In Pub. 590 the IRS deifinition of Qualified higher eduication expenses includes "equipment required for the enrollment or attendance of a student at an eligible educational institution". Is there any more clarification on what the term "equipment" includes? Have a client who needs to take an early withdrawal from his IRA. In addition to tuition, part of the withdrawal is going towards payment on a car that is needed to get to & from college. I would think that the car potion wouldn't get the 10% penalty exception but am not sure. Any thought/comments would be appreciated.

We are merging two standardized 401(K) prototype plans by 12.31.2003. Our administrator is telling us that we just do a plan document amendment and let them handle the rest. I did some research and was concerned because this one form call 5310-A keeps being mentions with regard to plan mergers and we have not filed it.

Our administrator is telling us that the 5310-A is not required (but won't tell us why) and that it is better to file this on the next 5500 schedule I that we file. Is this adequate? I ask because the 5500 instructions mention the 5310-A as though it should have been done in addition to the information on the 5500 (but of couse don't go out and say that). Any ideas?

Does the Uniform Coverage Rule require the employer to assume the risk by funding all health care FSA claims up to the annual election? Or, can the broker for the employer assume that risk? Thanks

Hello, my wife and I were thinking of getting a Roth IRA and a Coverdale IRA for the little guy's college. I know the max input is $3,000/year, but is that for all IRA's combined, or can I invest $3,000 in the Coverdale AND $3,000 in the Roth each year? Thanks.

I am curious as to how other shops handle defaulted loans in the balance forward world. For example, how do you handle a loan that is made in December, 2002 and payments are made through March, 2003. The loan would be in default and would become a deemed distribution as of 6/30/03. In most cases you would not get any information until February or March of 2004. How would you handle the 1099s?

Ok, I just took over pensions for work and here's what I found. There are four plans in the controlled group. All are prototype-profit sharing/401(k) plans with a match. All plans have been amended for GUST/EGTRRA - that 's the good news and the good news pretty much stops there.

Two of the plans are standardized plans outside of the 410(b)(6)© grace period (one is out of it by 11 months and the other is out of it by 7 years - pretty significant!). The other two are non-standardized plans.

All the plans have different matches (the one standardized plan that is 7 years outside of the grace period has the richeste match-but also has the smallest number of employees).

I would like to merge them all into one plan (the main parents plan); however, in the meantime, do I have to deal with the standardized plan issues? For instance, aren't standardized plans supposed to cover everyone in the controlled group - and they haven't.

Is there a retroactive plan document amendment I should be doing for the standardized plan that is only 11 months out of compliance?

Should I amend the plans to all meet the parent's plan so they are all identical - does that solve anything?

Also - none of the plans have been submitted for a determination letter - is that required?

If nothing else works - should I be heading in to the IRS EPCRS and the DOL's FVC programs? I just don't know where to start and I am do not know enough about the space to know what I am missing-this is all much different than the welfare area. Thanks

I have a plan that was new for 2003. All employees were hired in late 2002. Whoever drafted the orginal document did not think to allow immediate entry and the plan operated as if this was the case. I am going to file for a determination letter and I am wondering if I need to file the sch Q along with the 5307?

An employer is adopting a prototype SEP plan so that he can set it up on his fiscal year. Can he use fiscal year compensation when calculating contributions?

Are health FSAs subject to the group health plan rules (urgent care, etc.) in the claims procedures regulations? Does all of that detail need to be in our SPD?

Hi,

I am researching the dedutible limit when an employer has both a DB and DC plan and at least one participant is covered by both plans. There seems to be a special rule that if the total DB and DC contribution is greater than 25% of pay, the excess amount can not be deducted. The problem is the the DB minimum funding requirement is greater than 25% of pay, and the DC plan is a safe harbor plan that has to make the safe harbor contribution. As I understand the special rule, the safe harbor contribution would not be deductible and an excise tax would apply for that year and EACH year thereafter until it is able to be deducted.

Does anyone know if there is some way around this? HELP.

Many thanks

Anyone know when the form is going to be available. It's a little late in the year already.

Hi,

New plan established 4/1/03. Can the employer consider compensation paid prior to 4/1/03 in determining the 25% deductible limit? The definition of plan compensation excludes compensation prior to the effective date of the plan, but for deduciton purposes, I was hoping to use full year pay.

Any help would be greatly appreciated.

Thanks!!!

I inherited an employer that, when the group health plan was discontinued, began simply paying employees a few hundred each month to "use" for premiums or medical expenses. The amount is subject to all taxes; the employer includes a line on the pay stub that says something like "medical". They have asked me to add this "benefit" to the existing cafeteria plan, which, currently, only provides a medical expense reimbursement plan.

I don't see how (or why) I would want to add this to the cafeteria plan and keep it an after-tax benefit. (Let me know if I am missing something!) It would appear to benefit both the employee and employer if this was a pre-tax benefit (no income or fica/futa withholding).

As a result, I have considered the following options: an HRA (limited to premiums or unlimited), an employer contribution to the MERP (understand can't reimburse for insurance), or a premium reimbursement plan (Rev. Rul. 61-146).

In addition to various other concerns that I have, I am hung up on how and whether COBRA and HIPAA apply. (Employer has 24 employees) I have tried reading the rules several times, as well as whatever commentary I can get my hands on, but am very confused.

Am I correct that no matter how much the employer contributes, COBRA and HIPAA will apply because the employer does not offer a group health plan that is subject to HIPAA? Are they already subject because they only offer a salary-reduction MERP currently?

If I am not, could I avoid COBRA by having the employer contribute $500 to an HRA for insurance premiums or reimbursements and an additional $500 to the FSA for reimbursements only? Would I need separate plan documents?

Any comments or suggestions would be greatly appreciated!!

I recall that a DB plan can not allow a participant to elect an optional form of distribution with guaranteed payments beyond his or her life expectancy.

For example, can an 80 year old retiree elect a 20 C&C?

Anybody have a code section for this? Does it exist or have I finally lost my mind?

How do you complete the Schedule T for Cross Tested Plan. If everyone is benefiting do you check 3(d) or do you not check any exception, complete Item 4, and mark Average Benefit Test? In our plan all employees benefit but we have to do the Avr Ben Test. Do we have to show less than 70% on line 4(d) to be able to check Ave Benefit Test in 4(f)2?

We just acquired a plan that is age-based. The determination of the Allocation Points requires us to, first, multiply comp by the annuity purchase rate, and then, second, to discount step one by 8.5% from the participant's normal retirement age (age 65). THe result is the Allocation Points.

I have a participant over age 65. Am I correct that her allocation points are simply the product of step one because no discounting is possible? Or does table "Adjustment to Actuarial Factor for Normal Retirement Age Other Than 65" somehow come into play?

Thanks.

If you were in the business of approving hardships, what kind of supporting documentation would you request to approval a hardship for medical expenses? Would an Explanation of Benefits suffice? How about a letter from a collection agency? Would you always require a bill stating the type of service rendered and date service was performed?

Thanks!

Can the non-taxable portion of a distribution from a terminating defined benefit plan which consists solely of previously reported PS-58 costs be rolled over under the same rules that apply to distributions of after-tax employee contributions? These distributions are post EGTRRA and the insurance contracts were surrendered by the Trustee and cash values invested in the plan trust Are the rules any different if the plan is not terminating and the distribution is being paid to a terminated employee?

Situation: existing cross-tested PS plan. Has required 5% NHCE allocation to meet gateway.

Client wants to add a stand alone 3% safe harbor 401k prototype.

Question: Can the 3% be used as part of the 5% gateway?

I'm sure this is a basic question, but I'm not fairly familiar with QMCSOs. Does the law require a plan to add a child regardless if the employee completes an enrollment form?