My client's plan paid the necessary contributions to the staff, but neglected to make the contributions for an HCE (the client) based on old and outdated information provided to them by their CPA (along with the typical assumption that the market would continually go up). The account is owed well over $100k (after earnings). Error occurred 7 years ago.

Since the error occured a few years back, is my only method of correction through the VCP program? Any other ideas? Already tried to self-correct and the brokerage firm where the IRA is held won't accept the contributions as prior year contributions. Can't make it current year contributions as there is no current year income to support it...would raise a flag with the IRS if there is a current year contribution reported by the IRA institution but no current year deduction.

Any ideas?

Can an employee submit invoices for their long term health insurance that they pay for own their own?

Does a frozen plan with sufficient assets to terminate satisfy 401(a)(26)? Assume that at least 40% of the company's employees are participants in the plan.

I've heard an argument that if the plan has sufficient assets to terminate, the participants are not considered "benefiting" under this section and fails.

Any thoughts?

The spouse of a 100% owner currently works less than 1000 hours (1000 hrs required for allocation). She had been full time in previous years so she is an active participant. Can she be included in non-discrim testing?? It seems like this is an easy way to help testing if the spouse works a year or two to enter plan then only work minimum hours in the future to be included in test. Thanks.

We have a union contract that allows certain non-benefits eligible employees to buy-in to our group health plan at full cost. One of our "buy-ins" has sent us correspondence that he is now "covered by Medicare" and will discontinue his coverage. I do not know if "covered by Medicare" means both parts A and B.

The question is: are we responsible for sending a COBRA letter due to his Medicare entitlement? My initial thought is no, since he could have continued the coverage (with his Medicare becoming secondary) as long as he remained an eligible employee. If he then became an ineligible employee at that time he could be offered COBRA due to termination or reduction in hours, correct?

Thank you for feedback.

Can anyone provide me with a sample or a link to a sample indemnification section of an administrative services only agreement?

I just want some parameters regarding the responsibilites of the plan sponsor and those of the Insurance Company providing the services.

Thanks.

We allow employees to cover their domestic partner and domestic partner's dependents under our health and dental plans. IRS requires that we tax the employee for the portion of the premiums that cover the domestic partner and their dependents. Does the IRS set any other limitations on domestic partner status?

For example, an employee just submitted a claim for reimbursement under our flex plan. The claim is for an expense incurred by the domestic partner who is covered on our health and dental plans. Are we permitted to reimburse for this expense?

A client of our received on of these from Turner Investment Partners. The client received a "dividend" check from them in late 2003 for $47. The check was deposited into the profit sharing portion of this plan (has a 401(k) feature as well), as that has the Turner fund that this goes to. I am not sure what to do with this 1099. The "recipient's identification number" is not the trust ein that I have on record. Any ideas? Thanks for your help!

I have someone who wants to sell their real estate out of their IRA to his brother. I don't see anything under IRC 4975 that says that this is a PT. Am I correct?

In this case, the owner-employee took out a loan (less than two years ago) in violation of a loan policy provision that the term of the loan cannot exceed the lesser of 30 years or the number of years prior to Normal Retirement Age. Age discrimination issues aside, this is clearly an operational violation. Because this involves an owner (presumably a plan fiduciary), should the VFC program be used and a no action letter sought? On the other hand, can we simply use SCP and self-correct?

According to an NCPERS article, the new Social Security reform bill requires SS opt-out employers to provide a notice to new employees.

NCPERS Article: Social Security Bill Signed Into Law

Quotes from the linked article:

"The Social Security reform bill, HR 743 [Public Law No. 108-203], that impacts public sector employees was signed into law by President Bush on March 2, 2004."

"...Requires employers not covered by Social Security to provide written notice about the GPO [Government Pension Offset provision--KCW] and Windfall Elimination Provision (WEP) to new employees and have these employees sign a statement stating they understand that by working under non-covered employment they could be subject to the Social Security pension offsets.  This provision becomes effective January 1, 2005."

I'll bet more than a few new employees will take a "now you tell me!" attitude once you say "welcome aboard. Now that you're on the team, I thought I'd let you know your Social Security benefits are going to take a hit."

If any of you guys come up with a good notice, keep us in mind and post it here.

Let's hope the Feds publish a safe harbor notice in the next few months.

What is the procedure for filing with VCP? I have a prototype adopter who signed the adoption agreement for GUSt restatement on Feb 27, 2004. He did sign the "intent" to adopt a prototype plan last year.

An esop is being terminated. It was leveraged, but loan is paid off in full.

Corp. bylaws do not allow distribution in stock, thus all will get cash payout (to roll or 20% w/holding).

Document seems to be saying that corp can payout in 5 yr. installments. Does this mean we revalue the esop each year or use the value at time of termination?

Thanks

I understand that PURCHASING real estate from a lineal ascendent/descendent is a PT in my self-directed ROTH. My questions are :

May I purchase a piece of raw land with my contributions (not earnings), hold for the 5 yr. period, then sell it to my son or daughter? Or could I then sell it to an arms length party, who might then sell it back to me? Am I required to contribute the proceeds of the sale back intio the ROTH? Any chance I could sell it to myself?

Mike Preston said:

But there is one other issue to be aware of. If a new comp plan has any classes where individuals otherwise eligible for a contribution end up with none, then the IRS has stated, and I concur, that the net effect is that the plan can not use the Average Benefit Test. This means very little if the plan meets the 70% threshold. However, if it doesn't, then there will need to be additional NHCE's that benefit. This will happen most frequently when there are terminated NHCE's with hours in excess of 500.

Mike,

do you have a citation to back this up?

The Client had a Money Purchase plan for part of the year and had a funding obligation as a result. (And for those who will ask, Client's attorey failed to terminate the MP plan prior to start of Plan Year. There was no last day employment provision in the MP Plan.)

For the full year, Client has a cross-tested PS plan. Client fails the Ratio Percentage Test given an X% PS allocation.

When I perform the Average Benefits Test to see if the X% PS Allocation will pass, am I correct to include the MP allocation in this test?

Thanks.

Link to three-headed frog story:

http://www.local6.com/news/2900371/detail.html

Are the within 30 days and more than 30 days examples in the IRS regulations the only scenarios available in how to treat rehires or can an employer come up with their own set of rules as long as they apply to everyone? We have an employer who wants to require all rehires to resatisfy the plan eligibilty requirements unless they are terminated and subsequently reinstated through a grievance process, at which their benefits will be reinstated at the date of termination.

Thanks!

I have an unusual scenario and would like run this by for your expertise.

Plan A allowed for deferral and a match. The plan was frozen in 2002. In 2003 the employer adopted a multiple employer plan and participants began to contribute to the multiple employer plan. The assets from Plan A were merged into the multiple employer plan.

Plan A and the new multiple employer plan uses prior year testing (ugh). The employer does not want to switch to current year testing.

Is Plan A considered a successor plan for testing purposes? If yes, then the ADR and ACR would be 0%, which means the HCEs can only have 2% deferrals and 2% match. If Plan A is not considered a successor plan, I assume the adoption of the multiple employer plan is the “first plan year” and the ADP/ACP for NHCEs for the prior year is 3%.

Thanks!

We have a sole proprietor client with one employee that wants to increase the initial eligibility period in the 401k plan on the eve of the employee's satisfaction of the current eligibility period. Aside from being nasty, is there an anti-cutback problem? - or does eligibility not count as an accrued benefit?