used for anything (including paying the individual's 35% COBRA portion).

Employer who previously paid first few months of COBRA premiums as a severance benefit is considering switching that practice to instead provide a lump sum unrestricted cash payment to severed employees and then let them apply for and take advantage of the COBRA subsidy provisions. The lump sum cash payment could be used to offset the 35% COBRA premiums the severed employees would be responsible for as part of the COBRA subsidy.

Any words of wisdom, pointers, or issues to consider from those that have already made such a switch?

Company A has merged with company B.

Company A has a SIMPLE 401k, company B has a traditional 401k.

There is only one active participant in the SIMPLE 401k sponsored by company A (more than one employee, though).

The administrator of company B's 401k plan is planning on terminating the SIMPLE in July because of the mindset that the company cannot sponsor a 401k and a SIMPLE 401k. The administrator continued to say that the sole participant in the SIMPLE will not be allowed to defer into the traditional 401k plan because "it would then be a continuation of a previously terminated plan." The participant wouldn't enter the Trad. 401k until Jan 2010.

Two of these statements don't make sense to me (and it's likely I'm wrong on both):

1. My understanding is that a company can sponsor a Trad. & a SIMPLE 401k if the circumstances are due to a merger or acquisition.

2. The idea that this participant wouldn't be covered until January 1, 2010 seems to me like they are removing a benefit that was acquired while employed with the company.

Any thoughts on this would be helpful, thanks!

Here is the scenario - Company A has a 401k PS; Company B has a Simple IRA

Company A&B merge 05/01/09

Merged company wants to rename and adopt Company A's plan and credit service etc for participants in company B under company A's plan.

Company B only has one participant who is a non owner currently contributing in the SIMPLE IRA.

Is there any issue with all employees under company B participating immediately, ( credit service there by automatically becoming eligible ) in the renamed plan. I know that the one participant cannot exceed the irs limits on a combined basis.

Thoughts? I have gotten an opinion from an outside person that everyone under company B would be eligible except the one participant who was participating in the Simple because it is a "continuation" of a plan?

I posted this in the ESOP section, but perhaps the question leans more toward cross-testing?

http://benefitslink.com/boards/index.php?s...st&p=181920

An calendar year ESOP plan has 2 valuations per year, June 30 and December 31. The allocation condition is that you must be actively employed on the last day of the valuation period.

An employee who is active on June 30 gets a June 30 allocation, but if they quit December 15, they do not get an additional allocation for the 6-month period ending December 31.

The plan uses a definition of compensation that passes 414(s). The plan uses a pro-rata allocation method for each 6-month allocation period based on compensation paid during that 6-month period.

Assume all 3 are true:

• some employees get no allocations for the June 30 period because they left before June 30, and
  
• some other employees get allocations only for their compensation paid through June 30th because they left before the end of the plan year but after June 30, and
  
• some other employees get allocations based on full year pay because they were active on December 31.
  

Based on the assumptions listed, does this plan design require 401(a)(4) testing?

Can the safe harbor match be used towards satisfying the top heavy requirements? If so, is it then subject to a ACP test? Greatly appreciated, DN

Are participants who are terminated for cause in the year a partial termination occurs entitled to full vesting?

Rev. Rul. 2007-43 provides that "f a partial termination occurs on account of turnover during an applicable period [generally the plan year], all participating employees who had a severance from employment during the period must be fully vested in their accrued benefits, to the extent funded on that date, or in the amounts credited to their accounts."

This makes me think yes. Thoughts?

Is there a certain format that must be used for a plan sponsor to elect use a COB or PFB to reduce the minimum contribution? If so, does anyone know where I can find a sample?

When an IRA distribution is taken "in kind" and the shares are sent to a taxable account the cost basis on the shares in the taxable acount is the fair market value (FMV) on the distribution date. Could anyone tell me where I can find this in print i.e. IRS Pub or Reg?

I'm wondering if anyone can confirm that (a prompt) filing under the DFVC program is the correct approach given the following circumstances:

-Client recently received a letter from the IRS inquiring about a 2006 Form 5500 filing for "Pension Plan A".

-In fact, no 2006 Form 5500 was filed, because as of 12/31/05, "Pension Plan A" was merged into "Pension Plan B".

The problem is that the "Pension Plan A" 2005 Form 5500 filing was not marked as a final return, and did not show zero assets. (It should have, as the merger date was 12/31/05; the Form Preparer apparently did not follow the correct procedure).

The IRS inquiry letter provides a check box to be checked if the recipient (Client) is eligible for DFVC, and asks for the date on which a DFVC submission was made.

Client is currently talking with their Form 5500 preparer about having a corrected 2005 Form prepared.

What I'm not clear on is whether a corrected Form 5500 (marked final and showing zero assets) can just be submitted (with no penalty) or whether a DFVCP filing (and penalty) are necessary.

My assumptions are that:

1. Client needs to submit a corrected 2005 Form 5500 under DFVCP (with $2,000 penalty) [i'm not certain DFVCP is really required, but I can also certainly see the case that it is; i.e. that an incorrect 5500 is treated as a failed 5500 and must be corrected];

2. That having received the IRS inquiry letter does not make Client ineligible for DFVCP as, per the regulations, it is notification from the Department of Labor that could render an applicant ineligible; and

3. That the DFVCP should be submitted before, or by, the date on which a written response is due to the IRS. (Any idea what might happen if the DFVC submission goes in a few days later than the response to the IRS, so long as that proper date is provided in the response?)

Can anyone confirm that these assumptions are correct?

Of course, IRS response is due soon, so I'm hoping to finalize the response on this asap.

Thanks to anyone with insights and/or who may have faced a similar situation.

We have a plan that currenlty allows for forfeitures to be used to first pay for Plan Admin expenses and then to be allocated to participants per non elective employer contribution formula. If we amend the plan to use forfeitures to reduce employer contributions is there are timing issue? Can forfeitures from this plan year be used for any employer contributions of this plan year? Is it on a prospective basis by plan year or from effective date of amendment? I think it can only be prospective and it would be safer to say forfeitures for next plan year will be used for employer contributions for next plan year but can find where I'm prohibited from using them this year.. Any help would be appreciated.

thanks

An calendar year ESOP plan has 2 valuations per year, June 30 and December 31.

The allocation condition is that you must be actively employed on the last day of the valuation period.

An employee who is active on June 30 gets a June 30 allocation, but if they quit December 15, they do not get an additional allocation for the 6-month period ending December 31.

The plan uses a definition of compensation that passes 414(s). The plan uses a pro-rata allocation method for each 6-month allocation period based on compensation paid during that 6-month period.

Assume all 3 are true:

1. some employees get no allocations for the June 30 period because they left before June 30, and
   
2. some other employees get allocations only for their compensation paid through June 30th because they left before the end of the plan year but after June 30, and
   
3. some other employees get allocations based on full year pay because they were active on December 31.
   

Based on the assumptions listed, does this plan design require 401(a)(4) testing?

Wow, I'm not sure I know enough about the securities world to even ask the question right, but here goes.

Edit is because I've cleared up the terminology that I should be using, which may make the question less confusing.

Suppose you have Mr. A, who is a registerd representative with Merrill Lynch. So apparently, if he sells a client some mutual funds with, say, Fidelity, it is through Merrill Lynch as his broker-dealer. Let's say the commissions payable by Fidelity equal $10,000, and are paid to Merrill Lynch. Merrill Lynch takes a cut of $500.00, and pays the balance of $9,500.00 to Mr. A.

When it comes to reporting this on the Schedule C, is it acceptable to merely list Merrill Lynch for $10,000? Or should Merrill Lynch be listed for $500.00 and Mr. A for $9,500.00? I'm finding this very confusing. The DOL FAQ's didn't clear up this question for me, but that's possibly because I understand so little about how the securities world really works.

Second question - suppose a TPA has an alliance with an outside mutual fund company, which also has a recordkeeping platform. The client puts 1 million with the mutual fund company. The mutual fund company then pays the TPA some sort of finders fee, or asset based, fee, whatever, of $1,000.00. But the TPA must turn around and pay the mutual fund company $800.00 for recordkeeping services. Does the Schedule C show:

a. $1,000 to the TPA

b. $1,000 to the TPA and $800 to the mutual fund company

c. a net of $200 to the TPA and $800 to the mutual fund company

d. $1,000 to the TPA and $800.00 to the mutual fund company

e. other

b & d both seem wrong, as they seem to double up and show an artificially high amount. I'd lean towards a. Thoughts?

We just had a participant email regarding a hardship request. They claim a medical hardship, but do not wish to provide the medical bills for privacy reasons. The participant claims that HIPPA affords her that right. Anyone ever dealt with this before? I'm not very familiar with HIPPA and this seems like it may have some validity.

For now, we suggested the care be covered/blacked out so that only the amounts remain on a document that is clearly a medical bill/invoice. This practice should offer the protection the participant wants while still providing meaningful documentation to the sponsor/Trustee.

Any thoughts?

An employee is a participant in a 401(k) plan that excludes union employees. Last year, the employee changed to union status. The union employee is clearly not able to take a distribution (no distributable event), but is he eligible to take out a loan? Does his union status preclude him from this feature? The plan document only addresses "Change in Status" with respect to Years of Service, Years of Vesting service, and eligibility upon a subsequent status change.

Thanks for any help!

Wes

According to EPCRS, Section 13.04, "If the Service and the Plan Sponsor cannot reach an agreement with respect to the correction of the failure(s) or the amount of the sanction, the plan will be disqualified........"

Is there an appeals process that can be initiated at that point?

Hello,

I have a plan document that states integration formula is 4.3% and $20,000.

With 2008 SS wage base at $102,000...this puts the $20,000 below 20% of TWB.

Is this formula still appropriate? and if not, how do I correct it? ignore doc and run at 5.7%?

Thanks so much for answers!!