So if you fail an ADP or ACP test, you have 12 months to make a correction. If you don't make a correction within the 12 month prescribed correction period - then you have an operational failure on your hand.

You can use the Self Correction Program in the EPCRS - and one of the options is the One-to-One Correction Method, which involves the refunds being made and a QNEC in the same amount allocated to the NHCE's.

If a plan allows for forfeitures to offset employer contributions, can they use the forfeitures to fund the QNEC? Or, is this considered a corrective QNEC and would forfeitures not be allowed to fund this?

Thanks for any insight.

I was a full time employee from 1997 through November 2004. Since Nov 2004 I have continued part time. In Sept 2005, employer started an SEP for 2004 and paid out benefits 2004, 2005 and will again for 2006. I just found out about this last week from another former employee who fought for his share. Am I eligible? What should I do?

Client establishes new DB plan eff 1/1/06. Later on advises that made a SEP contribution in 2006 for 2006. Is the SEP treated as a profit sharing plan for purposes of the deduction rules? Can the deduction for the SEP be had if the SEP contribution is equal to or less than 6% of eligible comp under PPA for 2006?

I have a couple of questions : In general , does a participant in a 403(b) plan (1) need spousal signature for a loan and (2) need spousal signature to change to a non-spouse beneficiary.

I think the answers are N & Y but I'm not that sure.

Company has a HDHP medical plan that also covers preventative care benefits, and has a Dental Insurance plan.

Company also has an HSA and an FSA. I understand that an employee cannot have both unless the FSA is a limited purpose FSA.

With the HDHP covering preventative care, and the dental insurance plan covering dental expenses, must the dental deductible and vision care expenses be filed under the FSA or can they be filed under the HSA if the employee elects out of the FSA?

Are dental expenses and vision expenses not considered as medical expenses under Code Section 213 and they cannot be paid by an HSA?

Since we are now able to fund the HSA to the annual limits, why would an FSA be needed if it would cover all of the above?

I would appreciate any assistance and/or direction in this matter.

Thank You

Client (Policemen/Firemen's DB Plan) has asked us to implement this PPA '06 section effective 1/1/07 for plan retirees who currently have insurance premiums deducted from their pension payments. The insurance deductions are totalled for each insurance carrier and checks to each carrier are paid directly from the plan.

Question: Should each retiree's Insurance Premium amount be set up as a separate payment and reported on the 1099-R with Taxable Amount = $0?

OR

Should we leave the retirees' existing payments as is; report Taxable equal to Gross and simply check Box 2a - Taxable Amount Not Determined ?

Company has HDHP with HSA. Employer contributions are made to all employees.

Husband and wife are both employed by this same company and they are each eligible for catch up.

Should each carry single coverage in order to each receive the full employer contribution and each be able to fund the maximum catch up.

If the husband elects family coverage and puts his wife as a dependent and she does not elect separage coverage, would they have to split the contribution andcatch up limits?

If a person aged 50 contributes the full $5,000 catchup to his 401k plan, can he also contribute the full $1,000 catchup to his Roth IRA for the same year? I say yes. Is that correct?

Anyone familiar with any case law/articles dealing with the voting of company stock held by a retirement plan?

Thanks

Plan year end 12/31/06.

ADP test failed and a refund of $1,500 is required for the only HCE in the plan. There are a number NHCE’s in the plan.

The HCE is under age 50 and he contributed $15,000 for the year.

The desire is to get the HCE to a total allocation of $44,000 after any refunds.

The thought is that this could this be accomplished by making a cross-tested profit sharing contribution of $30,500 for the HCE. This would put his total contributions at $45,500 (15,000 + 30,500), which would create a 415 excess of $1,500. The plan says to correct a 415 excess by refunding employee 401(k) contributions. So, the $1,500 gets refunded as a 415 excess, which is excluded from the ADP testing. The ADP test now passes and the total contribution to the employee ends up being $44,000 (after the $1,500 refund). We have in essence changed the excess from an ADP failure to a 415 failure.

Anybody agree, or disagree, with this thought pattern?

TIA

A plan was adopted 6/10/05 and its first plan year ended 5/31/06.

After looking at the regulations or at least the section related to the effective date it is not entirely clear if this plan could provide pre participation compensation in determining the average comp limit.

On the one hand it seems that plans in existance prior to 1/1/07 could use old regs until proposed regs are finalized.

On the other hand it seems possible that this option is not available for plans adopted after 5/31/05 and those plans have to apply the proposed regs immediately.

Any helpful knowledge out there?

Thanks.

PPA says that new, faster vesting schedule applies once a participant has an hour of service in any plan year after effective date for plan. Can someone confirm that this means that plan's old vesting schedule will still apply to any contributions made prior to effective date? Or am I reading this wrong?

Two questions re: 457(f) and 409A "overlapping" compliance:

1) if a 457(f) plan requires immediate distribution upon vesting (assume cliff vesting), or in any event no later than the 2 1/2 month period following the year in which vesting occurs, can the plan still call itself "exempt" from 409A compliance (due to the short-term deferral exception) if the 457(f) plan provides for installment distributions in the event of a participant's disability?

2) if the answer to question (1) is "yes," could the same Section 457(f) plan make a Participant's demotion to a job outside the top-hat group grounds grounds for immediate vesting/distribution? Clearly this is not a recognized distribution event under 409A but possibly would be a sufficient vesting event under Section 83?

I personally don't think that the short-term deferral exception is so broad as to completely exempt a Section 457(f) plan from 409A compliance. However I would be interested in hearing other opinions.

Hello out there. I am working on a plan that has 5 employees. The two HCE's defer and the three NHCE's do not. Are there any exceptions to passing the ADP test if only HCE's defer? I am hoping so.

Thank you!

Someone please tell me if I'm wrong, but I thought that an irrevocable annuity contract purchased in conjunction with a plan termination was not a plan asset.

Well, I posted a similar topic about two weeks ago, but must've phrased it oddly, or incorrectly, because I got no replies.

I'm really interested in the software you may be using to administer Section 125 cafeteria plans, and how you like the software. Any help will be greatly greatly appreciated! Happy New Years!

JD

Since plan coverage may fluctuate during the year, administrator should estimate the number of persons that were covered by the contract at the end of the policy or contract year. Where contracts covering individual employees are grouped, compute entries as of the end of the plan year.

The above is from the item 1(e) of the 2006 Schedule A. I'm completing this and I have a few questions:

1. If you have an allocated contract, does this information cover only people whose benefits were purchased during the covered plan/contract year?

2. If a person's benefit was fully distributed from the plan in a prior year via a purchase under the contract (i.e., no longer a participant), is that person still considered to be a "covered person" under the contract and thus need to be included in the count when submitting Sch. A information for the contract in a later year. For example, Person A's benefit fully distributed from plan via contract annuity purchase in 2004. If reporting on contract in 2006, is A included as a person covered under the contract at year end or since he no longer has a benefit due under the plan in that year he is excluded, i.e., you only report people who still have a benefit under the plan that is funded by the contract or people purchased during that year.

I received a call from a colleague. She has a client that maintains a calendar year profit sharing plan. Can the client add a 401(k) feature to the existing P/S plan before the close of 2006 (effective 1/1/2006?)?

The thought is to use the assumed 3% deferral rate for NHC's for the 1st year (2006). I'm told that such an assumed rate would enable the business owner to defer $16,000 for 2006. Any problems?

It seems that the amendment adding the 401k feature would need to be made effective as of 1/1/2006 so that the owner's comp for the entire year is considered. Any problems?

Since the deferrals actually made by the NHCE's in 2006 will likely be zero, the utilization of prior year testing will preclude the owner from making any deferrals for 2007. To avoid this result, could the plan elect (prior to 1/1/2007) to switch to current year testing for 2007? I realize that such a switch, if permissible, would bind the plan to current year testing for future years unless IRS approval is obtained.

Any thoughts, comments, concerns would be appreciated.

Thanks.

Company A has two owners that own 50% each.

Company B has three owners

The two owners of Company A both own 30% each of Company B.

The third owner owns 40% of Company B, and has no ownership in any other company.

Is this a brother-sister control group?

Thank you.

This is a new one on me but wanted to see if anybody else had ever run across this or something similar. Have a doctors group with a group health plan and cafeteria plan with health FSA.

They had a prior practice of waiving group health insurance co-pays and certain co-insurance amounts on office visits / services provided to the practice group's own employees as well as the employees of some other medical groups. Maybe even for dependents of employees as well. Insurer found out about this and, not surprisingly, cried foul. (Insurer said it was concerned about practice group not passing on the co-pays / co-insurance amounts to members thus giving them free access, was concerned about medical group not applying standard rates for all patients, batted around notion of insurance fraud.)

Medical group got message that they needed to stop that practice but still wants to provide some form of similar benefit to its employees. Does not want to simply increase salary / pay bonuses to employees because that will be taxable. Similarly, grossing up employees for taxes would be too expensive.

So, they brainstormed and now want to provide a fairly significant flat dollar amount employer contribution to the cafeteria plan that can only be used to cover co-pays and co-insurance for services charged by the employer. The amounts would be restricted just to these employer group co-pays / co-insurance amounts and could not be used for any other medical expenses. If the amounts are not used during the year for co-pays and co-insurance amounts, they would be forfeited back to the employer so the practice group, in theory, is not out anything more than under their old policy

My first reaction was that this arrangement simply does indirectly what they already had gotten in trouble for doing directly. That is, it provides free use of the group health insurance benefits for their employees without the employees having to give any thought as to how much it will cost them out of pocket.

Client then asked, notwithstanding that, if there was a reason under the Section 125 rules that the employer contributions could not be restricted to such a narrow benefit. I haven't researched but that just doesn't seem appropriate although all employees would be entitled to the same dollar amount and same coverage options, presumably even if they didn't have group health insurance coverage through the group.

Anybody have thougths? Anybody have suggestions for some other form of benefit that might be provided in lieu of this sort of arrangement? Thanks