I am new at this so bare with me. I just had a question. Any thought or ideas will help.

We currently have a doctors office who does not provide health insurance coverage for his employees. they are all covered under their spouses plans and a couple have individual policies they have picked up themselves. they have checked into group policies, but it would be way too expensive. They are adding a new full time employee and she will need coverage eventually. She is currently covered under COBRA. They want to know what they can do as an employer to cover her premiums. Could they pay her premiums directly to the insurance company and provide this benefit for her on a discriminatory basis.

We service a plan that is in a "border state". Participant wants to name mother (citizen of Mexico) who lives in Mexico as beneficiary. Are there any problems with this? Am I correct in saying that payments will be subject to 30% withholding if the death benefit is actually paid? Lastly, what should be used for beneficiary designation form that requires the beneficiary's social security number? Mother does not have a social security number, obviously.

I see IRC 416(i)(A) that a company with 8 employees can have no more than 3 Key employees. Is there a guideline siting who is not a key employee?

Ex:

40% owner makes $40,000 per year

60% owner makes $125,000 per year

2 sons each make $50,000 per year

Do I pick one of the sons? Do I exclude the 40% owner? Can I choose who I exclude as a Key Employee?

Thanks in advance.

In connection with a challenge by a pension professional I present the following assertions for definitive confirmation.

If a DB plan provides say a unit accrual of 0.5% per year of final avg pay with pension payable as life annuity at normal ret this is considered benefitting for purposes of non discrimination and minimum participation.

If the above plan is offset by a DC plan benefit and the result is sometimes $0 for an annual accrual, the participant is still deemed to be benefitting and participating as above.

Thanks.

Has anyone seen data or even heard anecdotal evidence that filing VCP applications increases a plan's chance of being audited? Does the IRS even maintain data showing the number of applications a particular plan sponsor has filed?

Anyone interested in forming a study group in NYC or Long Island area for the November test?

Company A and company B are members of an affiliated service group. Company A sponsors a SH 401(k) plan. Company B does not sponsor any plan.

Company A's plan fails coverage testing and so an -11(g) amendment will be done to add in some company B employees. They will be provided a QNEC of the average NHCE deferral rate to satisfy 401(k) 410(b), a SH contribution and a nonelective contribution. There is no matching contribution.

I have to think this satisfies the requirements of Notice 98-52 but wanted to see if anyone (Tom Poje?) disagrees. My nagging concern is no notice was given to company B employees and they really didn't have the opportunity to participate in the 401(k) portion of the plan. The average NHCE deferral rate is very low, so they are getting a tiny QNEC.

I have read through the rules regarding the application of COBRA to FSAs and just want to make sure I understand how they apply in my situation.

I have a FSA that is exempted from HIPAA.

I have an employee who elected to reduce his salary by $300/ month for 2008.

This employee was terminated on May 31 after having his salary reduced by $1500.

Let's assume that the employee had not yet had any claims reimbursed.

Am I correct that the employee can elect COBRA coverage, pay the premium for June 2008 of $300 + 2% administrative charge, and then submit a claim for $3600 ($300 times 12 months)?

In other words, the employee would have paid approximately $1800 for $3600 worth of coverage?

Thanks

ABC Company has been moving forfeiture assets from the participant account at the point of termination, not waiting until the end of the year, per the plan document. This has gone on for 7 years or so. What concerns should they have? Is this correctable? How often have you seen plan designs like this? What are their options?

The Plan Document states In the event a Participant incurs a Termination of Employment, any portion of the Participant's Employer Contribution Account to which he is not then entitled pursuant to plan dopcument hereof shall be forfeited (a "Forfeiture"). A Forfeiture shall be deemed to take place at the following time:

(a) If the Participant has no vested interest in his Employer contribution Account, the Forfeiture shall take place at the en of the Plan Year in which his Termination of Employment occurs. In such case, the Participant shall be deemed to have a distribution of his zero Account Value at the time of his Termination of Employment.

(b) If the Participant has any vested interest in his Employer Contribution Account, the Forfeiture shall take place at the end of the Plan Year in which occurs the earlier of (i) completion of distribution of the Participant's benefits or (ii) incurrence by the Participant of his fifth (5th) consecutive one year Break in Service.

Please help!

I am aware that a Safe Harbor plan may allow for dual eligibility for salary deferrals and the SH match, however I need some plain english clarification on what that really means to the plan, how that changes the testing, and any potential issues or concerns that could arise and should be discussed prior to adoption of the provision. The plan is considering going back to SH for 2009 and adopting either immediate or 3 month salary deferral eligibility with 1 year eligibility for the match. In addition to that, the plan is considering adopting QACA with the same eligibility requirements mentioned above. Can someone please help me with this? Thanks in advance.

This post was also submitted on the non qualified plan board.

A plan sponsor implemented a 412i insurance funded defined benefit plan.

The IRS disqualifies the plan and recommends the plan be unwound.

The IRS disqualified the plan for failure to meet the coverage tests and for excessive death benefits and excessive deductions.

For purposes of t his thread let's assume it is a one participant plan with an annual life insurance premium of $100,000 per year for the past five (2003 through 2007) years for total premiums of $500,000.

Regarding the unwinding of the plan, the IRS makes the following settlement proposal:

1. The IRS says the unwinding of the plan will involve treating the plan as if it were always a non qualified plan.

2. corporation retains income of 100k per year for the years in question (2003 through 2007)

3. in 2008 the plan is disqualified and the individual shall receive $500,00 of income and the corporation can take an associated deduction of 500k for 2008.

The plan sponsor does not like the above proposal as they consider it double taxation, followed by an extremely high corporate deduction that will create a Net Operating Loss that can never be utilized.

As I said the IRS position is that the unwinding of the plan shall be to treat it as if it were a non qualified plan all along.

So the question is:

Is the above recommendation in conformance with the tax laws related to non qualified plans?

Or should (or could) the taxation involve treating each premium as compensation to the participant in the year it was paid and thus result in a corresponding corporate deduction for each year?

Please include references in your responses if possible.

Thank you.

A plan sponsor implemented a 412i insurance funded defined benefit plan.

The IRS disqualifies the plan and recommends the plan be unwound.

The IRS disqualified the plan for failure to meet the coverage tests and for excessive death benefits and excessive deductions.

For purposes of t his thread let's assume it is a one participant plan with an annual life insurance premium of $100,000 per year for the past five (2003 through 2007) years for total premiums of $500,000.

Regarding the unwinding of the plan, the IRS makes the following settlement proposal:

1. The IRS says the unwinding of the plan will involve treating the plan as if it were always a non qualified plan.

2. corporation retains income of 100k per year for the years in question (2003 through 2007)

3. in 2008 the plan is disqualified and the individual shall receive $500,00 of income and the corporation can take an associated deduction of 500k for 2008.

The plan sponsor does not like the above proposal as they consider it double taxation, followed by an extremely high corporate deduction that will create a Net Operating Loss that can never be utilized.

As I said the IRS position is that the unwinding of the plan shall be to treat it as if it were a non qualified plan all along.

So the question is:

Is the above recommendation in conformance with the tax laws related to non qualified plans?

Or should (or could) the taxation involve treating each premium as compensation to the participant in the year it was paid and thus result in a corresponding corporate deduction for each year?

Please include references in your responses if possible.

Thank you.

Are hardship distributions from salary deferral accounts and profit sharing accounts now treated the same - they are not eligible rollover distributions and therefore no mandatory withholding.

I believe at one time they were different.

A retired participant (non-owner) turns 70 1/2 in October '08, therefore her first RMD is not due until 4/1/09.

She is interested in rolling her vested balance out of the Plan now.

For plan purposes, does she have to take her 2008 RMD first, then rollover the remainder? Or can she just rollover the entire amount without taking an RMD because she is not required to take an RMD during '08?

Thanks!

I was recently hired at an organization at the end of January '08 (Jan 28). Immediately upon my hire, I filled out the paperwork to take out money for childcare reimbursement. They told me my deductions wouldn't start coming out of my checks until March. I know how much the childcare is per month, and took the 12 month $ total and divided by 10 months (the number of months I will work at this organization this calendar year) and chose to have that amount deducted from my paycheck.

The childcare expense prior to my employment here has not been reimbursed by any other Cafeteria plan, and does meet the requirement that it was to allow my wife and I to work.

I have turned in the expenses for the first four months of the year. Two of them (March & April) were reimbursed. January and February were denied. They stated that those expenditures occurred before I joined the Cafeteria Plan.

I thought this was my money, and as long as the childcare expenses fell within the correct calendar (tax) year, and met the federal requirements, that I should be reimbursed.

Is this correct? Will I not be able to recoup my own money now?

Thank you for your help!

Dale

We are a TPA firm working on a large Plan were an Audit is required. We do not have a SAS 70.

The auditor is telling me what since we do not have a SAS 70, they will have to do a full scope audit, as opposed to a limited scope audit.

The custodian and recordkeeper of the Plan has a SAS 70. The TPA does not.

Is a full scope audit required if the TPA does not have a SAS 70?

ABC Company has a 401a and a 403b. They would like to map participants who have previously been defaulted into a money market fund into the age appropriate Target fund.

Plan has 3 providers. Would they need to do this for all employees?

The plan has not chosen the TRFs as the QDIA. They only have it set up as the default. Would they be required to have all 3 provider lifecycle funds as QDIAs in order to get ther 404c protection when mapping the assets?

Al owns 100% of AlsCo LLC and 100k goes to his se tax

Al owns 50% of AlandBobs LLC and a loss of 10k goes to his se tax

That's a non-passive loss

AlsCo LLC has a profit sharing plan. Normally we would use 100k less 1/2 the SE tax X 20% to get the max contribution for Al

How do we treat the losses on his SE tax?

I've been studying sections 414(e) and 3121(w)(3) to determine if a seminary that sponsors a money purchase plan and a 403(b) plan is exempt from non-discrimination testing.

I've determined that the seminary's money purchase plan qualifies as a church plan and is exempt from nondiscrimination testing because section 414(e) applies.

However, it seems that the 403(b) plan uses the section 3121(w)(3) definition and that plan would be subject to nondiscrimination testing.

First, I'm wondering if my thought process is on target; and

Second, I'm wondering if anyone else has experience with a plan or plans maintained by a seminary.

I have recently taken over a plan that has whole life insurance as an asset. What value do I use for valuation purposes, Surrender or Cash Value? or something else?

The owner/sponsor wants to purchase the policy from the plan, how do you determine the value of the policy for the purpose of buying it out of the plan.

Where is this covered in the Code or Regs?

Thanks