Does anyone know the IRS' current position on terminating a plan that will have a funding deficiency for 2008? We have a couple of plans that will terminate as of 12/31/08 because the sponsor will no longer exist. There is a minimum contribution under PPA for 2008 but neither sponsor can make the contribution. The PBGC will be taking over one of the plans but the other is husband and wife who will waive all benefits necessary. I know you cannot waive benefits in order to avoid minimum funding.

I have a situation in which an FSA election is funded exclusively by employer contribution. The employee has terminated a month or so before end of the plan year.

The employee claims that they can continue to incur expenses because of the grace period. My understanding is that unless the employee goes COBRA, they cannot be reimbursed for expenses beyond the termination date whether or not a grace period has been provided for in the plan. Of course if they had terminated after the end of the plan year but during the grace period, they could still incur reimbursible expenses.

What is the correct answer? Can the employee be reimbursed for expenses after the termination date in this case?

1/1/2008 FT = $1,310,000

1/1/2008 Assets = 1,330,000

1/1/2008 FSCOB = 30,000

2008 quarterly contributions were due and paid on time.

Can the employer elect to reduce the 1/1/2008 FSCOB by 10,000 to avoid quarterly contribuiton requirements for 2009?

Does this election have to be made by 12/31/2008 (calendar year plan)?

I have a client with a prevailing wage plan that was on a GUST standardized Money Purchase Plan document and is getting merged into a 401(k) Volume Submitter Plan. Is it necessary to restate the prevailing wage Plan for EGTRRA prior to the merger or can I complete the participation Agreement indicating "Restatement and Merger" on the Corbel volume submitter 401(k) document?

I have a client who sponsors a multiple employer 401(k) Plan and has 3 other 401(k) Plans that are going to be merged into the multiple employer plan. Can I just merge the 3 plans and complete the participation Agreement indicating "Restatement and Merger" on the Corbel volume submitter 401(k) document?

I have read the regs and am a bit confused. Say, a participant only has 5000 available to take from the salary deferral account for hardship, meaning their salary deferrals for the past years in aggregate are 5000 not including earnings, but, the participant needs 8000 for the hardship. There is a match source in the plan and the plan allows withdrawals from that source. Does that mean that even though the aggregate salary deferrals are 5000 that the remaining 3000 could be withdrawn from match, or, do the regs mean that regardless of the balances in the different sources, you can only withdraw 5000 period from salary deferral and match? Hope that makes sense.

I was always under the assumption that a hardship was determined based on aggregate salary deferrals regardless of which source it is withdrawn from. Maybe I am wrong, I hope for this participant's sake.

Help please.

Thank You.

A calendar plan and fiscal year dB plan sponsor claims a contribution on the 2007 Schedule B that is made in fiscal year 2008 prior to the filing deadline of the 2007 federal income tax return. The Plan sponsor prefers to deduct this contribution in 2008 rather than in 2007. No problem. In the good ole days, we would have included the contribution in the assets for 412 and not included the contributions in the assets for purposes of 404. This was done in accordance with IRS Reg. 1.404(a)-14(d)(2)(i).

Enter PPA. Section 404(o)(2)(A)(ii) determines assets for maximum deductibility purposes in accordance with 430(g)(2), which means assets for 430 and 404 are one in the same. Clearly, this result does not make sense.

Is anyone aware of technical corrections to this particular reference or is it believed the cited IRS regulation would continue to apply.

O owns 100% of Corp C, a C corporation, and O receives Form W-2 pay from Corp C.

O also owns 100% of Corp S, an S corporation, and does not receive a Form W-2 from Corp S, although others (non-owners) do receive Form W-2 pay from Corp S.

Corp C and Corp S are obviously a control group.

Corp C and Corp S sponsor an HRA for their EEs.

Is O eligible for the HRA because he is an EE of Corp C? Would the answer differ if O also received Form W-2 pay from Corp S?

Or is O ineligible as though a 'partner' because he owns more than 2% of Corp S which is a part of the control group, whether or not he also has Form W-2 pay from Corp S?

If an ER's only health plan is a POP (premium only plan; no flex accounts) to pay for health insurance premiums, does HIPAA privacy/security apply if EEs submit the applications (with health history info) directly to the insurance agent and the ER is not provided with individual claims information from the health insurer, even as part of annual renewal?

Would the ER need HIPAA policies, notices, business associate agreements, etc. even in the absence of it having any health info on its EEs?

Does anyone know how operational discrimination is measured in a self-insured medical expense reimbursement plan under IRC Section 105(h)? Is it based simply on reimbursements made to HCEs as compared to the highest NHCE, or the average of all NHCEs? What if it's a small corp, and the NHCEs happen to be healthy and have no claims, while the owner does have claims? The regs are not helpful.

I’m wondering if other BenefitsLink readers have found a “product” solution to a spouse’s-rights situation that I guess happens often enough that someone might want to get a fee out of it.

A small-business owner is the only remaining participant in a money-purchase retirement plan. Because she is retired from the business, her yearly income is less than $100,000. (Her spouse has no income.) She would like to terminate the money-purchase plan, take a single-sum distribution of her entire plan account, and direct a rollover into a Roth IRA.

Her spouse understands his survivor-annuity and spouse’s-consent rights. The participant said that she would name her spouse as the primary beneficiary of the IRA. But the spouse understands that mainstream IRA documents allow an IRA owner to change a beneficiary designation. In his view, an IRA beneficiary designation (even 100%) that can be changed without his consent is not as much protection as a QPSA (even 50%) provision that remains in effect unless he consents. So far, the spouse is unwilling to sign a consent.

The participant would prefer to “Roth-ize” the retirement accumulation now because she believes that income tax rates after 2009 will be meaningfully higher than current rates, and she happens to have money to pay the “conversion” taxes now (without affecting her lifestyle spending). Maintaining the employment-based plan means losing the opportunity to “Roth-ize” the accumulation.

The participant believes that her spouse would sign the necessary consent if an IRA agreement has provisions legally enforceable by the non-owner spouse that make the IRA trustee responsible for not allowing any beneficiary change.

Does anyone know of a trust company that would make such an IRA agreement?

Our actuary has retired. We need someone part-time and can find no one locally. Can anyone recommend an actuary who works via mail and e-mail? Thanks.

I have a client with a Safe Harbor plan that has a Safe Harbor Match of 100% of the first 4% deferred. The Safe Harbor notices went out timely.

The client (as of yesterday) wants to either suspend the Safe Harbor Match (at least for next year), or amend the plan to a Non Safe Harbor plan beginning 1/1/09. (They haven't decided yet.) Can they do this so late in the game for the plan year beginning 1/1/09? If so, what requirements/notices would be required? (I assume that if it is allowed and they are suspending, a notice to suspend is required, but anything else? I assume that if it is allowed and they are amending, docs need to be done before 12/31, but anything else?)

Thanks for all your help!

In soliciting opinions here. My client had a plan in which they had late and/or non remitted deferrals. they put all the money in the plan plus earnings. is it necessary to go forward with the DOL program? the plan has been terminated and the sponsor is no longer a going concern. this would be the only thing holding up final distributions.

Under any circumstances, can an employee "flex" a spouse's (not an employee) insurance premium which is currently under COBRA? Doesn't makes sense to me why they would want to do that as the spouse is eligible for coverage under the employee's company insurance but nevertheless, the question remains.

Church plans are not my area of expertise, so I have a few questions. I have a start up, which only wants to include the 2 full time pastors and not include the 3 other employees who work 20 hours or less per week. Can this be done? I wouldn't think so if we set up a 401(k), but what about a 403(b)? If we can do this under a 403(b), would we be required to have a plan document? Any suggestions?

I'm reviewing a governmental plan for takeover and was provided a New England Prototype document that was executed in 1996. The Opinion Letter dates from 1990. We would like to amend and restate the plan using our EGTRRA Volume Submitter Plan. The client claims this is the most recent plan document.

Although the prototype subjects the plan unnecessarily to some ERISA requirements that are normally exempt for governmentals, I'm questioning if the plan document should have been updated through the years. Are the compliance rules for plan docs the same as they are non-governmental plans? Thanks.

Form 5500 instructions don't seem to help on this one.

Calendar year DB plan with under 100 participants. 2007 5500 filed by July 31, 2008. 2008 PBGC due 4/30/2009 and not yet filed. Client recently informed that on Sept 1, 2008 made significant contribution. If this contribution is counted for 2007, then no variable premium would be payable for 2008; otherwise, variable premium payable.

Question: Is it still permissible to amend 2007 5500 and Schedules B and I to include September 1 contribution? If so, will signing the schedule B on 12/26/2008 cause a rejection? If so, what are the legal alternatives (e.g., sign original date and attach explanation)? How late can a 5500 be amended? I know that upon IRS audit we've submitted amended 5500s long after the filing due date.

Hard to believe I've never done this before but I've never done this before!

My client maintains a cross-tested plan with a 401k feature (no match). There is very low participation in the 401k feature (approx. 12 participants deferring out of 100+ participants). The client recently informed me that deferrals have not been taken out of bonus payments since 401k was added to the plan several years ago. The administrator or accounting firm has asked that the plan be amended to provide that deferrals not be made with respect to bonus payments. Note that most bonus payments are made to HCEs but that some are made to NHCEs.

Is there anything which would prohibit adding such a provision?

Your input and help is appreciated.

My husband recently passed, I was noted as Bene on the Life Insurance policy but when it came to his Pension, I was not the Bene and they would not tell me who was or if anyone was named at all. I have been reading the U.S. Department of Labor Laws, but with all the legal wording, it's hard to understand. I was told by other employees that a letter was sent out for them to update their information because the employer had changed Service Provider for their Pension plan. This switch was made months after we were married. Knowing my husband and the many hours he puts in, he forgot to update this information. Is it safe to say that when a company changes service providers, the information from the old service provider should not have gone over to the new service provider? Because the plan administrator will not give me any information, only that "I am not listed as Bene", can I still file a claim or do I need to get a lawyer?

GoneToSoon

My husband recently died and in gathering papers, I came across his Divorce Decree from his first wife. The value of his 401K, as of date of trial, would be given when available. It also states, "The 401K shall be split via "QDRO" and the Wife shall be responsible for preparing the QDRO and submitting to the Husband's employer. It has been over 2 years, there has been nothing filed with the courts nor had we received anything from the plan administrator. What could possibly happen now, once I file my papers with the plan administrator?

GoneToSoon