Upon conversion of our payroll system to a new payroll provider, we discovered that the old payroll provider underreported employees' wages due to a miscalculation of the employees' pre-tax contributions to a cafeteria plan. The cafeteria plan includes an employer credit, and the old payroll provider excluded this employer credit from employees' wages.

How can we fix this problem? Is there an EPCRS program for cafeteria plans?

When we issue ADP refund checks after March 15th of a given year, we withhold 10% taxes from the individuals check when the amount is greater than $200. I have been told that this is an IRS mandatory withholding for money refunded where it is taxable in the current year, but can someone point me in the direction of the IRS language stating this fact?

Thanks.

I have a Roth IRA that I have already paid through my income taxes a few years back. Unfortunatly now, I have become disabled and may need to withdraw some money. I understand that I may be waived the penaly fee as I am disabled. But, when I do my taxes for 2003 next year, do I have to again pay taxes on the money I withdraw?

Just trying to get feedback on how everyone values Israel Bonds when they are in a qualified plan. At face value? And if not, how is the value determined each year?

I need to understand this once and for all or else I can't go on.

I understand that two plans can be permissively aggregated for top heavy testing, but that if the group is top heavy, only the plans that are required to be aggregated are actually considered top heavy.

However to permissively aggregate for top heavy testing(which helps many of our law firm plans that cover associates in a separate plan from the partners to avoid making a top heavy ctb), I also understand that the plans must then be aggregated for 401(a)(4), which is fine for the ADP test since the aggregated plans generally always pass ADP.

Now consider that the PS piece of the partner plan is cross-tested. The associates plan provides no PS contribution. However, because of the mechanics of cross-testing (consisting of the NCT and ABT tests) the associates are always included in the test if they cannot be statutoriallly excluded. So, in a sense, have I aggregated the plans for 401(a)(4) by simply cross-testing? Does this mean that the associate plan that is aggregated for top heavy does not need to provide comparable benefits or minimum gateways, as long as the "aggregated" 401(a)(4) cross-test passes with the nonexcludable associates treated as not benefitting.

Make any sense?

Please let me know and thanks!!

I see a lot of posts about the self-employed and the timing of deferral deposits, but not that many about employees. The situation I have is:

2 person plan. 1 is the 100% owner.

Contributions were withheld and not remitted for 2002. They still have not been remitted. Can they be remitted? Must (and can?) the custodian accede to the client's request to code these as 2002 deferrals?

If they will not be coded as 2002 deferrals, can the client pay them in cash to the participant(s), effectively overriding the deferral election?

If the contributions must be deposited and they are not 2002 deferrals, are they post-tax contributions? 2003 deferrals?

Any guidance is appreciated.

A COMPANY HAS A 401K PLAN WITH DEFERRALS AND AN ANNUAL 1% EMPLOYER PROFIT SHARING CONTRIBUTION TO ALL ELIGIBLE PARTICIPANTS.

The plan is Top Heavy for 2002 based on the 2001 balances and the In-Service withdrawal for the Key Employee.. Also, the highest contribution percentage contributed by key employees is 3.77% (2.77% Deferrals and 1% Employer P/S Contribution).

1. With the new top heavy rules how long would the In-service distribution taken by the Key Employee in 2001 have to be included in the Top Heavy test 1 year look back or would the 5 year look back rule apply?????

2. Since every eligible participant will receive the annual 1% profit sharing contribution, would an additional 2% need to be contributed to non-key employees to meet the 3% top heavy minimum???

Hello,

I am working with a client who has funds in Kmart's "frozen" retirement plan. She no longer receives statements & says that when she tries to contact the company for information she gets nowhere. Looking for other possible avenues for her to explore to see what she's got. Thank you.

A COMPANY HAS A SAFE HARBOR 401K PLAN WITH THE SAFE HARBOR MATCHING PROVISION. DUE TO ECONOMIC CONDITIONS THE EMPLOYER WANTS TO SUSPEND THE MATCH.. ALSO, THEY ARE TALKING ABOUT MAYBE SUSPENDING THE DEFERRAL..

1. Can the employer suspend both contribution sources for a Safe Harbor Plan or could they just suspend the safe harbor match????

2. If so, what documents will the employer need to provide the participants and would they need a corporate resolution or just a memorandum to participants????

3. If they are allowed to suspend both contributions sources could they at some future date allow for deferrals and keep the safe harbor match suspended???

We have a 403(b) (hospital) plan that has consisted totally of employee deferrals up to now. They would like to change that and start to make an employer profit sharing contribution of 1 1/2%. Eligible employees would receive this regardless of whether they were contributing or not.

Currently there are two entry dates 1/1 and 7/1 after a year of service (1,000 hours). Once an employee becomes eligible to be in the plan, can there still be a 1,000 hour per plan year requirement to receive the employer contribution. Some of these employees are part time and even though they meet initial eligibility rules, may not consistently have 1,000 each year.

Guess my question is can they be excluded from receiving a ER contribution if they do not complete 1,000 hours.

How does UBTI effect IRA income, what would qualify the IRA to have UBIT, how would it be accounted for? ie taxed and

how is it reported?

I have a 401(k) client that is currently making a company matching contribution to their plan. It is a discretionary match that they now wish to discontinue -- as soon as possible. It appears that since it is a discretionary match there is nothing to stop them eliminating it prospectively; however, I have not seen anything in the regs regarding what type of notice may be required to do this.

Does anyone know if (1) a sponsor may stop a discretioanry match mid-year after they have announced it, and if so, (2) is notice required, and how much?

Any input is appreciated..

I am working with a client who allows their employees to drop medical and/or dental coverage for themselves and/or dependents at any time without a COBRA qualifying event. The plans are both pre-tax. What is this employer's legal liability for allowing these types of changes?

I am aware of the rule that when a plan changes its accrual computation period, that credit must be given to those participants who would have received a year of service prior to the amendment.

Is there a similar rule for changes in the compensation limit? For example, a plan currently provides that compensation shall be limited to $200,000 for the year, but wants to change that limit to say $150,000 effective for the plan year beginning 1/1/03. If an employee has earned $175,000 on the date of the amendment, must that employee have $175,000 of compensation considered for the 2003 plan year?

Any authority is appreciated.

Since we provide a variety of self-insured group health plans (e.g. dental, vision, medical), we are using the OHCA to assert that our compliance efforts apply to all of these plans. However, we also have a Section 125 Plan in which one of the components is a health care reimbursement plan whereas the other two components are not covered entities. It would seem to me that hybrid entity status would be appropriate in this case. How and where does one go about documenting hybrid entity status? And, I assume that the health care component of the 125 Plan could still be part of the OHCA.

Jeez, this HIPAA is stuff has become mind-numbing.

Hello,

What is the deadline for a sole-proprietor to fund the {SIMPLE IRA} deferral and match contributions? Do they have until the extended due date? It may be several months after year end, past April 15, before we know what the Schedule C income will be in order to determine the proper amount for each part of the contribution.

Is the math as follows?

Sch C profit x .9235 = deferral amount (limited to $7,000 for 2002)

Sch C profit x .9235 x 3% = match

Is the deduction for both the deferral and the match taken on page 1 of the 1040?

Thank you.

Does a calander year Top-Heavy PS plan with a 1 year service requirement need to provide a TH minimum benefit to an EE hired in April 2002? This EE worked over 1,000 hours in 2002 and is still employed today. Thanx.

I've heard several of my peers suggest that a Hardship W/d is no longer subject to withholding. I read that the distribution would be subject to 10% withholding.

What am I missing?

I am trying to get my brain around this, and hope I am getting this right. We have a 125 plan, it includes pre-tax premiums for our health plans, a health FSA, and a DCAP.

The DCAP is not an ERISA plan, so nothing required.

The pre-tax premiums are not ERISA regulated, but the health plans themselves, of course, would be.

The health FSA is an ERISA plan, and therefore a 5500 would be required, unless exempted. At the beginning of the 11/01 - 10/02 plan year, there were 47 participants in the health FSA, so it would be a small plan (unless bundled with other plans). The part that loses me is the funding. All monies are pre-tax employee contributions. They are sent to our TPA, who processes the claims. So does that make it a funded plan with plan assets, and a 5500 is required? Or because the contributions are paid through the 125 plan, then Technical Release 92-01 could apply, and it could be seen as unfunded and no 5500 needed?

Thanks.