Does anyone know the latest on whether hospital based physicians are considered in a management affiliated service group with the hospital ? If not, what are your thoughts?

I've already dug through some of the old threads on this and haven't found anything related to this specific question:

Let's assume I have a restricted employee that will take the maximum amount (life annuity) from the plan until a lump sum can be paid (plan reaches 110%).

Plan year is calendar year. He retires in November, 2003. Monthly annuity is $10,000. For 2003, can he get $120,000 or is he limited to $20,000.

An Code reference would be most helpful as well.

Thanks for any help.

Well, I thought I had this topic down pat BUT

Participant is age 66

Average compensation 75,000

8 years of service and participation

Therefore, the maximum benefit under 415 is 5,000/ mo.

Actuarial equivalent: 6% GATT (APR = 124.5)

The GATT factors will be 4.92% and GAR94 (APR = 135.2)

What is the maximum lump sum payable??

I thought the lump sum was limited to the smaller of the plan rate or GATT factors.

Sorry, but my mind is just not functioning yet this morning (not enough coffee) Thanks for any and all help!

The HCE thought he had contributed $11,000, the maximum deferral amount for 2002 and that's what he deducted on his tax return. It was recently discovered that his actual contribution was a few hundred less than the max. The CPA is suggesting that the HCE put the additional amount in the plan now rather than amending the return to correct the deduction amount.

I know there's a DOL issue with late deposits for the NHCEs, but what about for HCEs?

A TRUSTEE ACTED "IMPRUDENTLY" AND MAKES PARTICIPANT WHOLE. CAN THIS MONEY BE PUT INTO PLAN AND NOT BE SUBJECT TO INCOME TAX?

We have a situation wherein a person is an employee of Company A and President of Company B. She, however, does provide services, on a limited basis, to Company B. She participates in the 401(k) plan, etc. of Company A, and not Company B. Do we have to take her into consideration for testing purposes with respect to Company B? Any guidance, sites, regs, input, etc. would be greatly appreciated.

Thank you

I would really appreciate the expertise of this group on the following unusual set of circumstances:

There is a married couple who work for our law firm. Both are non-lawyer, support staff and younger than 59 1/2.

The husband took a plan loan from the firm 401(k) plan to purchase a home. The individual to whom they paid this amount has since absconded with the money and never sold them the house.

The firm is going to help these folks bring a fraud action against that individual. In addition, I have been asked to try to figure out whether there's any potential relief on the plan loan front. They are currently making payments on the loan through payroll deduction, as the plan requires. They are now experiencing some financial difficulty and finding the loan payments difficult to make. Our plan does not allow for hardship distributions.

From their perspective, it looks to me like the best course (other than being able to pay back the loan) would be to intentionally default on the loan and then try to work out either a compromise or a payment plan witih the IRS when the taxes come due. Their facts are pretty sympathetic and the IRS might be willing to work with them.

But I just don't see any way for them to do that since payroll deduction is required as long as the employee is receiving pay from the firm. Am I correct that there's no way the plan could agree to stop the payroll deductions and allow them to default? My sense is that would be a breach of the fiduciary duty to enforce the terms of the loan, as well as a breach of the terms of the plan document.

Any thoughts on anything else these people might be able to do with respect to this plan loan? Many thanks in advance for your thoughts.

Julie

We have a new client who maintains a frozen traditional plan and a cash balance plan. In reviewing disbursement procedures, client maintains that for participants selecting annuity payments, IRS Distribution Code for 1099 should be '7' (Normal) in all cases regardless of payee age 'because our plan document allows for it.' Same with lump sum payments from cash balance plan, ostensibly because Normal Retirement Age is attained 'upon achievement of 5 years of service.'

I think they are concerned about 72(t) penalty and confusing 'retirement' with 'distribution.' We can explain all the particulars (exception codes, etc.) easily enough but I wanted a sanity check first. I find nothing in their docs which specifically address this issue and I can't imagine a plan overriding IRS reporting instructions. Or am I missing something?

We offer two medical plan options to our employees. Under COBRA, must we allow former employees to switch plans, if they wish to do so, at time of termination (we do not permit active employees to make such changes when they experience a mid-year life event)? If we are not required to offer this option, can we do it voluntarily? If so, are there employee relations, carrier or other administrative issues that would make it unwise for us to consider doing so?

Under our FSA plan, payroll deductions are completed by September 30th each year. An employee left us on October 31st and wants to elect COBRA coverage for the balance of the year. Can we charge this individual a monthly premium of 102% of one-twelfth of her annual FSA election amount? Or, are we required to give this individual a "free ride" since she has already completed her FSA deductions for the year prior to her termination?

Has the Service published any guidance on what the "life insurance premium factor" will be for the determination of the current value of the life insurance protection under the new regulations?

Based on the intentions of a PSP sponsor to contribute $X for 2002, say, Form 5500 and participant account statements were prepared and mailed to the sponsor with the express instructions to file those forms only after the $X contributions have been deposited which should be no later than 9/15/03. The CPA also prepared the corporate tax returns on the same understanding.

In November of 2003, it transpired that the PSP contribution was made in mid-October 2003, a month after the 8-1/2 month deadline for the 2002 contribution.

Other than the tax deduction issue (that is for the CPA to worry about) what are the various implications for Form 5500 and employee account balances @ 2002 as well as the contributions planned by the employer for 2003.

We recently had a situation involving an IRA that was eligible for escheatment under NY state law. NY requires that as part of due diligence we attempt to notify the customer by mail, and then if that is unsuccessful, they also require that we place a notice in various newpapers. They allow the expense of placing the notice to be charged to the customer. We were successful in locating the customer after placing the notices and are now passing the expense along to the customer. Is anyone familiar with how we should handle the IRS reporting of the debit to the customer's IRA for the expense of publishing the required newpaper notices? Would this be reportable as a distribution, or would it be a non-reportable fee transaction?

We have a plan paying a participant a lump sum of their cash balance plan. Participant recently moved to Illinois. Benefit was earned in NJ. Request indicates that NJ state taxes should be withheld. We have not come across this before. State taxes, if withheld, have always been for the state of residence. Is there a standard rule or does it differ by plan/state?

A retiree was a Nonresident alien. He passed away on January 8, 2000. He is survived by his wife. She speaks no English and has retained the services of a third party to translate and assist her through the process of claiming her husband's survivor benefits. The translator claims that Marie is receiving social security benefits under her late husband's SSN, that she does not have an SSN or Individual Tax I.D., and should not need to obtain this information to receive survivor benefits. I was under the impression that she would need to establish a SSN or ITID so that we may put her into pay and report her tax obligation correctly. I was wondering how other people handle such situations. Does anyone know of any guidance that has been issued, what would be considered "best practices," etc.? Thanks for your help.

Except for Self-Employeds, expenses paid by the employer under a self-insured non-discriminatory Section 105 plan are not taxable to the employees.

Section 105 & the Regs thereto do not say anything about taxability of these employer paid expenses for the owners of S-Corp.

However, instructions to line 18 of Form 1120S state that payments for Employment benefits programs for more than 2% owners should be included on line 7 or 8 (Compensation for officers/Salaries & Wages for others)!? Where does that come from in the Code?

There is no such distinction for similar benefits (line 25) on Form 1120 (for C-Corp).

Is it correct to conclude that S-Corp's 2% or more owners are treated same as Self-Employeds?

Is there a way to provide an S-Corp owner non-taxable medical benefits with a self-insured plan? Can an insured plan provide these benefits?

I must sincerely apologize in advance for what is undoubtedly a question beyond the acceptable thresholds this forum holds for even the most simple of questions. An investment friend asked me the following questions (thats it, blame it on someone else!!!) and, I'm just doing some of the digging to point himself, as well as myself, in the right direction.

With that said, here goes: He has an employee who works for a city public school system, which offers a 403(b) plan. His question boils down to whether this individual can opt out the school's 403(b) plan, and choose to start his own, personal 403(b) plan, making contributions to it, rather than to the school's plan? Obviously, this employee would bring his rather sizable account and annual contributions to this investment friend of mine, hence his interest in this being allowable.

The answer has to be no, correct? If this were an individual looking to opt out of a private companies 401(k) plan, he couldn't simply opt out of his employer's 401(k) plan, create his own 401(k) plan, and start making contributions, could he? (assume he is not in business for himself or anything like that)?

Based upon all of the guidance we received and interpreted from the IRS since 1998, up until July 2003, we understood that a safe harbor plan could be operated on a year-by-year basis. The safe harbor features of the plan would be "triggered" upon the timely notification to employees. If you missed the notice deadline, your plan would revert back to normal plan terms, i.e. you would have to test the plan for discrimination. Lately there has been talk that you cannot use the ADP test as an alternative to making the Safe Harbor contribution. From what I understand, the IRS is taking this position to avoid possible abuses where it may look like a test will pass on its own, so the client decides not to fund the safe harbor contribution. Didn't they have this figured out BEFORE they gave us repeated guidance that safe harbor plans could operate on a "year-by-year" basis? Or when they came up with the so-called "maybe" notice? Where is this new school of thought coming from, the proposed final 401(k) regs? And if so, why do they appear to be enforcing their position now instead of after the regs are finalized? I understand the IRS is even having some practitioners remove the ADP testing language from safe harbor GUST restatement documents that are seeking IRS approval. How can they do this?? Haven't they already approved prototypes that were NOT written like this, i.e. DATAIR? All of this flies straight in the face of the "year-by-year" theory, the "maybe" notice, the ability to stop the safe harbor match. I have no clue how to advise clients about this. In the case of the 3% nonelective contribution, what is the point of the notice? Why give it out at all if you have to fund the contribution anyway? Does the "maybe" notice have a place at all anymore? In the case of the SH match, can you stop the match with 30 days notice? If you do, do you still get a free pass on the ADP since your plan no longer has ADP test language in it?

Is anybody else having as much trouble with this issue as me?

E/er has a frozen MPPP. E/er also maintains a PSP. Assuming all participants are the same in both plans, wouldn't it be possible to amend the MPPP in order to provide for the transfer of all assets and liab's to the PSP upon termination of the MPPP. MPPP has three parcels of RE inside. Plan and e/er would like to keep from having to cash out the RE in order to pay out participants if they chose an in-pocket distribution instead of rollover to e/er's PSP. Thought I had run across this scenario on here, but it's been some time. Thanks for any suggestions....

I have a client who is in the entertainment industry. She currently employs two individuals and all others associated with her are paid on a contract basis. Years ago they switched the plan from a profit sharing plan to a SEP-IRA. At this time her balance was sufficiently high enough that she didn't make contributions for herself, only her two employees. I wasn't involved so I'm not sure of the logic there. So, the question is can an employer opt out of receiving a SEP-IRA contribution. I know that they can write it into a qualified plan document that HCE's are excluded from contributions but I wasn't sure about the SEP.

Since there was no amendment in place opting out years ago and I am assuming she should have been covered, what income gets used to determine a contribution? is it only w-2 and schedule c income? And if there is a loss on the Schedule C? Do they then legitimately not make a contribution for her?

And going back and making her whole..I am assuming that I go about it the same way is if a person was ommitted from a profit sharing contribution?

Any help would be appreciated...