I have a client (a partnership) with a safe harbor 401(k) plan. The plan matches deferrals on a per pay-period basis. For partners, the plan matches deferrals for each partner's monthly draw. Also, for partners but not for non-partners, the plan trues-up the match at year end. Does this last bit of information violate the safe harbor rules?

New DB plan. Husband and wife only. Same age. AA = 57, RA = 65, PS = 5+. Client would like some flexibility annually. Using FIL would create a range, but is it reasonable given the age of the participants? In other words, if they simply made the minumum each year the benefits would not be properly funded. On the other hand, they're funding there own retirement so who cares? Maybe the IRS cares? Maybe the JBEA cares? I would appreciate some input as to whether any of the actuaries out there would (or do) use this approach. Thanks.

If a survivng spouse is one of several beneficiaries, can the surviving spouse rollover his/her portion to his/her own IRA AFTER separate accounts are established?

My client, with owner and wife, and another HCE (makes $150,000), is setting up a DB plan in which only the owner and wife can participate. They have an existing 401(k) plan that is NOT top heavy right now.

The new DB plan will make the combined plans top heavy. They are planning to hire another HCE (at least after he earns $90k in a calendar year), but do not want him in the DB plan either, nor do they want to give TH contributions to the HCE's.

Can they set up a new 401(k) plan in which only non-shareholders can participate, that will not be aggregated with any other plans for top heavy or for coverage, such that Top Heavy minimums will not be required?

The owner and his wife will not contribute to either 401(k) plan when the DB is set up.

Question:

A participant submitted expenses for orthodontia treatment. The braces are the clear/invisible ones. Would this be considered cosmetic? We have a letter from the doctor stating the medical necessity for the braces. But can we recommend reimbursement for the full cost of the clear braces?

Any guidance on this would be greatly appreciated.

Does anyone know how are split-dollar insurance plans for tax-exempts treated? Do the 457(f) rules control?

I was told there is a case that says if (1) a spouse creates an IRA prior to the marriage and (2) makes no contributions to the IRA during the marriage, then (3) all of the assets in the IRA constitute separate property – even the interest and dividends arising from the investments. Usually, interest and dividends that arise during the marriage from separate property constitute community property. Does anyone have any thoughts or know of the case? Would it be different for a retirement plan?

While a client was balancing their checkbook and reviewing their uncashed checks from 2003, they noticed that the check that they issued for the deposit of the January 2003 deferrals has never been cashed. They routinely issue their deposits to their 401(k) plan within several days of their payroll and send them via USPS to TPA. TPA records them and sends them on to a large institutional custodian.

The client did their part but neither the TPA or the custodian have any record of the check. The check was/is lost in the mail. If we set aside the question "Why are they just noticing this now?" are the contributions really late by DOL's standards? Do we need to use the DOL's correction program? Who would be liable to make up the lost earnings? Client? TPA?

I'm trying to set up a cross-tested plan with prevailing wage in the definitions. I'm using AutoDoc and it requires a Schedule A be attached which specifies the prevailing wage contribution that will be made to the plan. Does anyone have an example or know where I could find one of the wording in this schedule?

We have found a discrepancy between some of our carriers, and the way that the out of pocket maximums are calculated.

One plan excludes mental health claims from going towards the out of pocket.

Is this typical?

Correct me if I am wrong but doesn't any changes to the language of a prototype cause the document to become individually designed or are there exceptions?

Will the IRS will issue a retroactive "pick up" letter under Code section 414(h)(2)? Put another way, is it possible for a governmental entity to implement a pick up arrangement (thus treating mandatory after-tax employee contributions as employer contributions) if it has not yet received the pick up letter?

I know that pick up arrangements cannot be made effective prior to the date that the last governmental action necessary to effect the employer pick up has occurred.

Your thoughts are appreciated.

We have had clients with late deposits. We did not go through the DOL program - but we did calculate earnings on late deposits and filed the 5330 forms. Three of our clients in the last few days got a letter from the Pasadena office the DOL - tellling the client they need to submit under THEIR program. Is anyone else going through this?

For computing TH benefits, does the compsenstion "have to" include 401(k) deferrals (specifically 401(k) deferrals)?

For TH rules, compensation is defined in Q&A T-21 of Reg 1.416-1 as:

..... Compensation used is as defined in 1.415-2(d).... [1.415-2(d)(2)(i)] excludes ....... amounts contributed to a plan of deferred compensation. Alternatively, Compensation that would be stated on an employee's Form W-2...

____________________

Although, S415 was changed to include 401(k) deferrals from 1997 (?) or so, the regs 1.415-2(d) and 1.416-1 Q&A T-21 have not been amended.

Also, S415 changes had no impact on W-2 compensation in this respect or did it?

The question is, if desired, can one exclude 401(k) deferrals from Comp when defining Comp for TH benefits (or define it as W-2 compoensation)?

I am a TPA who has never dealt with FSA claims under COBRA. My questions are if an employee elects to have his FSA under COBRA when they are terminated what is the claims cut off date? The date of termination or the end of the plan year? Can they continue to elect FSA in the new year? Also do you have to charge the 2% fee and if yes does this become part of the annual election or is it treated as a separate item.

Doing a (late) audit for a Company Division Plan from 2001 which merged into the Parent Company Plan at the end of 2001. In doing testing, a number of loans were discovered that were in default, but had never been given 1099s (due to significant personnel turnover and poor controls). Further, a number of these loans were not reported to the successor Parent Company Plan (loans were tracked separately from the remainder of Plan assets).

A few questions or requests for opinions:

1) In preparing the "final" 2001 audit report for the Division Plan (which would have a zero balance), how would you treat the defaulted loans that were not reported to the Successor Plan?

With the benefit of hindsight, would I show this as a transfer to the Successor Plan, and then inform the Successor Plan trustee so they could issue 1099s (showing as a withdrawal from the successor plan)?

I don't think I could show this as a distribution from the Division Plan since 1099s were never issued. Am I wrong on this?

2) Since the 1099s would be issued so late (many loans have not had repayments in over 2 years), would there be any penalties to the Plan Sponsor?

Any thoughts would be greatly appreciated.

Is there a notice that we have to give to employees (other than a SMM) if we are reducing their match to mirror another plan in our controlled group? I'm trying to figure out if we could accomplish this by the end of the year.

DB plan provides for unreduced disability provision if participant has 15 YOS.

Plan is frozen. Must participants be allowed to "grow into" the 15 YOS or can service be frozen for this purpose?

We have understood that an employer could hire someone and, to support the ‘recruiting package’ could offer that specific person accelerated eligibility for the retirement plan, since a new employee (unless he/she owned more than 5%) could never be an HCE in the first year so there is no discrimination. I’ve seen articles about this in the past but can’t put my hands on one now to answer questions from an attorney who is asking for the legal authority to do that. Has anyone out there heard of this technique and, if so, have you got something specific I can hang my hat on?

Can anyone please clarify the correction methodology and timing? I realize that a failed test c/n/b corrected after year end, and that all deferrals become taxable to the HCE's. That's fine.

My question is the option one may have for correction < year end. Can you simply impute enough W-2 income as needed to pass the test (a much better solution)? If so, where does it say that you can do this? If this is true, this method appears at odds with the first, i.e., how would anyone know if you "ran the tests" on 12/29/03 or 1/3/04?

Sorry I am so confused!!