Employer has safe harbor plan providing for employer contibutions. Employer wants to add to the plan "union" employees who will not recieve the safe harbor employer contribution. Can this be done? Can you have a group receiving employer contributions and a group not receiving employer contributions in the same plan? IRS guidance seems to imply that the entire plan be a safe harbor plan, but perhaps the union ees can be disregarded?

An employer (S-Corp with 2 equal owners) wants to start a PS plan for 2004 and would like to exclude as many non-owners as possible, at least for 2004 and 2005. We are considering a 2 year of svc requirement to enter the plan, which could keep everyone hired 7/2/2003 or later out of the plan until 1/1/06. Employer has a mixture of "regular" employees and leased employees. All of the current regular employees started either in late 2003 or in 2004. Leased employees started performing services in 08/2003, which is when the leasing agreement the company was enacted.

This may be too simple, but for these leased employees, is the day they started performing services for this employer considered their date of hire for plan purposes? Given the leasing date of 08/2003, that means their date of hire could not be earlier than this day, correct?

On line 7G does anyone know if I should include terminated participants that are 0% vested in this count? The question reads: Number of participants with account balances at the end of the plan year? Any info would be greatly appreciated! Thanks

Todays NY times (page C1) carries an article on IBM closing its cash balance plan to new participants after 04 and substituting a 401k plan. According to the article fixing up CB plans to eliminate the age discrimination aspects is very costly. It may be that CB plans will be a speciality type of plan like 412(i) plans for small employers not subject to ERISA.

I have an 82-year old client, who has been in pay status for a number of years, whose COL adjusted annual benefit is $135,000, or $11,250 monthly under IRC Section 415(b)(1)(B). His limitation year is 12/1 through 11/30.

He want to take out his entire $135,000 maximum annual benefit in one amount in January, '05. I guess that is okay, so long as he does not take anything out in December, '04. Does anyone disagree?

The much more important question, though, is this. I gave him a lump sum maximum, based on the $135,000 and age 82, using the '94 GAR Mortality Table and 5.5% interest. It came to roughly $776,000. When I quoted this latter amount, I assumed that this year's $135,000 would be included in the lump sum.

The client wants to do both the $135,000 and the unreduced lump sum. I don't think he can. There is absolutely no reason to jeopardize the tax qualification of this plan and his potential rollover by doing this. At least, that's what I think.

Am I right or wrong? Any thoughts or ideas would be appreciated. Thanks in advance.

Just trying to confirm - was there legislation this year which stated that an active participant over age 70 1/2 (not a 5% owner) no longer needs to make an election not to receive their MRD? Can a client not even offer them the option?

If an election is required from the participant, is it only to defer? Does a participant who wishes to begin receiving benefits have to formally make that election?

Thanks.

When does a plan have to be amended for Post-EGTRRA? It is my understanding that it was for the plan year beginning or after January 1, 2003.

What exactly are the mandated changes that have to be made. Is it just 401(a)(9)? Or are there other provisions.

Can someone please give me some insight on these questions?

Thanks!

I know that many employers providing retiree health coverage are imposing caps on employer contributions in order to limit FAS 106 liability. Are there any special requirements for imposing such a cap? How does the cap become "official" such that an accountant may properly determine that it really exists and calculate FAS 106 liability accordingly. Does it need to go in the SPD? A Board action imposing the cap? A memo to the file? Practical implementation suggestions are much appreciated. Thanks.

Help. Plan document is structured as a multiple ER plan but individual adopting ERs are filing Forms 5500 as single ER plans. TPA is saying that this method is approved by the IRS but can't find any guidance. The multiple ER plan would have over 120 participants, but each adopting ER is very small (less than 20 participants) so no audit is being done on the plan as a whole. Have anyone seen this before? They said it is common with PEO plans to file separate Forms 5500 like this but have one common document.

Any guidance is greatly appreciated.

A medical corporation maintains a 105(h) medical reimbursement plan. They do not have a cafeteria plan. They also offer an HSA as well as non-high-deductible PPO and HMO options.

Given the IRS guidance (in Rev. Rul. 2004-45) on coordinating HSAs with HRAs and health FSAs, is it appropriate to treat a self-standing 105(h) plan as the equivalent of a health FSA, or is the Rev. Ruling. limited to health FSAs that are nested inside a 125 arrangement?

The corporation wants to allow participants to be reimbursed, under the 105(h) plan, for the high-deductible deductible under the HSA.

Its my conservative understanding that the IRS wants HSA participants not to be insulated from that high-deductible, such that the "health FSA" terminology would be extended to include self-standing 105(h) plans.

Any comments appreciated!

What happens if an employee who has elected to contribute $5000 to the FSA.... in March the employee terminates employment therefore they have only contributed $1200, but has used $5000 from their account. Can one ask the employee to pay back to the company the amount that they used in excess of what they contributed. I read my summary plan documents but am not positive what to do. I read in the plan description that the employer reserves the right to use any forfeited money by the employee to offset loses, but that is if the employee has excess money in the account.

In addition, now this employee has received funds from us in excess do they have to report that as additional income?

Thanks for your help!

A small DBPP has the following:

Minimum funding under aggregate method = 13,000

Erisa FFL = 27,000

OBRA FFL = 176,000

RPA FFL = 46,000

Unfunded RPA CL = 60,000

It seems that the minimum funding is 13,000.

The FFL = 46,000

The deductible limit can be up to 60,000 under 404(a)(1)(D), thus resulting in a potentially large FSA credit balance.

It's a relatively new plan that provided past service credit.

Am I missing something or is this interpretation correct? As I haven't had much need to this point to apply the unfunded RPA CL limit.

Thanks.

Is it possible to implement automatic enrollment in a 401(k) Plan for employees in California. I know that California does not support automatic enrollment.

Does anyone know how other employers are circumventing California's harsh stance on this issue?

I think that if we try to have every employee sign a sheet of paper acknowledging that they consent to being enrolled, then we would be OK. This goes against the theory of "automatic" enrollment, but I think that it's necessary in California. Any thoughts? Any ideas as to what this acknowledgement should say?

Thanks.

Client had a defined benefit plan in past and currently maintains a 401(k) plan. The employee deferrals are invested in self-directed accounts under a mutual fund platform.

At the time of distribution from the defined benefit plan, all but 3 participants took their monies either directly or rolled to an IRA. 3 participants rolled their funds to the 401(k) plan. These assets are held in a pooled brokerage account and earnings and investments are allocated annually. 2 of the participants are HCEs, 1 is an NHCE.

The 3 are now contemplating breaking up the pooled account so they can self-direct (1 HCE is in his 40s, the other is close to retirement so they obviously have diverging investment strategies). The NHCE will take her amount and roll it to an IRA. The 2 HCEs are both doctors and understandably want to keep their funds under a qualified plan umbrella and aren't interested in rolling to an IRA.

The question is they want to establish self-directed brokerage accounts SOLELY for the rollover balances. No other participants have rollover balances in the 401(k) plan except for these 3 at present. I'm concerned about Benefits Rights and Features issues here since the only 2 participants with self-directed brokerage accounts would be HCEs (although presumably the amendment would be written to provide that future rollovers would also be eligible for the same investment option). Any comments on this issue?

I had to let an administrator go a few weeks ago, and I was wondering if there is a statute of limitations on how long I need to wait to repost the job and hire someone else.

Does the transition relief provided by Rev Proc 2004-22 allow a health FSA, which otherwise meets the limited purpose FSA requirements, to reimburse for prescription drug expenses during 2006?

Client is restructuring itself into two entities, they will still be in the same controlled group. My reaction is that they can still maintain and test their PS Plan as a single plan, they'll just need to amend the definition of employer and administrator, etc. to clarify who has what responsibility. Any thoughts?

I have a Safe Harbor 401k Plan with the Basic SH Match. The document says the match is calculated on a pay period basis with the true-up being made quarterly.

If a participant starts his 401k on 9/1/04, when I calculate the true-up, do I use the entire quarter's compensation, or compensation from when the 401k started on 9/1/04?

I've thought so long about this that I have myself confused. Thanks.

Many practitioners/commentators have categorically suggested that amending a plan to eliminate involuntary cashouts is a "solution" to the default rollover IRA requirements. Am I missing something? The proposed solution would "work" for a plan that allows participants to elect to receive a distribution after termination of employment in any form available under the plan. These plan sponsors will simply have to weigh the "hassle" associated with maintaining small accounts vs. the "hassle" of the default rollover IRA requirements.

What about a plan that permits distributions to terminated employees prior to ERA or NRA only if the account is valued at less than $5,000? Admittedly, most 401(k) plans do not hold accounts to ERA/NRA, but I still have a number of profit sharing and defined benefit plans that are "true retirement plans". I thought the timing of the benefit payment (i.e. at termination of employment) was an optional form of benefit protected under 411(d)(6) and, accordingly, plan can't "take away" employee's right to receive payment at termination of employment (and plan sponsor doesn't want to amend plan to permit all terminated participants to receive immediate distributions or plan would already contain an immediate distribution provision). I guess plan could be amended to give terminated participants with small accounts the right to elect to receive a distribution. However, wouldn't this create separate benefit structures under 401(a)(4)?

Similarly, what about a plan that permits distributions in the form of a LSD only if account balance/accrued benefit is less than $5000? I thought LSD was a protected form of benefit. Again, I guess plan could be amended to give participants with small accounts the right to elect to receive a distribution in a LSD (and plan sponsor doesn't want to amend plan to permit all terminated participants to receive a LSD or the plan would already permit LSD for all participants). However, wouldn't this create separate benefit structures under 401(a)(4).

Can an HCE still make the 3,000 catchup deferral, when the actual deferral is less than 13,000 due to percentage limitations with the ADP? For example, HCE can only defer 3% of pay, which is about 6,000. Can HCE still also defer an additional 3,000? Or is the catchup only once you've been able to max out at the 13,000 dollar amount (which we can't because of the adp testing.)