A follow-up to a recent post....

A medical provider sponsors a cafeteria plan with a medical reimbursement plan. The provider is upset because several of its employees have submitted bills for medical services owed to the provider or a related entity to the medical reimbursement plan, received reimbursement, then not paid the provider. We have explored requiring that all medical expenses be paid prior to reimbursement and requiring payment be made only to the service provider directly. While the medical provider likes the latter option, the question raised was could this provision be limited to only the medical provider and its related entities? Either in the plan document itself or by operation.

My instinctive response was no because it "smells" like self-dealing with plan assets. However, I am finding it very difficult to find anything (law, regulation, opinion, etc.) on whether the Department of Labor considers cafeteria plan (or medical reimbursement plan) assets to be "plan assets" for purposes of its fiduciary duties and prohibited transaction rules. While there is a moratorium on the trust requirement from 1992, I understood that the DOL has not gone as far as to say that these assets AREN'T plan assets for other ERISA purposes, especially the fiduciary rules.

Anyone run across this or have any insights, quotes from the law, or cites to opinions (DOL or otherwise)?

First please let me say that I am keeping notes of all my calls and the mail I have sent has been priority with registered signature.

My brother was 49 and only needed a few months having in 25 years with Delta airlines as a mechanic.

He was not married and did not have any children. He was divorced three times.

The last marriage ended in the first part of 2003. As soon as he had the divorce he started asking me for my SS number to put me down as his beneficary. They were married I think 4 years.

I know that he turned into Delta his change of martial status and he also had to take them a copy of the divorce decree. I have copies of all that .

The divorce decree stated that neither one had any rights to the others retirement, savings and pretty much just what they came into the marriage with they each left with.

His ex wife made as much and sometimes more money than he did.

He would often go over my SS number just to be sure he had it down correctly. He would say that with Delta the spouse was automatically the beneficary. He made changes with his life insurance right after the divorce and I have already received it.

I am the administrator of his estate. After posting on here a couple of weeks ago I was told I needed the benefit plan summary.

I have requested that over the phone and I do keep names and dates of those calls when I called the Deltal office in AZ where their human resources office is I talked to two different people and they didn't know what I was talking about. They didn't know what the summary benefit plan was. The next day I got a call from the lady that had given me the numbers for the delta benefits and she seemed to know what it was but I have never received it.

But in then mean time I got the letter from the court making me the administrator of his estate. I had made another trip to Atlanata to apply for it.

When I mailed the letter of testamintary I wrote a note asking for the benefit plan summary.

I sent that to Delta and to Fidelity, these were sent priority and registered receipt.

I also expained I was his only survivor and claimed the 401k.

Delta had gone into bankruptcy and their 401k was matched with company stock and after the bankruptcy that was all taken away from the employees.

So my brothers 401k is money he put there and what he had taken out of his pay check all those years.

It has grown and is worth a lot. Mostly in high risk stocks though Fedility.

I sent that to Delta and to Fidelity. These were also sent priority with signed receipt.

They each say that the other one is responsible for letting the beneficary know . Delta says Fedility is a separate vendor and they don't have anything to do with it and don't have acess to his beneficiarys.

Fidelity is waiting on Delta's legal department to let them know what to do with is since Fidelity does not show any benificary.

As the administrator I need to know,but I also know I am his only survivor and and he would talk often about dieing . I would not want to hear this because it hurt to bad hearing him say things about he thought he would not live long.

I never thought it would happen like it did. He was 49 and just dropped dead.

He didn't have any other immediate relatives,but I have a grown daughter and he loved her.

One of my main questions is how long can they keep stalling and then the divorcee decree they both signed and it looks like he took it to work and turned it in

because his employee number is on this divorce. And he mentioned at the time he needed to take a copy to work.

I am putting his house on the market soon and I have had all his mail forward to me but until I got the letter from the court I was having to have his neighbor forward me his mail.'

A Fidility statement came last week and there is a large amount of money in his 401K.

I don't care who he left anything to but I know his exwife lived beyond there combined income means.

He died Aug 27 but his body was not found until three days later.

I have had to pay for his funeral and his mortage payment plus utilities out of my own pocket until his credit union money gets here.

I do have the life insurance and one mortuary was paid out of that but his body was flewn

up here and so I had to have a second mortuary to pick it up at the airport and drive it to the next state for burial.

Now I have had to have some repairs done to his house and I have paid for most of his monthly bills out of my money.

I had to rent a large U-Haul and pay of it and gas for that trip. Plus have paid to keep his utilities on.

He didn't own for anything except his house. But there was a lot of upkeep just because of the neighorhood, with the homeowners association.

I realize that the 401K has to be rolled over but I am so hurt over losing him that between being told so many different stories with the Delta Family Care Saving Plan that is the 401k that I fear I am going to just die my self.

If offered all the money in the world I would want my brohter back. If this stress gets any worse I am afraid I will not be able to take care of it.

And I don't want some outsider doing it.

Thanks for any help or advice

Sandy

Can anyone please just let me know if there is a statue of limitations on letting me know about the beneficiary is?

I just worry that something could have happened and the ex was not off the paper work because of some glitch in the system.

Thanks for any suggestions.

sandy

I am very confused about the different kinds of employer-sponsored health insurance and what discrimination rules, if any, apply to them.

For example, assume CheapCo, Inc. employs 500 people. Consider the following two scenarios:

1. CheapCo, Inc. purchases group health insurance coverage from Anthem Blue Cross Blue Shield which covers only a few of its employees--perhaps only the "key executives". It is my understanding that CheapCo, Inc. can do this without violating any discrimination rules imposed by the Internal Revenue Code.

2. CheapCo, Inc. instead, decides to self-insure these same few employees--again, perhaps only the "key executives". In this case, I've been told that CheapCo's plan might violate the Code's discrimination rules.

Why should the tax code approve of the first scenario, but not the second (assuming my conclusions are true)?

Also, what is the difference, if any, between a "self-insured medical reimbursement plan" and a "self-insured medical plan"? While Section 105(h) applies to self-insured medical reimbursement plans, does any Section of the Code apply to self-insured medical plans where there is no reimbursement (i.e., a plan in which the medical provider sends the bill to the plan, not the participant)?

Thanks so much for your help!!!

Can an employer prefund an HRA for the year and take a tax deduction for the funded amount or is he limited to the reimbursement amount? A trust is established and the plan is funded.

Guys account balance is $380. Do I need to do an MRD, or is there some sort of a de minimis waiver?

I just have a couple quick Roth questions which for some reason I'm having a brain cramp on and can't find the right answers. We have a 401(k) plan which is safe harbor for ADP/ACP through an enhanced 4% match, and are thinking about adding a Roth component. If anyone could answer the below questions it would be much appreciated.

(1) It's my understanding that if you match a Roth deferral, the employer match goes into the pre-tax account. Is this correct?

(2) Are the ADP/ACP safe harbors the same for Roth as pre-tax deferrals?

(3) Can a plan choose to match pre-tax deferrals and not roth contributions, or even match roth contributions at a different level? Would this be considered discriminatory? If it isn't considered discriminatory, I'm assuming it would jeopardize safe harbor status?

Thanks a lot.

I have an existing DB plan with a benefit of a % pay at normal retirement. The valuation date is the beginning of the plan year. I want to change to a plan that gives a different % of pay to different groups. I want the valuation date to be at the end of the year. so that I do 401(a)(4) testing for the accruals during the plan year when I do the valuation. But if I change the valuation date to end of the year then I need to request pre-approval from the IRS at a fee of $2800. Or I could terminate the existing plan and pay the termination fees. (Actually the client will pay the fees...) I am wondering why I couldn't just freeze the existing plan, start up a new DB plan, and merge the frozen plan into the new plan. Any problem with that?

I have a participant who took a hardship for the purpose of buying a home. The deal fell through and he would like to return the money to the plan.

I have not found any documentation allowing this. Taxes were withheld from the distribution which would further add to this issue.

My recommendation is to suggest that the participant put the money into an IRA (since it has not been more than 60 days) to avoid the tax consequences on the distribution.

Does anyone have any suggestions?

I apologize if this topic has been addressed before. I was directed to here from another forum.

We had an employee that had around $350 for 401k withheld in 2005. I just received a letter from our 401k administrator (along with a check for the amount of his deferrals) that states that he was not eligible to defer until January 2006. The letter just says that we should tax the employee on the money.

What form do I fill out to ensure he gets taxed on it? There seems to be several theories from (1) simply adjust his 2006 W-2 (because that is when he is receiving the money back), (2) give him a W-2c for 2005 or (3) give him a 1099 R for 2006.

Any assistance you can give me is greatly appreciated.

Angie

this is one last revision of an attempt at generating a safe harbor notice in Relius. added info for Roth and catch-up and lots more "yes" user fields. if answered yes (or left blank) the particular sections will print.

alpha numeric User fields in plan specs: these are examples of possible coding:

#20 deferral changes can be made (e.g. quarterly or monthly, etc)

#21 is compensation definition (e.g. Total or comp less bonus, etc)

#22 and #23 distribution conditions (e.g. upon termination)

#25 contact person (e.g. Blunky the one eyed newt)

#26, #27 and #28 vesting schedule

#26 2yrs 20% 3 yrs 40%

#27 4 yrs 60% 5 yrs 80%

#28 6 yrs 100%

#29 hours for vesting

answer YES (or leave blank) if using these

#30 Roth available

#31 catch up available

#32 safe harbor non elective used?

#33 safe harbor non elective maybe used?

#34 basic match used?

#35 enhanced match used?

#36 any match?

#37 otherwise excludables?

#38 other contributions available?

I am new to the world of IRAs. Is it possible to have more than one IRA account? Are the dollar contributions limited to $4,000 total in a given year or can one contribute $4,000 to each IRA account? Thank you in advance for your replies.

I understand that if an employee leaves with a negative balance in their Health FSA (i.e. has been reimbursed more than they have contributed), that is the employer's risk under the uniform coverage rule. However, the boss is insisting that we amend our plan to require employees to have this withheld from their final paycheck. The boss also wants to issue 1009s to employees who have left in this situation, for the amount they were "overpaid." I know none of this is allowed, but navigating the IRS site to find the actual documentation is a nightmare. Anyone have a link handy, or some good resources I can cite? Thanks!

I'm reviewing a proposal for a DB/DC combo for '06.

Client has a profit sharing plan and is thinking about adopting a DB relatively soon.

According to my understanding of PPA, any employER profit sharing contribution in excess of 6% of eligible payroll is not deductible.

Am I correct?

Thanks.

http://www.dol.gov/ebsa/calculator/main.html

http://askebsa.dol.gov/VFCPCalculator/WebCalculator.aspx

Just an FYI

I'm a lawyer so I should know the answer (HA!). I'm a litigator, smarter people tell me the answer usually, so here goes...

I was an employee of a law firm, let's call it Dingbat & Duffus, LLP. I leave the firm and elect into my COBRA coverage. I'm now 11 months into my 18 months of COBRA and the word on the street is that Dingbat & Duffus are splitting up. Each will go their separate ways, "splitting" employees, etc. Each will prbably take on new partners, becoming, separately Dingbat & Grumpus, and Duffus & Crimsonnape.

One of the two firms will probably keep the old office, the old health insurance policy, etc. I see two ways things will go down:

1) Dingbat & Grumpus "keep" the same plan that Dingbat & Duffus had. Can they "keep" the same plan, or is it a termination and a new plan? If so, do I keep my COBRA?

2) The two new firms drop their "old" plans and get entirely new plans. Am I out of luck for COBRA?

I think that a "plain look" test would show that one, or both, of the "new" spin-off firms are successor corporations.

I'm no COBRA guru. I promise to offer free litigation advice in return for any good advice here.

Thanks.

NC Lawyer

Any sample participant notices out there on default rollovers? Thanks.

What is your reading of PPA with respect to providing a diversification notice to participants -

If a plan already satisfies the diversification requirements, do you think PPA still requires that the plan provide participants the notice informing them of the new rules, i.e. essentially informing them of their rights to do what the plan already allows them to do?

A client wants to set different maximum contribution limits for employee contributions to a health FSA under section 125 based on length of service. The TPA has said that doing so would violate nondiscrimination under 105(h) based on Treas. Reg. 1.105-11©(3)(i), which says that any maximum contribution limits on employer contributions cannot be modified based on length of service, etc.

I'm fine with applying this to employer contributions, but these are employee contributions. The TPA takes the position that once the employee contributes to the section 125 plan, the money becomes an employer contribution. I disagree, but have nothing more solid to go on then my logic, which doesn't always line up with the IRS logic. The further problem is that I see this done on a semi-frequent basis and have never thought it would fail nondiscrimination. Has anyone seen anything to contradict (or support) what the TPA is saying?

I find that I am in need of the annual compensation limit and DB maximum annual benefit in effect for 1991 (how strange is that?)

As it happens I have the benefit limits from 1975 - 1989 (except 1987) and both from 1996 through today, but I was doing other things in the early 90s and didn't keep my list up to date.

Are there any other old timers around with those old numbers buried in some old file somewhere?

Let's say a DB plan terminates and the value of the plan's liabilities exceeds its assets by $200,000. Let's assume further that a majority owner is due a lump sum as a result of the plan's termination equal to $300,000. The Company doesn't want to or cannot contribute the extra $200,000 so the majority owner agrees to waive $200,000 of his benefit. The majority owner receives $100,000.

Under these circumstances, is the majority owner taxed on the entire amount of his benefit ($300,000) or just the portion of his benefit that he actually received ($100,000)? Does the plan issue a 1099-R for $300,000 or $100,000?

Is the answer different if, instead, the majority owner decided he didn't really need any of his benefit and (1) waived the $200,000 and (2) had the remaining $100,000 used to "gross-up" the distributions made to the other participants? In this case, does the plan even issue a 1099-R?

A CPA told me in passing that when an individual has a vested, legal right to income, they cannot avoid including that amount in their income simply by "turning their back on it". Of course, my response was that it really isn't income, is it, if they do "turn their back on it". The CPA's response was that I was thinking about actual, as opposed to constructive receipt.

Surely this is not a new "issue". How have others handled this sort of situation? Thanks!