At the Cincinnati Bar Association conference, Monika Templeman, from the IRS, had the following in her power point presentation regarding IRS audits of 403(b) plans:

Ordering rule-employee must use limits in a certain order to apply the age 50 catch up.

1st applies to 402(g)

2nd applies to 15 years of service catch up, if applicable

3rd applies to Age 50 Catch-up, if applicable.

I've been staring at this for quite some time (since June) and I'm still not sure what she was trying to say. Anybody might have an idea?

Thanks

Suzie

Can a participant in a governmental 457(b) plan transfer a portion of his balance to PERS to purchase permissive past service credits? Does a PERS plan meet the definition of 414(d)?

Can an employee transfer their PARS account to a governmental 457(b) plan as a rollover?

Thanks

How do companies pay for active medical claims? My past experience has been that active medical claims are paid through accounts payable, however, my current employer uses a 501©(9) trust to pay for some of its active employee claims. I'm trying to determine how common is the use of a trust for payment active employee medical claims.

Prospect wants to know if he can make contributions to the plan in the form of municipal bonds. Can he or must they be in cash only? Thank you for your assistance.

A participant requested a cash distribution from a plan, and the plan paid the full account balance to the participant, without withholding 20%. They have tried to get the money back from the participant, but have had no luck.

What penalties will apply, and what steps should now be taken? Should the client still send a Form 8109 now without a check for the withholding? Or should they wait until the end of the year and indicated the missed withholding on the Form 945?

We have an Doctor who started a service station in another part of the country. He is 100% owner of his practice and the service station. The service station has only a few employees, and was going to be owned and managed by his father, who passed away shortly after the start-up. Ownership was then deferred to the son. Is there anyway we can NOT have these businesses controlled, under regulation 414®?

Company X sponsors a 125 plan for its active employees. Employees get to choose different options among medical, dental, life insurance, LTD, a medical flexible spending account and a dependent care flexible spending account. Employees who become disabled receive short-term disability for the first six months and then go onto LTD. Disabled employee continue to participate in the plan until they have two consecutive calendar years of disability, then they go onto the retiree benefit plan.

Company X's 125 plan provides that if an employee is on disability, while s/he will be provided a ballot to elect optional coverages, this election will not become effective until the employee returns to active status. Assuming that the FSAs do not continue during disability. Are there any problems under the 125 plan rules with this approach?

A client had late deposits, blah, blah, blah. Anyway, the calculation could not be done in time so we filed Form 5558 to request an extension for the 5330 along with a check to cover the taxes that would be due. Now that we have finally finished the calcuation, there is an overpayment of taxes. How do you go about getting this back? The instructions to the form 5330 say to file an amended return. Well how do you file an amended return when you haven't even filed the original?

Is it permissible for employees to fund an account in a cafeteria plan on a pre-tax basis to be reimbursed for the following expense:

1) insurance for a dependent who is in college? I have read that the policy must be an "individual policy," however, I wasn't sure if because the expense is a Code Section 213(d) expense because it is a medical expenses of a dependent whether it could be reimbursed through a cafeteria plan if a separate account was established for the reimbursement of "other insurance"

2) I think I have read elsewhere that no Medicare insurance (Medicare Part B, Medigap, etc.) is NOT reimbursable through a cafeteria plan even if a separate account is established, is this so?

Any guidance/cites is greatly appreciated!

that new members "samadams" and "cbrewer1" both registered on the same day?

Hmmm.

Are investigational drugs, or probably what I would refer to as experimental drugs or treatments for fertility eligible under an FSA? We have taken the position that a prescription filled through a pharmacy, thus producing a pharmacy receipt, would be acceptable to our claim administrators. Any one want to comment on the acceptability of this practice, or eligibility of the above?

I have reviewed the many postings on this question and want to confirm the following:

A plan that provides the basic safe-harbor match (100% of the first 3% deferred and 50% of the next 2% deferred) which are credited each pay period (without a year end gross up) wants to permit catch-up contributions.

Assume an employee earns 85,000 for 2004 and wants to maximize his deferrals. If he defers 19% of his compensation he will have deferred $13,000 by his 21st paycheck (of 26) and by the end of the year will have deferred $16,000.

If the plan requires that a limit be actually reached prior to classifying a contribution as a catch-up contribution and the plan does not match catch-up contributions, the employee will receive a match of $2,877. If the plan matches both catch-up and regular deferrals, the employee would receive a match of $3,400. An employer could also require the employee to make a separate election regarding the catch-up contributions which could result in a match somewhere in the middle.

If it matches the catch-up contributions, the plan avoids many of the administrative difficulties but the entire match must be tested under the ACP test (which in many plans would fail).

If it does not match the catch-up contributions, the plan (1) will have to carefully define which contributions are matched, (2) will have to review the deferrals at year end and reclassify “catch-up” contributions if a limit had not been met (and possibly correct matches), (3) may have endangered its safe harbor status because it effectively has a deferral limit that may prevent an NHCE from obtaining the maximum match.

In addition to the above discussion, the prior year catch-up contribution must be considered when performing the average benefits test using any testing period other than the current year.

Please let me know if you believe any of the conclusions above are incorrect or if there are any other considerations I have not mentioned.

Is there still a rule around that prohibits a participant from extending loan payments past their NRA? I couldn't find any information that this rule actually existed but it has come up in our office.

Thanks for any help!

As of what date is the limit calculated? I have a Title IV plan that terminated as of 12/31/03, at which point the plan liabilities exceeded its assets by $500,000. Currently, as a result of increased asset performance, the shortfall is less than 400,000. Can the sponsor deposit and deduct the full 500,000? Or must he wait until the final distribution date to arrive at the amout necesary to balance assets and liabilities?

Hi,

I've been on vacation for 2 + weeks. Any word on 403(b) regs???

We have an employee who previously inquired about FMLA (given the policy, documents and instructions) when she found out she was pregnant. Three months later, she went AWOL for a couple of days around the time her supervisors brought to our attention disciplinary action they were about to undertake. We reached out to her to complete the FMLA documents, and subsequently, her health care provider states that she will not be able to return to work until well after her FMLA coverage (and post-partum recovery) are over.

My question is, "when can we term her employment?" If we know in advance that she will exceed her covered leave, do we have to offer it to her anyway? Our main concern is her benefits package and when her COBRA eligibility would begin.

Does anyone have any thoughts on this? Thanks.

I do not know too much about VEBAs. I have a client that set up a VEBA to fund certain health benefits for employees. I know the VEBA has to file a form 990 each year. Does the VEBA simply file a form 990 and then the welfare benefit (i. e. health) file its own 5500 covering the health benefits?

Acting on information provided by an outside source, Company X has an internal unit that investigates claims of fraud internally as well as externally with respect to its customers. One of X's employees listed an individual as her spouse and there is a concern that the employee is not married to this individual. The internal fraud unit would like to access the medical and dental claims made by the employee on her "spouse's" behalf. Should the Privacy Officer permit the internal fraud investigators to accept these claims? Should the Privacy Officer hire an outside consultant to review the claims and issue a report to the Privacy Officer? Or perhaps should the fraud unit verify whether the employee is married without the claims information and, if not, discipline the employee for the fraud? Your responses would be sincerely appreciated.

Don't know SARSEPS, but does the ADP test for these plan run similar to qualified plans. For example

1. Is compensation capped at 200,000 for average deferral

2. Can compensation for test be net of deferal

Also,

when allocating a employer contribution, is it allocated net of deferals or is it gross comp?

Thanks.

If an employee is terminated at the end of this month, but will still receive 3 months severance pay & be covered under the employers health insurance, can they still participate in the FSA?