May participants in an ESOP also participate in a Cafeteria Plan?

Physician practices medicine through a professional association (a specialized type of corporation for professionals if that doesn't mean anything to you) he is the sole owner and only employee.

I want him to be able to reimburse himself for health care expenses that are uninsured without being treated as compensation to him. I know these are probably basic - stupid questions but (1) can I do this (2) what documents do I need (3) will anyone share them with me

I'm an attorney but please assume (correctly) that I know nothing about employee benefits law.

I am trying to get a sense of what other people are doing with HRA account balances when someone goes on COBRA. Lets say Employee, Spouse and Kids are all covered by a HRA that has a balance of $5000 on the day of the COBRA Qualifying Event.

If the Employee terminates and the family elects COBRA, it is clear that the family would start with a $5000 account balance.

If Employee and Spouse divorce (or Kid graduates college) and Spouse/Kid elects COBRA, does Spouse/Kid start with a $5000 HRA account balance while Employee's $5000 account remains intact.

Any citations would be appreciated.

Two dentists cost share employees and office space on a 50/50 basis. Each dentist works two days a week while the employees work 4-two days per week for each dentist. Dr. A decides to move her practice to another local office. Of the four eligible shared employees, she offers two employment at her new office for three days per week (and maybe four days). These two declined the positition. The other two eligible employees were not offered employment at the new office.

With regard to the later two, I think a partial termination has occured and 100% vesting is in order. With regard to the former two I'm leaning towards no partial termination. They were offered a continuing job with their employer Dr. A. working 3 days at the new office. They declined and therefore it was not the employer action that resulted in their termination of employment from Dr. A but the employee's refusal of the position. Looking solely at Dr. A, the employees worked 2 days a week for her before the split up and at the new office it would be 3 days. The employees need 4 total days of employment to pay their bills.

But, how does Dr. B come into play? Let' say she is unable to "pick up the slack" and keep the employees employed 4 days per week and they have to go to a completely different office in order to maintain their income level. Then Dr. A's action resulted in their termination also.

Thanks

Our company is new to Relius and although I've seen some messages posted about a contributions report broken down by participant, I have another question on the issue. We had a wonderful report in Blaze SSI that listed by participant compensation, deferrals, deferral rate (as a percentage of their comp), match, match rate, safe harbor 3%, profit sharing, profit sharing rate and then total contributions and total contributions as a percentage of comp. This was a great report to check deduction limits, 415 limits, the 3% SH calculation and comparability percentages. Relius is having a difficult time coming up with something similar and we feel it will be very difficult to live without that report. Does anyone have anything that's similar that they would be willing to share?

Another report we're having a hard time getting is just a 1-2 page summary of plan provisions report. In Relius, you have to print off a page for each type of plan spec, but I'd like something that summarizes the highlights on 1 or 2 pages.

Thanks.

If it is possible, where can I find information on migrating/converting a DB plan to a DC plan?

There is a client in hurricane ravaged Mississippi who has a 412(i) plan that has several NHCE's along with a couple of owners. They need to terminate the plan but have been told that for the owners to be able to waive any part of their benefit they must first convert the plan to a traditional defined benefit plan. They were told that after the conversion the owners can waive but not while it is a 412(i) plan.

Not being a 412(i) expert I have not been able to advise whether this is true or not. Does anyone know one way or another and if so, is there a cite?

Any help is appreciated. Thanks.

I'm looking for the new 403(b) regulations in regards to plan documents. Honestly, I don't even know what they would "look" like. I tried an internet search which led nowhere. I've also scoured this board hoping to find something that would jumpstart a search. And if I input only "403(b)" in trhe BL search engine, I end up with too many links to look through.

Thanks!

I know this is fairly common issue, but I wanted some clarification from different previous posts. I apologize in advance for the length, but wanted to drill deeper into this issue. 401(k) Plan Sponsor has not been taking deferrals on Bonuses for a number of years. Plan document INCLUDES Bonuses in definition of Compensation.

FIRST QUESTION

Is this specific situation covered under Rev Proc 2003-44 Appendix B Section.02 - "Exclusion of Eligible Employees"? Specifically, is the "Expansion of Correction Method to Partial Year Exclusion" meant to correct the exclusion of deferrals from periodic bonuses (that were otherwise allowed to participate) or is this section meant only to apply to situations when a participant is excluded from participating at all for a portion of the year.

Many posts here seem to indicate that the proscribed correction in this section (using ADP and ACP % of respective employee group) would be appropriate.

Others indicate that the failure is not following the employee direction (i.e. standing deferral %) and that the correction would require using the actual employee deferral election in effect (under the general principle of putting the Plan in same position it would have been in).

Has anyone had specific interaction with the IRS on which correction is proper?

SECOND QUESTION

If you believe that the ADP and ACP %'s should be used, I have some clarification questions.

It is my understanding that using the ADP% and ACP% is suggested because this would ensure that the plan would still pass the ADP/ACP test and not need to be recalculated (e.g. if correction is for prior years).

However, in the case of bonus corrections, does this mean that ALL eligible employees would receive a corrective contribution (at the ADP%) or only those employees that have been otherwise deferring (on all other non-bonus Compensation).

For example, assume you have 3 NHCEs with the following Deferral %s

NHCE 1 10%

NHCE 2 2%

NHCE 3 0%

Average ADP for Group = 4%

Under the Correction in Appendix A & B, would all 3 NHCE's receive a correction equal to 4% of Bonuses or would the 4% only be given to NHCE 1 & 2? If the latter is used, it would seem that this would change the overall average ADP of the NHCE group (which contradicts the reason for using the ADP %).

To keep the Non-Discrimination Test results the same, it would seem reasonable that you would use a "modified" ADP% for "participating employees" in this situation (10% + 2% / 2 = 6% Average) and give 6% to NHCEs #1 and #2.

FINAL QUESTION

If using the ADP% for a correction under Appendix A Section .05, which ADP% would you use if the Plan is restructured for testing purposes? Would you use the ADP Test Results before or after restructuring? Language at the end of the Section .05 seems to indicate that you would use test results before restructuring (please clarify this reading is correct).

Section 223(2) of the Code refers to a monthly limitation for HSA contributions (1/12 of the annual limit) -- However, Notice 2004-2 Q&A 21 states that contributions to an HSA may be made in one or more payments (providing for a lump sum). If an employer has a biweekly payroll and for 2 months out of the year the employer will have 3 pay periods in a month (thus exceeding the 1/12th limit for those two months) has the individual violated the HSA rules or is he in compliance if his annual limit has not been exceeded.

For participants that are receiving required minimum distributions, we send an election form to the participant to elect if they would like taxes withheld from the distribution and if so how much.

If the participant fails to return the form, how should the taxes be handled? Is it 10%, nothing or is it to be handled as if a periodic payment subject to the standard income tax tables?

Thank you.

Situation is as follows:

401(k) Plan, top heavy - no match

6 HCE

8 NHCE 3 Terminated during plan year

Compensation only counted from date of participation (calendar year plan , 1/1 7/1 entry)

Plan fails ADP

QNEC given to all nhce (hces do NOT get qnec) - no conditions to receive allocation

3% min given to all participants except 3 nhce not there on last day of plan year

am I correct that I have automatic pass for 410(b) but must now test for nondiscrim because I have two benefit formulas with different allocation conditions?

this fails (a)4 b/c 3 terminated nches only getting tiny QNEC and because one HCE who got in middle of year is getting top heavy min on all comp but 414(s) comp is half year

what can I do here to make it work - bring in one term nhce - do I have to do this by amendment?

Help

Attorney has asked me for recommendation(s) for an EA to assist in a QDRO. Attorney represents the employee. In addition to more than one qualified plan, there may be multiple non-qualified plans for which a PV is desired. (Employee/participant is an executive in a large co.) Attorney indicates high likelihood that the EA may also be needed in court testimony. Hence, I suggested that the attorney should engage someone with substantial experience in this area.

I don't want to touch this, but am willing to provide attorney with 2-3 referrals. However, I don't know any such specialists, or how to search for them. Any suggestions? Attorney is in NC (not sure where the employee resides).

Participant takes a lump sum distribution and therefore 20% taxes are w/h.

When are those taxes due to be deposited and filed by? The end of the month the distribution occurred, the end of the plan year, tax year? Are there any specifics?

Thanks

I have seen where you can have classifications based on age and years of service. Is it permissible to have the following?

Group 1 - Owner (HCEs)

Group 2 - Employees making more than $50,000 and with more than 5 years of service (this could be a problem because some in this class may be considered HCEs as well)

Group 3 - Employees making less than $50,000 with less than 5 years of service

Thanks

Client adopted prototype document in late 80's. Client recently made changes to plan by adopting a volume submitter document with special language changes. Client is submitting plan to IRS via Form 5307. Anyone see a problem with submitting what client has in hand now plan document-wise and then supplementing the information with the IRS once it is received from prior TPA? IRS will request to see original adoption agreement, etc.... anyway which TPA has but has yet to forward. Client wants to get the process started and due to the amount of time in which the 5307 will be assigned to an agent I don't see a problem with submitting what client has and then forwarding additional info. to IRS agent once it's assigned. Any comments? Thanks.

Our ERISA attorney insists that this rule applies to employer money for all in service withdrawals, including hardship, regardless of any other requirements. So, every plan we have says that hardship and age 59 1/2 withdrawals are subject to this rule. We need to get him convinced before the EGTRRA restatement that this is only required when you don't have an age or hardship requirement.

I think when we add this to plans that have never had this requirement before it is a protected benefit issue. He says no because it's required so that is how the plan has had to operate.

I found some published guidance a few weeks ago that literally said that this rule only applies when there are no other requirements such as 59 1/2 or hardship. Now I can't find it (no snide remarks please, I'm already kicking myself for not making a note, copying it etc). Can anyone give me a cite? He won't accept the "interpretations" in the Pension Answer Book or The ERISA Outline Book. I need to quote him chapter and verse.

TIA!!!

Client has EE that left in late 2001 and was rehired in early 2003. Only one break in service occurred. Plan has 1 yr. hold out rule for rehires. The EE never worked 1000 hours in 2003, 2004, 2005 but will probably work their 1000 in 2006. Now, the plan was amended from a profit sharing to a 401(k) effective 1/1/06. If EE works 1000 hours in 2006 they should be re-entered retroactively on 1/1/06 but its a 401(k) at that point. I don't want to tell them that the EE is a participant eff. 1/1/06 and then find out that they didn't work 1000 hours. Any suggestions as to how to handle the re-entry date?

Thanks!

If an employer offers both an HMO option and a PPO option to one group of employees, does the employer than have to offer the HMO option to all other employees?

Is the defined contribution dollar limit for spouses $84,000 in 2005 (i.e., $42,000 x 2) or are they limited to $42,000? Thanks.