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?

I have a client with a PS Plan with a 5/31 year end. Currently the plan's eligibility is Age 21 and six months of service. Entry date is on 6/1 after meeting eligibility.

Employee A, over age 21, was employeed 8/23/04 and should enter the plan on 6/1/05.

Client is wanting to amend his plan's eligibility to Age 21 and One Year of Service with the amendment effective 6/1/04. Will this keep Employee A from entering the plan on 6/1/05? Or since she has not entered the plan yet, will she fall under the new eligibility rules?

Thanks.

In a situation where there are 2 employer plans, does a prohibited transaction result if one plan buys an asset from the other plan? I cannot find anything on point in IRC section 4975 or ERISA 406 or 408.

I have a 401(k) plan that (during 2004) has adopted a resolution to terminate. I have a number of employees who were eligible for the plan (prior to the resolution) and made no 401(k) deferrals and have no account balances. They are still actively employed. The question is: Should they be included in the participant count in question number 7 on the Form 5500 or can they be considered as having received a distribution (deemed distribution) and removed from the counts? I know that they should be included in the count for question 6.

Any referral or cite would be a great help.

If an independent contractor is participating in the state's 457(b) plan can the independent contractor also fund his own SEP plan?

We have a company that submitted their own 1099R for a participants loan default for 2003. They issued it for the wrong amount (too much by about $1,000).

Do we just need to submit a corrected 2003 1099R for the correct amount or is there more needed?

Company X maintains a cafeteria plan for its employees. Company X is proposing a design change in which it promises to make a $300 contribution to the medical FSA it offers if the employee elects a specified medical insurance option, whether or not the employee also elects to make contributions to its medical FSA. Is there any legal prohibition against an employer providing one type of benefit contingent upon an employee's election of a specified benefit?

I saw a while ago a list of required provisions for EGTRRA, which I believe was provided by the IRS in order to assist practitioners with amending plans. Anyone know where I can get this? I also saw a similar one for GUST.