My company has a medical reimbursement plan. Recently, we were sold to another company and will have their plan available to us, so the old plan is being terminated.

I had made my election earlier in the year based on having high expenses toward the end of the year, so have not yet incurred enough expenses to be reimbursed the full amount that I have had deducted from pay.

So, my question is, if a plan terminates and there is unused money in my account, can it be forfeited, or am I somehow entitled to be reimbursed? I don't see the logic in my having to forfeit dollars because the plan has ended.

Thank you.

I recently had a CPA send me a DB/DC proposal provided to one of his clients by a TPA firm. He is an aquaintance and knows that I work as a TPA (i only deal with DC plans but he doesnt know that) and he wanted me to take a look at the design and let him know if it is legitimate.

I don't have all of the facts, because the proposal information I received seemed incomplete, but the facts that I can see are:

41 eligible employees

6 of the eligible are owners of the company

3 of the employees are also highly compensated

32 remaining eligible employees are NHCE.

The DB plan covered only the 6 owners at 50% of their AMC. Retirement date of 65 with a 25 year benefit accrual.

The DC plan covered all the other employees. I can't recall the contribution percentage, but it was a flat % in somewhere between 5 and 10 percent of pay. There was no overlapping coverage between the plans.

They did not include any discrimination testing with the proposal. When I asked the CPA friend to obtain the testing, I received a 410(b) and 401(a)(4) testing that showed that the DC plan passed everything and that the DB plan passed nothing. They included one sentence in the email saying that the plans would be combined for non-discrim testing at a later date.

My questions are these (please keep in mind, I have limited working DB knowledge):

1) Doesn't the DB plan have to pass 401(a)(26) so that the DB plan has to cover at least 41*.4 = 17 employees?

2) Can the plans be combined for non-discrimination testing or must each plan pass on its own?

3) The TPA firm uses Datair (which i am not familiar with) and it has 6 different tests. Annual with and w/o permitted disparity, accrued-to-date with and without permitted disparity, and equivalent allocation with and without permitted disparity. Which of these tests must it pass? Any of them, all of them? a specific one?

4) Any other input or something I am missing? I figure I am likely missing something.

We are getting conflicting information. There is an adopting employer of a multiple employer plan with a plan year of 01/01-12/31. The adopting employer has elected a safe harbor match for 2004, and now wants to un-adopt the multiple employer plan and begin a new single employer plan effective 07/01/2004.

The question is -- can the employer keep the safe harbor matching provision for the short plan year in the single employer plan and have, in effect, safe harbor matching contributions for all participants throughout 2004 in two different plans? There would be no overlap in deferral contributions. The deferrals and match in the mulitiple employer plan would cease before deferral and matching contributions in the single employer plan begin.

If they cannot convert a safe harbor adoption in the multiple employer plan to a safe harbor single employer plan, why not? It seems that the continuation of the safe harbor provisions are a benefit to the plan participants.

Thanks!

A DC plan provides a base contribution of 8% of eligible pay for participants with over 5 years of service and 3% of eligible pay for all other participants, plus an excess contribution of 5.7% of pay above the Taxable SS Wage Base for participants with over 5 years of service and 3% of pay above the Taxable SS Wage Base for all other participants.

Does this plan meet the broadly available allocation rates exception of the cross-testing gateway allocation requirement?

If not, is the only way to meet the gateway requirement is to provide the lesser of 5% or 1/3 the allocation rate of the HCE with the highest allocation rate?

Any help on this would be greatly appreciated.

Should a QDRO be used to assign an interest in a SEP IRA to a former spouse in a divorce proceeding or is it like an IRA where the assignment language is included in the divorce judgement? Thanks for you help.

We have a 401(k) plan that allowed an ineligible employee to defer. We plan on amending retroactively to cover the document failure. There are also several other employees who will now be eligible (all involved are NHCEs). Is the only impact of this that they are included in the k and m testing? Are there any contributions to be made on their behalf?

We have a client that terminated their money purchase plan on Septermber 30. They adopted a profit sharing plan on January 1. We are going to calculate the money purchase contribution based on compensation through september 30. A cross-tested profit sharing contribution will be made. The amount of the PS contribution will be based on testing.

Can we aggregate the money purchse contribution with the profit sharing contribution for the minimum gateway and testing?

Want to be sure I'm reading the 1.457-4© regs (and the Treasury Decision 9075 preamble to the regs) correctly.

For governmental plans, the excess deferral and income earned by it must be distributed to the employee "as soon as administratively practicable" after the excess is discovered and determined. The income earned by the excess deferral is reported on Form 1099 for the year of distribution, but the excess deferral is included in gross income for the year of the deferral (presumably by way of a corrected W-2).

For tax-exempt entity plans, if the excess and the related earnings are distributed to the employee by April 15 after the deferral year, the reporting is different than a governmental plan. The income earned by the excess deferral is reported on Form W-2 for the year of distribution, but the excess deferral is included in gross income for the year of the deferral (presumably by way of a corrected W-2).

I'm only looking for a "Yes, Ken, that's correct (or incorrect)" type of answer, but if anyone knows why governmental plans report the earnings on Form 1099 while tax-exempt entity plans report the same thing on Form W-2, I'd love to hear the explanation.

Thanks,

Ken Davis

Univ. of South Alabama

The employers love the salary reduction 403(b) arrangement because they are legally not the sponsor. In fact there is no "sponsor" like there is under sections 401(k), 457(b) and 401(a). Because they are not the sponsor they have no fiduciary responsibility. The 403(b) arrangment is simply a contractual relationship between the employee and the issuer of the annuity contract or custodial account.

Having said that, what legal responsibility does the American Federation of Teachers take on when they formally endorse and sponsor a 403(b) arrangement? Probably the same as the employer, none. So if the union is not a fiduciary should it have the right to enter into a sponsoring/endorsement agreement with the 403(b) issuer?

Peace,

Joel

Have a cash balance plan that is valued monthly. Spousal consent not required if balance is less than $5000. When a participant terminates, the prior month end balance is used to determine whether a spousal consent form needs to be included with other forms and disclosures. A participant that has $4,900.00 when forms are sent, could exceed $5,000 by the time the forms are returned and processed. Do you think we should have to go back and get spousal consent if that happens? Do you know where there are any rulings or information on this?

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An employee whose spouse has a minor child (by a previous marriage) does not claim the child as a dependent. By court order the spouse is responsible for 50% of the medical expenses the child incurs. Can the employee make an election to enroll in a spending account for the expenses her spouse incurs for the child?

If a plan did not execute a "good faith" EGTRRA amendment because it incorporated the required plan changes (ie. top heavy) by reference and the sponsor did not want to adopt the more liberal limits, what does that mean going forward?

Will the plan need to amend by the end of the EGTRRA RAP (2005) to reflect the new limits?

Does the plan have a compliance issues? If not, why would anybody file under the IRS voluntary compliance program (EPCRS) and pay the fee?

I assume the interim valuations should reflect the pre-EGTRRA indexed limit (ie. 180,000)?

Any commentary extremely helpful.

Thanks in advance.

The first filing for a plan was completed in a timely manner, but there were a couple clerical errors on the form - EIN was wrong and Plan name was wrong (premium amount was correct).

Is it best to just wait until the next filing due date (10/15/04), change the EIN on the form and provide an attachment to the PBGC or should the sponsor contact the PBGC now (I'm afraid this might cause more confusion).

I believe the instructions only address amended filing for over/under payments.

Your thoughts?

Here is the scenario --

Multiemployer DB plan has provision for retroactive annuity payment to lost participants upon commencement of distributions after NRD. Want to amend the plan to instead provide for actuarially adjusted benefit to compensate for missed payment(s). Would the removal of the retroactive annuity option be a protected benefit violation?

ok, an employer in 2003 was safe harbor, they amended the plan to rescind safe harbor provisions effective 1-1-04. this was due to the fact that the board of directors did not think the money would be there to fund the safe harbor match. the plan is at this time a trad. 401k with a dollar for dollar match up to the first one percent deferred. the board now feels that they will be able to make their numbers this year and they want to make the plan "whole" by funding the match as if it was a safe harbor plan for 2004. i know that even if this is ok, they would still be subject to non-discrimination requirements. my question is, is the safe harbor match outside a "safe harbor" plan discrimnatory? can they decide later in the year to give the additional funds to the participants? seems to me the government would not mind them increasing employee pensions.

thanks

Is it permissible for separate welfare plans (health, vision, dental, etc.) to file one Form 5500? If so, can you provide your support. Thank you in advance!

I know I may sound like an idiot but can you just put your money in the s&p 500? is that a mutual fund? any comments welcome

Since the first contribution for a new plan that is effective 1/1/03 isn't deposited until 2004, should 1G be checked on the first 5500?

A participant received a hardship distribution, and the employer did not suspend his deferrals for the next six months. I am hoping for some opinions on the method of correction.

We have looked in the ERISA books and see that it says the deferrals should be forfeited and used to reduce an employer contribution, and the employee should be made whole through payroll. If this is the correction, won't the employee be taxed twice (ex. social security) - on the original payroll and on the reimbursement?

The book seemed to say that you don't want to disburse and issue a 1099-R because there is no appropriate code so that it won't have an early distribution penalty tax. Notes from a prior conference said that the distribution could be coded as a 7, so the 10% penalty would not apply. Does that sound familiar to anyone else?

Thank you!