Employer has cafeteria plan with an employer paid FSA and health insurance premium. After year end, an employee (who elected health premiums but not FSA at open enrollment) submits a run-off FSA claim to TPA. TPA notifies employer. Employer responds by saying they forgot to notify TPA that in middle of year, employee becomes eligible for Medicare and no longer needs health insurance, hence elected to stop health insurance and enroll in FSA all in the name of change in status. Any thoughts?

Wondering if anyone uses the Relius function of having the plan sponsor process distributions themselves from the plan sponsor web (instead of sending participant's form to TPA). How does this work and have there been any issues?

Hi. Just looking for some opinions on this.

Let's say a plan uses auto enrollment, and has an escalator of 1% each year. Participants who do not respond with any elections are enrolled at 3%. The plan has one appropriate default fund, "Fund A".

The participant is auto enrolled. He makes an election to change his ongoing contributions from the default fund to Fund B. Does this election take him out of the group of auto enrolled participants subject to the escalator? Or when the escalator is applied, does his additional 1% need to be invested in Fund A?

We are not sure if only the election of changing the deferral percentage (either opting out or increasing) is the action that will take them out of auto enrollment status, or if changing the investment fund (but not changing the deferral amount) will also take them out of auto enrollment status.

Thank you very much for any input.

My husband and I lived in separate households for 1 year and 10 months. He died 10 days ago. I was still named as a beneficiary on his IRA. Since, at one time we contemplated a legal separation, a division of property was completed and signed by the both of us. On the division of property form I gave up interest in the IRA. However, we later learned that he could not stay on my health insurance plan if we were legally separated, so the legal separation document including the division of property was never filed with the court. Since my husband's death, his children have come across this document and are taking me to court to disallow my receiving a percentage of the IRA. It was verbally agreed upon by my husband and myself that if I kept him on the health insurance plan, that I would remain as a partial beneficiary of his IRA and continue as a surviving spouse on his pension plan. My question is since the separation document and division of property document was never filed with the court, and I am still his legal spouse and I never signed off as a beneficiary on a new beneficiary designation change form, am I still entitled to my beneficiary status? Is a document that was never filed in court and was never acted upon legal and binding? Thanks for any assistance anyone can give to me.

The NJ decision requiring equal rights for same sex couples (although not the right to be "married") has drawn comments that it will increase the rights to benefits and tax deductions for NJ residents. Since NJ already provides state income tax and estate tax benefits to domesic partners and spousal benefits to domestic partners of NJ state employees what additional benefits will be available? The only new state benefits apears to be that municipal govts will be required to provide spousal health and retirement benefits to domestic partners (it is optional now) and that the NJ Family leave law will cover DP. Under DOMA (1 USC Sect 7) same sex partners are not eligible for any spousal benefits under SS, fed income, fed estate tax or plans covered by ERISA. Other states (except for CA) are not required to accept civil unions or marriages of same sex couples entered into in another state (VT, MA).

Our client A currently has a 1,000 hours and last day of the year requirement to receive an allocation of the profit sharing contribution. Those requirements are waived if a participant retires at or beyond normal retirement age. The plan document also has new comparability language that says that each participant constitutes his or her own class.

Now client A comes to us and says that a partner who is retiring prior to age 59-1/2, which is the retirement age of the plan, wants to receive a profit sharing contribution in the final year.

Could we remove the last day requirement in the plan document, but still give a 0% allocation to any terminated participant OTHER than the partner who is leaving?

Terminated NHCE employees need not be given a top-heavy minimum contribution, and without a top-heavy minimum allocation, all NHCE terminees do not benefit for the year. (Due to mandatory disaggregation, I believe that this is true even if those NHCEs defer salary during the year.) Therefore, they need not be given the 5% minimum gateway contribution.

If we include those NHCE terminees as zeros in the 401(a)(4) test, and if we still pass, are we home free? Or have we somehow invoked "discrimination in operation" by giving, among terminees, only an HCE an allocation?

A husband and wife company with a pension plan froze their pensions at the end of 2002.

They are terminating their plan and have a surplus of about 200k.

The husband is already at the 415 limit, but the wife only had three years of service and participation at the time of plan freeze.

At the time of plan freeze the wife had an accrued benefit of $60,000 (60% of 3 yr avg comp), but the 415 limit was $30,000 (3 years of service or 30% of avg comp of 100k).

In order to absorb the surplus, if the wife could receive a lump sum based on an accrued benefit of $50,000, instead of $30,000, the surplus could be absorbed.

The goal would be to keep her accrued benefit, exclusive of 415 at 60,000, but to add two years of plan participation and plan credited service to increase her 415 limit to 50k. This could be accomplished by providing that service and participation accrue for 2003 and 2004, with no additional monetary accruals.

This seems like a feasible and allowable amendment, even if the formula is reduced (but includes service through 2004), and preserves the prior accrued benefit.

Any opinion on the above approach or accomplishing such an objective?

When does a vactaion or sick day policy cross the line from a "payroll practice" to a welfare plan? Is it based strictly on whether benefits are paid from the employer's general assets, or will the complexity of the policy come into play?

Would there be any reason under the regs that an employer could not exclude Partners in a Partnership from sharing in a safe harobr non-elective contribuiton - while allowing all other HCE's and NHCE's to share in the safe harbor non-elective. The partners want to contribute to the 401(k) but do not want to be included in the safe harbor.

This is a prototype plan and the exclusion options are

__ Highly Comp. - but they don't want to exclude ALL HCE's

__ Employee who have not met max age service ... - they don't want this

__ Other:_____________________________________________

(must be a category that could be excluded under permissive or mandatory disaggregation rules of

Regulation 1.401(k)-1(b)(3) or 1.401(m)-(b)(3))

Would listing "Partners" under other not suffice - as they would not be in a category that could be excluded.....

The loan policy and the prom note I drafted for a participant who recently requested a $50,000 loan states that they need to make repayments thru the payroll. This guy wants to write a personla check for each payment. I have never had anything but loan repayments made thru payroll (one exception was a termined ee making payments on 2 o/s loans - don't even get me started on that guy...)

I have told this client and the advisor/broker that he needs to follow the prom note (and the loan policy) and make the payments thru payroll. The loan policy is in the SPD - wouldn't they need to amend the doc if they want to allow him to write a personal check to repay the loan?

According to the ERISA Outline Book, "once the participant reaches normal retirement age (or age 62, if later), the plan is permitted to require that distribution be taken. In that case, only the form of payment might be left to the participant's election. The plan may permit the participant to postpone distribution beyond normal retirement age, subject to the minimum distribution requirements."

Participant has passed the NRA and is terminated. He is now requesting his RMD. The only form of payment allowed in the plan is lump-sum distribution, defined as one lump-sum payment in cash or property. May the plan require that the participant take a total distribution since he has requested a RMD?

Thank you.

We have a potential new client that would like to have the following match in their plan:

They want to have a tiered match in which there is no match up to 8%. Anything over 8% is matched at 2%.

Is there any non-discrimination issue with having no match up to 8%? Other than having to pass ACP of course.

We've never been asked for such a match. Anyone have any plans with a similar type of match?

Thanks.

Account owner is a Individual who has inherited an IRA as a non-spouse beneficiary.

Ex spouse has been granted a poriton of the IRA pursuant to Divorce Decree.

Account owner and ex-spouse are requesting a transfer incident to divorce under 408(d)(6).

Possible?? If so, how is new account plated as the ex-spouse is not the true beneficiary.

I've been doing this since before ERISA (yes I'm that old) and this is the first time I've seen this.

Company X sponsors a Code Section 125 for its employees containing a medical FSA. X administers COBRA under the medical FSA by allowing all COBRA beneficiaries the right to continue coverage for the remainder of the plan year (a calendar year). X's cafeteria plan has adopted the 2 1/2 month grace period. Employee G participates in the X cafeteria plan and selects medical, dental and the medical FSA for 2006. Assume that G terminates employment on October 20, 2006 and elects COBRA continuation for all eligible coverages (viz, medical, dental and medical FSA). If G has a $800 balance at the end of 2006, can G utilize it on medical expenses incurred during the grace period beginning 1/1/2007 and ending 3/15/2007, even though G has no further medical FSA coverage under COBRA?

If you conclude that the answer is "yes" what is your support for that position?

Soon to be extinct company wants to terminate and pay out its 401(k) plan before the end of 2006. The plan has about $5,000 in forfeitures however that need re-allocated before doing so. Document calls for forfs to first pay down expenses (of which there will be about $1,000) and then re-allocate anything leftover (about $4,000).

The big problem though, is that no one has worked for the company since 2003. The owner has been there, but he's not taken any pay since 2003. On what basis would we re-allocate the forfeitures?

I have not seen the documet and will assume for now, that the plan calls for forfeitures to be re-allocated after 5 breaks in service. So perhaps the plan was correct in not re-allocating sooner. But would that mean that now, we have to go back and fully vest the folks whose non-vested balances created these forfeitures?

Under Section 4203(b) of ERISA, there is an exemption to complete withdrawal liability to an employer in the building and construction industry where the employer ceases to have an obligation to contribute to the multiemployer pension plan and does not continue or resume covered work in the relevant geographic area for 5 years. Let's say an employer ceases its obligation to contribute to the plan in year 1 and in year 2 the plan terminates in a mass withdrawal (say a withdrawal of substantially all the employers during the relevant 3-year period). Is the employer subject to any liability for the mass withdrawal? My thinking is that since there has not been an actual wtihdrawal by the employer (we are still waiting to see if the employer resumes covered work) there has been no "withdrawal" and there is nothing to reallocate any liability to. I do understand that the 5-year ban on covered work is reduced to 3 years, but I believe it is reduced to 3 years only if the reason of the employer's cessation of the obligation to contribute is due to the termination of the plan by mass withdrawal. Maybe the 5-year period is reduced to 3 years even if the emoployer's cessation of the obligation was not due to the mass withdrawal. Any thoughts would be greatly appeciated.

401(k) plan permits deferral of compensation.

"Compensation" is defined to include salary and bonuses.

Plan permits participants to defer salary, but not bonuses.

Plan realizes error and, in 2006, allows participants to defer bonuses. Out of 400 or so participants, only 15 chose to defer bonuses.

The error has gone on for more than 2 years so SCP in not available.

Does anyone have any ideas as to how to fix?

Is this employer on a 5-year cycle for the current RAP or a 6-year cycle for the current RAP? I feel like I am going in circles with RP 2005-16 and 2005-66 ....

X adopts an MP in 2002 and receives a favorable DL (using Form 5307) in 2003. X switches to a new MP that has filed for but not received an EGTRRA opinion letter (has the GUST one) in late 2005 but changes the AA to incorporate a matching contribution formula that does not fit within the pre-approved adoption agreement language. Sponsor of new MP thinks that this formula WILL fit within the pre-approved language of its new document, which is being reviewed by the IRS. X plans to adopt the new MP when available. X would be a Cycle D employer.

Based on 2005-16, X has neither adopted a type of plan not allowed on a pre-approved document nor has it adopted an IDP that is not based on a pre-approved document. It has adopted an MP that has been filed for an opinion letter for the current RAP, but has not received one. Does this mean we have an IDP plan with a 5-year cycle or do we qualify for staying on the current 6-year cycle?

The hope is to ultimately go back to a pre-approved plan, so I want to avoid having the plan switching to the 5-year cycle when the current RAP by becoming an an intended adopter before the end of the current cycle (whichever is the applicable cycle).

HELP!!!

A foreign company wants to establish a US QRP for it's employees. Is there any circumstances under which this is allowed. I looked at the definition of Wages, and the Definition of Employer under IRC 3401, but I am still not sure.

If my employer normally only pays $400 towards health benefits per employee and they all receive a memo. However, another employee had an agreement no in writing that the employer will pay full cost of family coverage, does this leave room open for another employee to ask for more money from the company to contribute towards their health benefits.

Is the any regulations that states if you do for one employee that you need to do the same of another employee at the same level?

Please let me know where I can find more informaiton.

Thank you