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

I need help on the following scenario. A government contractor has multiple healtplans some of which are tied to particular worksites (ie BCBS of Florida for pensacola, FL site). Assume that the employer loses the Pensacola contract and therefore terminates that plan. How does COBRA apply to the former employees under the contract? Is the employer required to make one of their other plans available to these Florida employees? Assume that all of the other plans are HMO based plans that do not provide in-network access in Florida.

What are the employer's requirements under COBRA? Assume the employer has significantly more than 20 employees.

A client currently offers retiree coverage in a fully-insured plan to any retiring employee if certain length of service requirements are met. It wants to discontinue this for everyone except owners/shareholders, and is wondering about compliance issues. No one has ever been eligible before, so this change wouldn't affect anyone immediately. I don't see a problem with it (no discrimination issues b/c not self-funded), but I wonder if anyone else does.

Is the 8717 user fee for filing a form 5310 (request for determination upon termination) a reasonable expense of the plan, or is that considered benefiting the sponsor?

Suggested by a friend because of the Sunday and national holiday. Sounds right to me but I hadn't heard anyone put it together for sure. Does anyone agree?

Safe Harbor 401(k) employer match meets the requirements to avoid the ADP and ACP tests. Does the Plan still need to pass the Average Benefit Percentage test? Wondering if we can bonus the spouses (who do work in the business) to allow maximum deferral and share in the additional 11% profit sharing contribution. If we do bonus the spouses, the Plan wouldn't pass the ABP test... This is probably a very common issue. Thanks.

Taxpayer would like to lend from IRA to 50% owned partnership. All requirements of 4975(d)(1) would be met. Does 4975(f)(6) make 4975(d)(1) null? My initial thoughts:

4975(f)(6)(A)(i), along with the flush language kills loans to owner-employee, certain family members or certain corporations. Partnerships are not mentioned in these attribution rules and no other attribution should apply for purposes of 4975(f)(6), so on its face loan to 50% owned partnership works. Two concerns:

a) Am I missing a larger provision that would apply attribution via partnership?

b) Entity-Agrregate principles - if partnership is aggregate for purposes of 4975(f)(6), then may pass through "owner-employee" nature of the transaction....in short, indirect attribution.

Thoughts?

John Hyre

If a Participant of a pension plan enters into a QDRO with his ex-spouse and she is receiving 50% of his benefit, pursuant to the QDRO, as of a certain date, is the Participant's new spouse entitled to 50% of the Participant's benefit upon his death?

A Participant in a multiemployer pension plan gets a divorce and enters into a QDRO. The determination date used for the Participant's accrued vested benefit calculation is June 15, 2005. The percentage awarded to the Alternate Payee is 50%. The Alternate Payee began receiving benefit payments shortly after the determination date stated above. The Participant, however, continued to work. In that the Participant continued to work he became eligible to receive a benefit enhancement that was instituted after the Alternate Payee began to receive her benefit payments. Is the Plan require to apply this benefit enhancement to the Alternate Payee's payments in that the Participant will be receiving the same upon his imminent retirement? If you can cite to any authority on the matter that would be great, as well.

Thank you.

If 401(k) plan permits partial distribution, it's clear that there must be spousal waiver of QJSA right on first partial distribution. Must there be a waiver on all subsequent partial distributions, or has the spouse already waived all rights with first distribution waiver? Thanks

I cannot seem to find a definitive answer on whether the increase from 90 days to 180 days under the PPA for participant notice/spousal consent requirements applies to notices distributed after December 31, 2006 or annuity starting dates commencing after December 31, 2006. Obviously, if it applies to the latter, notices will have to be revised now to apply to distributions made after December 31, 2006. Thoughts?

Have an entertainer who is 100% owner of her corporation. She is also a member of the Screen Actors Guild. The Guild has a multiemployer defined benefit pension plan.

Our understanding is that if her corporation sponsors a single employer DB:

1) The single is not aggregated with the multi for the 100% of pay limit.

2) The single is aggregated with the multi for the 415 dollar limit.

If, for example, she had participated in the guild plan for 10 years and acrued a monthly benefit of $2,000, would the proposed single employer plan sponsored by her corporation be in violation the first year (max dollar limit = $14,583 / 10 = $1,458). Or, when aggregating plans, do we get to consider participation under BOTH plans for the 415 dollar limit in either plan?

Thanks much.

Our company has a Cafeteria Plan with benefits of Insurance Premiums (Medical and Dental company sponsored), Medical Flexible Spending and Dependent Care.

My question - if an employee has an individual outside insurance plan (such as Cancer policy) can he/she have the annual premiums withheld via payroll ded. as pre-taxed.

If so, would he/she turn the premium notice in to the administrator for the administrator to pay directly to

the insurance provider or could he/she pay premium and turn in premium notice to administrator for reimbursement to him/her?

I have searched many places and cannot find a definative answer for this question of outside insurance premiums. Any help or guidance anyone can provide will be most appreciated.

Thanks,

SueR.

Profit Sharing plan has partcipant directed accounts. 1 participant owns land. He pays the insurance premiums for the land from his assets, should he also pay real estate taxes from his assets?

Thanks.

Has anyone found a really good write up of the quarterly benefit statement requirements for part. directed dc plans? The most I can find is a paragraph.

We're an unbundled provider trying to tackle the vesting disclosure requirements/investment blurb.

DOL just issued this today, but it didn't seem to answer my questions. I'm looking more for a "what does this mean for unbundled providers" type of context.

http://www.dol.gov/ebsa/regs/fab_2006-3.html

I have a DB plan with a participant that has reached normal retirement age of 62, has accrued his full benefit, and who will continue to work for the corporation. He also has an existing roll over account, form a plan with his previous employer, in the plan. For legal reasons, he can not roll over his accrued benefit into an IRA.

Can he roll over his accrued benefit in the plan directly to a new roll over account in the plan (without first distributing it "outside" the plan and then rolling it over back into the plan)?

Since he already has a roll over account in the plan, can he roll over the distribution of his accrued benefit into the existing account?

I have a DB plan, with a favorable determination letter, that includes a 414k provision.

One employee has reached normal retirement age of 62 and wants to "transfer" his accrued benefit to the 414k account in the plan. The employee intends to continue working for the corporation. For various legal reasons he does not want to roll over his accrued benefit to an IRA.

I am aware that the IRS has granted many favorable determination letters for 414k plan provisions, but other wise has concluded a 414k account is not "compatible" with a DB plan. Also, there is a specific question on Form 5500, concerning a plan with a 414k feature.

Questions about 414k

1. Is anyone aware of any new information on the current IRS position on 414k (e.g., court cases, rulings, announcements, etc.)?

2. Does the new pension law in any way authorize or support the use of 414k?

3. Does anyone have a personal audit experience with 414k?

4. If the employee's accrued benefit is transferred to the 414k account, what is the economic risk upon audit? That is, what might be the IRS proposed method of correction on audit (Ignore the transfer, Distribute the balance to the participant, Disqualify the plan, Etc.)?

5. Is the use of a 414k provision a plan disqualification issue?