Health insurance premiums for coverage other than that provided by the

employer may not be reimbursed by a health FSA. Does this rule apply to

COBRA premiums that a new employee pays for coverage under the old

employer's health plan while waiting out the pre-existing condition period

of the new employer's health plan?

Thanks,

Ken Davis

Univ. of South Alabama

We are trying to resolve an issue and would appreciate any input:

11/01/03-10/31/04 Plan year

11/01/03-10/31/04 deferrals for HCE = 18000

01/01/03-12/31/03 HCE had 1500.00 in catch up

01/01/04-10/31/04 HCE already deposited 16000.00 (3000 catch up for 2004)

For the 10/31/04 ADP test do we include 16500 (18000-1500) of deferrals in the ADP test or do we include 13500 (18000-1500-3000)?

If we are to only include the 16500 and the test still fails, I assume this HCE would not be able to have any of the excess reclassified and would need a return since the 2004 catch up limit has already been met.

Please help, we are split 50/50 on this issue!!

I have run across a differenty type of situation and would like your input. I have a client that has a prototype document that says they will make a 3% SHNEC for the 2004 plan year. However, the client decided back in November, 2003 that he would issue a safe harbor notice stating that the safe harbor match would be made.

Can the plan be amended this late in the year to change from SHNEC to SHMAC or has the plan lost its safe harbor status for 2004? Will both the match and non-elective contributions have to be made?

We have an employee that will be leaving our company on 12/31/04. As part of his severance package, he will be paid for the first 6 months of 2005. Since the individual will be paid for half of next year, can he contribute to the 403(b)? Is he eligible for the match?

Our match does not require employment on the last day of the plan year. However, it seems that he would not satisfy the service requirement of 1000 hours (even though he is being paid like a current employee) to qualify for the match.

Any thoughts?

Thanks.

What's the difference between the new sidecar IRA provisions and the old QVECs?

I only work on safe harbor DB plans but would like to get the calculation of the NAR and MVAR of 1.401(a)(4)-3(d) straight.

I found a posting from March of 2001 regarding the calculation of the NAR and MVAR if the normal form of the benefit were 10C&C.

In determining the NAR, the example indicates that the 10C&C accrued benefit payable at NRA is first converted to a life annuity using the plan actuarial equivalence factors and this would then be expressed as a dollar amount or a percentage of average annual compensation. Is this conversion from 10C&C to a life annuity correct and if so, why? It looks like section 1.401(a)(4)-3(d)(1)(i) indicates that the NAR involves the “increase in the employee’s accrued benefit (within the meaning of 411(a)(7)(A)(i)…” Section 411(a)(7)(A)(i) says that the accrued benefit is “expressed in the form of an annual benefit commencing at normal retirement age.” Does 411(a)(7)(A)(i) not consider a 10C&C benefit to be an “annual benefit”? If normal form were a 50% QJSA, would one convert this to a life annuity first in order to calculate the NAR?

In the posting from 2001 basically, the accrued benefit payable at normal retirement as a 10C&C benefit is converted to a QJSA benefit payable at the participant’s current age using plan equivalence and then this benefit is normalized. This looks right to me, kind of (see below). The posting indicates::

1. Using plan equivalence, calculate the lump sum equivalent of the 10C&C accrued benefit payable as of the participant’s current age.

2. Using plan equivalence, convert this lump sum to a 50% J&S benefit payable at the participant’s current age.

3. Using standard interest and mortality, calculate the lump sum equivalent of this 50% J&S accrued benefit payable as of the participant’s current age.

4. Standardize this lump sum by accumulating it to testing age using standard interest and then dividing by the APR determined using standard interest and mortality.

I still contend that if the QJSA under the plan is not subsidized and is determined from the normal form using plan equivalence that it is not more valuable than the normal form of the benefit and the MVAR would be the same as the NAR but the regulations don’t seem to agree with me, and they win. Does anyone else have an opinion on this?

I know that it is relatively common, particularly in the severance context, for employers to agree to subsidize the COBRA premiums for departing employees (i.e., they don't pass the premium costs through). My question is whether an employer, by not passing through COBRA premiums, is effectively creating a self-funded medical reimbursement plan under Section 105(h)--in addition to the "real" medical plan that actually offers the benefits. If it did and you were considering subsidized COBRA for a departing executive-level employee, you could run into discrimination problems.

As a practical matter, I doubt that very many (if any) employers ever consider this as a possibility. The argument seems like an unnecessarily strict application of Section 105(h) in any event, particularly when the medical plan at issue is fully insured and not otherwise subject to Section 105(h). Still, I can't point to anything definite to refute it.

Any thoughts?

UPDATE: Actually, never mind, at least insofar as insured plans are involved. I forced some clarification of the argument. Still, for self-funded health plans, I'd bet dollars to donuts that employers don't focus on the potential for discrimination when they subsidize COBRA for a bigwig who's on his/her way out the door.

I'm trying to determine whether my client can distribute 100% of his IRA, and rollover 100% of his IRA, but designate the rollover such that only the pretax portion of his IRA is transferred to a qual plan that accepts only pre-tax money and the after tax $ gets rolled over to another IRA.

The goal is to avoid prorating the rollover so that he has to take a taxable distribution for a portion of the rollover to the qualified plan, solely because it does not accept after tax money.

Can he pick and choose which part of the account gets rolled over to the plan and to another IRA?

We have a controlled group that will no longer be a controlled group effective Feb. 2005 (half of one corporation is being sold). Per Derrin Watson’s book, we can test both companies separately, but can we terminate one of the companies from the plan?

What are TPAs doing to comply with Reg E? We're new to the FSA Stored Value Rx Card market and wonder who (TPA, Card Vendor or Employer) is taking care of the Reg E discolsoures, documentation requirements, limitations on participant liability for unaurhtorized transfers, correction procedures and reservation of certain rights on pre-authorized EFTs. If it is the TPA, what are TPAs doing to comply? Any other comments on this topic are welcome as well, Thank you!

By what date does a not-for-profit organization have to make employer contributions to a SEP or SIMPLE?

Company A has a SEP for the 2 owners and EEs. Company B wants to put in a Solo (no EEs obviously). As long as A and B are a controlled group the Solo will not fly... correct? I mean if "A" didnt have a SEP it would have to be part of "B"s plan. What if the Solo was a deferral only plan... no ER contribution.

Bottom line... can anything work?

Plan is in Ohio which has banned common law marriage

since roughly 1991. A participant dies and his "spouse"

seeks a survivor annuity. Unfortunately, she is unable

to produce a marriage certificate or other proof they

were married. Absent this proof, she is not the person

who will be receiving a benefit from the plan.

How is this best handled? Do we give her a deadline

to produce some proof? Do we file a declaratory

judgment action and let the court decide who to pay?

It would seem the ball is in her court to go to

the county where the marriage allegedly took place

and seek the proof the plan needs. However, we

do not want to end up paying the benefit twice.

Input is appreciated.

Due to a downturn in business a company has ceased making contributions of employer contributions to its stock bonus plan. The value of the stock has decreased to less than 10% of the value of the fund. The employer wants to amend the plan to offer actively employed participants who are non-officers of the company the right to sell the shares of employer stock in their accounts to the company at its fair market value (a full valuation has been done recently). Can this be accomplished without violating ERISA's prohibited transaction rules?

Wonder if anyone out there could offer me some good strong advice.....

I'm 50 yrs.old and want to start a Roth IRA and was wondering where to start one. I contribute $1200 per year to a flexible premium deferred annuity which is guaranteed at 3%. I know I should be more aggressive beings I have at least 10 more years to contribute. I want to contribute the maximum allowed. My husband is receiving retirement from the military and has a 401K at his current job. This would be a spousal Roth IRA and I want the best possible investment for the amount of time I have. Any suggestions would be grealy appreciated.

Kathy

PS Plan with last day accrual requirement.

Can I change plan now (in November 2004 but pre-12/31/04) to change the definition of compensation to be period of participation rather than full year (not for TH, just for any additional).

I think there is no accrual of anything until 12/31 so it si ok. But I am getting an argument...

Thanks

Earl

At the end of 2001, a participant was involuntary terminated as part of the plan's partial termination. He became 100% vested.

He was rehired 7 months later. Are his 2002 and 2003 employer contributions also 100% vested or does the regular vesting schedule apply to those monies?

Participant terminated 11/22/04. Turned 70 1/2 on 8/22/02. 1st MRD due 4/1/05.

Can it be done now?

I have a dental practice where one of the dentists has been a 1099 employee for the past few years. On October 1, 2004, this dentist was switched to a W-2 employee.

They have a calendar year SH PS 401k plan with a one year eligibility. Semi-annual entry dates.

Do I treat this dentist as if she were hired by the company on 10/1/04 or can I count her years of service as a 1099 employee?

Thanks.

The document allows for the plan to pay "reasonable administrative expenses" from the plan. The employer contributes shares each year. They would like to deduct the share valuation fee from the ESOP's portion of the annual dividend (actually the s-corp "distribution") prior to allocating the dividend to participants. The ESOP is a minority owner of the company. Is it appropriate for the participant's to pay this expense? The client says that they have no other use for this valuation, it is only done for purposes of the ESOP. I appreciate your thoughts.