In this situation, the employee is timely paying his COBRA premiums to the employer. However, the employer is not promptly forwarding the premiums to the insurer. The employer's arrangement with the insurer is to cancel coverage if premiums are not paid when due, but coverage will be retroactively reinstated if premiums are then paid within the following 30 day grace period.

Even though the employee is timely paying the premiums, his coverage is being canceled each month because the employer is holding the check. This causes much inconvenience for the employee who has to pay for doctor visits/procedures out of pocket and then must seek reimbursement once coverage is reintstated. Can an employer be liable for this? Any other remedies?

Thank you.

Does the trustee of a qualified plan have to be a U.S. citizen? Could a non-U.S. citizen be the named Trustee on a qualified plan?

Can you provide any insight into what I think is an iteration if spousal carve-out?

The spouse whose bday is first, and who has employer coverage, must cover the dependents. Their employee, if his or her bday is last, is not eligible for the family plan but only eligible for ee-only.

Am I crazy? Any thoughts?

Two quick questions...

1. In 2002 the IRS issued a model amendment for use by DB plans pertaining to the minimum distribution requirements....Is there an updated version available that incorporates the changes made by the final regs issued in 2004?

2. My understanding is that DB plans have to be amended to comply with the minimum distribution rules no later than the last day of the plan year beginning in 2005...Is this correct?

A friend of mine has a limited pay hospital plan (pays a $ benefit for each day as an inpatient). Long story short, he was offered a lump sum of $35,000 to turn in the contract. I have limited experiences with these types of plans, but was quite suprised. Does anyone have any comments about this? I find it unusual to say the least. Is it legal? Is it common? Thanks for any feedback.

I have a question hopefully you can answer.

We operate a qualified cafeterial welfare plan. Occasionally, we get court orders (from the DA office) telling us we have to begin covering the child of one of our employees under our health plan. What happens if the employee is not enrolled in a health plan? Are we required to enroll the child AND the employee (this is the only way a child could be covered under our plan)? In what plan? We do not have a default plan of any type.

Your perspectives and guidence would be appreciated.

Thanks

Cafeteria plan has health FSA, DCAP and pre-tax contributions for health plan premiums. Am I correct that we look at each benefit individually to determine whether we exceed the 100-participant filing requirement?

I'm just curious if anyone does much with these. My knowledge of them at this point is nearly zilch - about 10 minutes of fast reading. In the small employer market, are there certain basic situations where they might be useful? A very cursory skim makes it look like they can't be used for ASG's (but can for CG's) and groups of <50 can be used for DB 401(a)(26) testing, but coverage testing would be applied across the whole group, (the <50 exception doesn't apply) so offhand I don't see the big attraction, but that's a guess based upon pure ignorance!

My client did a VCP filing because forfeitures had not been allocated since the plan year ending in 1998. They received approval to proceed with their correction method. 5500s were filed each year in a timely manner. However, when the forfeitures were allocated, the number of active participants receiving allocations is different from the number shown on the 5500s. Do they need to go back and amend all of their 5500s?

An owner of a small company says he wants a retirement plan with a large amount going to him and as little as possible to his employees.

Below is the story and any observations would be appreciated.

Company: One owner and 13 other employees

HCEs: One owner and 3 other employees

Plan proposal: Combined DB/ 401(k) 3% safe harbor plan

Both plans exclude the 3 HCEs.

401(k) plan includes only 2 NHCEs and passes ND on its own as follows:

Coverage:

NHCE % = 2/9 = .22

HCE % = 1/4 = .25

Passes ratio test

ND:

HCE accrual = 2.4%

One NHCE > 2.4%

Ratio = 1/9 divided by 1/4 = .44

NHCE concentration = 9/13 = 69%, thus mid point = 38.25% and safe harbor = 43.25%

HCE ABP accrual = 3.08% (combining PS contribution, DB accrual, 401(k) deferral, and 3% safe harbor)

NHCE ABP accrual = 4.3%

Passes ABT

DB plan includes 5 NHCEs and the owner and passes ND on its own as follows:

Participation:

6/13 = 46%

Passes 40% test

Coverage:

NHCE % = 5/9 = .56

HCE % = 1/4 = .25

Passes ratio test

ND:

HCE accrual = 8%

one NHCE accrual =8%

Ratio = 1/9 divided by 1/4 = .44

NHCE concentration = 9/13 = 69%, thus mid point = 38.25% and safe harbor = 43.25%

HCE ABP accrual = 3.08% (combining PS contribution, DB accrual, 401(k) deferral, and 3% safe harbor)

NHCE ABP accrual = 4.3%

Passes ABT

As a result it appears that both plans are in compliance and provides a significant amount to the owner and little to the employees.

It seems that it might be best to assign employee groups or classes to avoid the need to specify employees by name in the plan document.

Any observations from a practical perspective regarding the above analysis and its credibility would be appreciated.

Thank you.

Saw artilcle online that stated that all defined benefit plans need to be restated by the end of 2006 but did not give the reason - anyone know?

I am confused on catch-up rule for a fiscal year plan and having some internal disagreement on the outcome.

Plan year 05-01-2005 to 04-30-2006.

HCE defer's $13,120 in 2005 calander year and which also corresponds to amount he deferred in 2005 plan year ending 04-30-2006. He has made no contributions in 2006 to date.

Plan failed ADP testing and he would get a refund of $1101.50. However, he is over age 50.

Can he reclassify his ADP refund as Catch-Up even though he has not made 2006 contributions?

Company is changing it's payroll cycle from semi-monthly to bi-weekly. For the outstanding loans, we need to re-amoritize the payments to reflect this change.

Do we need to issue new loan paperwork to all loan participants since the actual frequency and loan payment amount will change? The other terms of the loan will not change.

Any thoughts/comments are appreciated.

While cleaning out some stuff at home I found the following buried deep in stuff that I must have been given years ago. Good luck!

There are 36 books of the Bible hidden in the following:

(shhhh. don't tell people where they are yet. maybe just say how many you have found)

While motoring in Palestine my friend O. Dusty Baker and I met Chief Moth Mujud, gesticulating wildly. His fez, raiment and features were odd. I never saw so dismal a chief. On market days he pumps alms from everyone, a most common practice. A glance shows that he acts queerly. Excuse me speaking so, but he was showing a crowd how they used to revel at Ionian bouts, when the brew seems bad. A fakir was sitting on a humble horse, whose appearance was quite interesting – he was wearing as comic a hat as they make. He pointed up eternally toward a rudely carved J on a high cliff.

My companions excitedly cried, “See that J, Oh, now I know we are near the ancient Ai. Was this Ai a holy place?” From answer given elsewhere, I’ll say not.

We asked the age of the big stone J. “O eleven centuries at least,” he said. I knew that in such a jam escort was necessary. Besides, our car was stuck in a rut here. So leaving the sedan, I elbowed nearer the fakir. A toothless hag gained access to his side, and paused to rest herself. She asked, “Do you have a treasure?” To which I retorted: “Not I. Moth, you know – tell us. Chief Moth Mojud expressed a desire to show us, however, warning someone may try to steal or annex O Dusty Baker’s goods along the way.

Now I am at the work of tracing the missing cargo of tobacco that belonged to him. That’s my job. To the chief’s expression of sorrow over the tobacco loss I answered, “well, you did warn us.”

My brother might be able to help us. He is a lawyer; however, he is a bit of a tramp, rover, BS from Harvard. His name is Eugene. Sister is working with him as well. They asked, “Well, where is that rover, prodigal at?” I answered that it used to be incorrect to use ‘at’ that way (never use a preposition at the end of the sentence) but everyone does it anyway. By the way, the flu kept Eugene at home this year. It really is too bad, I, a homebody, am the one roaming the Orient looking for treasure, while he - a tramp - at home in bed.

I recall a federal statute was passed several years ago that prohibits the state of employment from continuing to tax the benefits paid to retirees who have moved out of the state. Unfortunately, I can't put my hands on the statute.

What I can't recall is whether the installments have to be paid over "more than 10 years" or "10 or more years."

Can anyone help?

If a participant takes an early withdrawal of their 401(k) plan after they terminate from a company (about $1,500), I know that there is a excise tax of 10%, are there any consequences for taking the retirement savings contributions credit on prior tax returns?

A not for profit organization (501©(3)) has controlled group of three entities and all entites are in one cafeteria plan (flex credit dollar arrangement). One of the qualified benefits offered under the cafeteria plan that flex dollars may be applied to is insured health coverage (HMO options, etc.)

One of the entities (covering 33 of 250ish employees in the controlled group) applied for (and is approved to receive) grant money to increase the employer contribution paid for the 33 employees - but not any of the other employees in the controlled group (the other entities were not part of the grant).

Can this be done? I just can't think of a way to do it - isn't there a discrimination issue? What about FICA issues? Would a separate plan have to be set-up to accomplish this?

Any thoughts would be greatly appreciated!

For most of the retirement plans that we administer, our role is that of a directed trustee. During my recent audit I have come across an issue with participant loans that are past due. As directed trustee, we notify the Plan Sponsor and request guidance on whether they need to be deemed. We have several plan sponsors that simply will not respond to our repeated requests. Since we are not receiving direction from the plan sponsor, the operations area takes no action.

As an auditor, I am wondering who is ultimately responsible for deeming the loan. From what I have researched and found, as a directed trustee we are required to follow the direction of the plan sponsor/administrator, and at the same time follow the plan documents. Several of these loans are more than a year past due. From an IRS perspective, I would presume the applicable 1099 should be filed within the tax year that the loan was deemed.

Do we, as directed trustee, have the authority and responsibility to deem past due loans? Any guidance is appreciated.

Hi everyone,

I've been told two different ways on the SSA count for line 7i on the Form 5500:

1. Your # equals the total of A's and D's (or B's and C's as well but it's not common to report those here); or

2. Your # equals only the number of newly reported participants (aka the "a's").

Unfortunately I can't find anything definitive (in writing) to prove or disprove either way.

Does anyone know of a source where I can find this info?? What is the standard practice on the board here??

Thanks for your help!

Vicki

Quick Facts: Employer is an "S" Corp. 100% employee owned via an ESOP. Distributions to terminated Participants are made as soon as administravely feasible following the separation of service using the prior plan year end valuation/appraisal. During the plan year the employer makes a cash deposit to the ESOP. The cash is used to to facilitate the distribution to the terminated participant(s).

A few of the higher balanced participants separated service during the last plan year. Employer deposits $1,500,000.00 and issues distributions equaling that amount.

Plan year end processing is taking place. Employer Contribution 404 Deductible limit and 404 declared dividend equates to $1,000,000.00.

For easy math say, share price is $10.00 per share.

So we issued and paid $1,500,000.00 in distributions, but we can allocate only $1,000,000.00.

This leaves 50,000 shares unallocated at the end of the plan year.

Any thoughts.