my background is not in Healthcare. But i am asked by my compnay to work on a project for a customer who is in the business of providing Healthcare benefits to the retirees. This is a state retirement agency.

I am trying to understand how the whole retirement helathcare works. So far, this is what i gather.

State Retirement Agency provides HC benefits to all their retirees. They can either enroll in their Traditional HC Plan or enroll in their Cafeteria plan depending on the eligibiity; Health care Plan is a PPO (or HMO in some cases), provided by a third party carrier (like Aetna) that state agency negotiated contracts with. Depending on the service credits, retiree receives a fixed amount of money every month. Retiree uses this money to buy Health Plan.

here are some fundamental question:

1. now say the retiree sees a doctor in the PPO network; to my understanding, 80% is paid by carrier and 20% retiree. But one of the business requiremetn says, Agency will pay medical and pharmacy claims on a daily basis (while agency receives the claims tape every 2 weeks from carrier); I am confused as to why state agency is paying any claims. I thought Carrier pays 80% and 20% by retirre; And that Aetna gets paid on a monthly basis from State Agency for providing the PPO plan to the state retierees.

Can somebody please help me understnad this. Is it anything to do with state retirement agency being "self-funded" (i am not sure if they are self-funded, i am just guessing);

2. I am trying to comprehend what is the role of stage agency in providing Health plan to retirees other than the fact that they negotiated a better deal for retirees through Aetna. Who is administering the plan, who is administering claims, who is processing claims;

3. also when medicare starts, who is processing the claims;

Appreciate any response as you can tell i am yet to learn the basics.

thanks

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A plan with just one employee (thus must file 5500 and not 5500EZ) has $0 compensation and $0 funding in its first year. Is it necessary to file a 5500 with all 0's or can they wait until their first year of actual funding?

Thanks.

I know that all the advisors say go with no-load funds verses loaded funds and the importance of being diversified but all the mutual funds minimum requirements are $1000, so it would take several thousand dollars to get started into 3 or more funds. What's a person to do when you don't have several thousand $$$? I was thinking about investing through my Ins. agent that offers sub-accounts through American Funds. She even helped me select 3 funds with only $300 to start followed by monthly DCA to be divided equally among the funds. I backed out after finding out about the 5.75% front-end load. Needless to say, the sales person was my daughter-in-law. My husband has a 401K and is pretty much diversified but we're wondering where to fund a Roth IRA into one fund since we're not going with the sub-acounts offered though the Ins. Co. The

only good from this is being able to diversify into 3 or more different funds each month for the price of one. What I want to know is are there any no-load mutual funds out there that one could purchase into three different funds for $1000 like the Ins. sub-accounts?

I'm new to 457s. Is there any coordination of 457(b) plans w/ 411(d)(6)? In other words, can protected benefit be taken away, such as mandatory in-service distributions?

Hi All,

Long time lurker, first time poster!

I have a client who wishes to exclude the bonus from their plan. For compensation purposes, I can do this because they are on a non-standardized prototype. But, they also want to exclude the deferrals on this bonus from their match calculation (they do a flat % of deferrals, no cap.)

Is this allowed on a prototype document? I've tried Sal's books and found nothing; maybe I'm just a horrible researcher.

My opinion is that they would not be allowed to exclude the deferral, but then again, you can exclude catch up from the match calculation......

Thanks for any help you can give!

Vicki

I am confusing myself with rational thoughts.

A plan has calculated numbers for FASB in the past and they were:

Ignoring all assumptions for the moment

Projected benefit 6,000

Service at retirement 20

Therefore, let's assume the service cost will be determined from the 300 earned benefit.

Let's further assume that the past service is 5 years.

This produces a PBO from the 1,500 earned benefit.

The actual accrued benefit is 5/20 * 4000 = 1,000.

This benefit will be used for the ABO.

Now, the client decides to terminate the plan.

Does the PBO immediately get determined using the 1,000 benefit??? Therefore, the service cost would go to zero. That seems to make logical sense but FASB 88 is confusing me during the readings.

Thanks to all for comments.

I'm trying to put together a general profile of the type of small client that might benefit from a cash-balance plan (assume it's primarily for max tax purposes). I have the following thoughts and would appreciate any comments and additions.

1. Multi-owner situations where partners want same contribution level above 41k.

2. Plans where there are employees who might better understand and appreciate the cash-balance structure.

3. Situations where a cross-tested profit sharing plan would work well a cash-balance plan (general tested) may also but with higher contribution potential.

Other thoughts ? Thanks.

5% Owner reaches age 70 1/2 in 2004 and elects to take his first RMD in 2004 - and there is a QDRO which stipulates that 1/2 of his benefit is allocated to his spouse as alternate payee: is the alternate payee also required take an RMD by the Participant's Required Beginning Date, even though she is only 65? What if the alternate payee rolls over her entire share before the participant's Required Beginning Date - would that avoid payment of the RMD to the alternate payee? Thanks for all input.

Affiliated Service Group of companies A, B, and C

Company A Profit Sharing Plan has a short year from 4/1/04 - 12/31/04

Company B Profit Sharing Plan has a short year from 7/1/04 - 12/31/04

Company C Defined Benefit Plan has a full year from 1/1/04 - 12/31/04

Can these plans be aggregated for coverage and non discrimination for the years ending 12/31/2004?

Reg §1.410(b)-7(d)(5) Same plan year requirement - Two or more plans may not be aggregated and treated as a single plan under this paragraph (d) unless they have the same plan year.

Does anyone see an wiggle room to argue that have the same plan year end is the same as have the same plan year for purposes of aggregating plans?

Or are the 1/1/05 - 12/31/05 plan years the first years that can be aggregated?

A client is insisting on excluding employees, on LOA (including maternity) at pye, from receiving a profit sharing contribution. Their agreement allows them to exclude those not "actively employed" at pye from sharing in the allocation. They are defining actively employed as anyone not working at pye.

The individuals in question were covered under the company's health coverage during their leaves and their jobs were held for them.

We have strongly advised them not to do this, but they are insistent.

We would like any opinion or advice you would like to share.

Are there any states that do not allow catchup contributions? I found an article dated 2002 that indicates that Massachusetts did not allow catchup contributions, but I'm thinking that only applies for "state tax" purposes; I have never seen anything to indicate that any state doesn't allow for catchup contributions for federal tax purposes. I have a Relationship Manager posing this question to me...

Situation:

A husband and wife are getting a divorce before Dec 31, 2004. As part of the divorce settlement, the husband is required to pay $50,000 to wife at the time of the divorce. The husband is 68 and the wife is 63. The husband has an IRA, from which the funds will be used for the settlement.

The husband has 3 options;

A: Withdraw the money from the IRA and pay the ex-wife.

What is the tax liability for the husband and ex-wife?

B: Roll the money over to the ex-wife's IRA.

What is the tax liability for the husband and ex-wife?

If the ex-wife withdraws a lump sum amount from the IRA, what is her tax liability?

C: Roll the money over to the ex-wife's Roth IRA.

What is the tax liability for the husband and ex-wife?

If the ex-wife withdraws a lump sum amount from the Roth IRA, what is her tax liability?

Which one favors the wife and which one favors the husband?

Just trying to get a sense of what is industry practice here...

I work for a bundled service provider (both DC and DB), and our typical process on placing trades for new plans to us who's assets are transitioning to us is to have the prior service provider place "sell" trades on day one, wire us the proceeds of those trades on day two, and (provided the wire "hits" in time), for us to place "buy" trades the afternoon of day two, settling those trades the following morning. Essentially, the plan is "out of market" for the one day (selling out at the close on day one, and buying back in at the close on day two).

A new client wants us to place the "buy" trades simultaneously with the sell trades that the prior provider is making (on day one) and settling those buy trades on day two with the proceeds that the prior provider will be wiring to us that same day. At issue are 1) the fact that we won't know what the proceeds of the sale trades are until after the market close (they are daily valued funds, traded at the closing NAV), and hence we won't know the amount to place the buy trades for (unless we would engage in after hours trading - WHICH WE WON'T!) - so we'd have to do an estimate on the buy trades (90% or so) with a true-up on day two; 2) by placing the buy trades prior to receipt of assets, are we extending credit to the plan (even though we theoretically don't have to settle those trades until after we're expecting to receive the proceeds from the sell trades), and if so, is this "incidental" such that it isn't a PT under various DOL guidance, including Advisory Opinion 2003-02A; and 3) what happens if for some reason: a) the sell trades don't settle on day two; b) the sell trades don't settle early enough on day two for us to wire those funds out in settlement of the buy trades; or c) the wire to us just doesn't happen on day two.

The new client (a money manager, by the way) and their consultant (a rather well respected regional player) both "insist"" that "everybody" does same day trades on conversions and we should as well. Interesting that the three service providers I've spent my career with thus far have never done same day trades on conversion. Of course, in the day today operation of a plan, we routinely place sell orders and buy orders for plans simultaneously (per participant direction), but in those cases, we typically are functioning as sub-transfer agent for each side of that transaction, and have a process in place for routine settlements. In the conversion in scenario, we're somewhat at the mercy of the prior to do that which they say they will do (and I have no reason to doubt them).

Any viewpoints?

I am working with a 403(b) plan that is required to file an annual Form 5500, although just the limited information. Due to administrative chaos in 2003, a Form 5500 was not filed for 2002. The error was discovered with the HR person called the Department of Labor for help with the 2003 Form 5500. This person was new and was looking for some general information and how-tos. The DOL agent told the HR person that the 2002 Form 5500 was not filed. Immediately, the HR person filed the Form 5500, but did not mark that it was filed under DFVC. This probably raised a red flag with the IRS who sent a letter assessing penalties.

Do you think DFVC is still available since they never got a writing from the DOL that the Form 5500 was late (i.e. they can file an amended Form 5500 and comply with the DFVC program)? Or do you think the only hope is to to write a reasonable cause letter to the IRS and beg forgiveness?

Any ideas?

If a prototype plan uses a 6 month of service requirement to enter the plan, can they later amend that to 1 year of service and actually start counting hours (eg 1000) to enter the plan?

Similarly, can the plan be amended to do away with elapsed time for measuring service for elilgiblity and vesting, and go to a 1000 hours counting method?

Thanks

Does anyone have any comments/concerns on the Principal Financial Group product, both bundled and unbundled? Any trouble getting data needed to complete reports, web site comments?

The plan participant who died was under 70.5 so no RMD issues exist. The non-spouse beneficiary wants to delay the distribution of the death benefit. The plan only allows for lump sum distributions, and the document states that the benefit will be paid "as soon as administratively feasible". How much risk is there if the plan sponsor delays payment?

How is the PFEA interest rate change applied to lump sums calculated under Q 14 of RR 98-1? Is the wearaway amount considered to be calc'd using the interest rate in effect at 12/31/04? Is the wearaway amount protected after 12/31/04?

What if the plan uses the "sum of" method? Is the A portion protected? What about the B? Are amounts accrued after 12/31/04 now a "B' " portion that is calc'd under PFEA?

A 401(k) plan requires participants to have a 1-year BIS before becoming eligible for a distribution. The plan has an early retirement provision of age 55/6 years of service with 6-year vesting. The plan is a Corbel prototype with this language:

"Distribution of the funds due to a Terminated Participant shall be made on the occurrence of an event which would result in the distribution had the Terminated Participant remained in the employ of the Employer (upon the Participant's death, Total and Permanent Disability, Early or Normal Retirement). However, at the election of the Participant, the Administrator shall direct that the entire Vested portion of the Terminated Participant's Combined Account be payable to such Terminated Participant provided the conditions, if any, set forth in the Adoption Agreement have been satisfied."

The condition in the Adoption Agreement is the 1-year BIS requirement.

Also, does this condition apply to a participant at NRD, age 65 in this plan? How about LRD? The requirement that a participant be paid no later than 60 days after the end of the plan year containing the latest of NRA, 10 years of participation, and termination of employment could delay payment to the 1-year BIS date for someone with short service at termination on/after NRD.

It seems that the first sentence in the above plan language may override the 1-year BIS provision for participants who die, are disabled or reach Early or Normal retirement, but I'm just not sure. Anyone?