Can an employee elect to defer a portion of an employee recognition award or other type of spot bonus under a 401(k) plan?

A client sponsors a cafeteria plan. The client uses a fiscal year ending 6/30. The cafeteria plan uses a PYE 12/31. The client wants to change the cafeteria plan's PY to mirror its fiscal year.

Assuming the client wants to implement this change effective July 1, 2007 so that there will be a short plan year from January 1, 2007 through June 30, 2007, can the client amend the cafeteria plan to add a 2-1/2 month grace period?

Since participants in the cafeteria plan have already made elections expecting them to apply for the entire year, we want to provide participants with the longest period of time to "use up" their unused benefits. By extending the effective "year" from 6 months to 8-1/2 months, we've come reasonably close to the full 12 month period.

A decree of divorce, which included the division of an IRA account, was signed off by the judge but indicated that the divorce was not effective until a future date (a date which has not yet passed). Prior to the effective date of the divorce, can this be considered a valid document for the purpose of effectuating an IRA to IRA transfer incident to divorce? (This is not a decree nisi.)

Has anyone worked much with 415(m) excess plans? There doesn't seem to be much guidance out there on the topic but with no worries now about nondiscrimination rules applying to governmental plans, they seem to be useful for purposes of laying on top of a discriminatory 403(b) or 401(a) plans. I have two specific questions:

1. 415(m)(3)(B) prohibits a direct or indirect election to defer with respect to the 415(m) excess plan. Does this rule apply only to the excess plan? For example, if the underlying plan permits elective deferrals, is this a prohibited indirect election to defer with respect to the excess plan? What if the amounts that are to be contributed under the floor plan and the excess plan are subject to periodic negotiations? Do you avoid any problem by utilizing an irrevocable election to participate in the plans?

2. We have been advised by reputable consultants that tax free rollovers can be made to and from 415(m) plans. We can find no authority for this. Does anyone have any thoughts on this issue?

Employer is considering establishing a secular trust to be funded over future years beginning after 1/1/2008. The amount and time of contributions to the secular trust are uncertain today. The benefits accruing in this trust would offset benefits otherwise payable by a pre-409A SERP plan. There is no desire to maintain grandfathered status of the SERP plan. Question: Could the employer take advantage of the 2007 transition rules allowing a change in the time or form of payment by amending the SERP plan by 12/31/2007 to offset SERP benefits by the benefits accruing in the secular trust, even if the time and form of the future payments from the secular trust are uncertain at the time? Stated differently, do the exact time and form of the "new distribution elections" have to be set in 2007, or can they be determined at a later date?

The employer wants to get SERP liabilities off the balance sheet with tax-deductible payments and provide benefit security to the participants, but wants the flexibility to fund benefits if and when it makes sense from a corporate tax and cash flow perspective, without violating the 409A prohibition on acceleration of benefts.

Joe

Suppose an Employer maintains a Safe Harbor (3% nonelective) 401(k) plan, calendar year. The 100% owner of the plan sponsor (a P.C.) is the Trustee of the plan and is Plan Administrator.

Now suppose that the State took him to court for fraud (for allegedly de-frauding insurance companies about something insurance-related), NOT related to the 401(k) plan at all. He loses in court and his sentence begins in a couple weeks.

Suppose he has not yet made the 3% nonelective Safe Harbor contribution for 2006 (about $20,000) and that another one will be due for 2007 (a smaller amount since the employees are now fleeing the office).

Suppose a decision is made to declare bankruptcy and these 401(k) safe harbor contributions are still not paid (but deferrals are all timely met). Under bankruptcy, do required contributions to a DC plan have priority over the claims of other creditors?

Or, is the pecking order determined by the bankruptcy judge? (for claims). Would the participants have to actually file a claim in order to formally be in line to get this?

Do know of a place this information might be found?

A QDRO that divides DB plan accrued benefit as of date of divorce. Separate interest. This plan defined NRA as 65. Allows full Normal Retirement Benefit after 30 years of service, even if P is younger than 65. Without 30 years, anything before 65 is reduced for Early Retirement. P becomes eligible for the 30 yr retirement one-two years after the divorce, but before P reaches NRA. Both P and AP begin benefits 3 years after divorce and after P is eligible for the full 30 year retirement benefit. The QDRO neither states that the AP shares in subsidies nor does it require the AP to receive a reduced benefit if the AP begins payment prior to P reaching NRA.

Question 1: Is the AP eligible for the unreduced benefit?

Question 2: Is the 30 year retirement benefit an early retirement subsidy?

Any legal authority would be greatly appreciated.

Thanks much.

Is a stand alone dependent care reimbursement plan covered under ERISA?

In the case of a self insured multiemployer union health plan, one employer decided to withdraw from the plan and will, at the start of the new month, be covered under a non union plan and notified the union and health fund of this in writing. One day prior to the month's end (1 week after the termination letter was sent), the employer sent a letter to the Fund stating that 2 of its administrative employees (aged 77 and 78) were being terminated as of the end of the month and that they wanted COBRA coverage.

1. Does the Fund have to offer COBRA to these employees?

2. Does Medicare eligibility come into play?

If you need additional information, I'll gladly provide it.

Thanks in advance for any help.

Can the definition of "Compensation" to be used for a plan year be changed mid-year under a safe harbor 401(k) plan?

Go back to 1991. Client terminated Defined Benefit Pension Plan; IRS approvals and PBGC certifications were handled appropriately.

Client established a Target Benefit Pension Plan and permitted participants to make "voluntary elective transfers" from the DBP to the Target plan. (This was before "direct rollovers" had evolved.)

The third party administrator designated the transfer as NON-related rollover and has never included it in the top-heavy testing.

The employee had other distribution options besides the voluntary elective transfer, and there is no evidence that the employee first rolled to an IRA and then to the Target plan.

Can anyone think of a reason why this would have been designated a Non-related Rollover?

Thanks.

My employer (a hospital) is acquiring another company (a physician practice). We want to bring the employees of the physician practice into our 403(b) Plan. We also want to give them credit for vesting service for their time working at the physician practice, prior to our acquisition. Is there any problem with doing that? Anything that we need to be careful of?

Thanks.

I have an employer who wants to have a PS contribution allocation requirement of (i) at least 9 months of service with at least 1000 hours worked in that period, plus (ii) employed on last day of the year

The first condition is obviously unique and what I have questions on. After reviewing, this would only apply to new participants, as participants in the plan on the first day of the plan year (1/1) who work 1000 hours would not receive a contribution only if they were not there on 12/31.

Can you have a 1000 hours requirement with less than 12 months of service? Any other pitfalls you see to this?

Thank you

An employee is going to have taxable income amounts returned to him that he had with-held pretax due to the employer not meeting the non-discrimination testing for their flexible spending account. 

The participant is electing to have that amount with-held from his pay and added to his 403b plan so that the net tax impact will be zero.  The participant is aware of the maximum contribution issues for his 403b and will not exceed that amount.  Are there any problems?

We have recently implemented a relocation policy. I know moving expenses are excludable income under 401k plans, but I believe it is only certain moving expenses. Do you know which types are excludable? I think it might be moving expenses that are reportable in a certain box on the W2.

I have a client with a 401(k) from an old employer; just as I was about to roll it to an IRA, I noticed that of the $50k value, $35k was in ESOP shares of employer stock. My question has three parts- first, I don't think I can seperate the investments and roll only the $15k and leave the ESOP shares for NUA treatment later (she is 57)- can anyone confirm this?

Secondly, I think I also lose the NUA if I create a uni-401k (she is self-employed) and do a like-kind transfer of the shares- again, confirmation?

Finally, I do believe that if I wait until she is 59-1/2 and have her take a LSD at that time, then I can roll the (today's value) of $15k and take the cap gain rate (assuming it's still low) on the ESOP shares. Anyone know the IRC that would say this is okay?

A DB plan is amended to close participation to employees who would enter or of after Date X.

Is anyone aware of/had a ruling on the IRS' view of whether the benefiting group in the plan would constitute a reasonable classification of employees for purposes of the NCT portion of the Average Benefit Test?

Or must such a group pass the ratio/percentage test?

Does employer have any tax advantages if paying employee their share from the company profit in a form of cash, stocks or check as soon as the profit is determined (current/cash profit sharing plan)? I know employee is taxes immediately when receiving such payment. I read somewhere that contributions to a non-qualified plan are currently deductible by the employer, whar does this mean? I thought that employer doens't have any tax advantages if the plan isn't deffered.

Thank your for your answer.

I am the benefit consultant for the hospital in Greensburg, KS (or what used to be Greensburg, KS). They have set up a MASH Tent area on the edge of town from which they now provide limited services. Several employees are obviously incurring a lot of expenses to rebuild their lives.

The question is, can an employee change or terminate their Healthcare Spending account election as a result of their "change in worksite" as noted in the Flexible Answer Book; Q 17:2? It says worksite, but I guess I'm looking for definition. This is from a 1977 temporary Treasury Reg that lists events that constitute a "change in status".

bucky.ks

When calculating the ERISA Full Funding Limit in a plan that calculates the term cost as a cost of insurance (face amount * qx), do you typically include this cost as part of the FFL?