We have an employee that has enrolled her child in medicaid. Does this constitute a change in family status to release her from the cafeteria plan.

An employee retired in 2002 (at the normal age under the plan). Her entire account balance consists of stock purchased with an ESOP securities acquisition loan; therefore, no distribution has yet been made to the employee. The loan will be paid in full at the end of 2004. What is the timing of the distribution that must be made to the employee under 409(o)(1)(B)? Does the employer have to make the first payment on the last day of the plan year in which the loan will be fully repaid, or does the employer have a reasonable time in which to begin distribution?

Final Catch Up Regs in IRS Bulletin # 37

http://benefitsattorney.com/cgibin/framed/...gi?ID=41&id==41

A corporation has a tax year ending September 30, 2003. It will elect a short tax year for federal income tax purposes for the period October 1, 2003 through December 31, 2003 and then become a calendar year taxpayer as of January 1, 2004. The corporation is a LLC, taxed as a partnership.

The corporation has never had a qualified retirement plan. It plans to establish a plan by 9/30/03 with an efective date of 1/1/03, a Plan Year of 1/1 through 12/31/03 and a limitation year of 1/1/ through 12/31/03.

As the first plan year will not end during the current fiscal year end of 9/30/03 but will be effective before the close of the 9/30 fiscal year how much may it deduct and when?

I believe it may not take any deduction, other than start-up and administration costs, for the tax year ending 9/30/03. But how much may it deduct for the short plan year ending 12/31/03 - 25% of the Compensation paid during calendar year 2003 or 25% of the Compensation paid during the short plan year? May it adopt a first Plan Year of 1/1 through 12/31 or must it adopt a short plan year as its first plan year? If the latter, may it use calendar year Compensation or short year compensation?

An S Corp has a self-insured health plan. The Company is currently paying the premiums for several minority owners who are not employees. It would appear that the company should charge these people for their coverage. Actual premium amount? Premium amount + administrative cost (same as COBRA participants). Or some higher amount representing fair value of benefits?

Obviously some other issues to be raised - do they meet plan document eligibility conditions. Covered (probably not) under any stop loss insurance.

Anyone deal with a solution - other than discontinuing the practice?

I am doing my first cash balance plan and it was terminated by amendment effective 12/31/02. The plan credits interest based on the 30 Yr Treasury rate in effect for the plan year. I have calculated the AB at 12/31/02 based on the 2002 interest rate. Would I use that 12/31/02 AB to cashout the participants in 2003 (using the 2003 interest rate and mortality basis for the lump sum) or would I project the account balance to NRA and discount it back to the date of distribution based on the rate in effect for 2003 to get the AB and lump sum? The results are different. The document doesn't seem to address this specific issue.

I would think I should use the 12/31/02 accrued benefit (at the date of plan term) to calculate the lump sums just like any other DB plan.

Any input is appreciated!

Incidentally, the client expressed in writing that they don't want to file the plan term with the IRS.

I'm not sure if this is the right forum for my question, but here goes...

Our client was a corporation owned by two individuals, 51% and 49%. They have changed the entity to a partnership. The partners are individual corporations. Each corporation is owned by one of the original shareholders of the original corporation. One corporation owns 51% of the partnership, the other 49%.

The only income of each new corporation is the partnership income.

My question is, are these three entities related?

We would like to continue the current plan but are not sure if the two corporations can participate in the partnership's plan as related employers.

Thanks.

My understanding is that a self employed can defer the 402(g) limit and contribute 25% of the adjusted SE comp. Is this correct?

We administer a 12 participant DB that has benefit liabilities that exceed assets by about $600K. The plan is covered by PBGC. The owners (stockholders) would be happy to waive a portion of their benefits to terminate as a standard termination. The majority owners are brothers. One has 50% of the stock, the other has 30% and his daughter owns 20%.

Clearly the one who owns 50% can waive his benefits, but it is less clear as to whether the 30% and 20% family members can waive their benefits.

Although the constructive ownership rules of code section 318 appear to aggregate family members, resulting in two 50% owners, PBGC reg 4041.21(b)(2) references the constructive distribution rules of IRC sections 414(b) and © when defining a majority owner. 414(b) and © deal with controlled groups, which we do not have here.

Anyone have any thoughts as to whether the family members can waive their benefits?

Thanks.

Can a sponsor require employees to fill out a form affirming the fact that they do not want to participate in a 401(k) Plan? The point would be to prevent that employee from coming back and suing for not being offered the Plan.

Any technical references would be ideal.

Thanks

A participant in a 401(k) plan claims that she cannot afford to continue repaying her plan loan. If the plan allows her to stop repaying the loan, short of a court order, does the violate the requirement that plan loans be provided under a legally enforceable agreement between the plan and the participant?

I'm trying to gather a collection of QDRO horror stories. If anyone has any, could you please pass them on?

Is it a good idea to distribute SPDs that have benefits described in them that are not offered by the employer? For example, the employer offers a health FSA but not a DCAP. The TPA provides an SPD that includes information about health FSAs and DCAPs. On the front of the SPD it would indicates that the employer only offers the health FSA. Anyone foresee problems with this?

Does anyone know if the Archer MSAs have been extended into 2004, or will only existing plans be allowed. Or do you know the status of any legislation that might once again extend the MSA concept for new plans into 2004?

If an employer sponsors an experience rated medical plan which operates on a 3/1 to 2/28 plan year, can the insurer charge more when the person terminates from employment? A detail I should share is that the employee turned 65 in January, the premium did not adjust at that time, but when the employee termed in June the insurer adjusted the premium (by increasing it).

I have a 401(k) plan whose payroll cycle is bi-weekly. However, they only remit the contributions on a monthly basis. I know that the DOL's view is that the deadline for 401(k) deposits is as soon as they can reasonably be segregated from the general assets of the employer. Should I have this customer remit their contributions after each of the bi-weekly payrolls? They recently were audited by the DOL and they did not make this recommendation.......

Any opinions would be appreciated.

MPP merged to PSP in 2002. Owner, wife and 1 other participant. Self directed broker accounts.

"other participant" did not merge her account but took a distribution from the MPP. No signed paperwork and amount taken exceeds 50% of the combined MPP/PSP balances so loan does not work. Also no 1099R.

Any suggestions to correct would be appreciated.

I work for a company that uses an employee leasing arrangement, so technically I'm employed by the leasing firm. We are paid weekly, and I participate in the 401K plan. The 401K plan administrator is an independant company, serving other clients nationwide.

The problem I'm having is the timeliness of investing the funds deducted from my paycheck. My employer says that 401K deductions are sent to the plan administrator "twice a month". I thought it was every two weeks, but they corrected me on that. As I write this (9/20/03), my deduction from my 8/22/03 paycheck still has not made it to the 401K firm. Or maybe it has, but the 401K administrator hasn't posted it to my account (purchased the mutual funds I've selected) as of tonight.

So, the first question, is there any regulation as to the time an employer has to forward 401K deductions to the plan administrator?

Which brings me to the second part of the problem. Since I can review my 401K account online, I have noticed (and have actual proof) that they have received the funds from the employer, but take as many as 3 weeks to "settle" the funds to the proper mutual fund selected. In other words, it takes them as many as 3 weeks to buy the shares in the funds. In reality, it appears that they are playing with my money. I've noticed a number of times that they would get a check from my employer, allocate the funds to the 2 mutual funds I've selected, and mark that as "pending settlement". 2-3 weeks then pass by, and the account is then marked "settled". If the price of the shares went up during that time, they "settled" the purchase at the higher price at the later date. If, during the 2-3 weeks the shares went down, they settled the purchase at the price prior to the shares going down, but at the later date. I am convinced they are pocketing the difference each time.

The second question, is there a regulation as to the time the 401K administrator has to invest those funds per the instructions of the contributor?

And the last question, when I buy shares in a mutual fund through a plan administrator, do I actually buy those shares directly from the mutual fund, or does the administrator buy those shares (along with other contributors wishing to own the same mutual fund) and allocate my ownership through in-house bookkeeping?

Carl C

My son is 17, working part time-would like to encourage him to start a Roth IRA-can he do it on his own or will he have to wait until age 18? He will not make more than $3000 this year, but will next year. Not sure how to get started with this but do want him to start a Roth as soon as he can. Any direction you can offer would be appreciated.

A profit sharing plan is to be set up as a new comparability plan. The employer is a small company owned 100% by one individual. The owner's wife is also employed at the company.

The targeted group is just the owner, excluding his wife who will be in the "all other" group.

Is it acceptable to list the owner as a classification by name?

If we listed the classification as "All Owners", could it be argued that the spouse should be included in that group, due to attribution?

Would a reasonable classification be something such as:

"All Owners, excluding those participants who are owners due to stock attribution rules".

Thanks.