Is it common for QDRO expenses to be paid out of a DB plan's trust?

I appreciate any comments!

We would like to start a Cafeteria Plan effective April 2004, but would like to accept claims back to 1/1/2004 is this allowed.

I have a plan that has three locations, with lots of turnover. We (the record-keeper) did a force-out of an account that was less than $5000. When the person received the check, he questioned it. It turns out that he was re-employed with another location.

Fortunately, he did not cash the check, and we just reinsted the account.

UNfortunately, there were several other people in the same situation who cashed their checks.

What are the ramifications to the plan/participants if the money is not returnded to the plan? What if someone spent the money and refuses to pay it back?

I guessing it's an operational defect, but I don't know what the plan would have to do to correct it (besides having the participants pay back the proceeds).

It would appear that for HSA plans to really work if the goal is to make sure that participants use dollars "wisely" and in a "efficient" manner, published pricing and some sort of valid quality measures are prerequisites. Otherwise, HSA plans appear to be little more than new cost-shifting vehicles cloaked in a "new and improved" marketing scheme.

Perhaps my comments may be a bit harsh, but it strikes me that for these plans to really work, the key isn't whether Suzie has the MRI or not, but "WHERE" she has the MRI ~ in a competitive environment where prices are posted and where service quality is also easily available. In many healthcare markets, cost isn't possible to obtain and compare and quality measures are kept under wraps.

While healthcare isn't like buying a set of tires, for a marketplace to be competitive there needs to be more transparency rather than just shifting cost to participants.

My 2 cents ... or 1 cent after the provider discount is taken

I am a broker. One of our clients self-administers their health care FSA. They have an employee that states that since the plan is self-administered, the employee does not have to provide written documentation of claims. Is this true? In what situations? I can see if the answer is when the FSA is accessed using a debit card.

We have a client that has a Target Benefit Plan. We thought they had terminated our services so we never restated their plan document. Turns out, they had created a Profit Sharing 401(k) plan with a new administration firm and had a new document prepared that complies with GUST and EGTRRA. They had issued notice to the participants informing them the Target Benefit contributions were ceasing 6 months into the year. They want us to finish up the final year contribution calculation and close out the Target Benefit Plan which will then merge into the Profit Sharing Plan. Does the new document for the Profit Sharing plan cover the Target Benefit Plan?

I know that I have seen published information concerning this, but we have a situation where an employer pays 100% of the premiums for both individual and family health coverage. The employer wants to permit employees to "opt out" of family coverage and in exchange, the employer will make a contribution, in the amount of the premium, into the 401(k) profit sharing plan on behalf of the employee. Any guidance, cites, insight would be greatly appreciated!

I know that I have seen published information concerning this, but we have a situation where an employer pays 100% of the premiums for both individual and family health coverage. The employer wants to permit employees to "opt out" of family coverage and in exchange, the employer will make a contribution, in the amount of the premium, into the 401(k) profit sharing plan on behalf of the employee. Any guidance, cites, insight would be greatly appreciated!

We are looking at amending our SPD to allow OTC drugs under our flexible spending program. We can't, however, go into the hole with the plan, which we suspect could happen with this coverage. We have proposed adding a separate limitation to the plan, for example, a maximum of $250 in OTC drugs over the plan year. Is this allowable? If so, should the participant make a separate election, or could we simply quit paying OTC claims at the $250 mark, whatever the participant's election?

An MD owns 20% of a medical practice(A) and 65% of another medical company(B). He will max out at $41,000 in company A's 401(k) PS plan. Can he receive another $41,000 allocation from a plan Company B would like to establish? We realize since he will defer the annual maximum 401(k) in A's plan, he will be unable to defer anything in B's proposed plan. I'm awaiting a return call from the MD to get clarification of the exact relationship, if any, between A & B. Thanx. Finally, A has many EEs, but B has none. The other owner of B is an EE of A.

A municipal government is offering a one time retirement incentive payment of $500 per year of service provided the employee irrevocably elects to retire by June 30th. The payment will be made within 30 days following the termination of employment. This is a one time opportunity that must be elected within a six week window and employees have had no right to such payment until this year and will have no such right in the future.

We are trying to determine whether the retirement incentive can be deferred under the city's 457(b) plan. It has been suggested that it cannot be deferred because it is being paid after the termination of employment. Although Treas. Reg. 1.457-4(d) addresses sick, vacation and back pay and requires they be made available before termination in order to be deferred, this payment is none of those.

The "can't defer amounts paid following termination" rule seems troubling because it would mean employees could never defer anything from their final paycheck because it is always paid after employment is terminated.

If anyone can help me understand why the incentive payments could not be deferred it will be much appreciated.

How can a 401(k) plan correct the failure to obtain spousal consent for a loan to a participant where the plan requires spousal consent? Rev. Proc. 2003-44 provides that a plan can obtain spousal consent after the fact in order to correct a failure to obtain spousal consent for a distribution from a 401(k); however, the Rev. Proc. does not address correcting such failures with respect to loans from a 401(k). Will obtaining spousal consent after the fact suffice to correct the failure to get spousal consent for the loan, or does the plan have to treat the loan as taxable to correct the mistake? Treating the loan as taxable doesn't seem fair to the participant if it was the plan's mistake.

A client of mine failed the ADP test. I completed the paperwork to have the investment company process a withdrawal of excess contributions and faxed it to them yesterday (March 15th). They informed me that when this form is received after 4pm EST that the withdrawal will not be processed until the following day. Is a penalty owed by the client seeing that a good faith effort was made to get the distribution done in a timely manner?

.....But, the plan can be broken into components, with different component plans tested differently.

For example, the plan could be broken into components with one tested on the annual method and one on the accrued to date method.

.....

Ok Andy - I have a DB plan which could benefit by breaking it into component plans and having different formulas for the compenent plans. I want to stick to just one DB plan and but not split into DB/DC plans.

In a handout from an ASPA conference (2002 Summer Academy) on plan restructuring, one of the listed requirements is: Each component plan must satisfy 410(b) ....and then goes on to say "The special rules for rate groups (where the rate group is deemed to be a non-discriminatory classification) does not apply to component plans...."

Questions

1. I could not find where this is stated in 1.401(a)-9. Is it mentioned somewhere else?

2. Which deemed non-classification provisions of the regs/code does this refer to? Is this referring to the non-classification test in 1.401(a)(4)-2©(3)(ii) - rate group's ratio % between safe/non-safe ratios .. ?

3. If it is 1.401(a)(4)-2©(3)(ii), does this mean each rate group has to have 70% or better ratio? If that’s the case, wouldn’t the average benefit % test for rate groups become redundant?

Of course the above only applies if a component has a non-safe design.

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Any special/common pitfalls one should look out for?

Being new at this, I am treading with care.

Thanks.

I originally opened my ROTH about 6 years ago when I was making less than $100K a year. About 3 years ago I advanced nicely and now make around $175K a year.

I was under the impression that since I make more than is allowed for ROTH contribution that I can no longer put money into it.

I was having a discussion with a co-worker on this topic and he said that you can only open it if you qualify, you can contribute no matter how much you make once you have it open.

Is this true? If so, I've been putting money into a traditional for years when I could have been adding to my ROTH.

Thanks in advance!

I have a profit sharing plan that the employer is contributing to under the auspices of funding retiree medical. It is not a 401(h) type account. The money contributed for the employee is fully portable and vests (qualifies for rollover status).

Contributions to this retiree health insurance account are made based on length of service and marital status: married participants receive a higher contribution than single; longer service employees receive a greater contribution. Again, the money does not have to be spent on medical. If an employee leaves, the money can be paid by the employee to a VEBA that will provide the medical coverage.

The problem (aside from married EE getting more than single) is that if both married parties are covered under the plan (employees have married employees). In that instance, neither employee receives a marital contribution, instead both only receive a single contribution.

My questions are:

1. Since this is a qualified retirement plan, can an employer discriminate on contributions based on marital status?

2. Even if the employer can discriminate based on marital status, can it still refuse to make a full contribution (marital vs single) for employees who happen to be married to othe employees?

Any comments are appreciated.

I have always explained to clients that Safe Harbor NonElective contributions must be allocated to ALL eligibles. This issue originally arose on the first of our clients to use the 3% methodology.

Recently, the "who gets it" issue has been complicated by Plan documents that now have "eligibility" requirements for Profit sharing [ like 1 yr, 1000 hrs/EOY employment].

Some practitioners have been telling their clients that only PS eligibles get it and they invoke the 1 year and 1000 hr rule.

An Example::

A Plan has immediate eligibility for CODA purposes, they apply a non safe

harbor match to those deferrals. They have a profit sharing and 3% safe

harbor NonElective contribution that is given to all employees who have 1,000

hours AND 12 months of service DURING the year. There is no "last day" rule. The

1,000 hour requirement is applied EVERY year.

Is this a legal safe harbor arrangement.

Company with underfunded DB plan (subject to PBGC if that matters) experiences financial distress in 2003 and freezes benefits. Withing a month or two of the freeze date, both before and after, 40% of the work force is laid off. Many are less then 100% vested.

Plan is to be terminated in effective in 2004, about 11 months after the freeze. Sponsor will come up with the shortfall needed to terminate in a standard termination.

Question: Do people laid off in 2003 who clearly would comprise a partial termination need to be fully vested as part of the 2004 plan termination, even though the plan was not sufficiently funded when the layoffs occurred?

How is "to the extent funded" interpreted in these circumstances?

An employee wants to stop his dependent care election due to a court order he received last week. We're asking for a copy of the order for our records and he does not want to provide us with one.

1) can he stop his D. C. election at this time for this reason?

2) if so, what do we need from him to verify this change? will his signed statement be enough?

A quick response would be appreciated because he wants this to be effective before his next paycheck.

Thanks.

can a cafeteria plan be administered by someone within our company or does it have to be by an outside company?