I replied in response to the comments made at this blog-thread on the drawbacks of IRAs. One of the listed cons was that there's no death-benefit. I noted that one can invest in an annuity within an IRA, but that I didn't think you could buy a life insurance policy within one (further research verified this). However, of course, annuities are expensive relative to mutual funds, as you're paying for the benefits.

Regarding annuities in a retirement plan, the only possible benefits I can think of are: (1) To guarantee an income stream from the retirement plan after retirement; (2) To provide a tax-advantaged death-benefit, should you die early, for the advantage of your spouse's saving for retirement. Specifically regarding #2, are (or can) death benefits from annuities within IRA's (be) kept within the IRA and treated as all other funds in the IRA?

Upon some further research, I went to a site describing a "time bomb" for the elderly hoping to pass on their money to their heirs, that is present in both annuities and traditional IRAs. Neither of these vehicles, unlike stocks and bonds, has a step-up basis feature upon your death. This, of course, isn't applicable to Roth IRAs.

So, curious, what's the analysis of those here on the effects of this? It seems to me that, to the extent that one can convert to a Roth, this isn't applicable. (and after 2010, there will be no income limitations on conversions).

Thoughts?

I have a very small 401(k) plan where the owner is going to start having to taking an RMD this year. Question, as he is still working full time, can he continue to contribute to the plan (deferrals, match and discretionary Profit Sharing contribution)?? So, if he has to take out, let's say, a $5,000 RMD distribution (the plan isn't that old, so he doesn't have a huge balance), could he simply defer $20,000 into the plan and more than wipe out the taxes that he'd owe on the RMD?

I've got a plan that defines final average earnings based on the highest 5 consecutive calendar years within the last ten years of employment. The employee only worked partial years during the first and last years of the 5 consecutive year period. Can we pro-rate those years (e.g. salary earned/actual number of months worked x 12 = annual salary) or do we have to just include the actual annual salary for her two short years? The plan is silent as to this issue -- technically, the lack of any provision allowing for a pro-ration suggests that we must use whatever annual salary she actually had. But the intent of the plan in determining the "highest" average suggests that the intent is to give the participant the benefit of pro-rating her earnings rather than skewing her average by using less than full years of employment. Any thoughts?

An employer sponsoring as self funded health plan subject to HIPAA and COBRA is sold to an unrelated employer. Coincident with the sale, it terminates its afore-mentioned plan so that it is liable only for claims incurred through date of sale. A standard plan provision states that claims must be submitted within one year of incurral.

How long must the employer give claimants to submit claims incurred pre date of sale after date of sale for them to be honored (not to exceed one year)?

It would be most appreciated if citations would accompany any valid responses.

Happy Holidays

The SEC has issued a cease & desist order against the City of San Diego, noting that the people who

prepared bond issues were aware that their pension funding obligations were about to explode.

http://www.sec.gov/litigation/admin/2006/33-8751.pdf link will give you the text.

If you ever get a chance to talk with the parties involved, the municipal conflict of interest issues were huge.

The same people approving their own higher benefits were responsible for underfunding the plans and also for the misleading SEC filings.

Thanks to Susan Mangiero, CFA for the information. Her discussion is found at http://www.bvallc.com/pensionblog/

I apologize if this topic has been addressed before. I was directed to here from the APA Listserv.

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

(1) Grandfathered nonqualified plan provides for distributions upon a change of control. A change of control will likely occur next year, but participants do not want distribution.

Any thoughts on whether it would be a material modification to provide that no distribution due to that specific change of control? any change of control?

(2) For non-grandfathered plan, same issue. Any thoughts on whether participant could avoid distribution on the basis that transition relief permits a new distribution election for amounts payable in the next year?

One year at Thanksgiving my mom went to my sister's house for the traditional feast. Knowing how gullible my sister is, my mom decided to play a trick. She told my sister that she needed something from the store. When my sister left, my mom took the turkey out of the oven, removed the stuffing, stuffed a Cornish game hen, and inserted it into the turkey, and re-stuffed the turkey. She put it back in the oven.

When it was time for dinner, my sister pulled the turkey out of the oven and proceeded to remove the stuffing. When her serving spoon hit something, she reached in and pulled out the little bird. With a look of total shock on her face, my mother exclaimed, " Patricia, you killed a pregnant bird!"

At the reality of this horrifying news, my sister started to cry. It took the whole family two hours to convince her that turkeys lay eggs.

To Kill A Walking Bird

My Best Friend's Dressing

Thighs Wide Shut

The Texas Coleslaw Massacre

Casserolablanca

The Fabulous Baster Boys

12 Hungry Men

Silence of the Yams

For Love of The Game Hen

I Know What You Ate Last Winter

All the President's Menu

White Meat Can't Jump

When Harry Met Salad

The Story of U.S.

The Wing and I

If you own 5% of the company's oustanding stock, are you considered a 5% shareholder?

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?