A POP cafeteria plan fails the key employee 25% concentration test. Would the acceptable correction method be to make all benefits taxable in the calendar year they are attributable to?

I've been researching Deemed Roth IRAs under employer retirement plans and need to verify two points, one of which just doesn't smell right. I have also posted this query under IRAs, but have not yet received a response.

1. The internet tax research network we use states ... However, the deemed IRA accounts are not subject to the ERISA reporting and disclosure, participation, vesting, funding and enforcement requirements applicable to the eligible retirement plan.

This would seem to imply that an employer can create deemed Roth IRAs for only a select group of individuals - i.e. only the HCEs or owners or officers. This does not pass my smell test. Does anyone have any insights on this?

2. Regular Roth IRAs have an AGI phase out. The research I've read seems somewhat vague regarding Deemed Roth IRAs. It states ... For 2005, the dollar limitation will generally be $4,000, plus an additional $500 for participants over 50. The maximum contribution cannot exceed the employee's includible compensation for the year. - It never specifically references and AGI phase out, however it previously states that the deemed Roth IRA must meet the requirements of 408A (which is where the AGI phase out is found) and also states Deemed Roth IRAs are subject the same contribution limits as regular Roth IRAs.

Any thoughts on whether the phase-outs apply to Deemed Roth IRAs?

In years past TPA has been filing schedule A for a self-insured medical plan for which the employer has a stop-loss policy. This year, the schedule A reports 17,000 in commissions to the TPA (which I assume are not paid from the plan) and 170,000 in premiums.

I didn't think a Schedule A was needed for a self-insured plan because the insurance contract is whith the employer, not the plan.

Agree/disagree?

We have a client with a 401(k) that includes employer stock. The employer has an administrative wherein when volume is extremely high (determined pursuant to pre-defined volume), trading is suspending until such time as the the employer can dispose of all the stock to purchase the new investment. Individuals who immediately prior to the trigger get the average price for the stock when disposed of. The employer does not exercise discretion in suspending trading, it is an automatic trigger once the criteria is met. Does the above create a problem and/or is it impermissible? I have looked for DOL guidance, but thus far have not been able to find any.

Hi,

The owner of our Company owns us and several other businesses all under the umbrella of a holding company. The holding co. was just formed recently. Regarding our 401k plan,

1. Does common ownership require a consolidated form 5500, rather than separate 5500's for each company?

2. Does common ownership require that all of the commonly owned companies have identical 401(k)'s (matching fund percentages, contribution limits, etc.) to aviod discrimination?

We are getting conflicting answers from the 401k plan and the accounting firm...

Thanks very much for your assistance!

JM-B in HOT SoCal.

Is anybody aware of a law in either Illinois or California which in effect penalizes individuals who elect COBRA coverage? An individual mentioned that they thought they had heard that individuals who elect COBRA in Illinois and California are not entitled to state-provided benefits at the expiration of the COBRA coverage. I have not heard of such a law - I would like to know everybody else's thoughts. If there are such laws, please let me know where I might find them.

Thanks

Two controlled corporations sponsor a standardized DC plan which has a calender year. Stock transaction in early 2006 will eliminate controlled group status, so a spin off plan will be established.

Any feelings on doing the spinoff in the second half of 2005 to save the audit report attachment for the 2006 5500 return? If separarated before year end, both plans [identical otherwise] will have under 100 participants on 1/1/06.

My feeling is no, cart before the horse. Initially I thought there might be a 411(d)(6) problem for the period of time up to the stock transaction, but everything in the spin off plan will be identical. I don't anticipate any testing issues....

If a plan fails coverage and has to give a contribution to a terminated EE who is zero percent vested- is that okay? Seems like there would be some requirement that it be at least partially vested- but maybe not.

Please and thanks

A company is working under the Federal Contract subject to the Service Contract

Act, which states that an hourly amount ($2.59) be paid to the employee in

the form of health & welfare benefits for each hour worked. These dollars

are known as the "fringe" dollars. Fringe dollars can be used for either

health and/or retirement.

This company is putting the funds into a self-funded health plan

administered by a TPA (third party administrator). The funds accumulate in

the self funded insurance plan and pay claims as they come in. After the

year is finished, and claims from Nov. & Dec are paid, the plan then takes

the excess funds and puts them into a 401K. This happens sometime in Feb or

Mar.

Is there any ERISA violation here? I was under the impression that dollars

from year needed to be deposited into a 401K within the same year? Is there

any other violation here?

Thanks

Brad

I am trying to locate a form of a death benefit option agreement ("DBOA") under a Code Section 419(e) plan. Under the Code Section 419(e) Plan, trustee will pay 100% of scheduled premiums. DBOA will provide that trustee is entitled to 100% of the death benefits. I can't find a copy of such a DBOA. Any suggestions? Thanks in advance. Ed

I've been researching Deemed Roth IRAs under employer retirement plans and need to verify two conclusions I've reached, one of which just doesn't smell right.

1. The internet tax research network we use states ... However, the deemed IRA accounts are not subject to the ERISA reporting and disclosure, participation, vesting, funding and enforcement requirements applicable to the eligible retirement plan.

This would seem to imply that an employer can create deemed Roth IRAs for only a select group of individuals - i.e. only the HCEs or owners or officers. This does not pass my smell test. Does anyone have any insights on this?

2. Regular Roth IRAs have an AGI phase out. The research I've read seems somewhat vague regarding Deemed Roth IRAs. It states ... For 2005, the dollar limitation will generally be $4,000, plus an additional $500 for participants over 50. The maximum contribution cannot exceed the employee's includible compensation for the year. - It never specifically references and AGI phase out, however it previously states that the deemed Roth IRA must meet the requirements of 408A (which is where the AGI phase out is found) and also states Deemed Roth IRAs are subject the same contribution limits as regular Roth IRAs.

Any thoughts on whether the phase-outs apply to Deemed Roth IRAs?

Hi,

2 years ago I contributed $1500 to a roth ira. It was a contribution of my income, not a rollover account from another IRA. I want to withdraw that $1500 now and leave whatever profits I have earned in the roth ira account.

I'm prior to the 5 1/2 year limit, but I'm not withdrawing any earnings. Am I subject to any penalties if I do this?

I have to aggregate a ps plan with a db plan to test a4. NRA = 65/5 in the ps, 62/5 in the db. Each plan covers different people. Does this mean that I have different uniform normal retirement ages, and I can test at the latest uniform retirement age? Or do I have a non-uniform retirement age, so my testing age is now 65 across the board ?

In either event, db accruals have to be actuarially increased from 62 to TA. Does the increase apply to those accruals that are limited by 415 at 62 as well? Or can I make use of the fact that the 415 limit is constant from 62 to 65?

This I know: a participant terminates and has "over spent" his account, the employer does not need to offer continuation coverage; a participant has "under spent" his account, the employer must offer continuation coverage.

This I don't: At the beginning of the plan year the Employer gives money (assume $200/month) to each of the participants to shop for benefits. A participant terminates, and to date has not used up any of the money. Upon termination employer contributions cease. Must the employer offer the participant continuation coverage, and if so, would the participant then make a new election, or continue making the same contributions he elected (the amount the employer was contributing on his behalf)?

Does the answer change if the employee contributed additional amounts to the Health FSA (assume $100 on top of the Employer contribution of $200/month)?

October 15th is on a Saturday and we will have until Monday October 17th to mail the 5500 forms with extension for 12/31/2004 plan years. What date should be on Line 1 of the form 5558? Instructions say not more than 2 1/2 months. So, should we put 10/15/05 or 10/17/05?

For ESOPs that allow diversification per the regs, my client thinks there's a minimum amount under which you do not have to make the distribution payment. He thinks it's $500. Is anyone aware of where I might find that in the regs?

Sal Tripodi's book on the topic refers to Notice 88-56 but I haven't been able to find a copy of that notice.

Is a long term care plan subject to the 5500 filing requirements?

I had an employee that was with my corporation for 2 years (terminated in early 2005).

Per our plan documents, there are NO restrictions for participation (no 1000 hour requirement, no one year of service, etc.).

We do NOT match contributions.

This employee was never notified about participating in the plan and now there are other "salary" issues being "negotiated", so I want to know what "problems" this 401(k) issue might create.

What possible sanctions do we face for not including this employee ??

Does anyone have IRS code sections or D.O.L. regulations ??

In applying the 6 month waiting period for deferred comp distributions to "key employees" in public companies, the threshold question is "who is a key employee?" Never mind the fact that a lot of public companies probably aren't all that used to dealing with Section 416, we know that several of the Section 416(i) definitions are based on "compensation" which is ultimately defined in Section 415©(3) (via Section 414(q)(4)) -- rather unhelpfully -- as the participant's compensation for the year. However, Section 1.416.1 Q&A-T21 of the regs helpfully points out that "compensation" is defined in Section 1.415-2(d): the usual wages+non-deductible moving expenses+taxable welfare benefits+NQSO proceeds+amounts subject to an 83(b) election. Not too hard so far.

So the question is: when do you ascertain how much an employee's compensation is? End of the year immediately preceding the year of termination? Year-to-date compensation (i.e., comp for the year of termination)?

Because of the weird effects of using year-to-date compensation (e.g., non-key employee receives a NQDC distribution that transforms him into a key employee who must wait 6 months to receive the distribution that transformed him into a key employee--say that 3 times fast), it has to be year-end compensation from the year immediately preceding the year in which the termination occurs--doesn't it?

Anyone have any bright ideas about this?

Is section 457 the only choice for a 501©(3) to offer NQDC?

Thanks,

Ken Davis