A participant in an employer-sponsored health plan obtained medical treatments that were not covered under the employer's health insurance coverage (but is covered under other health plans offered by the insurer).

The participant was directly billed a total of $25,000 plus for the medical expenses by the medical providers. The participant requested the medical providers to submit the claims to the insurance company, which they did. The famous-color insurance company refused to adjudicate the claims, even though it has contracts with the providers that would have reduced the overall billings to approximately $11,000.

The insurance company orally represents that its policy is not to adjudicate claims that it "knows" are not covered. The participant believes that the insurer has a duty to adjudicate claims under the health plan, and that failure to do so is a violation of ERISA fiduciary duties. (The employer agrees with the participant.)

Does the participant have a right to be a third-party beneficiary of the insurer's contracts with the medical providers? Should I advise the client to sue the insurance company. Is he likely to prevail?

Is the employer stock held by an ESOP(non-leveraged) considered for purposes of ownership determination for highly compenasted and key employee consideration?

Thanks

padmin

How can I determine if an employer has ever filed a form 5500? Is there a simple way to do this?

401(k) plan has a match formula that matches 100% up to the first 3% of compensation deferred. They calculate the match per pay. They have not been limiting the compensation to the annual limit under 401(a)(17). So for the 2004 plan year, an HCE that made $300,000 ended up with match of $9,000 instead of 3% of 205,000 equaling $6,150. My understanding is that they can match on each pay but need to limit the overall match to the 3% of the compensation limit for the plan year. Has anyone had experience with this.

Also, had an issue with recordkeeping system where HCE that was eligible to defer did not start deferring until 7/1. When we tried to do the match calculation on the system, it would not give him match since his salary from 1/1 - 7/1 exceeded 205,000. So they said he had already exceeded the compensation limit and was not eligible for match over the 205,000 - even though he had not deferred on that match. Pursuing this with the recordkeeping system people.

If a doctor has prescribed a health club for an individual, can this in any way be considered an eligible expense through an FSA Plan?

Thanks,

Joe

We have a small S-corp client with one HCE and several NHCEs. The client has had a SEP for several years.

He made timely SEP contributions for his NHCEs for 2003, but made only 75% of his own SEP contribution. His accountant assumed the full amount had been paid in and deducted it on his tax return. The client is usually very good about making the deposits; he probably just made a mistake in depositing less the required total for himself.

He made additional contributions in December 2004 (for the 2004 year). Can those be applied to the shortfall on the 2003 contributions? We're talking about $5,000 that wasn't deposited on time.

What are his options for making this right?

Thanks for your help!

My employer has bought a company - effective sale date 3.1.05. What are the legal requirements for benefits? Do we have to have identical benefits are both companies? If yes, from day one? Our 401K company needs 90 days to integrate them into the 401K plan. What benefit issues should I be working on first; what is most critical? We are wondering about the health, dental, life, disability in addition to the retirement plans.

I apologize if this is a stupid question.

I've combed the web and read a book... But no one (that I've found) seems to say what to do with the money that you can place into the Roth IRA.

I'm 24 (so I have a while to go - let's hope) and I already have a litte invested in mutual funds and stocks.

I did a search of the forum here and somone described the IRA as a briefcase (i think) that you put whatever you want into as an investment to avoid it being taxed upon withdrawl (i beleive I am oversimplifying here).

So could I then just invest the 2500 for the last year (2004 before the tax deadline) in an index or mutual fund?

Also, I was looking into Scottrade for my Roth. Is this a good idea, or has anyone heard anything bad about them? I also have a full service broker that I could use, but there are fees involved.

I also appreciate any additional advice anyone here can offer me. I know your time is very valuable and I appreciate your responses.

Thank you,

Kevin

I have a client who wishes to "upgrade" to 401(k) Plan from a SIMPLE IRA. Can they implement the 401(k) in 2005 even thought they have already had dedcutions in the SIMPLE IRA for 2005? Can the SIRA have a short plan year?

I have a client who wishes to "upgrade" to 401(k) Plan from a SIMPLE IRA. Can they implement the 401(k) in 2005 even thought they have already had dedcutions in the SIMPLE IRA for 2005? Can the SIRA have a short plan year?

My understanding is now that the 411(d) regs. are final, participants do not have to be notified prior to the elimination of a distribution option from a DC Plan as long as there is an otherwise identical lump sum available. Is this correct ?

I know it is good PR and the SPD / SMM requirements are still in place, but I just want to be sure I understand the minimum required.

Thanks.

I've got a doctor who worked with his accountant to withdraw money from his PS plan several times last year. In each instance, instead of withholding 20% and remitting it through normal channels (and never mind filling out distribution forms!), he figured what the effect of the distribution would be on his total 2004 taxes and then sent in estimated taxes accordingly.

[For example, if he's in a 30% tax bracket, and he took $40,000, he would have sent in $12,000. If the next distribution of $60,000 put him at at 40% tax bracket, he would have sent in $24,000.]

Yeah, I had to pick my jaw up off the floor, too.

And of course, I first learn of this on 2/7, and am asked to prepare the 1099-R, etc.

So I will reflect the gross distributions in Box 1 of the 1099-R. And all taxable, since they were all cash payments. For withholding, I suppose that it would be the total of these amounts that were calculated, even though it will be more than 20%. And since he's 58 and termed, he meets the Code 2 exceptions for Box 7, so at least there's no additional 10% penalty.

The questions I have are:

1. Is there a problem in general with withholding MORE than 20%? I can't imagine that the IRS would be upset with getting more money sooner.

2. How in the world is the money already sent to the IRS (presumably under the doctor's SSN and not the employer's EIN) going to get matched up? There's going to be an issue with the 945 showing a payment under the employer's EIN, but it not being there, and I expect it will only get resolved when the IRS sends a notice and really looks into it.

3. Assuming that this all did really happen on the accountant's advice, can I somehow justify grievous bodily harm to said accountant? Mental anguish or something?

Thanks for all your replies.

Can anyone refer me to an easy to understand example of the mechanical calculations of how cross testing works. I'm trying to explain the concept to an engineering firm. I know it will be an uphill battle, but wish me luck anyway.

The son of a 50% owner has worked part time. In 2000 and 2001 he worked 1000 hours during each of those calendar years. In 2004 he attained age 21 and his entry date is 7/1/04. However, he is in Iraq.

Do I include him in the ADP test with zero comp and zero deferral? Our document provider said "yes". I realize that there may be Userra issues once he is back home, but am concerned about his being in the test with zero, zero. Having him in the test, of course, helps the HCEs.

I trying to determine whether an owner is a Substantial Owner and would have the ability to waive a portion of his benefit under a PBGC standard termination.

The businesses covered by the plan are owned 100% by a privately held holding company. There are 3 classes of stock (A common, B common & Preferred) of the holding company, and about 19 relatives who own various shares of each class. Both the parents and children of the owner in question have stock in multiple classes. There are a total of 10 shares of A common stock, 1,000 shares of B common stock and 4,900 shares of Preferred stock.

What determines whether or not you "count" the shares as ownership for this purpose? Is it only voting rights? Control of some fashion?

I don't have a copy of the articles of incorporation, which I suspect would spell out the various rights of the classes. I can certainly request additional information, but I'm not sure what question to ask.

Thanks!

Is it possible to obtain a copy of a plan document from the IRS or some other agency? Presumably the IRS might be the only option for a modern document and only if submitted as part of an FDL application.

We have a 401k Cross tested SH plan. Employees receive 3% SH contribution starting on the first day of the month after 90 days of employment. The plan has a last day of employment provision for Profit Sharing. The company is providing an additional 3.5% for PS resulting in a total 6.5% (3% SH and 3.5% PSP).

My interpretation of the Gateway Minimum is that all NHCEs entititled to the SH would also be entitled to 2% of the additional 3.5% PSP. However, the law appears to allow us to disaggregate the plan and potentially exclude the people who have not satsified statutory service (<1 year) from receiving anything other than the 3% SH. I think.

Question, if we disaggregate the plan, must we run separate 401(a)4 test for each of the two disaggregated plans? Or can we disaggregatet he plan to demonstrate coverage and then run an (a)4 test for the entire plan? Or am I totally off base here?

I have a 401K through Merrill Lynch which was my last employers 401K provider. I currently have about $1400 in it and right now have a desire to withdraw the money and am willing to take the 20% fee hit (for withdrawing) and then the 10% tax hit which would leave me with around $1100. I will be using this money to iron out some debt and straighten a few things out.

I have a desire to continue to invest later in life, but would like to iron out debt so that I could invest more in the future. Basically, withdrawing my 401K would be allowing me to jump start on a money management program and iron a few things out.

What is your advice/insight?

Thanks

IRS Model Tax Notice

What recourse do we have when we have a plan that has been terminated and there is one person who does not return paperwork to have his funds distributed? His balance is a little over $13,000 at the present time, so he doesn't qualify for the automatic cashout? We know where he is, we have sent him certified mail which he signed for, but he won't respond to our requests to fill the paperwork out so that we can distribute his funds and finally close the plan!