We do third party admin for 2 clients over 120 participants and need independent audit.

The auditor is requesting an SAS 70 report for our firm

Is a TPA firm required to have a SAS 70 audit done on controls/procedures?

Thank you

Hi everyone,

I am working on an article for HR Magazine on the topic of the state-of-the-art of dental benefits. My understanding is that most companies offer these benefits today because they are expected by employees. Also that they are relatively inexpensive compared to other health benefits. Doesn't seem like there is a huge variety in products and prices out there either. In other words, dental is a "no-brainer" benefit.

Do you agree? Is anyone doing anything to cut their dental benefit costs, or trying out innovative new products and programs that are somehow more competitive?

What's new in DENTAL!?

If you'd like to chat and possibly be quoted in the article, please email me at mfblunt@mindspring.com so we can set up a phone call. You'll have a chance to review the article before publication.

Thanks a million,

Martha Frase-Blunt

HR Journalist

City 401(a) Defined Contribution plan was not amended by 12-31-2003 for 401(a)(9) final regulations. 2 participants terminated service in 2003 and elected lump sum distribution. I believe the recommended course of action should be adoption of model amendment and enter EPCRS VCP for 2003 calendar year. Any thoughts?

Company A becomes an affiliated service group with Company B after the owners of A purchase part stock of B and begin doing business with them in early 2003. Both A and B maintain qualified plans. I know the transition rules allow each plan to pass coverage but don't apply to nondiscrimination. Therefore, when running the cross-testing of A's plan, I need to account for the eligible participants of B as zeroes in A's testing. They plans are not permissively aggregated.

My question is what rules are there in counting prior service for the employees of Company B. If I don't count any of it before they became related employers, then all B employees are not eligible for A's plan and will be excludable in the nondiscrimination testing. Of course, if I need to count service before they became related employers, then they will factor in.

Health Care reimbursement portion of cafeteria plan:

A client is asking about the health care portion of the cafeteria plan :

If spouse has a cafeteria plan and they contribute, if their employer sets up a cafeteria plan, can they also contribute since there is no federally set maximum and the is up to discretion of employer subject to discrimination testing of course. It makes sense to say yes due to the actual regs stating that dependent care plan where annual mandated maximums are set, no double dipping is allowed.

Does anyone know of any reg that specifically addresses this issue? Could you confirm my intuitive response? Thank you. By the way, i have seen employers set no maximum (engineering firm) and another set a 10,000 so this does not appear to violate any policy of dollar maximum so logically it would seem that since there is no prohibition on dollar amount requirement, it is permitted.

I don't know why this has not come up with my groups more often. This would be a very attractive feature with the over the counter medicine component available as well for tax savings available only through cafeteria and not through tax deduction (that they could be dependents on each others account and have access to two different maximums) Any thoughts? Thanks for your input.

A 105 MERP is hovering around 50 participants so may be technically subject to HIPAA. It seems silly because it is such a simple, innocent little plan! The only medical info the plan "sees" is the EOB in order to reimburse a portion of the deductible. Deductible reimbursement is the only benefit.

I want to take the position that the EOB is not PHI--it is only used to substantiate and pay benefits. Can I do this with a straight face? Privacy is the only HIPAA requirement that is bugging me. I feel like we can get out of the other requirements (creditable coverage, nondiscrimination, enrollment, etc.--due to design and affiliation with the major medical plan).

You HIPAA lovers out there... any thoughts or scoldings?

We have a non-profit client with an unfunded Section 105 MERP. Because of budget issues and their grant funding being a bit unstable, they would like to convert this as a funded benefit - EmployER funding only. They do not want to establish individual accounts like an HRA. They have less than 100 employees.

As a small plan, I expect that they would need to file Form 5500 and a Schedule I (but not an accountant's opinion). Is this correct? Would they need an audit of any sorts? Would expect that a trust would be needed too.

Right now they allocate a portion of the grant monies for the plan. Can they keep the current specific benefit under the MERP (a portion of their fully insured health plan's deductible) and have the flexibility to use the fund balance for other health benefit items? For example, if over the years they have low utilization and the balance grows, could the fund dollars be used to say offset a significant premium increase in a subsequent year?

They are ok with incurring additional costs and administrative requirements to gain comfort that the funds will be available even if grant money dries up.

Of course cites would be helpful - other solutions are welcome too.

Believe it or not, a CPA is asking me the following question.

Suppose a one person S-corp has a pension plan with a required contribution of 200,000. The W-2 salary is 100,000, and there is other "pass-through" income which is reported on the owner's Schedule C.

Question was: can the entire 200,000 be deducted if it creates a loss?

Well, I don't know. I'm not a CPA, and I don't know if there is such a thing as a "loss" allowable in an S-corp. It would seem reasonable that there is, to the extent that there is any basis on the part of the shareholder.

Anybody with knowledge in this area care to venture an opinion? I searched some past threads, but the ones I looked at weren't definitive. Thanks in advance - any any cites, if appropriate, are also appreciated.

Any clearer guidance from IRS or DOL regarding whether a loan from a plan can be used for the construction (vs. acquisition) of a home? Plan participant has 50K in PSP account balance and wants to get a loan for 25K for purposes of building a house. Thanks for your help.

I have a situation where an HCE just discovered he has an excess deferral for 2003. He received two W-2's from different employers---but they were related employers. Since we are past 4-15 and evidently can not distribute, would anyone have suggestions on how to handle? Excess is about $300.00. Thank you.

Hello,

Employer has a grandfathered SARSEP and will be setting up a crosss-tested 401(k) PSP during the same year as the SARSEP in order to maximize disparity of ER contributions. They currently make a 6% SARSEP contribution on behalf of all employees.

I understand that the 402(g) and 415 limits apply to the combined plans and we are keeping that in mind when determining the max contribs to the PSP. I also think (but am not 100% sure) that the contributions to the SARSEP (both ER and EE) are not included in the General Test (i.e. the ABT) portion of the PSP. In other words, SEPS are not part of the ABR testing group.

Can anyone confirm this? Thanks so much!!

Ok, applicable dividends are paid to the ESOP and reivested in qualifying employer securities pursuant to 404(k)(2)(A)(iii). Is there any guidance on how long they have to remain invested in the stock if the ESOP has a 401(k) feature with mutual fund investments and employees want to diversify the dividends? In a 55/10 diversification situation, does anyone know how the diversification requirement and the reinvestment of applicable dividends in stock requirement coordinate?

plan sponsor does not want any new participants right now. is there any way to exclude all new hires until they exceed 30% of the workforce? i dont believe this is a valid exclusion.

Does anyone have any useful links relating to the eligibility of us citizens paid by a foreign based American subsidiary and their 401k eligibility. Given the US income tax exclusion o f $80,000 has anyone had any experience setting up an after tax source for these people.

Thanks

padmin

I read somewhere, but of course can't find the article now, that 401(k) plans require contribution deposits to be EFTs and checks are not allowed. Is this the case? Is this an administrative requirement by the 401(k) plan, or is it some type of governmental requirement?

Is there any reason that you would not be able to accept a copy or fax of a death certificate? Any administrators out there want to comment? Do you require an original?

We (a TPA firm) have been using Corbel for several years for documents and are not fully satisfied. We are now considering Accudraft. Just wondering if anyone has any comments about their experiences with either one.

If a new 401(k) plan defines its first plan year as 6/1/04 to 12/31/04, with following plan years ending each 12/31 thereafter, is it a calendar year plan in 2004? In other words, would you say it's a calendar year plan with a short plan year?

Reason for the question: determining the proper 12-month look back period for identifying HCEs.

In a case where the Treasury Regs have not been changed, but the Proposed Regs contain the rule as the way it is currently intended to be, which one trumps which?

What states that rule of priority as per above?

Same with the IRC, IRC has the rule as intended. (No age discrimination IRC 410(a)(2)), but the Regs still allow discrimination in DB and TB plans per 1.410(a)-4(a).

Proposed Regs though reinforce IRC 410(a)(2).

What resolves that conflict?

Thanks

Can assets from a profit sharing plan be merged into a defined benefit plan? It appears that based on Reg. 1.414(l), this is a possibility. It states the following:

"In the case of a merger of a defined benefit plan with a defined contribution plan, one of the plans before the merger should be converted into the other type of plan (i.e., the defined benefit converted into a defined contribution or the defined contribution converted into a defined benefit)..."

How should this conversion be done?

In addition, what reporting is required? Would the plan still be eligible for the exceptions for the Form 5310-A under the merging two or more defined benefit plans?