I hate to pound this issue, but here goes:

Company has over 100 participants, and has properly filed their Form 5500 (Plan Number 501, for arguement sake) for the Welfare Benefit Plan, reporting Health, Life, Dental and AD&D Insurance information. Company also has a Flexible Spending Account plan, which allows employees to pay health insurance premiums on a pre-tax basis, and also allows employees to utilize reimbursement accounts for unreimbursed medical expenses. The Flexible Spending Account plan is administered by a payroll provider and has a plan number of 502.

The payroll provider states that no Form 5500 is needed for the 502 plan. I tend to disagree and would like to see a Form 5500 filed, since the Flexible Spending plan is paying for a Welfare Benefit. I went through past posts on this topic, and cannot get what I feel is a comfortable answer. Can anybody help? Thanks for any replies.

Fact pattern:

Participant still working with company (no termination of employment), but for some reason loan hadn't been paid since 2002. It was deemed a distribution.

Participant wants to take a new loan now. I understand that she must pay back the first loan before taking another one.

My question is: Does the first loan have to be paid off all at once? Or can periodic payments come in?

Can you point me to the regs that say either way?

As usual, thanks in advance.

Can a 401(k) account be segregated into 2 IRA accounts for the purposes of segregating the pre-tax and after-tax dollars?

Ok - 2 plans aggregating for testing. One plan is a 401K for salaried employees and the other is a 401K for hourly employees. Both 1/1 plan years.

For the 12/31/03 test, no ACP was done because the hourly plan had no match, and the salary plan had a discretionary match that was not funded.

The hourly plan added a discretionary match in 2004. That plan will be able to use 3% as the NHC prior year percent. If the salary plan makes a discretionary match, they'll have to use 0% as the prior year % since they've had the match, but have never funded it.

So how does this work if the plans aggregate for testing? What prior year percent will be used? Thanks for any help!

We have a client that is interested in the Cafeteria Plan. Part of our administration cost if $6.50 per participant. The client would like to have the participants pay this fee instead of the employer paying it. Is this allowed & if so can the participants have the $6.50 deducted from their pay pre-tax?

Thanks!

7/31 fiscal year C Corp has SEP on calender year basis. Deductible limit for 7/31/2004 is based on compensation during 2003 calender year. Corporation liquidates on 7/31/2004.

Is there any way to make SEP contributions based on the wages paid 1/1/04 - 7/31/04? Seems if they are funded before liquidation, they would be excess contributions since the 7/31/04 limit was already reached based on calender year 2003 wages. The excess contributions would not be deductible and would be available for carryover, but there is no next year. I assume the carryover deductions are lost.

The employee cannot exclude these contributions made during 2004 and has to withdraw the excess contribution. The distribution of the excess contribution is not taxable since it was already included in wages. 72(t) is not an issue since employee is over 59 1/2. The 415 limits have not been exceeded.

I would like to make sure there is no way to leave the contributions in the employee's SEP. Is there a better solution than my understanding above.

Does anyone know where to get a current list of state withholding requirements for qualified plans? I need to update our files.

The links from the Sept 2000 posts no longer work.

Thanks all.

I am working on allocations from 1999 through 2003. For 2001 the Employer contributed more than the deduction limit (21% of comp). For 2002 and 2003 they contributed 25%. How do you handle the excess from 2001? Should the excess be returned to the employer???

Thank you for your help.

Help. Seems I should know this (or be able to find the answer) but can't.

Plan is failing both ADP and ACP tests. Can a QNEC to be made to pass the ADP test and then another QNEC made to pass the ACP test. The same QNEC would not be used twice. It seems so but just want to be absolutely sure.

Thanks for the help!

An employer would like to make a payment to the surviving spouse and children of a deceased key employee. Employer has no plan in place to otherwise provide death benefits. Given the IRS tendency to reject characterization of employer payments as gifts, are there any other means to provide a nontaxable payment?

What period of compensation should be used in the ADP test for a calendar plan year in which the 401(k) plan is terminated as of 9/30? Should the comp be for the period of 1/1 - 12/31 or 1/1 - 9/30?

First, FSA distributions are limited to Sec. 213 deductible medical expenses plus over-the-counter drugs [sec. 105(b)].

Second, prescription drugs are deductible medical expenses -- legally-procured substances that require a prescription for use by an individual [sec. 213(d)(3); Reg. Sec. 1.213-1(e)(2)].

Third, cosmetic expenses -- surgeries or procedures to improve appearance, not to promote wellness or prevent or treat a disease or illness -- are nondeductible [sec. 213(d)(9)(B)].

Ok...the law's very clear so far. But, what's your opinion about medications prescribed by a physician for cosmetic reasons? Common examples include drugs to improve skin tone or to stop or prevent hair loss.

These medications are certainly prescription drugs, but are they also nondeductible cosmetic "procedures" and, therefore, nonreimbursable under a FSA? I've been unable to find an answer to this question. Certainly, my instincts scream that Propecia isn't tax-deductible, but does the letter of the law suggest otherwise?

I read an article in a recent issue of the ASPA Journal which encourage small plan filers, with late deferral contributions, to include an attachment detailing the late deposits and corrections.

Does anyone actually forward an attchement with the 5500? I thought you were not suppose to submit attachments.

A few years ago I used a 5500 program which allowed room for a one sentence comment at the bottom of schedule I. I used this one sentence comment section to disclose the plan had deposited the late deferrals with earnings.

Any comments would be appreciated.

We are working witth a non-profit foundation with an ERISA 403(b). As an option

for them(to avoid third party admin), does a paired non-ERISA 403(b) (for deferrals) and a SEP-IRA (for employer contributions) have merit? Can the existing ERISA 403(b) assets be transferred to the new non-ERISA 403(b) without any triggering event?

The previous post brought up an interesting question. Reading the ASPA info under PA-2 Section 11.

"QNECS, QMACS, and SAFE HARBOR 401K DEFERRALS are never allowed to be withdrawn for hardship."

I am aware of the QNEC and QMACS, but I was not clear about the distribution of Safe Harbor 401(k) deferrals. Does this mean that a safe harbor 401k plan that consists solely of deferrals and or the safe match / safe harbor non elec cannot offer hardships?

Thanks for the clarification.

I am looking for information on administering a fringe benefit plan for prevailing wage employees. Any help would be greatly appreciated.

Brian? AndyH? PATA? Calling all Red Sox fans...

I'd love to chat about this past weekend, including the lamest bench-clearing brawl in baseball history.

I've put this message in the "Inspiration" forum because I think that the Red Sox are pretty darned inspiring.

IRS Notice 2004-62 extended the minimum funding deadlines - for a calendar year 2003 plan, to 10-15-04.

Does anyone know if there is any additional extension contemplated? Or has one been issued and I missed it? Thanks!

can you have hardships for something other than the safe harbor reasons (funeral expenses) from deferral source?

Relius is acknowledging that Relius Government Forms (5300 program) will not print if your computer has been updated to Windows XP Service Pack 2. Workarounds are to either uninstall SP2 (you do not want to go there - several people have reported problems with the uninstall) or run the software on an older computer. They do know this is a problem (and will also affect the 1099-R software) and have contacted Microsoft to see why there is a conflict.

A word to the wise...

Our solution is we have one computer on our network that is still running Windows 98 for compatability. You can do all of your data entry on your XPSP2 box, but you need to print off the older box. Hopefully this will be resolved by January for 1099R processing.