If a participant utilizes the services of an art therapist, who is not licensed in psychotherapy, but has art therapy credentials could the expenses incurred be reimbursed through a health FSA?

I came across a brochure from a provider that determines a loan differently from how I was taught. Here are the parameters:

Vested Balance: $60,000

Highest balance in the past 12 months: $6,000

Current Loan Balance: $5,000

I am assuming the vested balance is $55,000 in fund balances and a $5,000 loan balance.

Is the maximum loan amount available $19,000 or $25,000?

Has anyone prepared an RFP for a DB Trustee search and/or a search for a provider to outsource DB administration. Or, can you recommend any sources to obtain one. Thanks!

I searched the board and sort of found an answer to my question but it didn't totally clear things up for me.

Company A buys Company B in early 2005 and creates a parent/subsidiary controlled group. Both companies have 401k Plans. The plan is to merge Plan B into Plan A effective 1/1/06 and have Company B employees begin participating in Plan as of that date. This means that a final valuation and 5500 filing will have to be done as of 12/31/05 for Plan B. From what I read, if the legal date of the merger is written to be 12/31/05, then that is when the assets are considered to be transferred to Plan A, correct? It is most likely a physical impossibility to value the assets and cut a check or wire all in the same day on 12/31. So, the assets will not physically transer until sometime in Jan. 2006. Obviously a black out notice will be issued to the affected participants. Am I understanding correctly then that on the final 5500 for Plan B for 2005 plan year that we would show a transfer out to Plan A of the value of the plan assets on 12/31? Even though the assets in Plan B don't physically transfer until maybe the middle of Jan 2006 is there a 5500 filing requirement for the 2006 plan year for Plan B? And if the answer is no, in what reg or cite is that communicated? I'm also guessing that any investment gains/losses for Plan B's assets prior to transfer in 2006 are just lumped together with Plan A?

If the plan is cross tested and top heavy, do participants receiving the top heavy contribution need to receive the 5% gateway or can they be limited to the 3% top heavy minimum?

In my experience, and it is my understanding, that if an employee terminates their employment and have claimed more money from their flexible spending account than they have contributed then that is the end of it. By the same token, if an employee contributes money to their FSA all year long and has no claims while they are enrolled in the plan and then quits before year end then the money is left in the plan.

The company where I am now employed has a policy that an employee who terminates and has not contributed enough money to their flexible spending account to cover their claims must repay the money in their final paycheck. However, if vice versa is true and money is unclaimed in the account then the employee has to leave the money. This just seems wrong to me and I have argued using all of the documentation I can find - Q&As on the final IRS regs for cafeteria plans, commentaries, etc. but payroll argues that the company still has a risk because of the employee who will leave with big claims and money that can't be recovered in the last paycheck.

Now, I am hearing that large companies - for example, MCI - has the same policy. Does anyone have anything definitive on this issue other than just an opinion - that is, something that says, "an employer cannot require an employee to pay back monies they have claimed against their Flexible Spending Account if their contributions don't equal their claims."

Thanks in advance.

Does the IRS charge a fee to review an application submitted under Treas. Reg. 1.408-2 (i.e., an application to obtain designation as a non-bank trustee)?

Appendix B to Rev. Proc. 2003-44 provides two permissible methods for correcting the exclusion of eligible employees from a profit sharing plan: (1) the "Contribution Correction Method" and (2) the "Reallocation Correction Method".

Assume that a plan provides that profit sharing contributions are made pursuant to an integrated allocation formula that uses "allocation points" or another method, so that the integration rules are always met regardless of the amount of the plan contribution (i.e., the plan does not specify a certain percentage amount above and below the wage base). Also assume that the plan discovers that a prior year's allocations to certain participants were based on inaccurate compensation (not including some fringe benefit amounts that should have been included, and including other fringe benefit amounts that should have been excluded).

I interpret Appendix B to mean that the plan sponsor may correct the allocations that are based on inaccurate compensation by first determining what was the effective allocation formula for the other participants (whose compensation in the original allocations was correct) -- e.g., for participants whose compensation was correctly determined in the original allocation, this may have effectively resulted in an allocation of 8.334% of all compensation plus an additional 5.7% over the wage base. Then, the plan sponsor would make a corrective contribution, adjusted for earnings, to each affected employee who did not have sufficient compensation considered, and apply an appropriate forfeiture to employees who had too much compensation considered, based on this formula. No reduction or other adjustment would be made to the accounts of the employees whose allocations were based on accurate compensation.

However, the plan sponsor's recordkeeper believes that because the allocations were made pursuant to an integrated profit sharing formula, the mistaken allocations may only be corrected under the Reallocation Correction Method, requiring the plan sponsor to redo allocations for all plan participants (even those who were not affected by the error) and notify all participants of the change.

I have not been able to locate any information to support the recordkeeper's argument that this correction must be made using the Reallocation Correction Method. The fact that the allocation formula initially used was intended to maximize benefits to highly compensated employees doesn't seem to have any bearing on the proper correction method.

Does anyone have any thoughts on the proper correction method to be used in these circumstances?

A DB plan participant retired and elected a direct rollover of his accrued benefit. Two months later the plan realized that the lump sum paid was too small because it did not account for certain service. The plan is now ready to make a second payment to the participant. We want to rely upon the original distribution election for this second payment. Any reason not to do that? Should the participant be able to elect again?

If a company makes a $500 per year employer contribution into the FSA for their employees, can the employer contribution amount be pro rated for individuals that do not participate for the entire year (for example a new hire)?

Can a Roth IRA contribution be made this year using earned income from past years of employment if person is now retired and not employed?

We are acquiring another company (assets only, not assuming the plans). However, b/c there is a collective bargaining agreement - we have to mirror the plans they currently have place. One plan is a 401(k) and (m) plan. The main difference is that we (base company) provide a match of 2% up to 50% of comp and the new plan (new plan for purchased assets) provides a match of 2% up to the 100% of comp.

We crunched the ADP/ACP tests on a controlled group basis (based on info we rec'd in due diligence) from both plans' (testing it as the base company's controlled group AND then testing it as the new company's controlled group) - we passed the ratio percentage test both times.

Is there anything we are not thinking of (other than 401(a)(4) ND) and how would we report this on the Form 5500 (I'm thinking of Schedule T)?

I don't do much with SIMPLE plans and someone has asked if the SIMPLE can be aggregated with the person's personal IRA accounts for purposes of the 70 1/2 RMD calculation and distribution. It seemed logical to me that this would be ok, but I couldn't find an answer in print. They are aware that any Qualified Plan distributions must be taken from the plan as a stand alone. Any help is appreciated.

I'm getting ready to submit a VCP filing and was wondering about the expected turnaround time.

The filing deals with 9 employees being excluded from the 401(k) plan for part of the year.

Thanks in advance.

What is the appropriate correction for a distribution made to an employee who was actively employed and did not quality for in-service or hardship? The employee is an HCE.

Does anyone have any insight into the expected release date for the EPCRS update?

If the document states the interest rate assumption for testing is hard coded in the document as 7%, could an amendment be made after the plan year end to change it to 8.5%?

Can a participant's plan assets be attached for child support payments? I've never heard of this reason. I thought the only entities that could attach participant's retirement assets were federal tax liens and QDRO's. We received a notification to pay out a portion of a participant's balance. Thanks for your help.

A db plan participant terminated 4/26/04 (calendar year plan) with 600 HOS. The value of her vested benefit was $4685. I think she's not excludable for 410b because of her hours, but she's excludable for 401a26 because her vested benefit was < than $5000. Is that correct?

I've seen varying responses to the following scenario and am trying to get some consensus.

Employee elects to contribute $480 to his Health FSA. He pays a pro-rated amount on a monthly basis via payroll deduction (i.e. $40/month). He does not request reimbursement any time during his participation, terminates employment with only $240 in his account, but has saved up receipts for $480 incurred prior to his termination. His SPD states that coverage under the HFSA ceases when his contributions cease and he is otherwise ineligible to participate (e.g., no longer an active employee).

Question:

1. Could employee submit his claims within 90 days after his termination date for the entire $480 even tho he only has $240 in his account? If not, then

2. Would employee have to be offered COBRA to get the full benefit of his original election?

3. If employee is offered COBRA and only makes one add’l month of contribution at $40 + $2 admin fee, can he request the entire $480 in receipts during that month and then terminate?

Your thoughts are welcome!