We have discovered that a client put in too much safe harbor match (SHM) into a participant's account for 2006, probably because they didn't pay attention to his compensation amount (he made $330,300 for last year). They use the regular SHM formula and this participant contributed $15,000 in deferrals. I am ok with his deferrals, but they deposited $12, 004.04 in SHM (after his rec'ble for 2005), and he shouldn't get more than $8800 (to top it off, the client reported this participant's match to be $13,285.20).

The excess will need to be removed from his account, and after speaking with John Hancock about how they would like to handle this issue, they sent me an excess withdrawal form. I don't think this is correct. The money shouldn't be returned to the participant, it needs to go back to the company, or at least held at JH to use towards the next safe harbor payment they need to make (they make them during the year).

Thoughts?

I have two plans each with 100 pensioners. The first plan covers the United Amalgamation of Coal Miners and Asbestos workers and the lump sum option is unavailable even for de minimis benefits -- i.e., everyone takes a pension. The second plan covers the employees of the National Academy to Promote Nonsmokiing, Aerobics, and Organic Foods and it offers an optional lump sum.

So by adding the complexity of pre-retirement/post-retirement perennially changing one-size-fits-all multigenerational projected and setback mortality tables makes this country a better place to retire? It is of note that somewhere along the way unisex mortality tables for lump sums will released which would obviate any hope that mortality could become representative in virtually any situation.

We have a new 401(k) plan that is to become effective 7/1/2007. The employer wants to have a 21 & 1 requirements with semi-annual entry. In addition to the doctor, they have 2 ee's hired 9/06 and 1 hired 4/07. They want to have the 2 2006 hired ee's in the plan as of 7/1/07, but impose the 21&1 on the 2007 hire ee.

Would writing the document to say that "any employee working for the company on 1/1/07 is eligible for the plan on 7/1/07" be acceptable? Using a date (1/1) prior to the effective date (7/1) in order to bring people in?

Thanks

I understand that HRA's are subject to HIPAA, but I am not totally clear on the notice requirements. If the HRA is tied to a health plan, will the HIPAA notice that is sent under the health plan presumed to satisfy notice under the HRA? Are annual notices required?

Hi there -

We have a general purpose FSA. We initiated an HSA in 2005. At the time we did not know there may be a conflict between FSA & HSA. We found out about the conflict in December and our FSA provider told us that they did not offer a limited purpose FSA but that we could just advise participants on the fact that they needed to self regulate their FSA's as LFSA's.

We have two folks who want to enroll in HSA's effective 6/1/07. They are terming employment and therefore for their general FSA's on 6/29/07. Can they have an HSA for June?

We did advise all FSA & HSA participants about the restrictions on usage in December, and have provided periodic updates re: same. However, we did not cancel anyone's participation in the FSA. Should we?

All thoughts appreciated.

Leslie

We have a debate regarding loan payments made via payroll deduction that I hope to get some guidance on before advising client. Loan policy states as a term that, " If the participant is currently employed by the Employer, the Plan Administrator will require the participant receiving a loan from the Plan to enter into a payroll deduction agreement to repay the loan. If the participant is not currently employed by the Employer, the Plan Administrator may require additional collateral for the loan."

The participant has asked the employer to stop withholding loan payments from the paycheck, basically with the intent not to pay it back. What is the employer able to do? Can the employer require the employee to have the payments withheld or do they abide by the participant's request, which will result in a deemed distribution?

Suppose that in a DC plan, EE divorces and ex-spouse is awarded $100,000 of benefits. The plan provides, and thus ex-spouse can take withdraw the $100,000 (as adjusted by any subsequent investment experience) at any time. Ex-spouse chooses to leave the money in the plan.

The plan calls for default payout, as a lump sum, at the time participant's reach the later of normal retirement age or age 62. The plan also requires payout by December 31 of the year in which the participant reaches age 70 1/2.

Question 1: If there has been no withdrawal or election by the ex-spouse by the time the employee reaches the later of normal retirement age or age 62, does the plan automatically pay the ex-spouse a lump sum? What if the QDRO, as many do, simply provides that the payout of the awarded portion is at any time the ex-spouse elects?

Question 2: If the ex-spouse affirmatively elected to postpone payout beyond the time that the employee reaches the later of normal retirement age or age 62, must the plan the plan payout the awarded benefits to the ex-spouse by December 31 of the year in which the employee reaches age 70 1/2?

Question 3: If the employee dies earlier than reaching age 70 1/2 and the QDRO did not specify the ex-spouse as the "spouse" of the awarded portion, is the ex-spouse considered a non-spouse death beneficiary as to the awarded portion with MRD either 5th year post death, or over ex-spouse's lifetime beginning the year after death?

My expectation is that the Participant is the borrower and that Reg Z requires the truth-in-lending disclosures be made to the borrower. While the proposed spousal consent form includes all the Reg Z information, it is not in the Reg Z specified graphic box format. Does the spousal consent have to comply explicitly w/ Reg Z?? Has anyone researched this question or seen any guidance??

THANKS for you comments.

We have a client that for January 2006 was NOT part of controlled group. In July 2006, due to ownership changes, the entities became a controlled group. One of the entities sponsors a SEP. They need to cover all eligible employees of both entities. Question: Should we use compensation for all of 2006 to determine contributions for the "new" employees or compensation from the time the entities became a controlled group?

Where would I find the definition of compensation for this purpose? Thanks.

My client has 2 FSA's: a general purpose and a limited purpose. They also have an HSA. Both FSA's have a limited purpose 2 1/2 month extension period.

An employee in the limited purpose FSA also makes HSA contributions. She is leaving the firm. She wants to roll over her FSA balance into the HSA.

I cannot find anything that says you can roll over other than at plan year end. I have been over IRS Notice 2007-22 a few times, and it seems totally silent on this issue.

Also, assuming that she can do the roll over, do we always have to look at the FSA balance on September 21, 2006? What if the person was not an FSA participant in 2006, just 2007?

Thank you for your help.

Am I right in my thinking for plans that have a Trust EIN that the number is no longer reflected on forms 5500, Sch. A, I & R (the ones we typically use)?

Should after-tax matched contributions be segregated from employee after-tax contributions and what are the withdrawal/distribution restrictions associated with the after-tax matched contributions.

If a 403(b) non-ERISA Plan has a division where two priests receive 1099's instead of W-2s. Can the priests contribute to the 403(b) non-ERISA Plan?

Besides Kirk Maldonado's treatise on the securities aspects of qualified plans, are there any cites to SEC documents that discuss registration requirements when privately held securities are an investment option under a 401(k) plan? Our firm, unfortunately, does not subscribe to the BNA Portfolios.

If a wrap plan includes AFLAC benefits, is it necessary for the employer to offer COBRA for the AFLAC benefits as well? Any help would be appreciated. Thanks.

Client has a 401(k) plan using the safe-harbor matching contribution design. Plan also allows for profit sharing contributions allocated using a new-comparability design to participants who satisfy the 1,000 hour, last-day rule.

Don't ask why, but, none of the participants have ever made any deferrals - not even the owner. Instead, the owner makes profit sharing contributions every year. Now the situation arises where there are non-key HCEs eligible for a PS contribution. It seems OK to not give them any allocation at all if the cross-testing passes and top-heavy minimums are not required by virtue of the safe-harbor design (the key has >60% of the benefits). Wacky, yes, but is anything being overlooked?

Can HSAs be used for Medicare Premiums

1) A Health & Welfare Fund ("Fund") obtains judgment against defendant. May the Fund pursue attorney fees incurred in the collection process (tracking down defendant, attorney time in drafting writs of execution, etc.) after judgment has been entered? In what venue (Federal or State court) must the Fund pursue those fees?

2) If the suit concerned delinquent payments, may a collection action be pursued in state court?

3) If the suit concerned non-payment, may a collection action be pursued in state court?

I have been asked by a client to look over a DRO to see if it is qualified. Currently, it is not signed, so I consider it a draft.

It specifies a specific dollar amount, but no "as of" date. I used to do a lot of these but it's been awhile - shouldn't there be a date there (Amount of Benefit to be Paid to Alt Payee section).

The next section talks about timing and form of payment. The timing is fine ("as soon as practicable after the Order is qualified") but it just indicates that the "alt payee has elected to make a direct rollover into a qualified plan and directs the Plan Administrator to directly transfer her funds to [alt payee's name]'s IRA account at [alt payee's investment carrier]." Should an account number be listed here? The reason why I ask is b/c I have been told that a distribution form is not needed to process the distribution to the alt payee. Like I said, it's been awhile (at least 3 years) since I did a QDRO, and my thought is that she DOES need to complete a form so the trustee can sign it. The QDRO is not signed by the trustee (of course), but I think they need to sign off. Or does the fact that they deem it to be qualified is an automatic consent to the distribution.

Maybe I am thinking about this too much, but it is a lot of money, so I want it to be correct......

Thanks for your thoughts, guys.....

904 of PPA required earlier vesting for plans except ESOPs with loans outstanding on 9/26/05. Such plans do not have to change their vesting until the earlier of the loan payoff or the date the loan was scheduled to be paid off at 9/26/05. What about plans that have loans that were taken out before and after 9/26/05? Do we think that having one loan outstanding prior to that date would allow share allocations from loans taken out after that date to continue on a pre-PPA vesting schedule until the old loan is paid off (or scheduled to be)? Seems like quite a potential loophole, especially if the old loan has a really long amortization period. However, requiring different schedules for shares acquired with different loans would be messy at best.

I've seen no guidance, maybe because the IRS thinks it is clear. I'm interested in what the members of this board think.