What are your thoughts on the impact of Circular 230 on the types of materials often prepared in connection with cafeteria plans? For example, do you think we might need a disclaimer on an SDP for a medical FSA?

We have a 401(k) plan where the stock fund (publicly traded stock) has been converted to an ESOP for purposes of the dividend pass-through deduction. Even after implementing the automatic rollover rules, any stock in a participant accounts will need to be liquidated when we force-out accounts under $5,000. Is failure to distribute stock in this situation an issue?

PAL

We administer a DB plan and are presenting to a top 25 HCE the option to receive his full accrued benefit in the form of a lump sum if he agrees to sign a Repayment Agreement. The plan is less than 110% funded. Under what circumstances would the Plan Administrator have the right to enforce the agreement and have the employee pay back to the plan all or a portion of his lump sum distribution?

Can this failure be corrected without filing with the IRS or must you file under VCP and request a waiver of the excise tax?

Multiple employer VEBAs are considered MEWAs, and as such, would be regulated by the states.

According to Section 514(b)(6)(A)(ii), any law of any state which regulates insurance may apply to the extent not inconsistent with the preceding sections of this title.

I know there is a separate section which outlines the purposes of ERISA. Are they included in Title 1? If not, wouldn't it be prudent to consider the outline of purposes for ERISA in determining whether any state laws were "inconsistent" with ERISA?

Don Levit

Does anyone know when a government plan had to be amended in order to benefit from 411(e)(2)? Was there a remedial amendment period for a government plan's compliance?

Plan provides for a discretionary match. At the plan's inception there was a Board of Director's resolution limiting the match of 50% of deferrals up to 5% of comp. The match formula is also disclosed to EEs every year in the company newsletter. In 2004 payroll did not cap the 5% of comp. This affects HCEs and NHCEs.

Is this considered an operational defect where the affected Ps will loose the match or can you give the additional match because the plan provides for a discretionary match? (See message board Q&A from March 9, 2002 - Correction of Error in computing Matching Contribution.)

Additionally, someone one suggested running a 401(a)(4) availability test. If it passes it would be okay to leave the additional match contribution in plan. I never heard of using this in an operational defect situation. Anyone ever heard of this?

Thanks!

If a DB plan has no active participants and uses the individual aggregate funding method is it true that there will be no minimum funding required, because there is no normal cost? I am taking over a plan in this situation that has a full funding limit of $60,000 but no required minimum contribution. The only participant is a terminated participant who is the owner.

In looking at the Catch-Up regulations, it states that "catch-up contributions with respect to the current year are not taken into account for purposes of section 416. However, catch-up contribution for prior years are taken into account".

If I'm doing the top heavy test for year 2005 for a CY 401k plan, I'm comparing account balances as of 12/31/04 (the determination date). So what catch-up contributions am I permitted to exclude from the test? What is the "current year" the regs are referring to?

the combo plans provide the top heavy in the DC, so it is 5%.

an ee works over 1000 hours and quits, so he is not eligible for the top heavy in the DC.

now, does he have to somehow get the top heavy in the DB, or is there some some rule that says 'no, the plans are now considered combined and we operate using the rules for whatever pln provides the top heavy - in this case the dc requiring last day employment.

Received an existing volume submitter plan (401(k)) to review. The allocation formula for employer contributions is - 3% up to $95k, plus 6.565727% in excess of $95k. That's all it states. Doesn't seem to meet the permitted disparity rules that I am aware of, not only because the intergration level exceeds the TWB but the disparity is greater than it should be.

Can you provide any insight or information that would justify the formula? And the plan filed and rreceived a favorable IRS LoD.

I understand that it is possible for an employer to directly reimburse an employee for their individual health insurance premiums. In fact I learned that here Rev. Rul. 61-146.

So here is the question. Our company has an HRA plan (employer funded) for all employees. Each are given $1000 a year to spend on medical expenses and it rolls over from year to year. Nobody uses it for premiums because they don't need to but could if they wanted to.

We plan to hire an individual in need of coverage and planned to offer to reimburse him up to $500 a month for family health insurance premiums upon his submission of proof of coverage/premium statements.

Can we do this outside the standing HRA. The new employee would get that too but do we have to offer all the old employees the same "deal" as this new employee? Our arrangement is part of salary negotiation and has been included because we do not offer group coverage due to our small size and it being so cost prohibitive.

Do you see any problems with our proposal?

Any suggestions for a starting point? Thanks in advance!

New Small Group company (C Corp) is offering FSA for the first time but the plan is top heavy. The top 2 executives significanly exceed allowed pre-tax contributions. As an alternative, ExecuCare Executive Reimbursement plan would provide these two employees the ability to receive benefits for unreimbursed medical expenses on a tax free basis and in addition, the employer will be able to write off the claims payments (110% of claim amount) as an eligible business expense.

Question: Can the employer make itself whole by reducing the two participants annual income comensurate to the dollar amount the employer paid in benefits?

What's the consequence of failing to send the safe harbor notice prior to the beginning of the plan year? Do you lose the safe harbor for the year and have to test? Thanks.

What are the implications if we reduced a participants DB (employer funds only) single life pension annuity benefit in order for a participant to qualify for state assistance? This is the participant's request. This should be a good conversational topic for today.

A DB plan was amended during the current plan year to freeze accruals, before any benefits accrued during the plan year. I want to take into account this amendment when doing the beginning of the year valuation for this plan year. I don't want to go the 412©(8) route which requires applying to the DOL. Can I take into account this amendment?

The client terminated the MPPP two years ago and has been working to distribute all of the assets. Well, all assets were distributed early in 2005. Part of these assets were life ins. policies. It seems now that the Ins. Co. that provided these policies went through some kind of sale and has notified our client that additional money will be coming as a result of the ins. company sale. They can't tell us, however, how much it will be and when it will come. My question is whether or not the Trust has to keep the MM account open with the broker. It seems to me that if the INs. company issues checks in the name of the trust at some point in the future, the trust will need someway to deposit and then distribute these amounts. Suggestions?

Since an LLC owner does not receive w-2 compensation (just pass-thru comp), you will not know until the year end what amount should be reported as income, and hence what income to match. Are there any restrictions for an owner of an LLC to fund their account with the employer money throughout the year, before they know what the year end income will be? Or if they overfund, do they just have to take a distribution prior to the tax filing due date (like a traditional IRA)?

Please advise. Thank you!!!

Beneficiary owns various shares of stock direct and by application of the family attribution rules. Beneficiary is also the general partner of a limited partnership. I don't have the exact details yet on how this is structured, but in general terms, how do you attribute the stock in such a case. Assume I understand that the stock held by a parntership is attributed to the partner proportionately. I just haven't seen any guidance how to answer this question under 318 in the context of a limited partnership. Thanks.