Eligibility Requirements of age 21 and 2 years of service...requires dual entry dates?

Plan A is merging into Plan B.Plan A allows for and has outstanding loans, Plan B does not allow for loans.

Since Plan B does not have a loan policy, I would say that they should adopt a loan policy with the same provisions as Plan A that does not allow for new loans. I think it would be a mistake to not have a loan policy for Plan B and try to rely just on the loan agreement. Does this make sense?

If plan sponsor changes name or type of entity they operate under from s corp to llc for ex;is amendment needed?

A company decides to start a HSA plan January 1, 2009. They give all of their employees a one time $1500 contribution. The employees can make contributions via salary reduction. Employee 1, age 45, will leave the job next friday. Employee 2, almost age 65, will terminate employment April, 24 2009. Employee 1 has contributed $100 each month since January and has used $700 from the HSA on qualified medical expenses, however, $200 was reimbursed to her do to an initial visit to the doctor. Employee 2 has not contributed any money to the HSA plan.

Some thoughts:

1)Both employees fail to meet the testing period from December 08-December 09' since they are leaving within a month or so. Therefore, i know Part III of Form 8889 applies.

2)How will I go about calculating what amount is part of income, going on the assumption that the employer contribution is considered an excess employer contribution under the above circumstances. I have read the instructions on Form 8889, looked at the Line 3 limitation, Employer contribution worksheet, and Line 19 and unsure what the correct amount is. If the employees withdraw the excess employer contributions before the filing date, then will line 22 need to be checked/filled out on Form 8889?

Thanks!

An ER (client) is being pitched a plan that specifies age-weighted HRA accruals into a retiree VEBA. The ER would establish and then fund into a VEBA pursuant to HRA accruals, as permitted by a couple of IRS pronouncements from the 2005-2006 era. These ER contributions (i.e., the HRA accruals) would be separately credited under the VEBA to the benefit of EEs individually. The age-weighting gives each employee an 'equivalent' amount of retiree health benefits for each month of covered service. Of course, the small ER's motivation here is to skew tax-free benefits in favor of the owner/employee and spouse/employee, as they are the two oldest EEs (ER is a C corporation).

To the extent that the EE and spouse do not use up the credits under the VEBA by the time both have died, the remainder would be re-allocated to the credit of other VEBA members.

The ER is not satisfied with what authority I've found suggesting that HRA accruals may not be age-weighted.

IRC § 105(h)(4) provides that--

A self-insured medical reimbursement plan does not meet the requirements of subparagraph (B) of paragraph (2) unless all benefits provided for participants who are highly compensated individuals are provided for all other participants.

Treas Reg § 1.105-11©(3)(i) seems to prevent age from being taken into account in a defined benefit HRA, at least for DB health reimbursements:

any maximum limit attributable to employer contributions must be uniform for all participants and for all dependents of employees who are participants and may not be modified by reason of a participant's age or years of service.

As an aside, the next sentence of Treas Reg § 1.105-11©(3)(i) prevents benefits being made in proportion to employee compensation if the plan covers highly compensated individuals:

In addition, if a plan covers employees who are highly compensated individuals, and the type or the amount of benefits subject to reimbursement under the plan are in proportion to employee compensation, the plan discriminates as to benefits.

Treas Reg § 1.105-11©(3)(iii) is as close as I've come in my research to specifically prohibiting age-weighting of the defined contribution HRA accruals into a retiree VEBA. The benefits for retirees are only excludable from taxable income if

the type, and the dollar limitations, of benefits provided retired employees who were highly compensated individuals are the same for all other retired participants.

I've opined that the owner would be better off avoiding this plan, or to redesign it as a defined benefit or if to be a defined contribution, without the age-weighting of HRA accruals into the retiree VEBA fund. The ER is not satisfied, certain that it can be done unless the IRS has specifically ruled that HRA accruals cannot be age weighted. Does anyone know of other authority bearing on the issue of whether HRA accruals into the retiree VEBA could be age-weighted?

I've suggested a PLR application might be useful, but is hesitant because of the cost.

Hi, I have a client who failed to allow a division of eligible participants to enroll in the plan. They want to use the overall plan rate of return for each year (2000-2008) to calculate earnings. This is something I have never seen. Typically it is actual earnings, or for administrative ease, the highest performing fund for the time period. Never overall plan earnings. Is this an acceptable method under VCP?

Does a valuation need to be performed every year for a frozen plan with one participant?... mainly, in regards to the Schedule B

Treas. Reg. 1.401(k)-3(e) indicates that SH nonelective contributions must remain in effect for an entire plan year "to satisfy the requirement of 401(k)(12)". There is limited relief from this rule for terminating plans and for SH matching contributions. We would like to terminate the SH nonelective contribution in 2009 (and only pay what has been accrued to date). Is this permissible? I realize that the safe harbor protection under 401(k)(12) would no longer apply.

I have a question from a financial advisor. His wife is both a W-2 employee and a Schedule C director for a company. Can she max out her 401k deferrals in the 401k plan but also have a SEP where she can contribute the max from Schedule C income? I don't know enough about Schedule C and SEPs and hope you can help. Thanks.

Several unrelated employers maintain a multiple employer plan. Plan calls for a 3% safe harbor nonelective contribution in 2008. Employer A is unwilling/unable to make the contribution. Does this ruin the entire plan? Can the multiple employer plan sponsor kick this employer out and avoid ruining the entire plan? Should the plan sponsor make a contribution on behalf of Employer A?

A was employed by company and made 15,500 in elective deferrals in 2008 before losing job. A is self employed for remainder of 2008 and establishes a SEP. A, as employer (sole proprietor) contributes max amount to SEP in 2008 (25% of comp). Is this permissible?

If I've been self employed and contributed to an HSA over the past 2 years and then began work for an employer who offers an HSA, I understand that I can continue to keep the original savings account even though I've discontinued the associated HDHP, and may make contributions to it or the new employer's HSA, providing I don't exceed that annual contribution limit between the two...correct?

But what happens if I leave the new employer in future years and start another job the provides non-HSA health coverage. May I continue to keep the 2 HSA accounts and use the $$ to pay QME's I pay under the second ER's health plan (deductibles and copays)? If so, I'd assume that because I'd no longer have a HDHP that I would not be able to contribute to them.

Thanks

BruceM

A new cash balance plan is effective 1/1/2009 with a contribution credit of 10% of compensation.

Is there any problem with providing all participants at 1/1/2009 with an immediate past service benefit of 10% of 2008 compensation?

Would this result in the plan having a Funding Target at 1/1/2009, allowing for a range of contributions for 2009?

Is there any sort of de minimus amount below which a plan can choose to ignore lost earnings? My gut reaction is no. Our record keeping folks are howling about dividing small balances among multiple participants with multiple investments taking considerably longer than the value of the earnings, so we're grasping at straws.

Related quandary, now that most investments have losses rather than gains, do we get to adjust down?

A multiemployer plan is going to be certified as critical and their trustees are not going to use the WRERA option to freeze their funding status. In other words, they are critical.

There is a host of secondary information that says any type of accelerated forms of benefit payments must be eliminated. One optional form of benefit offered by this group is a Social Security Level Income benefit. It pays a greater annuity prior to the retiree becoming eligible for Social Security. Once they become eligible, the benefit is reduced. The idea is to give the retiree a stable monthly benefit over the remainder of his life.

My reading of ERISA sections 305(f) and 204(G) leads me to believe this type of payment will NOT need to be eliminated. I think the trustees will have the option to cut it (like any other adjustable benefit) but I don't think it is required. The law seems to have carved out a narrow exception for this type of benefit.

Agree? Disagree?

Section 4.07 of Rev. Proc. 2008-50 provides that "Correction of Qualification Failures in a terminated plan may be made under VCP and Audit CAP, whether or not the plan trust is still in existence." Any opinions out there on whether this should be read to exclude terminated plans from participation in SCP? i.e., is this a case of expressio unius est exclusio alterius?

Consider the situation where settlement accounting is required when total lump sums for a year exceeds the sum of the service cost and interest cost for that year. When is the settlement recognized?

I believe that in this situation it is quite common to reflect the settlement at the end of the year regardless of when the lump sums were actually paid. In normal years, the settlement gain or loss at year-end would not differ substantially from a more precise method. However, for 2008, an X% recognition of the accumulated loss at any point in the year would probably be better than the same X% recognition at 12/31/2008.

Thoughts?

Are assets in a 401(k) plan protected by the $500,000 of SIPC insurance coverage? I realize that this coverage does not protect against market losses--like today--but what if a firm(s) offering the mutual funds or stocks that are in the 401(k) plan goes bankrupt? Would those be protected?

Beginning of year valuation method. Calendar year plan. New plan 1-1-2009 (small: 60 employees).

Accruals are based on plan years with 1000 hours of service, but excludes any years of service earned before the plan year that includes the participant's date of entry.

As of the 1-1-2009 actuarial valuation date, a half-dozen ineligible employees (all with 1000 hours in 2008) have not yet reached their plan entry dates. Since they were hired early in 2008, the entry dates would be in 2009, such as 2-1-09, 3-1-09, etc.

The enrolled actuary would like to include that half-dozen group of employees in the 1-1-2009 valulation for plan contribution purposes, making this an ongoing actuarial assumption. Another enrolled actuary has stated that this is not allowable.

Comments?

Does anyone have reference or a list of the unallowable (or allowable) investments under 404c regarding self-directed brokerages? It may be a list of prohibited actions (eg shorting) but I am not sure

Also, are there things an adviser should be/could be doing on a routine basis with SDBA in reporting to Plan Sponsors?

thanks