I once knew this but have forgotten due to infrequent use of this funding method. If I change assumptions do I have to set up a 412 base for the assumption change (assume it's a charge base) under the FIL ? I'm clear on the initial base (UFIL) and how gains/losses are treated (spread gains) but don't remember assumption bases per se. I'm thinking if I don't set a base up then my UFIL won't balance/equal my 412 bases-CB-ARA, right ? Anyway, any clarification would be appreciated.

Here is situation: Participant dies - Beneficiary designation form indicates her "ex" husband is the 100% beneficiary. She was currently married to someone else at the time of her death. She willingly and knowingly left her 401K funds to her former spouse. Both current and former spouse were taking turns taking care of her before she passed away.

Question is: Does the former spouse get the same spousal options in any distribution? Specifically:

1. Rolling funds into an IRA in his name?

2. Wait to take distribution until the participant would have been 70-1/2?

3. Leave the funds in the plan ($15,000+) and take distributions using his life expectancy?

Never had a situation like this come up and I can't find anything in the regs right off the bat. Any help would be appreciated........

Did a search and couldn't find any situation/question exactly the same, so here goes.

Employer established a SIMPLE-IRA in 2004. Employees deferred, employer matched, etc.. However, the employer had more than 100 employees who had earned more than 5,000 in both 2003 and 2004. The question was, what can they do?

It seems to me that this is corrected through Rev. Proc. 2003-44, and is an "employer eligibility" failure. It further appears that since the SIMPLE corrections are similar to the normal qualified plan corrections, that this cannot be corrected through SCP, and will have to be submitted through VCP.

However, since I've never encountered a situation like this, I thought I'd see if anyone has other thoughts/ideas? Thanks!

Per HIPAA regulations, in order to trigger a pre-existing conditions exclusion, medical care provided during the 6 month look-back period can only be considered if it is provided by a state(i.e., the 50, as well as US territorities) licensed physician. Does that mean that medical care provided in a foreign country by a non-state licensed physician cannot be utilized for the purpose of establishing a pre-existing condition, and triggering a pre-existing conditions exclusion?

Plan provides 33% match up to 6% deferrals. Match is contributed monthly and there is no year-end true-up. If the matching contribs exceed the match based on 6% of the comp limit, is the excess forfeited?

Plan Year was 2/1 - 1/31. Compensation is defined as calendar year ending with or within the Plan year. Limitation Year is defined as calendar year ending on or within the Plan Year.

The Plan Year was amended to calendar year, with a short Plan Year of 2/1/04 to 12/31/04. The definition of compensation and the Limitation Year are unchanged, both remaining as calendar year.

Should any limits be pro-rated? It seems that they would not, since the compensation period and the Limitation Year have not changed.

Also, this is the second year that the plan has allowed salary deferral contributions. It was a profit sharing plan prior to that. The first year of being a 401(k) (the 2/1/03 to 1/31/04 plan year) was not Safe Harbor. For the second year of being 401(k) (the short plan year of 2/1/04 to 12/31/04) a Safe Harbor Notice was distributed telling particiapants that for the 2/1/04 to 12/31/04 Plan Year the Plan will be Safe Harbor and will make the 3% non-elective contribution. Any thoughts on the short Plan Year Safe Harbor?

Thanks.

We are looking at a law firm with approximately 80 partners. Income to the partners is distributed via a K-1. The question is for 1% and 5% ownership thresholds for Key and HCE determination, what is the appropriate partner percentage to use for these tests?

The K-1 (2003) shows the partnership percentages under Item D for profit sharing, loss sharing, and Ownership of Capital. Two numbers for each are supplied: before change or termination, and end of year. I am fairly confident that you would use the higher of the two column numbers since the 1% and 5% references "highest percentage" owned during the plan year. The question is do we use the profit sharing/loss sharing (which are identical) or the ownership of capital for testing?

My company has been reviewing the self-funded medical plan design for our expatriate group (both U.S. expats and TCNs) and are researching whether our current plan is "typical" of expatriate plans, particularly the deductibles. We are interested in the type of plan designs offered by other companies. In particular, we are wondering if our deductible and out-of-pocket amounts create inequalities among our expatriate group due to cost differences around the world.

We offer one indemnity plan that provides coverage for doctors' office visits, diagnostic lab and x-ray services, hospital expenses, surgery and anesthesia charges, prescription drugs, durable medical equipment, physical and occupational therapy, and psychiatric care. All charges are subject to an annual deductible ($200 Individual, $500 family). Once the deductible is satisfied, we pay 80% of the allowable medical expenses. The annual out of pocket maximum is $1,500 per person. The plan provides a yearly maximum of $350,000 per person and a lifetime maximum of $1,000,000 per person.

I'd be interested in any comments or experiences you've had in developing and administering a plan for expatriate employees and the general plan design offered. This tends to be a highly vocal employee group, so we want to tread carefully in recommending changes! Thanks in advance for any replies.

My company sponsors a cafeteria plan that covers several subsidiary companies and employee groups under one medical plan design. We are considering offering domestic partner benefits to same sex couples, but are thinking of rolling it out first to only one of the business units (a subsidiary) as a "test case.” Are there any discrimination issues we could conflict with in offering DP benefits to one subsidiary business unit vs. another when both are covered under the same cafeteria plan?

Due to the ADP test, excess contributions & earnings (>$100) were returned to the employee prior to 3/15/05. My understanding is that these are taxable in 2004 even though no 1099-R will be issued until January 2006. The difficulty is that the check stub accompanying the returned contribution shows 30% FITW. How do I report the withholding for 2004 without a substantiating IRS form?

I have a situation where six people that all quit the same company and started their own. They also brought two NHCEs over with them. They are ready to start a retirement plan and they wish to make everyone 100% vested as of the effective date of the document. My problem is that my prototype will not accomodate this. Now, if I design the plan to count all service with the company they were all formerly employed by, I could get by this. My question is would I have any discrimination problems with this design.

Also, I am going to assume they will want to amend the plan in the near future to eliminate prospectively the provision in regards to the service with the prior employer.

All thoughts and comments are appreciated.

The trustee has received an IRS levy on a participant's 401(k) account balance. The participant had rolled over to this plan a large balance from previous employer's plan. The document allows for withdrawals of rollover contributions at any time. The employee has agreed to the levy in order to stop additional interest and penalties from accruing on the amount due IRS. Is this distribution subject to the mandatory 20% withholding?

I am working on a plan with 2 owners and 6 NHCEs. Each owner has a 2003 hire date, and the NHCEs all have 2004 hire dates. If all of the NHCEs are excludable employees, is it true that they do not need to receive a PS contribution if the plan is disaggregated?

This plan has a safe harbor match, & no other non-elective contributions.

Thanks!

Small business owner adopted MPPP when he was the only employee and adopted a benefit formula equal to the lesser of 25% of compensation or $40,000. Great for when he was the only employee, not so great when he hired 3 new employees and did not know that he needed to contribute for them as well. I have looked through EPCRS and understand what the standardized correction should be, ie contributions for the excluded employees plus interest. However, his payroll for these 3 employees is $100,000 - he will not be able to finance this. Has anyone seen any provisions that may suggest that there is sometype of other correction available?

Regardless of actual ownership.... Wife is considered an HCE due to attribution.... right?

My client X sold the assets of its subsidiary Y to an unrelated buyer Z and spun off a portion of X's 401(k) plan attributable to Y's participation in that plan to an identical new 401(k) plan established by Z. This happened on August 1 of 2004. In performing the 2004 ADP for X's plan (prior year testing is used), I believe X needs to include deferrals made to its plan through August 1, 2004 by HCEs who were spun off to the buyer's plan. The ADP test for X's plan fails. How can we return excess contributions attributable to the HCEs whose accounts were spun off to Z's plan if we don't have any of their money in our plan? Since Z will be testing only for deferrals made under its new plan, should it care about our testing problems? I don't see how we can force Z to make a distribution of excess contributions from its plan to help our ADP problem, unless we can argue that not all of the monies transferred to the Z's plan in the spinoff were qualified dollars (because they exceeded the ADP limits and had to be distributed to the HCEs), and thus Z's plan needs to distribute these dollars attributable to excess contributions to preserve its own qualification. Has anyone ever dealt with this situation? I do not think the Notice 98-1 provisions on plan coverage changes (which are also included in the final regs) are relevant. My client could ignore the HCEs who were spun off in performing its ADP test (very dubious) or ignore this group of HCEs in making the refunds of excess contributions to the remaining HCEs (equally dubious). I am leaning toward writing to Z and explaining that it needs to distribute the calculated amounts of excess contributions (and interest) from its plan to preserve the qualification of its plan. I would appreciate any thoughts. Thanks.

Can the Trustees of the plan use plan assets to pay consulting fees.

Example: A consultant wants to examine the plan for a fee and the consultant said just use the plan assets to pay me. The consultants objective is to reduce plan costs to participants (ie. Lower expense ratios (costs) ) The consultant said take the money from participants accounts on a pro-rata basis, because expense ratios do the same thing. He went on to say if he couldn't show us how to reduce the costs by at least the amount of the fee that he would refund the money back to the plan.

Is it legal to use the assets in this way, if it will ultimately save the participants money? Is there IRS Code where this is explained? Can you put the money back?

Client acquired frozen defined benefit plan and subsequently amended the plan for current law, terminated the plan (board action as well as appropriate IRS and PBGC filings) and distributed benefits to participants. It has now been several years, and the Plan's trust still contains residual assets. The Plan has not been timely amended for EGTRRA, but client has, however, been timely filing IRS Form 5500. Client is contemplating either (1) taking the reversion or (2) merging the Plan with one of their current plans. If they decide to merge the Plan, must they amend the Plan for EGRRRA as well as file under VCP as a late EGTRRA amender (which requires a contemporaneous determination letter filing) to avoid risk of tainting current plan?

We normally deal with pretty small plan sponsors and when distributions occur, our clients typically use an 8109 coupon to forward withheld taxes, usually with their bank. But recently an accountant told us that one of his clients got a $500 fine for not sending this repayment electronically, although the amount was correct and the timing was fine. Does anyone have any further information on whether electronic filing is now required?

Employee is promoted. Changes from one union affiliation to another. Original union provided 100% reimbursement of family health premium. New union provides 80% reimbursement, resulting in employee cost of approx. $180 per month for same plan. Employee wants to drop dependent coverage because of the new out-of-pocket cost. (Dependent has long-standing other coverage in place.) No change in plan eligibility has occurred, just employer reimbursement.

Would you permit employee to drop dependent due to "significant change in cost"?