What proof is required before a claim for a baby sitter is processed. It is my understanding you need a federal ID numberand a paid reciept for a Day Care. I am not clear the rules for a baby sitter

Insurance products have surrender penalties and mutual funds have redemption charges.

Mutual funds' account statements don't show redemption charges, if any, (at least, I don't remember seeing them) but insurance products' statements generally do.

Generally (from what I have seen) , current market value of ins products = Cash surrender value. Yet, the value of mutual fund's units are not reduced by redemption charges (I have not, yet, seen it done).

Any thoughts on this.

Reason for the question:

I am looking at a statement of variable annuity which is invested in mutual funds. The statement shows a current surrender penality, which is about 5% of the mutual funds' value. The variable annuity is the plan's only asset.

What is plan's assets market value for funding - surrender value or the accumulated value?

Does anyone know of any guidance on what fees on investments would be permissible in HSAs? Could a broker act as an intermidiary agent, sigining individuals up for HSAs and registering trade, but using a 3rd party bank or other financial institution to make the trade? If so, would fee splitting be permitted?

If an ADP test fails and refunds are due even after the recharacterization of the HCE contributions for participants who did not defer the maximum, how are QNECs calculated to prevent refunds?

It seems that any recharacterized catch up contributions are disregarded and the QNEC to non-HCEs is the total amount that would be needed if there were no catch up provision. Is this correct?

Thanks!

Participants in a plan are permitted to invest only their vested account balances. The employer invests the non-vested dollars. Now the employer is adding a safe harbor contribution to the mix, which must be 100% vested.

Must the employer set up a separate account for the safe harbor dollars (so they can be tracked), or can they be commingled with the account that holds the vested dollars as long as the employer adds another line item to the employee statements showing the safe harbor deposit?

we have a client who is a self employed dentist with a profit sharing plan. there are also 3 eligible employees in the plan. can anyone suggest an easy way to calculate ideal salary for owner? I am going in circles....

A beneficiary is being paid the proceeds of a life insurance policy that was held in the spouse's qualified plan. The taxable amount on the 1099R will be different that the amount of the total distribution since only the cash surrender amount is taxable. I'm wondering if there needs to be an explanation about why the 2 amounts are different, such as a code indicating a distribution of life insurance proceeds. I'm not seeing anything in the 1099R instructions that mentions a code for life insurance.

What forms(roll over, etc.) need to be completed prior to a QDRO distribution to a non participating ex-spouse. Where can I find an example of these forms?

From 1/1 to 7/31/2003, I had two employers who were part of the same plan.

Employer A sold Employer B and as of 7/31/2003 considered all the employees (participants) of B as terminated. Employer B then set up its own plan.

I tested Employer A and included the salaries & deferrals of Employer B thru 7/31/2003 in the year end testing.

I then tested Employer B using the salary and deferrals from 8/1 thru 12/31. Is this methodology correct? If so, what should I use in testing ADP , Prior or current year.

Plan A used prior year percentages and passed.

In tryng to use current year percentages Plan B does not pass for the short plan year.

Hope I haven't confused too much

We have a Client (LLC) who manages several properties. The first property is family owned of which the client individually owns 8%. He receives 72% of the management income from this property. He also owns 8% of the other properties (collectively owned through LPs). He receives the rest of the income from these.

In addition, he owns 48% of a Bldg supply business which is housed in some of the properties that are mentioned above.

The bldg supply business has a qualified plan; the others do not. From reading Derrin Watson's book, it does appear that the management function exists. However, the LLC should still be able to set up a SEP or individual 401k plan. Are we interpreting this correctly?

We are involved with a Fund that has been

in a struggle with a delinquent employer over the

last several months. The employer generally runs

2-4 months behind, but eventually pays the contributions,

and assessments.

This employer is now a full 6 months behind and there

is some concern he could be heading to bankruptcy

court. The Trustees have requested the business manager

remove all manpower to put pressure on the employer

and to limit liability.

Given the poor employment prospects in the area,

the BM is hesitant to pull the members. Thus, a rift

is developing between the Trustees and the Union.

What options does the Board have to limit its exposure?

Does a health plan have more options than a DB plan?

We have a situation wherein a tax-exempt employer sponsors a church plan. The church plan is underfunded and the employer would like to contribute a promissory note to the church plan in the amount of the underfunding.. problems?

If anyone can help me with this it would be great!! If an employee is enrolled in the Health FSA and terminates mid-year, if they take the remainder left to deduct for their account out of their final paychecks, can they submit expenses incurred after their termination date?

Also, can anyone point me to a good reference for a COBRA letter for health FSA's?

Thanks!!

We had an unusual set of circumstances arise. The good news is that we are dealing with less than $1,000 in benefits, so very little exposure is involved here. Participant enrolled in a 401(k) plan 2 years ago, indicated he was unmarried and designated his sister as his beneficiary. He died unexpectedly, one week before his divorce was finalized. The divorce was ultimately finalized after his death. Should the benefits be paid to the designated beneficiary or the ex-wife?? I'm thinking ex-wife since the beneficiary designation could be considered invalid since she didn't consent to the designation of another beneficiary. There are no children and the sister was designated as the beneficiary of his life insurance policy. Trustee would like to honor the request of the participant if at all possible.

Could someone please help me understand the interplay between Code sections 401(a)(14) and 409(o)? My understanding is that 409(o) is an acceleration provision. Therefore, the general rule is that distributions must commence according to the provisions of 401(a)(14) UNLESS the participant ELECTS to accelerate distributions under 409(o). Is this correct? This would mean that a plan must distribute under 401(a)(14) even if the exempt loan has not been repaid in full?

Also, does 409(o) apply to S Corp ESOPs? I read somewhere that it does not, but there was no cite to the applicable authority for that statement.

Assume that a PBGC premium calc is being done for 7/1/2004. Assume the asset valuation method for funding was market value but is switched to a smoothing method 7/1/2004 that amounts to 120% of market value. The premium instructions seen to call for the use of 6/30/2004 (market) assets, but would allow the use of 7/1/2004 provided that the actuary adjusts for the difference.

In this manner, an asset method change cannot be used to reduce PBGC premiums in the first year. Is this right?

But this all presumes that the change is effective 7/1/2004. If time permits, I suppose the change could be made effective to the prior valuation date, without phase in, and then utilized currently to reduce the premium, right?

We have a client that has a PS plan and the investments are at MFS. MFS provides quarterly statements directly to plan participants. Is it required for them to also get a statement for year end showing contribution made for that year? Obviously that info would not be on the Dec 31 MFS statement.

Thanks for any help.

A client called and asked me about a participant who was disabled a couple of years back. He was out of work, and was eventually terminated in 2002. This person is apparently receiveing COBRA from this company, and was recently looking for an extension. This person apparently has turned in a letter from Social Security that states he is receiving benefits as a perm. disabled person. The letter is from October 2003. My client's question is this: Since he is condsidered perm. disabled by the gov't, should he be considered so in the 401(k) plan? My answer was no, because he was terminated prior to his status being changed to perm. disabled.

Your thoughts?

READERS - post your experience about fees charged by brokerages and any rules that enable you to have a lower fee structure. This can help readers save some time.

John G - moderator

READERS: post your experiences as to who does and who doesn't allow minor children IRAs. This will save some folks time in finding a custodian.

John G - moderator