Hi,

Sorry for the basic question, but I have been out of the welfare plan area for a few years. Our client received Schedule A information from Blue Cross showing the premiums paid and the number of subscribers for the period 6/1/02-6/1/03. The number of subscribers are over 100.

It is my understanding that a Form 5500 would need to be filed since the plan is fully insured and covers over 100 participants. A Form 5500 never hs been filed before, but they had filed for the POP plan through 2001 when the filing requirement for 125 plans still applied.

We asked the client for the plan document for the welfare plan so we could get the plan name, plan year and effective date. The client said they do not have a plan document that he is aware of.

Questions:

1) Are welfare plans required to have plan documents like retirement plans?

2) Am I correct that the plan needs to file a Form 5500. The client thinks they don't have a "plan", just a contract with Blue Cross. Is this possible?

Many thanks for anyone's help!

Employer wants to add optional benefit to its health plan extending coverage to retirees on a self pay basis. Retiree can elect to continue coverage under health plan by paying the entire monthly premium attributable to that coverage. Eligibility would be based on years of service (10) and age (55).

Any problems with this arrangement?

Is a plan document required?

Any problem with a subsequent termination of the program?

Thanks for your input.

There's an old Revenue Ruling (Rev. Rul. 58-230) which says that a participant incurs a 6 months' suspension from participation under the plan if that participant makes an in-service withdrawal. Does anyone know if this Revenue Ruling is still in effect?

Would it depend on the plan document and could a plan be written with a longer suspension period, such as 2 years?

And if such a suspension is allowed, is the employee still required to get a top heavy minimum and as such the cross-tested gateway?

Does anyone know of any legal requirement to have a medical conversion plan for people that have exhaused their COBRA months?

Does anyone happen to have the 403(b) elective deferral limits since 1973? Basically, this is what I've put together so far:

2003 - $12,000

2002 - $11,000

2001 - $10,500

2000 - $10,500

1999 - $10,000

1998 - $10,000

1997 - $ 9,500

1996 - $ 9,500

1995 - $ 9,240 (? - not real certain of this one)

1994-1973 - ?

Can anyone help?

For a calendar year plan the normal deadline is 7/31 and the extended deadline is 10/15. I understand that there is a one month extended deadline for nonprofits. Does that mean that the normal deadline is 8/31 and can be extended to 10/15 or that the extended deadline is 11/15?

Thanks.

Have a client who is in a non-ERISA 403b. She is looking to see if (& how) she can get her funds. Here's the facts:

1. She has congestive heart failure but is still employed (albeit in a very limited capacity).

2. She declared bankruptcy a year or so ago.

3. She is 55 years of age

Questions are as follows:

1. Does she qualify for a distribution due to disability? I know the IRS guidelines state that person must be "unable to engage in any substantial gainful activity". Because she is working only a few hours per week does that disqualify her. It's interesting that the custodian sponsoring the 403b only requires a physicians statement that the person is or will be disabled for 12 months or longer. I'm always inclined to caution clients if they don't follow the full IRS definition.

2. If she can't take funds due to disability how about finc'l hardship? I know bankruptcy in & of itself doesn't qualify unless you meet one of the 4 IRS criteria. 3. I went over this info with the employer - they really want to help this person out. They brought up this idea: what if they let the person go (in which case they've separated from service & could take a distribution) & then hired them back a few months later? I don't believe 403b's have any break in service requirements that a qualified plan might have. Never heard of this being done before.

4. Because this is a non-ERISA plan what liablity might the employer have if the employee takes a distribution that possibly is later found through an audit to have been done impropoerly? I know that the employee is on the hook for penalties but am not sure about the employer. How about the custodian (especially under the disability distribution where the physicians statement does not follow the IRS definition).

Thanks!

Question: Does each participating employer under a multi-employer VEBA have to file a separate Form 5500, and if so, if a participating employer is considered as having a large plan, does an audit have to be filed as well? This is the information that the "Trust" is telling each participating employer. The "Trust" files one return and attaches the "Trust" audit.

If a loan is deemed distributed and is later offset by rolling it into another qualified plan (which I believe is permissble thanks to EGTRRA), can the participant take out a new loan to repay this rolled-over loan? If so, it seems like the "repayment" portion of the new loan would create basis in the participant's plan account (i.e., part of the pre-tax loan will create post-tax dollars in the participant's plan account). What do you think?

Shoudl a sponsor obtain a board resolution for its profit sharing contribution?

Are there any requirements out there regarding how to prove the intended contriubion, other than looking at the actual deposit.

I have a problem where I added $20 extra to last year's Roth IRA contribution (2002) that I now need to push onto this year's contribution(2003). I have Form 5329 that I plan to send next week to pay there 6% penalty, but I'm not sure how to finalize the "moving" of the $20.

If I happen to not make any other contributions for this tax year, does the excess $20 just seem like a contribution I made during this tax year or are there other forms I need to fill out also to make this mistake fixed?

I also do not want to go through my broker since they want to charge me more than the amount I'm moving over to do this.

Thanks for any help.

Jim

A participant in a 401(k) plan is filing Chapter 13. He wants to know if he is still able to contribute to the plan. He also wants to know if he must still pay back his 401(k) loan.

He is still an active employee at the company and is still getting paid the same as before. Let me know your thoughts

Won't condoms now be considered a reimburseable expense? According to the regs, "medical care" is defined to include amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body. So, by definition, condoms are for the prevention of disease so they'd be reimburseable, right? Makes sense to me. But aren't they taxable (sales tax) in most places? Would the state taxability change in any way due to this new development?

And what about feminine products??? I've always wondered why they're taxable. I mean, women only buy them because they have to, they're a necessity. But I can't figure out where that would fit in the definition as medical care so I'm guessing not - doesn't seem fair but who am I to argue what's fair. Wait, maybe because if they weren't used it could possibly spread disease, so in a way it's a preventable?

How about Dr. Shoals (or whatever brand) shoe inserts? They affect a structure of the body.

While this post is my pitiful attempt to be lighthearted about this, I just fear so much trouble on the administration side (as most of us are probably feeling). I believe most plan sponsors will wind up with something near an "anything goes" plan.

I resigned from a company 4 years ago but kept my 401k there. Today I received a letter and a check for my entire account balance less taxes. I was shocked because I had received no letters or calls that my plan would be cashed out. The letter that came with the check said I had a balance under 5,000 so I could be cashed out - actually my balance was over 5000 but it was all rollover money so they said that was the same thing since I had not contributed to the plan enough money to reach the 5,000 minimum. My question is, is this legal, and can I get the entire balance transferred somewhere else without having all those taxes taken out?

Can anyone cite for me where to find instructions for requesting the blessing of a specific plan provision when submitting the plan for a favorable determination letter? We have a client who would like their favorable letter to give the nod to one provision in particular. Will the IRS include a thumbs-up to this provision if we ask for it pointedly in our submission cover letter? I think that I read some time ago that this was the case, but am unable to document it. Any assistance from anyone who has done, or has tried to do this, would be very appreciated.

Top Heavy Plan w/ last day clause for contribution is terminating 9/30, do they have to put in a contribution for plan year, Plan Year is 1/1 - 12/31

We assisted a client in terminating their PBGC covered defined benefit plan. They filed with the PBGC and received a favorable dletter from the IRS. All participants were paid their full lump sums after the employer made the plan sufficient by contributing $100,000+. All participants were paid out by the end of 2002 and a final 5500 and PBGC Form 501 were filed.

Now the client has received a check, payable to the Plan Trustees, for $30,000+ in demutualization proceeds. The transaction that generated the proceeds happened well before the plan termination but we weren't aware of it at that time.

The question now is should this money go back to the Employer to offset the $100,000+ they deposited (and not consider it a reversion)? Or should it be considered excess assets and allocated back to the participants as provided for in the plan document?

Has anyone had experience with this type of situation? Thanks!

Employer took a deduction for a $25,000 profit sharing contribution for the 2001 plan year. $25,000 was not deposited by the filing deadline of 10/15/02 (sole proprietor). From what I understand, the 2001 tax return needs to be amended. If the client deposits the $25,000 by 10/15/03 and takes a deduction on the 2002 tax return, can we leave the 2001 allocation report as is or should we revise the 2001 allocation report and take away the $25,000 allocation for 2001 and allocate the contribution as a 2002 allocation? What else would need to be done to correct the late deposit?

Are there legislative or regulatory changes that you would like to see made with regard to QDRO administration? And, if so, who in Congress or the IRS would you contact to plead for these?

This was on the BenefitsLink nondiscrimination Q&A column at http://benefitslink.com/perl/qa.cgi?db=qa_...rimination&id=5 -- Aren't the examples at the end of the Q&A just inaccurate? Am I missing something?

Q&A: Nondiscrimination Issues for Tax-Qualified Retirement Plans

Answers are provided by Milliman USA's Employee Benefits Research Group

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Minimum Contributions to a Top Heavy Plan

(Posted August 28, 2001)

Question 5: A plan is top heavy for its 2000 plan year. The key employees in this very small company must return part of their 401k deferrals for 2000 due to the ADP test, so that their average deferral percentage becomes less than 3% after their refunds. (It was 3% or more before the refunds.) The 401k deferrals are the only contributions into the plan; no other company contributions will be made other than a required top heavy contribution for the non-key employees. The company wishes to make the lowest possible top heavy contribution. Must the company contribute 3% for all non-highly compensated employees, or can it instead contribute the original amount the key employees deferred less the required refunds, which would result in a contribution of less than 3%?

Answer: Under the tax code's "top heavy" provisions (section 416 and Treasury Regulations section 1.416-1, Q&A M-20), salary reduction contributions are in the unenviable position of being counted for determining whether a plan is top heavy but not in determining the minimum contribution to be made to a top heavy plan for non-key employees. An exception to this rule exists for salary reduction contributions for key employees. Salary reductions for key employees up to 3% of compensation are counted for purposes of determining the minimum non-key employee contribution. Section 416© of the tax code requires that an employer generally contribute a minimum contribution to a top heavy defined contribution plan equal to 3% of each non-key employee's compensation. However, the minimum contribution does not have to exceed the percentage at which contributions are made under the plan for the key employee(s) for whom the percentage is highest for the year.

Therefore, if a plan that only provides for contributions through salary reduction is top heavy and any key employee makes salary reduction contributions in an amount greater than 3% of compensation, any non-key employee who contributes less than 3% would be entitled to an additional employer contribution up to the 3% minimum. For example, if the non-key employee contributes 1.5% of compensation and the highest key employee percentage is 4%, the non-key employee would be entitled to an additional 1.5% contribution (3.0% - 1.5% = 1.5%). In this plan, if the highest key employee salary reduction percentage is 2%, the non-key employee would be entitled to an additional 0.5% contribution (2.0% - 1.5% = 0.5%).