Does anyone know if an employer can legally terminate an FSA to start an HSA (mid plan year)? I am aware of the transition relief available. Thanks!

A controlled group of companies maintains four separate defined contribution plans. Effective 1/01/06, three of the plans are merging (without termination) into the fourth plan. Most of the provisions of the 4 plans are consistent or not protected. However, I have a question regarding in-service distribution provisions.

The surviving plan permits hardship distributions only. No other in-service is provided for. One of the three merging plans provides for no in-service at all, so I'm ok here. One of the other two merging plans provides for in service at 59 1/2 of employer profit sharing, and the other provides for in-service at NRA (65 for all plans) and for participants in the plan for 5 years and balances allocated for at least 2 years. I call it the 5-2 rule. The employer would like the surviving plan to provide for hardship only, as it now does.

Question: Must the in-service distribution provisions be carried over into the surviving plan to avoid a violation of 411(d)(6), or can they be eliminated much like optional forms of benefits (ie annuity and installments) wilh notice to plan participants?

Thanks.

An employer has an existing cafeteria plan for the payment of health insurance premiums. Beginning in 2006, he is adding an HSA component. We know that the premiums can't be paid with HSA dollars, but as long as the employer keeps a separate accounting, is there any problem with having the 2 components under the same cafeteria plan?

I have a plan with a number of employees from India. Many of these employees have named a relative in India as their primary beneficiary. Recently, one of the employees died. His Beneficiary Designation Form names his mother, who lives in India, as his primary beneficiary.

The company asked how to pay the mother. I told them she needed to get a temporary tax ID so Uncle Sweets can get his tax money first. The company thinks this process is arduous and have not asked the mother to get the temp tax ID.

Is there something bigger, better, faster than the process I've suggested that you know of?

Thanks for the help.

Hi,

The Company I work for has decided to reimburse our employees this year for their deductible on their health insurance. I checked with our Accountant and Attorney and neither one was able to help us obtain a section 105 form. We were told we needed this in order to make any reimbursements. Also, do we need to do anything with HIPPA? We really wanted to self administer since we only have 12 employees on he plan.

A plan is designed as a safe harbor basic match plan, whereby the employer is to deposit the safe harbor match on a pay period basis. However, the employer has failed to deposit the safe harbor match on a pay period basis in 2005. What are the consequences of not depositing the safe harbor contributions by the end of the quarter following the quarter in which the 401(k) was depsoited?

1. Does the employer have to allocate the safe harbor match based on the full year compensation?

2. Does the employer have to deposit lost earnings and pay an excise tax?

3. Does the employer lose the safe harbor protection and have to perform ADP / ACP testing on the plan?

The same employer sent out the 2006 safe harbor notice to its employees and the notice states the safe harbor would be deposited into the plan on a pay period basis. Can the employer amend the plan to remove the pay period provision and issue a revised safe harbor notice to the employees - or are they stuck with the safe harbor match done on a pay period basis?

We are a city with a 457 plan covering 1000 employees. We have assets of about $25 million. We're not satisfied with our current vendor. Any recommendations out there? Who specializes in our market and what makes them good? All thoughts appreciated.

Hi -

I'm 24 and I want to start putting money into an IRA Roth, but not sure which broker to go with. From the looks of the boards here, people seem to think very highly of Vanguard. May I ask why?

I plan on doing a lot of research on which broker to choose, but it would be a great jump start if I could hear why people tend to go to certain brokers. I was thinking of Fidelity or ING (If ING even offers a Roth) simply because I had heard of them previously. I do know that I want low fees, some help and guidance (but not a complete brokerage firm, like Merrill Lynch), a diversity of funds, and a very good website that helps me understand clearly what is going on and where I stand in regards to my future.

As for the fund to choose, I'm hearing that I should not go with a Tax-Exempt fund or an International fund, but stick to more stable (more conservative) funds. Since I am younger, I should also stay with the fund chosen instead of moving around from fund to fund. Anything else?

Also, do you suggest putting in more than the minimum each year - or just keeping it at $3000 (or whatever the minimum is)? If I make 45k a year, am single (but soon to be married in a year or two), and have $8,000 saved up for whatever, (but still have college loans, rent, bills, etc. each month), what do you recommend?

Any other great words of wisdom? Thank you so very much! Much appreciated.

Jessica

I'm a civilian attempting to puzzle out answers about my own retirement plan that my accountant and current benefit providers can't answer. I haven't been able to find what I'm looking for in past posts here. I am a 100% owner of an LLC and have a SEP-IRA. I'd like to convert to a Solo 401(k) to increase my maximum contribution. I am unmarried, have no employees, and don't intend to have any. I also own a 51% interest in an unrelated LLC, where the 49% partner is not related to me. He has his own LLC where he is a 100% owner and his own retirement plan. This second LLC has substantially lower earnings than my own LLC (or my partner's own LLC). I do materially participate in it now, although I may not in the future.

If it weren't for this second LLC, it seems like a solo 401(k) would make perfect sense, as I could increase my annual contributions substantially and begin making makeup contributions when I turn 50 next year. But in reading the language of the plan document and the relevant IRC sections they reference, I am concerned that if this second LLC were to hire an employee in the future that worked more than 1000 hours per year, that person might have to be covered by my plan because of "affiliated service group" and/or "controlled group" rules.

Can one of the experts here let me know if that is a legitimate concern?

Is it premissible to exclude leased employees from the tests under Section 105? They are not specifically mentioned in the regs, but I was wondering whether there was anything out there that includes or excludes them. Thanks.

This came in newsletter I get. Thought you 409A people might enjoy it...

http://www.faegre.com/articles/article_1781.aspx

I have a interspousal deed to transfer the entire interest of the residence to the participant. The participant wants a 2nd personal residence loan, stating that the loan is for paying the divorced spouse out.

The first princ. residence loan was to purchase the same property.

Are there any issues with providing a 2nd loan, that's amortized for 15 years for the same property at the participants word that the money is used for the purchase of the transferred interest? The document does allow 2 loans, and 15 year amort. for principle residences.

If Bank A buys Bank B when must the employees of Bank B become participants in Bank A's 401(k) plan. The eligibility period is 3 months. Can you hold them out during the transition period under 410(b) or must you follow the eligibility terms in the document?

I have a SH 401k with a 3% SHNEC. The groups are named as the 3 partners individually, and then 1 group as NHCE"S. They are giving the 3%SHNEC, but only one partner wants to put in a PS. Can I give him a minimal ps allocation wihtout giving an allocation to any other groups as long as I pass all other testing? I've never had this before and it just seems weird....can't wrap my head around it. Thanks for any help.

Merry Christmas all!

A Politically Correct Christmas Poem

Twas the night before Christmas and Santa's a wreck...

How to live in a world that's politically correct?

His workers no longer would answer to "Elves",

"Vertically Challenged" they were calling themselves.

And labor conditions at the North Pole,

were alleged by the union, to stifle the soul.

Four reindeer had vanished without much propriety,

released to the wilds, by the Humane Society.

And equal employment had made it quite clear,

that Santa had better not use just reindeer.

So Dancer and Donner, Comet and Cupid,

were replaced with 4 pigs, and you know that looked stupid!

The runners had been removed from his beautiful sleigh,

because the ruts were deemed dangerous by the EPA,

And millions of people were calling the Cops,

when they heard sled noises upon their roof tops.

Second-hand smoke from his pipe, had his workers quite frightened,

and his fur trimmed red suit was called "unenlightened".

To show you the strangeness of today's ebbs and flows,

Rudolf was suing over unauthorized use of his nose.

He went to Geraldo, in front of the Nation,

demanding millions in over-due workers compensation.

So...half of the reindeer were gone, and his wife

who suddenly said she'd had enough of this life,

joined a self help group, packed and left in a whiz,

demanding from now on that her title was Ms.

And as for gifts...why, he'd never had the notion

that making a choice could cause such commotion.

Nothing of leather, nothing of fur...

Which meant nothing for him or nothing for her.

Nothing to aim, Nothing to shoot,

Nothing that clamored or made lots of noise.

Nothing for just girls and nothing for just boys.

Nothing that claimed to be gender specific,

Nothing that's warlike or non-pacifistic.

No candy or sweets...they were bad for the tooth.

Nothing that seemed to embellish upon the truth.

And fairy tales...while not yet forbidden,

were like Ken and Barbie, better off hidden,

for they raised the hackles of those psychological,

who claimed the only good gift was one ecological.

No baseball, no football...someone might get hurt,

besides - playing sports exposed kids to dirt.

Dolls were said to be sexist and should be passe.

and Nintendo would rot your entire brain away.

So Santa just stood there, disheveled and perplexed,

he just couldn't figure out what to do next?

He tried to be merry he tried to be gay,

but you must have to admit he was having a very bad day.

His sack was quite empty, it was flat on the ground,

nothing fully acceptable was anywhere to be found.

Something special was needed, a gift that he might,

give to us all, without angering the left or the right.

A gift that would satisfy - with no indecision,

each group of people in every religion.

Every race, every hue,

everyone, everywhere...

So here is that gift, it's price beyond worth...

"MAY YOU AND YOUR LOVED ONES, ENJOY PEACE ON EARTH"

I have to run a 2001 nondiscrimination test because it was never done.

The ADP test passes. The ACP test passes. However, the Multiple Use test does not.

I know that in certain situations, you're able to "shift" elective deferrals from the ADP to the ACP test. I believe one of the requirements to shift is that you pass the ADP before and after the deferrals are shifted.

If I shift some deferrals from the ADP to the ACP, then the results of my Multiple Use test are a little better. It still fails, but the refunds will be slightly lower.

I'm trying to determine if it is acceptable to shift in this situation or not.

The ACP passes on its own. So I don't need to shift to pass the ACP. I can't find anything on this topic.

Anyone have any opinions?

1. Is there a problem in a pension plan purchasing real estate property in partnership with another entity who is not related to the plan sponsor/trustees?

2. Is there a problem if the real estate properties are bought and sold frequently (i.e. flipping the properties)?

How is the basis handled when the excess deferrals are miscalculated and participants received excessive refunds (are, in essence, overpaid) and must refund the overpayment of refunds back to the Plan?

To treat this as an after-tax contribution would mischaracterize the situation, but for participants to repay the amounts back into the plan would mean that they would pay taxes on these amounts twice, wouldn't it?

How are these amounts generally segregated out by a Trust?

A small business wants to start a Profit sharing plan for 2005. The company began in May, 2005. The only employees are the two 50% owners and the spouse of 1 of the owners, so we have only HCEs for 2005. I'm told however that (for whatever reason) all 3 individuals received no W-2 income at all for the year. Instead, they are being 1099d for all compensation paid to them for 2005. They will go to W-2 starting in 2006.

It's likely that more information is needed, but based on the above, do you think we can set something up for them for 2005? Does 1099 income prevent them from having any plan wages in 2005? Thanks for you advice.

This is regarding vestint for a rehired employee. Original hire date was 2/8/1999 - term. dated 6/28/2001. At the time of termination, the plans vesting was 100% after two years which because the employee worked 1,000 in 2001, he was considered 100%. He has now been rehired as of 8/2005. On 7/1/2001 the vesting for the plan was amended amended to a 5 year cliff. Document states anyone employed on 6/30/2001 will vest according to the original vesting schedule and anyone hired after 7/1/2001 will vest according to the amended vesting.

I know this participant's hire date needs to be adjusted to give him credit for prior service since he did not incur (5) one year breaks and he has been allowed back into the plan on his rehire date not having to complete eligibility again. But what vesting schedule should apply to him? Should he remain 100% Vested?