I am getting more and more questions from employers who, for one reason or the other, would like to essentially provide each employee a health insurance "stipend" that could be used to pay for coverage under the employer's group plan or, alternatively, for premiums for other coverage if an employee elects not to participate in the employer's group health plan. In most cases, this seems to arise as a matter of "fairness" for the owners. The thinking is basically that they are willing to pay $X amount for group health insurance premiums for those employees participating in the employer's group plan so, therefore, they should be willing to pay the same amount to employees who forego coverage under the employer's plan when they have health insurance coverage elsewhere (e.g., spousal coverage, individual health insurance plans, etc.).

I have worked with employers who have established "opt-out" or "cash-out" programs under their cafeteria plans to make sure that those employees who actually elect coverage under their employer's plan are not subject to constructive receipt concerns by the IRS. One of the challenges of that approach, however, seems to be that the employees getting the stipend amount rather than coverage under the employer palnn must recognize the stipend in income and pay taxes on it while employees covered under the company's plan basically get the stipend on a pre-tax or "tax free" basis. The "fairness" rationale then leads the business owners to consider providing a tax "gross-up" or additional amounts to the non-electing employees in order to make up for the different tax treatment.

Also, as I understand it, having the employer contribute the stipend as an employer contribution or flex dollars to a health FSA for those employees not electing employer plan coverage poses big problems because the health FSA rules do not permit participants to use the account to pay for health insurance premiums.

All of this has me wondering if the better approach is not be to establish a simple medical reimbursement plan whereby the employer agrees to reimburse all eligible employees for amounts spent on health insurance premiums up to a maximum monthly stipend amount. For example, if an employee is willing to give each employee up to $300 per month to cover the cost of major health insurance premiums (whether under the employer's group health plan or through other coverage), as long as the employer requires proof that the amounts are essentially being paid in arrears to reimburse the employee for legitimate health insurance costs, shouldn't those payments be tax free?

Would this vary if the amounts being reimbursed were premiums paid by a spouse on a pre-tax basis under a cafeteria plan sponsored by a spouse's employer? Would this potentially be discriminatory if the reimbursement formula provided for payments of 50% of monthly health insurance premium costs up to a maximum of $300 per month? Perhaps that depends on which employees are getting the maximum reimbursement amounts and which are not.

Granted requiring a receipt / proof of premium payments would be a real pain but it seems to me it's preferrable to having the stipend treated as taxable income to those participants that do not elect coverage under the employer's plan. I don't see many folks with these sorts of reimbursement plans these days--at least not outside the very small company / nonprofit sector. Admittedly, I also don't see many employers who are willing to pay a stipend or otherwise make a contribution to the cost of health insurance coverage outside of the employer's own plan but the interest in such programs seems to be on the rise.

I would be grateful for any thoughts on the best or most tax-efficient way to make these sorts of programs work. Thanks.

I am a 2 person office and I am the owner or the S Corp. The other employee does not have dependents. Can I set up a 129 where I can have money taken from my paycheck each period and administer the plan myself? I've read different things about this plan and am not sure if I can participate.

A company sponsors a DBPP for its two employees and excludes himself, the owner.

The company is dissolving and is in the process of terminating its DB plan.

The plan is covered by the PBGC or at least has been paying annual premiums.

The plan assets are $300k and the plan benefits on termination basis are 450k.

The employees are willing to just take the benefits covered.

To my knowledge an employee cannot waive benefits even if they are willing to and thus as far as I can see the only way to terminate the plan is in the form of a distress termination.

Any other creative ideas out there?

Thanks.

I just want to confirm that a 501©(6) (e.g., business leagues, chambers of commerce, professional football leagues) can have a 401(k) plan. Is there any special recordkeeping ot tax reporting that needs to occur?

If a person is paid indirect compensation, in cash or some other form, under an agreement with an insurance company based on volume and/or profitability of business placed with the insurer and some of this business involves ERISA covered plans, presumably (based on DOL AO 2005-02A), a portion of this compensation has to be allocated to the ERISA plans and appropriately reported by the insurer to each plan for Schedule A purposes. At the least, this needs to be done for compensation paid to external persons, e.g., brokers, etc. Noncash compensation reported should reflect the cash or fair value of whatever is provided. What about similar indirect compensation paid to internal sales persons, i.e., employees of the insurer? For example, an insurance sales employee gets such additional indirect incentive compensation over and above any set base salary. Does this additional compensation for such employees need to be allocated and reported for Schedule A purposes?

1. Radiation Therapist

2. Nurse Paralegal

3. Genetic Counselor

4. Legal Nurse Consultant

5. Art Therapist

6. Computer Forensic Expert

7. Medical Illustrator

8. Veterinary Physical Therapist

9. Animal Defense Lawyer

10. Animal Assisted Therapist

(According to CareerBuilder.com)

Is this correct?

http://www.post-gazette.com/pg/06299/732847-28.stm

If so, does it affect every lump-sum payout?

Thanks

Particpant in divorce proceedings. Has requested hardship distribution for purpose of buying out spouse's interest in their home. Participant claims he will loose the home if hardship not allowed. I am inclined to disallow; however, could this be construed as a distribution to prevent foreclosure on the mortgage?

It has been a while since I had a top heavy plan. As of 12/31/2006, owners had greater than 60% of total plan assets, creating a 2007 top heavy plan. For 2006, the only contributions made by all participants were salary deferrals. I know the original 416 regulations said count key employee deferrals and ignore non-key employee deferrals.

Have there been any changes? So we can count non-key deferrals, for insatnce.

Jim

Company maintains a 401(k) plan for its employees. One of the provisions states that if the plan administrator is unable to have a check to a participants or beneficiary cashed, after the use of reasonable diligence in attempting to locate the person, then the check amount is forfeitred until or if a claim is made for the amount, in which case it will be fully restored without earnings. Similarly, if a benefit is required to be paid by the plan, but cannot due to inability to locate the participant or beneficiary, then the account balance is forfeited until a claim is made, in which case it will be restored. Based on IRS regulations, I am comfortable with this approach.

The question that arises is how is the Schedule SSA reporting handled? If the participant terminates employment and does not take a distribution, then the participant's account balance is reported on the Schedule SSA. If there is an uncashed check or an account balance that is forfeited because the participant could not be located, are you now required to enter Code B or C in line 4 box A? What if the check remains unclaimed or the account balance remains unclaimed? Do you enter Code D in line 4, Box A?

The participant's designated beneficiary is his estate. The participant died in 2007. The 401(k) plan allows nonspouse beneficiaries to directly roll over the death benefit to an inherited IRA. Can the executor of the estate directly roll over to an inherited IRA?

This is an attempt (of course, use at your own risk - but someone has to try to make life a little easier) at generating the required participant quarterly notice.

In order for this report to work, the user fields in Plan Specs would have to be coded as follows:

Date field 26 = date vesting was last updated

alpha field 29 = hours needed to accrue a year of service (e.g. 1000)

alpha field 31 = vesting yr 1 (e.g. 0%)

alpha field 32 = vesting yr 2

alpha field 33 = vesting yr 3

alpha field 34 = vesting yr 4

alpha field 35 = vesting yr 5

alpha field 36 = vesting yr 6

must have something in these fields, e.g. put 100% fields 4 5 and 6 if fully vested after 4 years.

alpha field 37 = no if plan is not subject to permitted disparity.

This report will look at ees years of service and compare to the alpha field to print vesting %.

of course some modifications would always be necessary. this particular statement says you are always 100% vested in your deferral account and any rollover. If you have QNECs, safe harbor, etc you would have to add that as well.

Have a client who is age 51 and wants to know if she should retire, take her money and run before the new rules kick in ( for calculating lump-sum payments).

She is also trying to determine amounts , should she stay with the company until age 59 1/2.

Anyone know of a calculator that uses the new rules?

I searched high and low, but no luck.

Is the 4/1/07 deadline for RMD's pushed to 4/2/07 because the first is a Sunday? I have been searching everywhere for some written guidance, but can't find anything. If your answer is yes, do you have a cite?

thanks!

Annie

1. A welfare benefit plan has stop-loss coverage. It's the plan's initial year. The PYE is 06/30/06, and the insurance contract year ends on 12/31/06.

2. Known - The plan administrator must check the "Insurance" box as a funding arrangement and segregate the stop-loss premiums on Schedule H, Line 2e(2).

3. Known - Schedule A is required. The plan administrator reports the information for the insurance contract year that ends within the plan year.

4. Not known - What happens when there's no Schedule A information? This is the plan's initial year, and the first insurance contract year won't end until halfway through the plan's second year.

The DOL software will do an edit check, notice the lack of a Schedule A, and issue a letter to the plan administrator. Is there any way to avoid the letter? Or, would you simply alert your client to expect a DOL letter, and then respond to it after it's arrived?

I can't get anyone at EBSA to return my calls. (The EBSA employees might not have a clean and simple answer.)

Regs. allow for a 2% administration fee to be charged on the cobra election. I have written provisions in PD allowing cobra participants to conbribute pre tax all or a portion of their cobra election from final paycheck.

My husband divorced in February/2001 after 17 years of marriage. We married in May/2006. He retired in Aug/2006. The ex filed a QDRO in August/2006 and received a "non-qualified" response in Sept/2006 citing several reasons, the last being he is receiving benefits under a joint plan and she was not named as the surviving spouse. He received a court order to modify the QDRO to comply with Fidelity's response to the non-qualified. In the order her lawyer stated that the wife filed immediatley after divorce but it was not acknowledged by General Motors. So 5 years later they filed again. The judge signed the modified QDRO stating the ex is entitled to pension benefits. She is requesting that she be made the alternate payee and given surviving spouse status for the lifetime of the benefits. The order also states that if the Administrator does not accept this revised order, they and my huband must make the modifications to so that his ex can be given the benfits and status. Right now we are waiting on a decision from Fidelity. I know this will not end. What are our options?

Plan sponsor is terminating 401(k) plan and a profit sharing plan. I know that general rule is that you cannot distribute participant's account balance without consent if greater than $5,000. What happens if the participant, for whatever reason, does not make distribution election? Since all assets need to be distributed within one-year, can the plan sponsor just send these participants lump sum checks? How long must sponsor wait for participants to make an election?

My former employer (known for being somewhat aggressive) taught that when forcing out a participant the distribution had to be processed after 30 days, but before 90 days (pre PPA06) had passed from giving the distribution notice. My new employer says that there is a special rule that requires that force outs to be processed only after the 90 (now 180) days have passed. I have not been able to find anything that says that force out rules are different than regular distributions as far as the notice requirements. Have I missed something?

A participant is a musician in a loud band. An audiologist has recommended ear plugs to prevent hearing loss. Do you think this is a qualified expense?