My state is the 2nd or 3rd to do this. Unmarried dependents up to age 26 are eligible to be covered whether or not they are students or reside with you.

For state income tax purposes, coverage of a overage dependent (or a civil union or same-sex marriage partner) has no tax effect. For Federal tax purposes, we need to impute income to the employee for the cost/value of the coverage for the inelgible dependent, withhold taxes and not use the Section 125 Plan for payroll deductions for the coverage. That much we've figured out.

What we can't get a definitive answer to is whether that overage dependent can/should be covered under an HDHP/HSA plan . The HSA component is the problem since we contribute most of the deductible ($1500 single, $3000 family) to each employee's HSA.

If we have an employee with single HDHP/HSA coverage who adds an "overage" dependent, can/should we contribute $1500 or $3000 to the HSA ? The employee shouldn't use the HSA funds for that overage dependent, but the ee owns and controls that account, not us. There is no TPA to adjudicate claims.

If the employee already has family coverage, we still need to impute income for the cost of coverage for the federally inelgible dependent, but the HSA funding question goes away. The employee assumes the risk if they use the HSA funds to pay for pre-deductible expenses of the dependent.

Is it actually a company policy issue ? Should our policy be that our contribution to the HSA is based on the number of federally eligible dependents ?

Can anyone think of a helpful preliminary description of the amounts involved in the closing agreement program? Also, the relationship between the maximum payment amount and the final sanction.

Lack of supporting documentation; what code references or other official literature addresses this situation?

Small ER ends professional practice, pays out benefits to all EEs but the owner/EE. Continues QRP (holds merged MPP assets) for purposes of creditor protection until professional malpractice statute of limitations period runs. During that period, owner/EE makes 4 withdrawals during the last PY and the current PY, dating back 15 months. There was no 402f notice, no QJSA/QPSA notices or waiver by spouse of owner/EE. Owner/EE is passed the later of age 62 or QRP's normal retirement age, so not a problem in failing to give notice of right to postpone payout.

Incident to steps being taken to terminate the QRP, these notice and consent problems were discovered. In looking at Rev Proc 2008-50, section 6.04 on VCP describes the method for VCP correction, referring to Appendix A.07 for similar correction principles, of spousal consent failures.

The QRP qualifies for SCP correction of significant operational failures by SCP as the QRP has its own D-Letter. SCP correction may be timely accomplished.

My question of whether VCP is required or SCP is available boils down to whether these spousal consent and notice problems amount to something other than an operational failure as defined in section 5.01(2)(b), i.e., solely a failure to follow plan provisions.

Thanks in advance for input.

First time I've encountered this - the FSA interest rate for a plan is higher than 175% of the federal mid-term rate needed to calculate the 412(m) charge. Does this mean that there is no charge for just making the whole contribution on the minimum funding deadline and not making any quarterly contribuitons? Doing the calculation literally would result in a credit, but I don't suppose it would be appropriate to reduce the contribution by not making quarterly contributions. Does anyone know whether it's acceptable to just show zero for 412(m) charges in this situation? All help is greatly appreciated.

Given the state of our defined benefit plans, a lack of work in the region and skyrocketing health care costs, several groups are having difficulty finding management representatives willing to sit on a jointly trusteed board. One solution that has been proposed is to offer trustees a small stipend (>$500 per month) for their service to the trust. This would not be payable to anyone already receiving full-time pay from the union, an employer or an employer association. A trust amendment would be adopted by the settlors.

For example, we have a contractor representative who recently retired and wanted to resign. Can the Board offer him a small monthly stipend to remain involved?

How about a union trustee who is unemployed or retired?

What about an attorney or accountant who would be willing to serve for the union or association in exchange for the small stipend and paid conference expenses?

The relatively small cost of retaining or attracting qualified trustees would be well worth the money, but I cannot seem to find any guidance on the issue. The regs seem to speak only to "lost wage" reimbursement.

We have acquired two separate DC plans that both have QJSA language, and for whom we have participants facing MRD requirements. For what its worth, one plan is a Money Purchase Pan and the other is a Profit Sharing plan that was created as an offset to a defined benefit plan. So my understanding is that if we have not gotten (cannot get) an affirmative election from the participant (and spousal consent if married), then we have to make the distribution as a life annuity or a QJSA.

So the question is where we get an annuity vendor to provide a monthly annuity benefit where the premium or lump sum at distribution date is less than $2,000. Our search has trund up terminal funding annuity providers, but generally with a $10,000 mimimum payment.

I guess in the interests of full disclosure I have to say that we deal with this issue on a daily basis, but we can get participant and /or spouse consent in that situation.

Ideas?

Defined benefit plan with a long history of 10/1 - 9/30 plan years was amended before 10/1/08 to transition to a calendar year through a short year 10/1/08 - 12/31/08.

The amendment included language prorating service, compensation, etc. as you might imagine.

Driven by funding considerations, plan sponsor now wants to amend again, before the end of the short year, to run the current plan year out to 9/30/09 -- rescinding the plan year change to avoid a 1/1/09 valuation date.

What unintended consequences might this bring about? Employees who have already met short-year service requirements (250 hours for a year of service) when the amendment is adopted may have an additional year of service. But what other and worse things are lurking out there?

Thanks for your help.

Dr A had a practice with a PSP and contributed $46,000 in 2008. Business closed 9/30/08 and started working in a hospital with a 403(b) plan. Wants to defer $15,500 to the 403(b) this year. My thought is that the 2 must be aggregated this year, even though business has closed, and he can not defer anything to the 403(b), unless if he is over 50, then he should be able to do the $5,000 catch-up.

Any views would be appreciated.

I am the Alternate Payee and I was married to the Participant for 32 years (including 5 years after he retired) - at the time he retired he elected to receive a monthly benefit payment. Since then we went through a dissolution and our QDRO states that I receive 50% of his monthly benefit. During our marriage we had cashed in MY 401k, therefore when we split up, I asked for 1/2 of his pension and he agreed. I have since re-married and he just re-married a couple of weeks ago. He now wants me to give up my monthly benefit since I have a job and my husband has a job (he and his new wife have no jobs). I feel that during our marriage (when I was and still am employed the whole time) - it was OUR house, it was OUR 401k that we cashed in and used, and it was OUR 401k that I am now receiving monthly benefits from. I am not even considering "changing" our existing QDRO BUT I would like some advice on how to answer him without going into an all out war. I actually think the Participant was trying to change beneficiaries to his new wife for his pension. I wish I could have taken a lump sum but I had no choice since had already designated a monthly benefit payment at the time he retired.

Questions:

1. Can a QDRO be revised and how costly is that and would we have to hire lawyers?

2. The QDRO states in one section that "the amount awarded by the order shall be paid for the participant's lifetime until the earlier of: (i) the death of the participant, or (ii) the death of the alternate payee. The alternate payee shall have no rights in or to any amount of the participant's accrued benefit under the Plan not assigned by this order. It then goes on to say that "The alternate payee will be entitled to receive benefits following the death of the participant to the extent provided under the form of payment in which benefits are currently being paid to the participant." Are these survivorship rights?

3. Can he change beneficiary rights to this QDRO? I don't want to deny his new wife of anything that is rightfully hers BUT at the same time, I don't want to screw myself either.

Life situations can change in a heartbeat! Any advice would be appreciated.

Doctor owns 100% company - wife works there and gets W-2. Company gets taxed as a sole prop

The doctors gross comp gets reduced by 50% FICA and contribution.

Does the wifes comp get reduced also becuase of attribution? Even though she is not the owner - he is?

Thanks

From my reading of the EOB, I have come across a special rule for processing the ABT for coverage testing. Specifically, it states that if an employer maintains both a DC and a DB, then the ABPT can be calculated separately for both plans (with some caveats). Can someone clarify this rule? Is it as simple as assuming that the ptps in the DB plan only have a zero in the DC plan (for ABPT)? If they are in both plans, does this mean that the ABPT is calc’d solely on the figures in the DC plan? So, if I were to employ this rule for my DC plan, then I would not need any financial information from the DB plan provider, correct? All I would need would be a census listing with the indicative data (if the pops were different) or a count of those who were in the DB, (Not in DC), who met the elig requirements of the DC. Does this sound right?

Finally, if the plans needed to be tested together for the ABPT, is the calculation as simple as converting the DB EBAR to an allocation % and adding it to the alloc % of the DC? (Or converting the DC Alloc % to an EBAR and adding it to the EBAR of the DB plan?)

Any comments/help would be greatly appreciated.

I know a hardship should only be taken after all distributions and loans available to a person are taken.

However, I've read that a loan doesn't have to be taken if it creates additional hardship. Where is that stated in the regs or guidance?

And secondly, what if a loan wouldn't cause add'l hardship, but one is already taken, yet more is available. For example, a person took a $5,000 loan last year for 5 years. Now she wants a hardship. However, since the loan was taken, an additional $4,000 has been added to her account. Would she have to refinance the existing loan for an additional $2,000 before a hardship could be taken? Or does the existence of the first loan satisfy the provision that all distribs & loans must be taken before a hardship can be done?

Publicly traded ESOP plan provides for distributions to participants in the form of cash or stock. It has been interpreted to mean that a participant who has shares of stock in his or her account can sell the stock and receive cash from the trustee, which has happened. The sponsor wants to terminate the ESOP and require participants to take the shares of stock in their accounts in kind, and eliminate the cash option. Can this be done? The regs don't seem to permit exactly this but if anyone has a different opinion let me know.

Can the effective date of an EGTRRA amendment be "current date" (such as 11/26/08)?

Looking for sound advice for this situation.

TY 2006 made excess contributions to ROTH IRA, paid the 6% excise penalty upon income tax filing.

TY 2007 made excess contributions to Roth IRA, paid 6% excise on TY '06 excess contributions and 6% excise on '07 excess contributions upon income tax filing.

TY 2008 will make excess contributions to Roth IRA, will still have to pay 6% excise on '06 and '07 contributions, but due to market conditons, value of Roth has lost ~ 50%.

401(K) is fully funded, and excess contributions are due to exceeding MAGI limits for Roth eligibility.

The Roth IRA does predate 2006, however majority of contributions are '06 or later.

Do not want to really give up on the Roth, because of tax free earning potential, but the 6% excise adds up, especially when the underlying securities have declined so much in value.

What is the best option?

Now that PPA has new restrictions on payout for underfunded plans what happens to the old restriction rule on (lump sum) payout to any of Top 25 HCEs? Was that rule repealed by PPA? Since there is no such thing as current liability now, one can't compute the Assets/CL ratio anyway!

By the way, which Code section had the Top 25 HCEs rule?

Here is the situation:

A plan's 2008 AFTAP is 96%. but it's 2009 AFTAP will be well below 60% if the stock market stays at the current level - uge loss on assets. An HCE is terminating whose PVAB is $600k and represents 70% of the plan assets.

Under PPA, he can be paid out during 2008 but not under the old top 25 HCEs rule!

If an existing plan is adding a new EACA feature effective 1/1/2009, are you providing an "annual notice" to all "existing" eligible participants by 12/2/2008 for the 2009 plan year (like you would for an annual safe harbor notice) or does the annual notice for existing eligibles begin for the 2010 plan year.

For plans that added the feature as of 1/1/2008, we only gave a "pre-participation" notice to all eligible EEs who did not make an affirmative election to participate in the plan and newly eligibles. We are now giving the "annual notice" to all existing eligibles for the 2009 plan year. My gut tells me this was not correct. Thank goodness we are still under proposed regulations.

Thanks!

I hired in with a Construction company on 2/28/05 under the ESOP plan. Their plan year ends on March 31 of each year.

I was laid off the following year on 3/05/06 (one year and 5 days later) due to lack of work and then recalled back for work on 4/18/06 (5-6 weeks later). When I was rehired, I asked the Company Controller if all my seniority continues from my original employment and he confirmed that it would. As proof, I did not have to wait another year for my 401K, etc.

Now I am being told that I did not qualify to participate in the plan for the fiscal year from 3/31/06 thru 3/31/07 because I was not employed on 3/31/06 even though I worked well over 2,000 hours that year. Can they do that? I mean, just because I was not employed on 3/31/07, I don't qualify? Can anyone help me?

I think this topic has been covered here but I can't find the thread.

Rephrasing the regs:

Reg 1.430(d)-1(f)(4)(iii)(B) appears to state that to value the distributions subject to section 417(e)(3), change the mortality to the Applicable Mortality from the annuity starting date (and not the interest rates).

Reg 1.430(d)-1(f)(4)(iii)©. If the lump sum is greater of lump sums determined under the plan assumptions and S417(e(3) assumptions, then the present value must be adjusted if the PV of the distribution is greater than the value determined under 1.430(d)-1(f)(4)(iii)(B)!?

What on earth does this mean?

Does it mean, the PV of benefit for valuation purposes is:

(1) PV of monthly benefit using the approach in ....(iii)(B) plus

(2) Excess of the PV of lump sum over (1)?

I don't think this equals the PV of lump sum at age z using the valuation segment rates!

Couldn't one simply use the PV of lump sum which is likely to be greater than the value per the method in ....(iii)© as long as the 417(e)(3) rates remain below the valuation rates! Are they ever likely be higher than the val rates?