I have a client with a medical plan offered thru a 125 plan. Like most employers, the client has a number of employees who are being called to active military service. The client would like to keep these employees on the health plan, and pay 100% of coverage, for family coverage, for as long as they may be gone.

I have explained, without success, that these employees have coverage under USERRA and/or COBRA. The client’s problem with this is the 18-month limitation. The client wants these employees, and their families, covered as long as they are gone on active duty.

I have tried, without success, to convince the client that the military personnel are covered by CHAMPUS/TRICARE. I have tried, without success, to convince the client that even if the client kept these people on the plan, the reinsurance carrier will have some major problems with this, and that the client will be stuck self-funding their own plan without reinsurance. Basically, the client is going to do this no matter what because it is "the right thing to do."

Has anyone else faced this? If so, can you offer any advice?

One of my many fears is that we will have discrimination issues treating the military group differently than the non-military group. Obviously, the client will not pay COBRA for an unlimited period of time for all former employees, only those employees who are called to active duty. Doesn’t this look like a possible discrimination issue?

Also if, God forbid, these employees are in active military service in excess of 18 months, would the payment of the health care be considered income to the employee? If so, how is it taxed?

Are there issues/questions I have missed?

As always, no good deed goes unpunished.

Any help anyone could provide would be greatly appreciated, as would citing to a legal authority.

THANKS!

I have a Profit Sharing Plan effective for the entire plan year. that adopted a 401(k) effective 11/01/02 (calendar year plan). In my adp test I use compensation from 11/1/02 - 12/31/02, correct? Do I have to cap comp. earned from 11/1/02-12/31/02 at $200,000 or do I prorate the 200k for 2 months? I think I do need to prorate but I am confused about the effect of having the ps plan in place for the entire year.

Does the state of New York require an employer headquartered in New York_to provide_to all employees, including employees who work outside of New York, short term disability insurance.

_

Example:_ ABC company headquartered in NYC._ Division X is in the mid-west .. does the employer use the NY insurance rules for employees in_the mid-west state?_ The mid-west state does not require_employers to provide short term disability.

_

Could you also provide me with the NY cite and, if applicable, regulation.

_

Thank You!

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A man-made object is now 7.6 billion miles from Earth.

http://www.google.com/search?q=phonebook:407-644-4146

Try changing the phone number to your own!

Or somebody else's -- e.g., a phone number on your long distance bill that you don't recognize.

Finds the person's name and address, with links to online maps to his or her location.

A schoold district adopts a 403(B) arrangement for its superintendent as the only employee. The 403(B) has a vesting schedule and provides that upon forfeture, any nonvested balance reverts to the school district. Does anyone have problems with this approach under the tax law?

Shareholder wants to sell additional stock to ESOP. Shareholder wants to make sale contract "effective" as of 1/1/03, (note retroactive date) but "close" on the sale on 6/01/03. Sale price is to be the valuation determined on 1/1/03. Expert advisors feel that this transaction can be effected if an update of the valuation is done as of 06/01/03 and the valuation price is equal to or greater than the purchase price. Is this right???

Also, since a valuation is done using historical data and it takes time to finish a valuation, mechanically, how do you close a transaction at a price that does not exceed the fair market value???? Won't any valuation be finished several weeks after a closing????? In the practical world how is this handled????

We have a takeover plan (401k) that has numerous participant loans. When a loan is made, the funds are actually withdrawn from the participant's mutual fund. A loan account is set up to track payments and is considered an asset of the plan.

We have found two participants who took loans in '99. Both participants stopped making loan payments in 2001. Both employees are still employed. The employer felt sorry for them because they are paid very little and felt it was the right thing to do because "it was really on their money anyway." We are now going to report the loans as defaulted. My questions are:

1.) Do we report the outstanding loan as of the date of the last payment and add interest on? 2.) Do we just carry the balance and accrue interest (don't report) every year? 3.) When the participant quits, how do we then report it? We cannot adjust basis because on both participants hardship withdrawals have taken place so the only remaining asset is our loan account. 4.) Am I correct in thinking you cannot rewrite a loan in default unless you are still in the cure period?

Please help!! We're trying to get the 1099R out at least by the 2/28 deadline. I know we should have had the employees copy out already.

Thanks,

Pat

We are trying to figure out if we need to submit the 1042-S to the State also as well as the IRS. Amy response would be appreciated.

I have a newly acquired DB plan that covers HC physicians and generally NHC office staff; the physicians have a better formula and so the general test was required and passed in 2001.

Question: the client wants the plan amended to provide a better formula for 1 particular NHC member of the office staff ( who has a unique job description) . Would this amendment neccessitate immediate general testing or could it wait until 2004 ( i.e. 3 years from 2001 ) ???

We have a cross-tested plan that is simply has to classifications - owners and non-owners. The non-owners get a 5% contribution and the owners 18%. There is one young HCE in the non-owner group.

Each of the owners show passing the rate group testing. The Non owner group is failing the benefits and ratio test.

Why would this require a higher contribution for the non owner group. Am I missing something?

Are there any provisions in HIPAA that relate to plans that dip above or below the $5 million annual receipts/premiums level on a year to year basis, similar to provisions related to the the 100 participant threshhold for Form 5500 filing?

I am unaware of any but am wondering if anyone has some leads on this issue.

Thanks....

Two companies that are related, but not part of a controlled group, have their plan assets held in a single brokerage account.

Aside from administrative concerns, what other issues (legal, liability) should the plan sponsors be aware of? We are trying to get the money split into two accounts, and would like to raise issues besides "it is difficult to administer."

Thanks in advance.

I have been contacted by one of the trustees of a terminated plan. There were three trustees, the two owners plus an employee ( the one that contacted my office).

The company went out of existence in mid 2002. The plan terminated and all funds were distributed in 2002. 7 of the participants took lump sums and had the 20% taxes withheld, a total of $9000. A letter was written by the broker and signed by one of the owner trustees to the investment company telling them to issue checks to the employee equal to 80% of the distribution and a check for 20% payable to the Plan Sponsor. The 20% check was deposited in a company checking account. Before a check could be written the bank seized the account to cover funds owed the bank by the company.

The broker indicated that this procedure was use because the TPAs he works with say that is standard procedure in handling the tax with held. I think is the easy way but I have always felt that any funds transferred from a plan to the plan sponsor was a prohibited transaction.

The question now is who is liable for the $9000 plus interest and penalties?

The company (no assets)

The trustee that signed the letter

All 3 Trustees

The broker who wrote the letter

The investment company who issued the check to the company

PS no 1099s have been issued.

I have a cross-tested 401(k) that is NOT top heavy and is NOT a safe harbor. Plan covers over 100 employees and we have a number of different classifications. We are considering a zero allocation to one classification that includes HCE's as well as another classification that includes NHCE's. I think we will pass cross-testing. As I read the 401(a)(4) regs, which reference the 410(B)(3) regs as to who is "benefiting" for cross testing purposes, it does not appear that I have to give each a minimum gateway contribution. Again, plan is not top heavy and not safe harbor, so no one will be "benefiting" in that regard. The plan does not exclude these classifications, we simply want to exclude them on a year-by-year basis depending on how the numbers work. Has anyone run into this situation? My software (Relius) seems to agree with me and is giving me a "pass" on the gateway test even though I have many otherwise eligible NHCE's receiving zero.

I've got a cross-tested plan where HCE max allocation rate is 10.5%. NHCE group is receiving 3.5%. Plan is also top heavy--my problem is that I've got quite a few employees who are receiving 3% TH minimum only (worked less than 1000 hours) during the current year, so the plan is showing failure of gateway. I want to bump those receiving only 3% TH to 3.5% to satisfy gateway, but I don't know how to do it unless I go in manually for each of those employees. There has got to be a better way? Any suggestions? I've coded screen 13 to indicate that minimum alloc to NHCEs is 3.5%, but this doesn't do anything for the employees receiving 3% TH only. Am I missing something?

Anyone have guidance from any accounting firms on the appropriate accounting for liabilities under a Health Reimbursement Arrangement (HRA)? Curious whether any are holding the view that a company offering an HRA must set up a liability for the benefit promises they are making. Does it matter if the employer provides vesting of the benefits?

Thank you in advance.

tl

Is anyone aware of any state laws covering privacy of medical information that aren't preempted by HIPAA? Is there a website with state by state information?

Thank you.

I believe that a plan cannot exclude employees by name but I cannot find a citation that confirms this. I know that 1.410(a)-3 allows exclusions based on criteria other than age and service. Why not just exclude certain employees by name? (Which as I started with, I don't believe is permitted.)

However, the IRS doesn't seem to mind discrimination against HCE's so can a plan can exclude certain HCE's by name?

Also, if employees are excluded by job classification and all employees in a certain classification are say older than age 50 (assume that all the older employees are titled "Executive Associates" even though age is not a requirement to be labeled an Executive Associate, it just works out that way, and the plan excludes Executive Associates) , this appears to have the effect of imposing discrimination based on age. Does anyone have a citation prohibiting this? I suspect it may also run afoul of 1.410(a)-4.

I realize that even though the plan may exclude people by job classification that these employees will not necessarily be excludible employees and will count against the plan for purposes of 410(B).