I have a deferred comp plan that pays different amounts based on the type of separation from service (cause, no cause, etc). The time and form of payment is same for all specified types of separation (payment within 90 days following separation and payment in lump sum). I think I'm compliant with the single time and form of payment rules, am I not?

We administer a defined benefit plan that has term life insurance on participants. Per the document, beneficiaries can receive the larger of either the value of the life insurance or the present value of their accrued benefit. We have recently had a participant die and the present value of the accrued benefit is larger than the life insurance and they have elected a lump sum payment. The beneficiary is the spouse.

The plan was suppose to be the beneficiary of the policies. We are now having some problems with the insurance company who wants to pay the proceeds to the beneficiary.

What is the tax treatment of a lump sum payout for the participant if the insurance is paid to the plan? And what is the tax treatment if the insurance is paid to the participant and the balance paid from the Plan?

We are in the process of performing a VCP, and we are using outside legal counsel for this project. My question is, can we use our forfeiture account funds to pay their legal fees for helping us with our VCP? Please note, I am aware that we cannot use those funds to pay any fines or penalty interest, we are just curious about the fees the ERISA atty is charging us.

Any thoughts?

I am not familiar with DB plans so bear with me...

We have a DB plan where participants receive a monthly periodic payment. One of the participants is in a nursing home and apparantly on Medicaid. Her daughter has been calling us and requesting that we send her periodic payments from the plan not to her mothers bank account, but to the nursing home's bank account.

At first blush I just thought this was nuts. The plan document says there are no assignment of benefits allowed, so that was one thing. But even aside from that, I was thinking how would the 1099s and the taxability of this work?

But then the story got more strange...

One of the department of finance heads from the nursing home called. She explained to me that I did not know how Medicaid "worked", that all the residents of her home had always had their payments go directly into the nursing home's bank account. Then, Medicaid actually pays the difference between what was deposited into the nursing home from each resident and what the bill is from the nursing home. The finance head told me that was "par for the course" and "how Medicaid worked".

I asked who the 1099-R was mailed to, and she told me she did not know, but that none of her residents filed taxes at all. Then I asked why they didn't file, and she said they had no income. I kept asking about the taxability of these payments, but she kept spinning my head in circles saying that by the time she got the money from her residents, the taxes were already paid. But the whole not having income thing...what about all the income from the periodic payments from this pension plan?

We have gone round and round for weeks...not only do I not know anything about DB plans, (dont worry, we have someone who does...Im just trying to help him out researching this weird question), but I know nothing about Medicaid.

Sent the question to TAG who said they had never seen anything that said Medicaid rules pre-empt a plan document rule, and they thought it would violate 401(a)(13).

Any thoughts on this? I decided if this was actually the way it DOES work, than I think I will find a way to get my employer to pay my bills FIRST, then give me a W-2 that says I made no money. I dont have to file tax returns and things would be grand.

This makes zero sense to me, but we have to answer the participant, who is very persistant...

thanks for any help.

Participant has a whole life policy inside of a retirement plan.

Participant's balance is currently $350,000. Cumulative contributions are $300,000. Participant is going to withdrawal $300,000. My only question is when appyling the incidental benefit rule can plan sponsor still base the 50% limit on $300,000 or is the limit reduced due to the distribution? My understanding is that the limit can still be based on the $300,000, but wanted to double check.

Thanks in advance for any guidance.

Under PPA, a non-spouse designated beneficiary, as defined in S401(a)(9)(E), is eligible for direct rollover to an IRA.

Per S401(a)(9)(E), a "designated beneficiary" is any individual designated as a beneficiary by the employee.

A participant died without a surviving spouse and without designating a beneficiary.

Under the plan provisions, default beneciaries are the deceased participant's children.

Are they considered "designated beneficiaries" for Inherited IRA rollover purposes?

I don't think so, because in this case the employee did not designate the beneficiary(ies), but I wanted to confirm my conclusion.

Hello all! Does anyone have instructions for the years 1988 & or 1989 form 5500 ScheduleB.

Thanks

Larry

Can a service provider who provides HSA debit cards and other HSA administrative services be a business associate of a group health plan under HIPAA? Practically, the answer should be yes, but is the service provider providing payment or health care operations on behalf of the plan? I'm not so sure.

[CROSS POSTED TO HIPAA BOARD]

Can a service provider who provides HSA debit cards and other HSA administrative services be a business associate of a group health plan under HIPAA? Practically, the answer should be yes, but is the service provider providing payment or health care operations on behalf of the plan? I'm not so sure.

[CROSS POSTED TO HSA BOARD]

If a plan is terminating, does it have to be restated under the EGTRRA Restated documents? It is current wiht all amednments except for the final 415 limits.

I have been asked to review a DRO which is the basis of a request by the AP for benefit payments from my client's defined benefit plan. The following are the facts as I know them:

Company receives a call from AP's lawyer in 7/2008 inquiring about AP beginning to receive a portion of her ex-husband's pension benefits. Company says there is no QDRO on file for Participant. AP's atty faxes to Company copy of DRO and cover letter from her file dated 9/1995 transmitting DRO to Company at an address that was not at that time (or at any time) the correct address for the Company's Plan Administrator.

The DRO contains the following language: "Copies of the Order shall be sent by ordinary mail to the [Company name] Pension Plan Adminstrator, who shall promptly notify the Participant and the Alternate Payee (whose addresses are listed below) of the receipt of a copy of this Order." No notification of receipt by the PA was sent to either party.

Several years ago, the Participant began recieving his benefits in the form of a single life annuity. The AP now wants to receive the benefits granted to her under the DRO. The benefit awarded under the DRO is supposed to be 50% of the Marital Share in the form of an annuity based on the Participant's life and that benefit is supposed to commence at the time benefits commence to the Participant (essentially a shared interest, it appears).

I am waiting on the Company to provide to me any information they have about what sort of QDRO guidelines and procedures they had in place in 1995 and provide me with a copy of the SPD in effect at that time. I am hoping that this may shed some light on what the AP's attorney knew at the time about the DRO approval process at the company.

I have read prior posts that have touched on some of the issues here - (1) the ability of the Company to get monies paid to the Participant back (demand repayment but, if must sue for these monies, must be able to track the funds OR offset future payments for some period to recoup past overpayments - is this permissible?); (2) the failure of the AP attorney to follow up on DRO submission - the system cannot work unless you assume that folks submitting DROs are aware enough of the process to know that a formal qualification must follow from the PA.

Is there an issue of constructive receipt of the DRO by the PA? If there were no quidelines or the SPD did not contain an address for the Plan (assuming the AP's attorney even looked at the SPD) did the AP's atty do the best she could?

My first inclination (which I, of course, kept to myself) was that the PA was justified in denying the AP any benefits because there is no QDRO (and there is the issue of laches, too). But, the Participant was well aware that under his divorce decree and under a DRO that he signed his ex was entitled to some portion of his pension.

If anyone has any advice about sending my client down a road other than relying on its records (no QDRO) and seeing what the AP does about it, I would welcome hearing it. If there is some larger issue that you think I might have missed, please feel free to chime in.

The spouse of Participant A signed the spousal consent on the beneficiary form naming Participant A's children from a previous marriage as the primary beneficiaries.

However, I don't know if they were acting up recently or not, but the spouse wants to revoke the spousal consent and have her, as spouse, listed as the primary beneficiary.

Does the spouse have a right to do this as spouse, or does the original waiver of rights always apply?

A money purchase plan has a 10% contribution rate with an allocation condition of 500 hours of service or employed at year end. Employer wants to terminate plan effective 01/01/08. I am telling them that since the benefit has been accrued that they will need to make the 10% contribution.

Is this correct? I have seen multiple sites that since the benefit has been accrued participants have completed more than 500 hours that the contribution is required.

On another note I have seen information that the plan can be terminated and the required contribution be made to the PS plan.

They are looking into doing an ESOP plan so my second question is that could they terminate the MPP plan and make the required contribution to an ESOP?

Thanks in advance.

I assume that a retiree health plan document generally refers to the underlying insurance policy with regard to its substantive provisions. Does anyone have any thoughts as to what provisions ought to be in such a document as opposed to merely referencing the policy? Better yet, if anyone has a sample retiree health care plan that they'd be willing to share offline via PM, I would be most appreciative.

Thanks.

I have a plan that was a member of a controlled group for the majority of their plan year. They actually stopped being a member of the controlled group, effective the last day of the plan year .

For that plan year, should I include code 3H on the 5500? Do these feature codes apply to plans if they have that feature at any time during the year? Or is it features as of the end of the plan year? I couldn't find anything in the instructions or the reference materials I have. Any assistance would be appreciated!!

We would like to implement a company match to our Healthcare FSA for one location only. We have no HCEs in this location. Does anyone see any issues here?

Is it plausible that previously approved 2007 claims but paid during January of 2008 can then be denied upon internal audit during August, 2008 and thus become 2008 taxable income to the employee?

I have a situation where a participant was granted a loan based on 50% of his total account balance, rather than 50% of his vested account balance. It turns out the amount granted was more than half of the vested balance.

So, I now have a prohibited transaction.

How do I correct this? I think I would just issue a 1099-R for the amount over the 50% vested balance. Then have the ER pay the excise tax on 5330.

Anything else?

I have tried to research the current rules about domestic partners and keep coming across conflicting information. The client believes that a participant's domestic partner can be reimbursed for medical expenses out of the participant's FSA account based on the following FAQ from the IRS website:

"A town has a cafeteria plan which offers health care benefits to domestic partners. Does a domestic partner and his or her child qualify to be covered under the health plan?

Cafeteria plans can offer health insurance to employees, their spouses and their dependents. The domestic partner and dependents in this case may not be participants in a cafeteria plan because they are not employees, but the plan may provide benefits to them. For example, a domestic partner may not be given the opportunity to select or purchase benefits offered by the plan, but the domestic partner may benefit from the employee’s selection of family medical insurance coverage or of coverage under a dependent care assistance program."

However, I have read other articles which said that any benefits paid to the dp must be taken from after-tax employee compensation (which makes the FSA reimbursement pretty pointless). I have read that the plan can reimburse the employee for these expenses if the dp meets the definition of a "qualifying relative" (the document points to 152 definition for dependents). Then read something that seemed to indicate that the compensation limit in the definition of "qualifying relative" does not apply - which would really make it is for many dp's to be considered dependents it would seem to me.

The document has this for the definition of dependent "an individual who is a dependent within the meaning of 152(a) without regard to 152(b)(1), 152(b)(2) and (d)(1)(B) thereof of the Code of a Participant or a former Participant in the Plan"

I greatly appreciate any clarification on this issue. Thank you!

First of all, I have placed a call for the attorney who wrote this document, but he is out for 3 days. I thought I'd see if anyone else has seen this. Anytime I have a plan that excludes vesting service it is specifically stated in the document that years of service are being excluded for vesting purposes (these would be years before the effective date of the plan).

Well, this document simply defines a "year of service" as the completion of at least 1,000 Hours of Service in a Plan Year.

Would you interpret this to mean that service before the effective date of the Plan would be excluded for vesting purposes?

Thank you