Can I have a high deductible insurance plan/HSA for a dependent child?

We currenly have a family catastrophic plan/HSA but want to drop the parents due to the fact hey are covered by the VA for their medical needs. Thus they would only need coverage for their dependent children.

Is this within the scope of the rules?

Company has a DC plan, all participate for 2003.

Can the DC plan be amended to exclude Key EEs and a DB Plan set up to cover the Keys and a group sufficient to pass coverage/participation/non-disc. without the DC plan still needing the TH min contribution (which would be nondeductible because the DB ded > 25% of pay.)

I have looked and find: "1.416 T-6 Q. What is a required aggregation group?

A. For purposes of determining whether the plans of an employer are top-heavy for a particular plan year, the required aggregation group includes each plan of the employer in which a key employee participates in the plan year containing the determination date, or any of the four preceding plan years. In addition, each other plan of the employer which, during this period, enables any plan in which a key employee participates to meet the requirements of section 401(a)(4) or 410 is part of the required aggregation group."

Its the "4 preceding plan years" that makes me unsure. Would the Keys have to sit out for 5 years and then the DB plan could be set up and not be required to be aggregated?

Or is the 4 year look back a reference to the old Top Heavy look back period and is obsolete post 2002 plan year?

Thanks

I have a participant who has seasonal affective disorder. She was taking meds but wants to try another route due to side effects. She asked if a light box that is specific to that condition would be reimbursable. Also if the replacement bulbs would be too. She said she would have no problem getting a Dr's note for this.

Due to change in status on December 15 and lower cost we decided to move health insurance and medical reimbursement account to husband's employer as of Jan 1. Notified wife's employer on 12/29 to terminate these accounts as of Jan 1. Her employer required proof of her insurance coverage, and continued deductions until this was forwarded to them in late January. They then refunded the January insurance deductions but not the reimbursement account deductions, saying that the IRS did not allow this. So we tried to get reimbursement for January expenses but they did not allow them. Can they do this, or do they at least have to either 1) refund her January reimbursement account deductions, or 2) reimburse our January expenses?

I need the SEP/SIMPLE Answer Book!!!! I'll be ordering next week. In the meantime, maybe someone can help me with a few SEP questions, ranging from easiest to hardest:

S-Corp started in June, 2002 with 2 equal (50/50) owners. No other ee's in 2002, just them, but they take no comp. In 2003, both take a salary. They also hire 2 p/t people. In 2004, they are again taking salary and expect to make a lot of money. They 2 p/t people leave in 2004, and are replaced in July, 2004 with 4 new p/t people. Owners objective is to start a SEP in 2004 that will include them (owners only) and not the others.

1. Would the eligibility have to be set at "having performed services in 2 of the previous 5 years" to get the 2 owners in (3 out of 5 would keep them out for 2004, correct)? Would the minumum wages have to be $0 since they were not paid in 2002? Also, if 2 out of 5 is correct, would that mean the 4 new p/t people will not enter until 1/1/2006?

2. Assume all of the p/t people work less than 1000 hours. Can the employer terminate the SEP after 2005, start a PS or 401k in 2006 with a 1 Year of Service/1000 hour eligibility requirement, and have everyone excluded other than the 2 owners?

3. I believe 415 applies to SEP's so if they contribute $3,000 each to the IRA, they can receive up to a $38,000 employer allocation each in the SEP? Is this correct?

4. Employer also uses around 20 leased employees from a hospital. These employees are covered under the hospitals DB plan. I think the ER reimburses the hospital for all wages and benefits including the DB plan. Do these leased employees have to be covered in the SEP?

5. Finally, can the company borrow from the 2 owners to fund the SEP?

This is quite a laundry list so thanks for any comments. I'd rather stick to 401ks.

New deferred comp rules under American Jobs Creation Act do not apply to eligible 457(b) plans. Presumably this means an organization-wide deferred comp plan of a governmental or private tax-exempt employer, and NOT a top-hat 457(b) plan for the executive of a private non-profit; i.e., the new deferred comp rules DO apply to a top-hat 457(b) plan??

Due to the final COBRA regulations released May 26, 2004, is it necessary to amend all Cafeteria Plans, including Premium Only Plans?

I haven't seen anything that requires a plan to notify participants who are catch-up eligible. I'm trying to find some language that specifically indicates that a plan does NOT have to inform participants of this eligibility. I'm having trouble finding that in the code. Can anyone point me to something?

New deferred comp rules under American Jobs Creation Act do not apply to eligible 457(b) plans. Presumably this means an organization-wide deferred comp plan of a governmental or private tax-exempt employer, and NOT a top-hat 457(b) plan for the executive of a private non-profit; i.e., the new deferred comp rules DO apply to a top-hat 457(b) plan??

In determining the DB accrual rate for the ABPT do you divide by plan year comp or average comp ?

On pages 60 & 134 of Labombarde's 1991 book entitled " A Guide to Nondiscrimination .................." , he indicates either but the regs seems to say only average.

Does anyone have a cite that would support the use of plan year ??

I thought I had read that a SH Match has to be funded at least every 3 months? Yes or No -- If yes, can the Adoption Agreement use the Plan Year "calculation" method?

what are the requirements of the sponsor to disclose these changes? Also when a plan converts as stated, is the sponsor required to provide a new SPD to the participants? If so what is the timing?

Thanks in advance

WHY

Now that HR4520 will probably be signed, we are getting kinda worried. Can some "haircut" provisions be grandfathered? What do you think?

Do you think any of the key provisions (that have been changed) can be grandfathered in?

Employer is making a SEP contribution for 2 employees who termed. They were sent applications to complete but never returned them. Can employer complete an application on behalf of the termed employees & select a money market option? That would seem to be the most prudent course of action.

We have a plan with a plan year that begins 10/1/2003 and ends 9/30/2004. I know when testing them that I use the compensation for this period, but when telling them what the max. deferral amount, catch-up and compensation can be am I right in using the figures for 2003 since it is technically a 2003 plan year?

Please help me settle an ongoing disagreement that I have with some of my partners. This isn't a critical issue, but it would be nice to have some other opinions.

The Form 5500 instructions say to use a business code that best describes the plan sponsor . This is a certainly a simple decision for any organization that sponsors a single-employer plan for its own employees. Also, the guidelines are clear for a multiple-employer plan: choose a code that best describes the main activity of the participating employers.

A multiemployer plan, however, is sponsored by a joint board of trustees. Neither the labor organization nor the contracting employers sponsors the plan. I believe that the appropriate business code is 525100 (Employee benefit funds).

Example. There's a collectively-bargained plan for electricians. The multiemployer plan should use code 525100. The employers, who contribute to the fund pursuant to collective-bargaining agreements, use code 238210 (Electrical contractors) for plans that they sponsor for their non-union employees. When the union sponsors a plan for its own staff members, the code is 813930 (Labor unions and similar labor organizations).

Obviously, the fate of the free world isn't hinging on the answer to this question. I'm just curious about other people's thoughts.

If a DB plan has a COLA tied to CPI and terminates does the calculation of a lump sum distribution have to reflect the COLA?

My understanding of the definition of leased employee under 414(n) dictates

1. recipient must pay fee for services of indivdual.

2. the individual must provide service on a substantially full time basis for one year

3. receipient must have primary direction over ind. services

4. the leasing org. must be the common law employee

Under #2 above an employee must complete 1500 hours in a 12 month period.

Employee A meets all of these requirments and is classified as a leased employee for the receipient company XYZ.

XYZ does not exclude leased employees from its 401(k) plan.

XYZ has eligibility requirements to enter its plan of age 21 and 6 months of service with monthly entry dates.

When does employee A (who is over age 21) become eligible to be in the XYZ 401(k) plan? Doesn't he have to wait the full 12 month period and work the 1500 hours in that 12 month period before he can be classified as a leased employee thus even allowing him to be an eligible employee for XYZ's plan? Does

How can there be retroactive entry into a 401(k) plan?

Any thoughts would be appreciated.

Would there be any testing issues if a plan has different eligibiltiy for 401k and SH match? In this case, immediate eligibility for 401k and 6 mos for SH match.

(Plan allows for dual eligibility for SH).

A client has asked the following question regarding methodology.

An employer has a plan that is a life only benefit at 65 with actuarial equivalent of 5% and UP1984 (for the sake of argument).

The calculation of the normal accrual EBAR is the increase in the accrued benefit (one method) divided by compensation. This does not recognize the AE assumptions versus testing assumptions (ignore the most valuable issue for the moment).

Is this fair to NOT recognize (through normalizing the life benefit from plan to testing assumptions) the difference in assumptions??

Now, let's say the same employer establishes both DB and DC plans as 'carve' out groups.

The DC EBARs are calculated using 8.5% testing assumptions AND the DB EBARs ignore the assumptions for normal accrual purposes (using the method above).

Is this fair or even legal???

My answer was that the regulations do NOT REQUIRE the normalization when the benefit is a life annuity. The issue of the AE versus testing assumptions will be dealt with in the most valuable EBAR. There is no issue of 'fair' but what the regulations outline as the proper procedures.

Any disagreements??