I have some questions about how early payroll deductions can start in relation to the effective date of the coverage the deduction is paying for. Looking at the regulations, it appears to me that payroll deductions should not start in advance of the effective date of coverage, but I am being told that "the industry" does not always operate that way. Is it permissable to collect payroll deductions for 30 or 60 days in advance of when coverage under the policy will commence? If so, is that only true for certain types of policies? Are there any regulations covering this specific issue beyond such things as only amounts not yet earned can be committed to paying premiums (at the time of election of coverage) and no retroactive coverage?

Thanks for any insight you can offer.

I know very little about SARSEPs, but have been asked to research the following:

Client has existing SARSEP. Original documentation was signed with ABC investment company. That documentation has no requirement that all assets be invested with ABC Company. Broker recently adds investments from XYZ Investments as an option. XYZ requires company to fill out new documentation through them. Company complies, using original effective date.

Is this all okay? Does the new document supercede the old? This seems too obvious to me, but I was asked to find an answer.

Thank you.

Are mandatory employee contributions to a defined benefit plan always considered after-tax contributions?

Thanks to one and all.

Does anyone know if there has ever been a court judgemnent made againt an employer, fiduciary or trustee for excessive fees in a plan??? If so, do you know where I can look to read about it??? What's the Case Name??? Where was it brought???

Participants' pension plan failed to make timely RMDs (i.e., "age 70½" distributions). Thus, participants must pay the 50% excise tax imposed by Code § 4974. They will attach the letter (outlining the mistake and the reasonable steps being taken to correct it and begging for a waiver) to their Forms 5329. Does anybody know how tough the IRS is on such requests?

Thanks.

We got a small DB plan using individual aggregate funding. The owner has accrued his full benefit. Last year, before the Plan was frozen, He was just three years from NRD, and his unfunded liability was amortized over those three years. Now that the plan is frozen, it is the actuary's understanding that the IRS expects you to change to Unit Credit funding for frozen plans. In which case we would in effect be amortizing the owners unfunded liability over 10 years instead of two. Doesn't seem to make much sense. The unfunded liability of the others is insignificant.

For a startup 401 plan effective 01-01-2005, are non-owner employees earning greater than $100,000 HCEs? Or would they first be considered HCEs for the 2006 Plan Year? Thanx.

Since I'm not versed in the Roth IRA product, can you rollover distributions from a traditional 401K plan to a Roth IRA? I know you can roll from a traditional IRA to a Roth, but not sure of 401K plans. Thanks for your help.

Dad and Son are owners in a closely held business. They each have their own IRAs. They invest in stock of the closely held business.

Is it possible for Son's IRA to buy family business stock from Dad's IRA?

I'm not even sure where to start to look for this in the regs???

Giving an enhanced match (100% up to 4%) to satisfy ADP/ACP safe harbor. It is in done by payroll method written in document. Looking over what has been put in, it looks like a few people have received slightly more than 4%, roughly 4.2%. The regs regarding payroll period method match deposits only talk of not having to 'true up' the match contribution at year end due to changes in deferral elections, etc. I can't find anything about having to 'true down' the match contribuiton. I don't really see anything wrong with leaving this money in the plan allocated to these participants, does anyone else? I mean, if by virtue of electing to use the payroll period method you can get away with not giving someone the full match amount, why would there be a problem with allocating an extra $50, which is what it turns out to be for most of the affected people.

My employer has changed computer systems and will now receive premium payments from health plan participants after the month for which the coverage applies (e.g., participant makes payment on March 1 for insurance coverage received in February). Consequently, if a participant terminates employment in the middle of a month, the employer must bill the employee for the premiums for the weeks of coverage he/she received during that month (e.g., employee terminates employment May 18; employer must bill the terminated employee for premiums owed for May). So, the employer may have trouble getting paid.

My employer is worried about losing a lot of money after employees leave. The employer realizes that they cut checks for accrued but unused vacation to employees when they terminate. To ensure payment of the the health plan premiums, the employer wants to withhold the vacation payout checks until the terminated employee pays the premiums owed. Or the employer wants to deduct the the premiums owed from the vacation payout check before the check is mailed to the terminated employee.

Withholding checks for this reason may violate state law. Reducing vacation payouts by the premiums owed just seems sticky to me. These appear to be separate things and shouldn't be combined. Does anyone know if the Fair Labor Standards Act addresses anything like this? Or the DOL? Can reducing the amount of the vacation payout checks really be permitted?

Anyone have any thoughts?

Thanks for your help.

Question:

Can an S Corp (a bank) offer its own stock as an investment option in its 401(k) plan? If so, are there any issues to be worried about?

Facts:

* Non-publicly traded.

* Not an ESOP.

Thanks!

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.