The automatic rollover requirement (of mandatory distributions between 1,000 and 5,000) does not make an exception for after-tax distributions as far as I can tell.

Consider an extreme case where a terminated participant is entitled to a lump sum of $1,050 consisting of $1,000 of his own after-tax contributions and $50 of taxable interest. If the employer wants to force a cash-out, the entire distribution would be subject to the automatic rollover rules. Or is there some exception?

I'm sure this has been asked before, but I'm new.... Company wants to require employees currently with family coverage, who have working spouses with available medical coverage from their employers, to elect the other coverage as primary coverage for the spouse. Is this legal?

I have a question on this as it relates to new mandatory rollover rules.

In a conversation with someone who handles 1099 reporting, it appears that the IRS imposes a penalty of $50.00 if a 1099 has an incorrect address. I'd like to explore how this relates to the new mandatory rollover rules.

Suppose a Plan Administrator sends a distribution kit to the last known address of a terminated participant. Everything is done correctly, SPD's disclose mandatory rollover rules, 402(f) notice, etc....

After 30 days, or whatever "reasonable" period PA has selected has gone by, the PA processes a mandatory rollover to First National Bank of East Overshoe in the name of the participant. Everything has been done in accordance with the IRC, and the DOL safe harbor regulations.

Now the PA does the 1099. But it turns out the address of record is incorrect. Not an unlikely occurrence in these situations. It appears PA is fined $50.00 when the IRS does its annual "audit" or whatever it is called.

1. Is this true, or am I misunderstanding?

2. Does the PA have any recourse? I am given to understand that they do not.

3. Can this expense be reasonably charged to the plan? Seems difficult if the participant's account has already been completely liquidated - I'd say no.

And as an editorial comment, if the above scenario is correct, it really stinks if the PA is following the law and DOL safe harbor, and still gets fined.

Comments or discussion? Thanks!

If a redemption fee is created as a transaction and it is incorrect is it a prohibited transaction to refund or reverse the transaction.

Partnership A is owned equally by Corporation B and Corporation C.

X is 100% owner of Corporation B.

Y is 100% owner of Corporation C.

It has been determined that an Affiliated Service Group exists.

What is used as compensation for the partner-owners (X and Y)? Does the ordinary business income from the partnership (which X and Y materially participated in) get added together with the W-2 received from the corporation?

I have some questions concerning what happens if a SIMPLE IRA provider decides to cut some expense and close out accounts <$100 that have been open for more than a year. The SIMPLE IRA provider is forcing the closing of these accounts. Participants are not voluntarily closing their own accounts.

1. When the provider sends a check for the balance of the account (<$100) to the address of record how is this reported on the 1099-R.

2. Is the distribution cosidered premature with exception? Does the participant have to pay a 10% premature penalty, or 25% penatly if they have not contributed to the SIMPLE for more than 2 years.

3. Is there a $ threshold that a distribution can be under, and not have to be reported?

If anyone can point me to an IRS publication or notice that can help clear up these questions it would be greatly appreciated.

Thank You

A client has stated that he knows there is a pre-tax plan that "works just like a section 125 cafeteria plan" for mechanics (or auto-mechanics) to set aside pre-tax dollars to purchase tools. He just doesn't know the particulars and wants his company to participate. Anyone have any knowledge of such a plan?

In 2004 we used 5.07% for calendary year plans for lump sum distributions. This was grandfathered by PFEA.

For 2005 what rate do we use? Do we now use the corporate bond rate, the 5.07% or the 30 year t-Bill for December 04?

That law is STILL confusing me!

What are the rules for attributing stock options for ownership? I guess more specifically, how do you attribute?

2004 minimum required contribution = $100,000

2004 contribution made on 9/15/2005 = $110,000

Therefore, 12/31/2004 Credit Balance = $10,000

2005 quarterlies = $25,000

The entire contribution for 2005 is made on 9/15/2006.

175% AFR = 7%

Val Rate = 6%

What is the late quarterly interest on the 4/15/05 payment?

Obviously, we can't offset the quarterly by the credit balance until the 2004 contribution is made.

Further, it's certainly true that the credit balance should get interest from 1/1 once it is made.

Is this correct (I'll use months for elapsed time for simplicity):

CB @ 4/15 = 10,000 * 1.06^(3.5/12) = 10,171

Late 4/15 Q interest =

25,000 * (1.07^(5/12) - 1.06^(5/12)) Interest from 4/15 to 9/15/05

PLUS

(25,000 - 10,171) * (1.07^(12/12) - 1.06^(3.5/12)) Int from 9/15/05 to 9/15/06

I've heard arguments that the quarterly should be accumulated with interest to 9/15 and the CB should get interest to 9/15, then the difference should get penalty interest beyond that, but I have trouble crediting interest to the CB beyond 4/15 since it was not sufficient to meet the quarterly as of that date.

Any thoughts?

I have a question about weekly methadone treatments at an outpatient facility. I understand that inpatient care for substance abuse is eligible for reimbursement from a FSA, but I've not encountered outpatient care. Are there any pitfalls I need to watch out for or should this be handled like any other FSA expense?

I'm not sure if this is the right message board to ask this, but I'm hoping there is someone experienced both on HIPAA and retirement plans. I work for a TPA of 401(k) plans and a new client of ours refuses to provide our firm with the social security numbers of the plan participants. The client is a medical office and states as a result of HIPAA privacy rules she is enable to provide this information.

I have heard about HIPAA - but not all the details - but there must be something in the regulations of HIPAA that just refer to privacy information only within the context of health plans or medical information. Would someone be able to provide me information or point me in the right direction for research?

Thank you!

Two employees leave company A in 2005. EE #1 is 0% vested in his match and EE #2 is 80% vested in his matching account balance. Both EE 1 & EE 2 are NHCE's. For whatever reason, the employer wants to make them both 100% vested in their matching account balances.

Can this be done with a simple amendment targeting these two employees - without changing the vesting schedule for all the other employees, or would accelerating the vesting on these two targeted employees be a violation?

I am new to this forum and appreciate all the great information. I do have some questions though and would very much appreciate feedback on them.

My co. has less than 10 employees and offers a Section 125 Cafeteria Plan wherein the co. makes monthly contributions for eligible employees – “employee whose customary employment is at least 1000 hours per year and who has completed at least three months of service…" The plan year is Jul 1 to Jun 30.

If an employee has worked full-time for a number of years; requests and is granted part-time employment (over 1000 hrs/yr) because of health issues (still qualifies for benefits); is advised on Nov 22 that his employment status changed to less than 1000 hrs/yr effective Oct 31 with no written notification til Dec 16 (no longer eligible); then is terminated on Feb 1 with no explanation and no prior indication of any dissatisfaction by mgmt (this man has been a valued employee for a number of years), at what point does the benefit stop – Oct 31, Nov 15, Dec 16, Feb 1? Since he was a qualified part-time employee at the beginning of the plan year, can the employer cut his hours so as not to pay the benefit for the remainder of the year? I realize the employer is responsible for the full yearly benefit on the first day of the plan year but plan termination date effects total eligible expenses and thus total compensation.

Does it matter that no requests for reimbursement were submitted before termination? How long does he have to submit his claim?

In this case, the employer is stating they are only liable for 4 months of the company compensation (Jul,Aug,Sep,Oct). Is there a document that spells this out clearly in a format that most people can understand and yet references actual regulations? If the company stands firm on their position, is the only recourse through an attorney? Can the employee take this to the IRS and if so, who and where?

Thanks in advance for your responses!!

We are reviewing a take over Money Purchase plan that has an original effective date of 5/01/87 and during several discussions with the client it has been come to our attention that they may be a governmental entity. The potential problems are that the plan was set-up on a standard DC prototype document and has had non-discrimination testing and annual Form 5500’s prepared for several years.

1. For at least the past 12 years their TPA has filed a Form 5500 and prepared testing for the plan. However, from the information that we have gathered, we suspect these requirements may not be applicable.

The client would like to take advantage of the ERISA exemptions offered to governmental agencies (no testing or 5500); however, I am unfamiliar with governmental plans or what the best approach would be to get the client where they need to be. Does the existing plan need to be terminated or merged into a new plan so that a final Form 5500 can be filed?

2. The plan was set -up on a Non-standardized Prototype adoption agreement

Is there a larger underlying problem with the plan being on a prototype document not designed for governmental plans? Or is there no problem since operationally the plan has been in compliance with testing and 5500's?

Any guidance as to what type of retirement vehicle might be more appropriate and/or the necessary steps that should be taken to get them there would be greatly appreciated.

Mother in law dies and leaves house half too each daughter. One daughter would like to sell her interest. The other daughter would like to keep the house. Daughter 2 happens to be the wife of the owner of the Plan Sponsor. Sponsor would like to buy the house.

Is sister of wife of trustee an underlated party. Would real estate in the Plan be a good idea?

Notice 2004-84 contains the List of Changes in Plan Requirements. Under item #12 it states that guidance regarding post-severance compensation issues is expected to be issued soon.

Has anyone seen this guidance? If so, please advise where they are.

Thanks so much.

I have a life insurance policy that is in a 401(k) Plan. The policy originated when the plan was a P/S Plan.

The annual premiums for the policy have been paid from his 401(k) deferral balance. The employee has now terminated employment and will not be allowed to defer any longer. His 401(k) balance is less than the annual premium for this year.

The employee does not want to lose this policy. He is 75 years old now and needs the death benefit for his wife. But the cash value of the policy is over $100,000 now and he can not afford to pay ordinary income on the policy if it is distributed to him.

1. Are there any rollover options for the insurance policy?

2. Can he contribute the amount of the premium payment into the plan each year even though he is now terminated?

Any ideas on how to accomplish the above?????

A plan has salary deferrals and a 3% safe harbor nonelective contribution made to the plan. The safe harbor contribution satisfies the ADP and top heavy minimum. Is it possible for the employer to increase his safe harbor contribution to 4%? Would it still pass the ADP and top heavy minimum?

Can an employer provide supplemental unemployment benefits under a section 125 plan?