Is the exclusive benefit rule of 457(g) violated if a governmental sponsor reimburses itself from 457 plan assets for amounts it paid out to participants from its own general assets because of a long delay from the insurance company who held the plan assets? Contributions to the Plan are made solely by the participants--thus, future employer contributions to the plan cannot be offset. Since the participants were paid the distributions that they were entitled to, can the employer simply be reimbursed from the plan once the funds are released by the insurance company without violating the exclusive benefit rule, or does all of the money have to stay within the Plan? Also, if the money does have to stay in the Plan, does it have to stay in the accounts of the participants who received the distributions, or can it offset administrative expenses associated with the Plan? The employer was only trying to accomodate the distribution requests to the participants in a timely manner. The plan documents do not address the issue. Any comments would be greatly appreciated.

We have an active employee with dependent coverage for medical and dental. His dependent will be offered COBRA shortly. The employee wants to have the dependents premiums deducted from his paycheck on a pre-tax basis. Can this be done?

employer has deposits automated to be ACHed or wired out of their checking on the day of payroll. This is triggered by the investment company when they receive the list bill. However, somehow one got missed in Feb and one in Mar of 2003. They discovered in Apr and immediately sent it in.

I am reviewing what needs to be done, and from what i can see, the VFCP is an application process that has no forms. Apparently it is up to the fiduciary to 'submit' this...

Does anyone have any sample documents we could review to see the format that could be used?

Also, if we do the 5330 and the VFC application, do we still indicate on the 5500 that funds were deposited late?

If an employer establishes a VEBA to allow their employees to contribute post tax contributions for the purpose of funding the premiums for retiree medical upon retirement, would there be restrictions on the types of investments that would be available under the VEBA? Do employees get to 'pick' the investments, or would the employer pick them for everyone?

Thanks!

I have a client who currently sponsors a target benefit plan. His financial planner has asked for a proposal to replace it with a db plan. If I start the db plan anew I have to start the 10-year 415 phase-in at the same time. But if I convert the tb plan into a db (as permitted by the Corbel db volume submitter document), it would seem that I could count prior participation toward the phase-in. Anyone agree or disagree?

Are there any other issues to be concerned about? What about non-discrimination? Would I now have a db/dc combo that must pass the general test? Or would the conversion date be a fresh-start date and I can look at just the db plan going forward as either a safe harbor or subject to the general test on a stand-alone basis?

Thanks for any thoughts.

Say an individual leaves company 12/31/02. Employee is going to paid severence over 3 years and will be issued a W-2. This makes sense, since the severence is in essence compensation for services past rendered.

However, could this individual participant in the 401k feature of their 401k plan? I know that there would be no eligibility for match, simply due to the hours worked being none....

Facts:

Prototype document has the following provisions:

Early Retirement Age is 62.

Normal Retirement Age is 65.

In-service distribution is allowed upon reaching normal retirement age.

Person A reaches early retirement age and is still employed. Person A requests for his distribution because he has reached early retirement age. However he is still actively employed. Can he take a distribution and roll over all his money out of the 401(k) plan?

My feeling says no because he has not terminated service. He has basically just reached the early retirement age and the plan document does not allow in-service distribution until age 65. Am I on the right track or am I making this too complicated?

Thank you for your help.

Where in the regs does it state that a participants balance is not assignable,assignable, alienable, or subject to garnishment, attachments, executions, or levy of any kind.

Thanks for your answer

I keep reading about severance pay being paid over several years after separation of service. I thought that taxes are due when earned not when recieved however many schools are paying teachers via a W2 after seperation of service and then taking taxes at that time. The Arizona Republic wrote:

"Employees who worked for the district for 10 or more years were eligible. In exchange for leaving July 1, employees will get one year's salary, up to $60,000, spread out over the next eight years. Employees older than age 60 will get their money in fewer years."

http://www.azcentral.com/news/education/07...erretire06.html

Now in that example aren't taxes due on the $60,000 at separation of service?

I know that this isn't quite 403(b) material but you all seem to know so much I thought I give it a try. Thanks for any info.

Rev. Rul. 75-539 states that sick leave accumulated at retirement that may not be received in cash but is used to purchase medical insurance is excluded from application of the constructive receipt doctrine. PLR

9840006 expands this concept to exclude from income excess annual sick leave used to increase the employee's account in a cash balance DB plan (again, the sick leave could not have been received in cash).

Any reason why this concept won't work for excess annual vacation? For example, a state university currently allows an employee to have up to two times annual vacation in the bank. For vacation earned in excess of that amount, the employee must either "use it or lose it." The idea would be that on an annual basis, vacation that would be lost would be automatically converted to sick leave, which would then be converted to additional State Teacher's Retirement System benefits at retirement. Sick leave may be accumulated without limit and under our state laws is automatically used to "buy" more service credits under our TRS.

Thanks,

Ken Davis

Univ. of South Alabama

Hello List,

I just had someone from another listserv tell me that a cafeteria plan is

not needed to avoid constructive receipt of income in the following

circumstance. The individual seems to always give good advice, but this

answer took me totally by surprise as it implies that the reimbursement

account type of cafeteria plan is unnecessary. I'd like to get some

opinions from this listserv.

""Are you saying that it is not necessary to use a cafeteria plan to avoid

constructive receipt of income when an employee has a choice between

receiving compensation in the form of cash or an otherwise tax-free fringe

benefit? For example, an employer agrees to pay for its employees

dependent care costs up to $2,000 per employee (in a program satisfying

section 129) BUT ONLY if the employee agrees to reduce his/her salary by

that amount. The employee elects to defer $2,000 at the beginning of the

year. Is the use of a cafeteria plan required to avoid constructive

receipt of $2,000 of compensation income?""

Thanks,

Ken Davis

Univ. of South Alabama

I have a 401k plan where forfeitures reduce the employer contribution. The only thing is, there was no ER contribution made. There was no match or discretionary contribution and the forfeitures were not reallocated to any participants. I dont want to put a negativie amount on sch I for ER contributions. Has anyone had this problem?

If they had contributed a match, for example, I would reduce the match by the FF amt and put the net amt as ER contribution.....any help would be appreciated

Can a GHP require a disabled retiree who is eligible for Medicare due to disability to enroll in Medicare as a condition to coverage? The GHP would pay secondary to Medicare.

I have a client in his late 80's that set up a DB plan for his professional corporation many years ago. He has been taking regular distributions under the original plan since he retired. His wife is in her late 70's and they have 4 children. The PC has been inactive for several years. The DB plan is quite overfunded (and with fairly substantial assets - around $3 million) and we are looking for options.

Among the ones that I have considered are employeeing one child (same profession as client) by PC or all children if possible and include them in the plan. Also, amending the plan so that we can minimize the penalties on a distribution to the PC. The distribution would be held by the PC until client's and spouses death then liquidate PC. Any other ideas or recommendations for sources to look at for ideas?

My fear is that if no changes are made that upon client's and spouse's death the DB will terminate and the combined penalties and income taxes (federal and state applicable here) will exceed the value of the DB.

Thanks for any and all suggestions.

Can anyone point me to regs that require callbacks to confirm the rate for FX on ERISA accounts to be done prior to booking a trade?

i believe the two PTEs cited above mention only written confirms w/in 5 days.

many thanks

We do not deal with much insurance in pension plans. However, I am taking over a plan that has whole life insurance policies in the plan. The owner is looking to max to the $40k.

Does his premium count against his $40k?

Is there anything else I should I should look for when calculating the % to the NHCE.

Thanks

A company has been withholding FICA on sick pay beyond the six months of such income that is subject to FICA per Code section 3121(a)(4). The Company acknowledges that it was not entitled to withhold these sums and plans to change its program going forward and to offer refunds of monies collected for past periods -- to a point. The company claims that IRS regulations establish a five year statue of limitations for refunding these improperly withheld sums. I know that there are specific limitation periods for claiming refunds from the IRS. Does anyone know of a regulation that applies to the company in a case like this. Perhaps they are saying that if the company has paid these sums to the IRS and if it can't get the money back from the IRS then the company has no obligation to refund these sums to affected individuals? Are the affected employees left to a state claim against the Company? Thanks for your thoughts.

I have been thinking about this and I can't think of a way that Relius can handle this. If I am losing a plan and want to provide an electronic file for everything to the new recordkeeper, is Relius capable of this?

Have recently taken on a plan that definitely is a late amender for GUST and appears to never have been amended for TRA 86 (we're still reviewing files and hope to find a more recent document).

Has anyone looked at the issue of whether the VCP user fee is assessed only once in this situation? In other words, will our $750 cover both the TRA 86 & GUST amendments?

Thanks,

JD

A participant contributes $10,000 in after-tax contributions to a plan. These are the participant's only contributions. The participant elects to receive a distribution from the plan in the form of a life annuity. The participant receives a benefit of $9,000 during his first year of distributions, $1,000 of which is attributed to the participant's basis in the annuity contract and is not taxed. The participant dies after receiving only one year's worth of annuity payments. Under the terms of the plan, the participant's spouse is entitled to a refund of the difference between the participant's contributions to the plan and the amount of benefit received by the participant.

The participant's spouse is only entitled to a refund of $1,000 (total contributions of $10,000 less annuity payments of $9,000). However, as the participant's basis was $10,000, and only $1,000 of that basis was distributed to the participant, the participant has an additional $9,000 of basis in the plan. Clearly, the $1,000 the spouse is entitled to receive is not taxable. But what about the remaining $8,000 ($9,000 less $1,000 paid to spouse) of basis? Is it simply lost? Can it be deemed a loss on the participant's final tax return or on the spouse's return in the year the refund is made?