Company A leases most of its employees from a hospital. Company A wants to start its own 401k plan. The owner would like to exclude the leased employees from company A's plan, but would likely fail coverage.

When the owner pays the hospital for the leased employees services, included in that is a portion that is for the leased employees retirement benefits in the hospitals plan. Lets say it works out to be a 5% of pay contribution for each employee.

Question: Can the owner take credit for that 5% in this plan? In other words, if the owner were to make a 3% safe harbor contribution plus an additional 2% PS contribution to Company A's plan, does that mean that since he is already giving 5% to the hospital for the leased employees retirement benefits, he can put 0% in for the leased employees into Company A's plan?

Thanks

I have read and re-read everything I can find on the topic, but I am still confused. Please help!

The Participant was receiving RMD's when he passed away. He was not married.

Is there a time frame as to when the monies have to be distributed to the beneficiaries?

Thank you so much for your input!

If a company changes PFOs in the year, but both PFOs continue to work and the PFO not serving as a PFO at the end of year is one of the three most highly compensated executive officers, how may people go in the table?

PFO1 (the one not serving at the end of the year as PFO, but who still works as an executive officer) is picked under 402(a)(3)(ii) and 402(a)(3)(iii). So do I put in the PEO, PFO2 (one serving at end of year), PFO1 and three other executive officers or PEO, PFO2, PFO1 and 2 other executive officers?

Correct me where I am wrong--please.

As I understand things an employer can use an HRA as a vehicle to reimburse employees for out of pocket medical costs as well as for individual health insurance premiums. An HRA requires a plan document and must treat all employees of a specified class equally.

However, an employee may reimburse individual employees for privately obtained health insurance premiums (section 106) that needn't be done across the board for everyone and no plan document per se is necessary.

Thus you only need the plan document and HRA when expenses are to be reimbursed, above and beyond outside insurance premiums.

Is this correct?

An employer I support has recently hired three new employees and as part of their benefits package has given two of them what he has deemed a $3000 medical stipend, the other gets a $2000 medical stipend.

I'm not sure how to treat the reimbursements (taxable or nontaxable). The employees must provide receipts along with their reimbursement requests. I'm thinking that for premium reimbursement it's fine to do without a plan document and it doesn't need to be offered the same to everyone. However for medical expenses other than premiums, I'm thinking that should be contained in an official plan document and the amounts made available to all employees. (Company has other employees for whom there are no medical benefits provided at all).

Can the employer do what he intends? If not, how can he legally accomplish what he's looking to accomplish?

I know that he could simply pay the reimbursements and make them a part of taxable income and there would be no issues but he'd rather keep them taxfree.

I have a DB plan that has two participants, both HCE's. In addition there is a 401(k) plan that covers 3 particpants, the two in the DB plan plus another HCE. In the past, the two participants in the DB plan have fully funded their required DB contribution (whcih exceeded 25% of pay) and put the maximum 401(k) deferrals in the 401(k) plan. The newest HCE is eligible for the 401(k) plan for the current year, but not the DB plan. The DB contribution for the two other HCE's does exceed 25% of all 3 HCE's compensation.

So, here is my question. Since the new HCE is not in the DB plan, can we make a deductible DC contribution for him. My initial thought was NO, since we have people covered by both plans, the plans would be subject to the 404(a)(7) limit.

I then read a paragraph in the ERISA Outline Book that indicated there must be an embloyee that is a "beneficiary" under each plan in order for the 404(a)(7) limit to apply. The author's thought was that it is reasonable to use the "benefiting" definition under the Sec. 410(b) coverage rules to determin who is a "beneficiary" under the plan (absent IRS guidance to the contrary). He goes on to say "an employee must share in the allocation of an employer contribution ... to be treated as benefiting under a defined contribution plan".

Since the two older HCE's get no employer contribution under the DC plan, only deferrals, would you think a DC contribution to the other HCE would be deductible? Thanks in advance for your help.

Company A matches 75% of first 8 percent of 401(k) deferrals. Employer may make additional discretionary matching contribs. Company B matches 50% of first 8% of 401(k) deferrals, and may also make additional discretionary matching contribs. Company B acquires Company A and merges Plan A into Plan B. Can plan retain Company B matching formula? And does this result in Company A participants becoming 100% vested in their matched contributions as of the merger date? Any other issues?

I am receiving conflicting information regarding how to calculate COBRA rates for a partially self-insured medical plan. The broker and plan administrator have advised that we should use the following calculation:

Specific Premium + Aggregate Premium + Max Aggregate Factor + Administration fee + Network Fee + 2%.

I believe that it is incorrect to use the max aggregate because that represents an inflated rate.

Am I correct? If so, what are the consequences of using the max aggregate in a COBRA rate calculation? Is there any official guidance on this topic?

For a new plan effective in 2006, that has operated in good faith compliance with the statute and regulatory guidance issued to date, is a written plan required now or can we still wait until final regulations are released to draft document?

I alwasy understood the rules for multiple plans- the salary deferral features to be different fehn what's here?

http://www.prudential.com/media/managed/2007LimitsNFP.pdf

Was I wrong? Especially on the 457 limits

While I'm sure I know what needs to be done, I thought I'd double-check with more experienced practioners. A new bookeeper just discovered the $4,000 catchup contribution was not listed on the Dec 2005 payroll report. Thus it was never paid to the investment company by the client. But, the W-2 reports an $18,000 deferral. The correction I propose is 1) Immediately pay the $4,000 with calculated interest, 2) File an amended 5500 and Schedule I a) increasing the ending balance by the $4,000 and b) changing the response to "yes" on Part II 4a, and 3) File a form 5330 and pay the excise tax. Not that it matters, the affected Participant is the owner's wife. I'm not looking to take any shortcuts.

I realize that traditional unit credit funding is associated primarily with non-pay related formulas and projected unit credit with pay-related formulas. That said, is there any argument or ability to still use traditional unit credit with a DB "accumulation" plan where the formula is a certain % of each year's compensation. While I assume I could, maybe should, use projected unit credit in this situation I'd prefer not to due to budget constraints. I realize the ER pays more on the back end if a salary scale is not used.

Anyway, any thoughts on whether I still have a reasonable funding method if I use traditional UC funding in this situation ?

Client wants to terminate s/h 401(k) 12/31/06. He will need to make the s/h match for 2006, but it probably won't be deposited/allocated until 2007. Does this mean client can't have a SIMPLE in 2007 since employee receives allocation in that year? Thanks.

Recently, we received a revised election form from an attorney who added a section to ask any HCE participant how they wanted to have any possible ADP test failure refund taken from their account. THe three options provided were:

All Pre-Tax then Roth (if necessary)

All Roth then Pre-Tax (if necessary)

Proportionally out of both

I have reviewed our plan documents and it states that the refund can be taken out in any way the administrator sees fit. My questions are as follows:

Does the choice have to be a formal amendment to the plan (I think no)?

Can we also add the choices above to our forms?

Do we HAVE TO add the above choices to our forms?

What criteria (if any) should the Administrator use to choose how to process the refund?

Can the Administrator pick a different method each year? (FOr 2006, All ROth. For 2007, All Pre-Tax.)

Can the Administrator pick a different method for each participant each year? (Mr. A does all Roth and Mr. B does all Pre-Tax.)

How often can the Administrator Switch?

Is there anything else we should be aware of when reviewing the refunds?

Has anyone seen guidance addressing whether the PPA provision permitting the transfer of funds to the PBGC for missing participants in a terminated DC plan overrides 1.411(a)-11(e)(1) (i.e., the prohibition against distributing amounts from a terminated DC plan that does not offer annuities if there is another DC plan in the controlled group)? Thanks in advance.

Have a QDRO that assigns alternate payee a dollar amount as of a specific date. It also gives earnings/losses going forward. The plan is pooled and everyone shares in the earnings pro-rata. If I have to calculate earnings for lets say 1 year prior, where does the earnings come from? The Plan or the Payee himself?

Example: Wife gets 10,000

Earnings would have been $1,000.00

Does the $1,000 reduce the total plans earnings for that period or do we take the 11,000 from the husband

Am reviewing a couple of withdrawal liability calculations

and fournd them both using PBGC rates for calculating

the unfunded vested benefits for purposes of withdrawal

liability though valuation interest rate is around 7.5%.

Aren't they both supposed to be the actuary's best

estimate? How can you have two best estimates?

Any guidelines when choosing interest rate for

withdrawal liability?

Client is terminating an overfunded DB plan and creating two qualified replacement plans to make up the benefit. One of the replacement plans will be a new DB designed to mirror the terminating DB...the second replacement plan will be the current DC plan that will be amended to provide for a QNEC on behalf of each employee who was a participant in the terminating DB as of its termination date.

The QNEC under the DC plan will cover at least 95% of the participants from the terminating DB who are were employed as of the date the DB plan will be terminated. Under the 95% rule for qualified replacement plans, can any part of the reversion transferred to the DC plan be used to offset future matching contributions (in addition to the QNEC)? About half of the participants in the terminating DB plan will not be eligible for matching contributions under the DC plan. I.e., must both the QNEC and the matching contribution separately meet the 95% rule or is it sufficient that only one type of contribution meet the rule? I know this is probably confusing, but I can't find any guidance on this one.

The client is acquired in a stock acquisition. They have determined they want to proceed with a formal plan termination. They would like to be able to distribute the account balances of the employees who are not retaining their employment than distribute the remaining balances after the favorable letter of determination is received.

Any creative solutions?

My IRA has a very high value (well over $4 million). My grandchildren are designated beneficiaries. I am retired and can control my annual income, other than SS. I have not reached age 70 1/2 yet. Would it make sense to convert some or all of the IRA over to a Roth?

A participant turned 70 1/2 in 2003 and took distributions for his 401(k) in 2004.

His 12/31/2005 401(k) RMD was not pulled from the plan, but from his IRA.

What is the liability to the participant? To the Plan?