Company X requires employees performing certain functions to sign a contract providing that upon their satisfaction of the eligibility requirements to participate in the X Profit Sharing Plan, the employee will receive 90% of the amount s/he has earned working in the stated function. The contribution is treated by X as an employer contribution and is thus not included in the employee's gross income at the time it is made. Sometimes an X employee will perform an unrelated function before being transferred into the function requiring the signing of the contract. I am very concerned on how this contribution should be treated for tax purposes, because any of such possible treatments have vastly different tax consequences. Here are the three alternative ways I see this contribution being treated:

(1) For those employees who previously worked for X in another capacity, I can see the contribution being treated as either (a) a 401(k) contributions, since it is made under a cash or deferred arrangement (since it fell outside of the one-time irrevocable election exception) for which ADP testing would be required or (b) a mandatory employee contribution which would be subject to ACP testing.

(2) For those employees who had to sign the contract at the time they were initially hired by X, I can see the following possibilities: (a) the contribution is an employer contribution since it was made under the one-time irrevocable election rule; or (b) the contribution is a mandatory employee contribution, subject to ACP testing. For (a), unless the contribution could satisfy a safe harbor, the contribution would have to be subject to the general test to determine whether it satisfies the nondiscrimination test for the amount of such contributions.

Any thoughts?

Considering a policy to restore benefits to employees coming back w/in 6 months of leaving the company. One suggestion that has come up is if, when they left, they went on our COBRA plan - paying the higher premiums - and then when they came back w/in 6 mos, we immediately began charging only the employee level premiums for their coverage.

However, if they weren't on our COBRA plan, they would be subject to our standard waiting period (less than 2 months) before being covered. Other than premiums, our COBRA plan is identical to our employee plan. Since the differential treatment is based on whether or not they took our COBRA, and not necessarily on a health condition I'm thinking there probably isn't a problem with this.

Does anyone see an issue with this? Thanks.

This is bugging me because I feel like I should know the answer ....

Standard FSA medical reimbursement account - can it be drafted to require the participants to show proof of payment of the expense prior to reimbursement of the medical expense under the plan?

The employer is a medical facility that is mad about several employees who have turned its bills into the FSA and been reimbursed but then never paid their bills at the medical facility. The question was whether the employer could "force" the participants to use the reimbursements to pay their medical bills. Two options came to mind: require proof of payment prior to reimbursement or require that all unpaid medical bills be paid directly by the plan.

Any thoughts (with cites to supporting law, if any)?

To clarify treatment of corrective distributions under PPA, would taxation in year of distribution for calendar year plans begin with distributions occuring in 2009 for the 2008 plan year?

Plan participant has purchased beach property through his directed investment account in PSP. He does not personally use it or otherwise benefit from it. Plan allows for in-kind distributions. Would IRC §4975(d)(9) exempt the distribution of the beach property to him assuming there is an otherwise distributable event (ie, termination of employment, retirement....)? He has been told that to receive the real estate even as part of his distribution would be a prohibited transaction..... Thanks.

this report will generate a list of the plans on the system (only the most recent year shows)

it also pulls a vesting schedule name(e.g. 3/20).

I suppose since plans will have to go to a new vesting a 2/20 (or better) in 2007 it could make it easier to spot those plans.

Of course, this only works if you have a legitimate name for the vesting schedule.

this report only works in crystal.

in other words open in crystal and print preview.

Hello,

For school, I need to write a 20-page paper on any ERISA topic. Most my current knowledge is in the pension portion of ERISA and I would like to write my paper in that realm. However, I cannot think of a topic worth 20 pages of discussion. Any suggestions would be appreciated!

Thanks,

Eric

2006 COLA 3.3

2005 avg wage index 36,952.94

2007 Bend 1 680

2007 Bend 2 4100

Taxable Wage Base 2007 97,500

if for whatever reason you are missing values for prior years,

the table can be found at the govt web site

http://www.ssa.gov/OACT/COLA/autoAdj.html

Any word on when the 2007 limits will be published?

An employee completed a salary reduction agreement and enrollment form in 2004. Nothing was ever withheld for this person though. He just noticed this year, 2 years after the fact. In reading the regs it appears that this can be corrected through SCP, right? The plan is a safe harbor plan with enhanced match so there is no ADP test. So, should he be restored using the actual % that he indicated on his enrollment forms? Or do we have to figure out what the ADP was for the lower group (he's NHCE) for the years in question. Also, are the earnings calculated using the same provisions as under the lost earnings for missed deferrals (i.e. DOL calculator under VFCP)? Or do you need to make up earnings based on the actual investments that the participant chose?

Thanks.

Can anyone think of any problems that would arise if a plan is amended to provide for faster vesting, and require fewer hours of service to to comprise a year for vesting purposes for one particular group of employees but not for others? I can't think of any. The group of employees at issue are not highly compensated, and the current hours of service requirement in the plan is less than 1000. The plan is a multiemployer plan, and eligibility to participate is essentially immediate if the employee is covered by the contract.

The following exception from 10% penalty applies to distributions from IRAs: Distributions equal to or less than your qualified higher education expenses.

If my minor child has a Roth IRA (from employment), could she get the full amount distributed to her and then contribute this entire amount to her 529 plan? Would such 529 contribution be a "qualified higher education expense"? Please point me to any support that says so (regs, pubs etc.)

Thank you,

hope to see at least a few faces at the Conference next week

If an employer decides to terminate an HRA for retirees, what can the employer do with any remaining acount balances as of the termination date?

Must the employer continue the HRA until all participant accounts are depleted?

IRS guidance indicates that a participant has the right to receive cash under the arrangement, payments made to all participants in the current year and future years must be included in gross income. (IRS Rev Rul 2006-36).

Can a plan allow a participant to pay off a deemed loan if the plan does not otherwise allow for after tax contributions?

One person employer currently has a safe harbor plan (previously covered more employees, all of whom have left). Wants to change either to sep or simple, but the regs seem to say it can't be done if another plan is still maintained by the employer. 2006 contributions won't be made until tax filing date. Does this mean SEP or SIMPLE can't be adopted until after the 2006 contribution to the safe harbor plan is made?

Are any ERISA benefits taxable to participants?

I have already posted this on the Nonqualified Deferred Comp board, with no response, so I'll try here. A NQDC plan is funded entirely through the purchase of life insurance. The plan is to provide 20% of average pay (w/o regard to the 401(a)(17) and 415 limits) at age 65. Is such a plan sublect to FAS 87?

per a request. here is a crystal report that hopefully will produce the safe harbor notice needed for plan years beginning 2007. (will print vesting and distribution info) This was converted to 11.0. the 10.2 version is posted on the relius board.

first I should say I don't have any convoluted plans (e.g. different vesting schedules for different stuff)

one can always add more items by entering data in the user fields.

this report is based on a combination of Corbel's example and (if I remember correctly) Sal "The ERISA Outline Book" example of a few years ago. but maybe I am wrong there, I don't recall where I received my original example.

alpha numeric User fields in plan specs:

#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 (this might only be available on version 11.0) I added this after the fact. I figured it can't hurt.

As far as I can tell, I have included everything needed. If there is no match then those portions of the report can be surpressed. etc. etc.

per a request. here is a crystal report that hopefully will produce the safe harbor notice needed for plan years beginning 2007. (will print vesting and distribution info) This was written at 10.2 I will a version for 11.0 on the 401k board

first I should say I don't have any convoluted plans (e.g. different vesting schedules for dufferent stuff)

one can always add more items by entering data in the user fields.

this report is based on a combination of Corbel's example and (if I remember correctly) Sal "The ERISA Outline Book" example of a few years ago. but maybe I am wrong there, I don't recall where I received my original example.

alpha numeric User fields in plan specs:

#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 (this might only be available on version 11.0) I added this after the fact. I figured it can't hurt.

As far as I can tell, I have included everything needed. If there is no match then those portions of the report can be surpressed. etc. etc.