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?

Treas. Reg. 1.411(d)-4 permits employer discretion with respect to protected accrued benefits if objective plan criteria set forth in the plan are followed.

Does a plan that entitles an employee to an ehanced benefit if that employee joins the plan in 1995 qualify under this rule if an employer transfers employees into the plan not only in 1995 but also in 1994 and 1996, so that the favored class is confined to one calender year.

I'm looking for specific guidance on the determination of what deferrals can be characterized as catch-up contributions for an off calendar plan year. My specific example is this; An owner defers $1000 per month during 2003 and another $10,000 during the first 6 months of 2004. Its a 6-30-04 plan year and he has deferred a total of $16000. If the plan fails the test and the maximum he could have deferred is, say, $12,000, can I consider $4000 to be catch-ups? We can use $3000 as 2004 catch-ups for sure, but can I count $1000 as 2003 catch-ups? He didn't exceed the 402(g) limit in 2003, but are we allowed to re-charaterize due to the ADP failure? I've looked around for guidance, but have come up empty so far.

During October 2004, I will be giving the employee's their notification

for 2005 for the Simple-IRA we have set up for them. The plan has been in place

for about five years. Since I am new to this I have several questions.

Question: For compensation do I look back from the day each employee was

hired through December 31, 2004 to determine who received at least $5,000 in compensation in any two years or is it from the date each employed was hired

through December 31, 2003. I might be getting hung up on the date the plan is

effective, January 1, 2005.

Question: The phrase "reasonably expected to receive at least $5,000 during the current calendar year is eligible to participate in the SIMPLE IRA". This phrase,

in my situation, does it refer to wages expected to be received in 2005? Also,

the phrase, "reasonably expected", what exactly does that mean. Wouldn't

most people qualify for the simple plan under this criteria if they meet the rule

Thanks for your help

Dave

The following is an excerpt from the PBGC's Model Notice which is required under ERISA section 4011.

------------------------------

[iNCLUDE THE FOLLOWING WITH RESPECT TO ANY UNPAID OR LATE PAYMENT THAT MUST BE DISCLOSED UNDER SECTION 4011.10(b)(6):]

Your plan was required to receive a payment from the employer on

1. . That payment [has not been made] [was made on
   1. ].

------------------------------

Reading it literally, it only requires the date(s) to be listed and not the actual amount of contribution paid/unpaid. But what use is disclosing just the date(s) without the amounts?

Am I misreading it?

Assuming amounts are required to be listed and the Participant Notice is required for 2004, which must be issued no later than 12/15/2004.

A plan's valuations are performed @ EOY and therefore the 2004 required quarterly contirbution will not be determined well after the notice's deadline and may well be zero when evenually computed.

What amount(s) should one disclose on the notice?

Plan was requesting a favorable determination letter from the IRS when they discovered that the CRA amendment from last year was adopted two weeks late. It was forwarded to audit cap for a document failure where they issued a letter stating the sanction to be a non-negotiable amount of $3,000. This was after it was explained to them in writing that the late amendment had absolutely no operational impact on any participant (this a basic profit sharing plan - no transportation fringe bfts.), the total trust assets are only $20,000 and it was amended only 2 weeks late.

Rev. Proc. 2003-44 states that the sanction for audit cap is a negotiated percentage of the Maximum Permissable Amount ( MPA seemingly defined as the amount charged if they were to throw the book at you). Also, "Sanctions will not be excessive and will bear a reasonable relationship to the nature, extent, and severity of the failures."

Have any of you had any similar experiences? We are the tpa and are taking responsibility for the oversight but we hope there is a way to reduce the amount. The assessment of a non-negotiable sanction of $3,000 on such a small trust for such a minor infraction seems excessive. Is there anything that can be done?

Thanks in advance.

I would like to be able to withdraw from my Roth without penalty if possible. I will be making my first home purchase in 1-2 months (approximately).

I have been looking around the web to find the exact laws on withdrawing from a Roth IRA regarding the first purchase of a home. Does anyone have a link or exact knowledge on this subject?

Would the money withdrawn have to go towards the downpayment or could it be used as 'living' money to pay for the mortgage, taxes...etc..

Thanks

-Rich

I have a situation where a professional worked for a large manufacturing corporation (corporation G). He recently branched off from the corporation and began his own company (Sole prop V). Corporation G was going to discontinue and out source this small segment of the corporation so the Vice President of the segment has branched off on his own. The employees that worked for him at the corporation are now working for him at his new company. The segment deos some sort of highly specialized plastic fabricating.

The odd thing is that the owner worked out some sort of deal with Corporation G to keep the employees on their payroll and he would lease them. The reasoning was that he would not be able to provide health benefits to the employees because he is a much smaller operation. Obviously this is not a typical situation and I am quite surprised the original corporation agreed to keep the employees on their payroll.

I have a situation where the employees have been common law employees of Corporation G for many years and continue to receive their paycheck from Corporation G. Sole Prop V pays the salary and an additional fee that is used to pay the health and retirement plan costs for the leased employees to Corporation G. Now the sole prop is looking to add a 401(k) profit sharing plan. The participation and benefits provided are not high enough to the leased employees at Corporation G for the owner of Sole Prop V to generate any meaningful retirement benefits.

I have received all of the pertinent information to determine that there is no control group or affiliated service group issues. I am waiting on the answer of whether the sole prop owner was ever an owner of Corporation G. He definitely is not an owner now.

The kicker is that the employees of Corporation G did not begin their work for Sole Prop V until 8/1/2004. This means they are not eligible for any retirement plan at the new company until 2006 if we use a standard 21 and 1 year of service. The sole prop has been in existence long enough because it was used to receive some consulting salary throughout the years (although the income was small in comparison to now) that the eligibility could be written so that the owner is eligible to begin participating right away.

The problem I am having is that these employees were working with the Sole prop owner previously. From their point of view nothing has changed except they moved to a different office location. They still have the same employer, they still do the same job, they just work in a different location. I feel like I should consider the employees eligible for the new plan instead of waiting till 2006.

In talking with someone in my office their comment was, "He didn't have ownership in that other company so as far as he is concerned they could have been working for Genreal Motors. There is no reason to look at them any other way than as newly leased employees."

I can kind of buy into that, but it doesn't feel right. If we can wait until 2006 then the owner can take advantage of higher contirbutions until then and we can take a new look at the design once the leased employees need to be factored into the discrimination testing.

Any thoughts? Any questions I still need to get answers to that I am not considering?

For normal EGTRRA catch-up contributions, is there a lifetime maximum?

I know with 403(b) plans, the "special catch-up" has a lifetime max. of $15,000.00.

Thanks in advance.

Anyone heard of this? Financial planner asked me the following:

"I am researching the prevalence and viability of adding a disability rider to a 401(k) product. "

Section 409(o)(1)(B) allows ER securities acquired w/ the proceeds of a loan described in 404(a)(9) to be exempted from the distribution requirements of 409(o)(1)(A) until the close of the plan year in which the loan is repaid. 404(a)(9)© says the paragraph does not apply to S corporations. What happens in the case of a C corporation that has a leveraged ESOP that includes the provision in 409(o)(1)(B) that later converts to S? Does the restriction on distributing stock acquired w/ a loan remain, or since 404(a)(9) does not apply to S corporations, does that mean the stock must now be distributed subject only to the rules of 409(o)(1)(A)? It seems reasonable that if a leveraged C corporation ESOP loses the benefit of the 404(a)(9)(B) interest exclusion upon converting to S, it would also lose the ability to delay distribution under 409(o)(1)(B) upon conversion to S. Of course I'm sure other arguments could be made too. Any guidance would be appreciated.