Hi,

Somewhere I recall that when excluding employees who have not completed 6 months of service from the top 20% calculation, if the employee works any day during the month, a full month is counted. However, going back and reading the regs, I can only find this under the "normally work less than 6 months category". Does anyone know if the same applies for the less than six months of service exclusion?

For example, if an employee is hired 7/2/01, can they be excluded in the 2001 top paid group calc or does July count, putting them at six months and therefore not excludable.

Does anyone know the cite or the IRS' postion?

Many thanks!

in looking over an individual's pension entitlement.

company A merged into company B on 1/1/95. accruals after 1994 are based on the cash bal provisions of the company B plan.

employees of company A prior to merger have 12/31/94 benefits grandfathered and receive additional separate accruals after 1994 under plan B.

12/31/94 plan A AB is also converted into a cash balance and receives only interest credits and at ASD the balanace is compared to pv of 12/31/94 AB. the cash bal in plan A gets 11% int credit while employed and 8% int credit after term and prior to ASD.

using 11% for actives and 8% for terms seems to violate some cash bal requirements. for one thing it seems to now fail the 411(B) accrual rules and according to 96-8 it seems to result in an impermissible forfeiture as mandated in 1.411(a)-T for understating the post termination interest credit rate.

so, bottom line it would appear the plan s/b required to maintain 11% after term as well.

the plan paid the term employee the pv of 12/31/94 ab plus the plan B cash balance at ASD. however, if we take the plan A cash bal, increase it at 11%, convert to age 65 annuity, the pv of such ben is greater than the pv 12/31/94 ab.

so it would appear there could be a claim for additional benefits for this individual.

any other observations?

I have a 401(k) plan that was amended to allow the collectively bargained employees to participate. I'm not sure if I should include the collectively bargained employees in the ADP/ACP test, or if the test should only include the noncollectively bargained employees.

I received a court order for a 401(k) plan participant ordering to stop loan repayments and refund the payments made from September 1st to current date. Is it legal to refund amounts that have already posted into the plan?

The plan has bifurcated eligibility requirments- 1 year of service for 401(k) purposes; 2 years of service for employer's discretionary contribution. The plan provides for a 3% nonelective safe harbor contribution. The discretionary contribution is cross-tested.

Do we have to give the 5% minimum contribution to satisfy the gateway test to participants, who receive the safe harbor contribution, even though they have not met the 2 years of service requirement to share in the employer's discretionary contribution?

My understanding:

During the Remedial Amendment Period (RAP), you are permitted to change between Prior Year Testing Method and Current Year Testing Method without consideration for the new rules restricting the switch from Current to Prior. The method used in the final year of the RAP, however, is the method you are "stuck" with and must adhere to the new rules when changing.

Question:

With the last extension of the RAP to mid-2003, does this now mean that we are free to change Testing Methods for Calendar year 2002 plans, locking us into this method for 2003 and subsequent years?

A 401(k) plan allows for loans and also allows annuities as a distribution option.

Is spousal consent required if the loan amount is less than 5k, but the total account balance is more than 5k?

Thanks.

What types of employers (regardless of size) do not have to provide COBRA continuation coverage.

Thank you

I've heard for many years that a 401(k) is one of the benefit plans allowed in a cefeteria plan.

I have always wondered why any employer would want to list his company's 401(k) in his company's cafeteria plan document, because a 401(k) is pretax on its own (thus inclusion in a cafeteria plan is not necessary).

Does anyone know why the IRS would include a 401(k) as one of the plans allowabe in a cafeteria plan ?

Does anyone know, under what circumstances an employer would benefit from having its 401(k) in a cafeteria plan ????

Plan with a SHMAC and segregated accounts. The ER calculated the match incorrectly throughout the plan year so now we have participants that were underfunded and overfunded with regards to the match. Most of the SDAs have losses. I know I can transfer from the overfunded to the underfunded but what would be the best way to handle the losses?

Is an employee considered an active participant for IRA contribution purposes when the only plan his employer has is an ESOP? The corporation is an S corporation and it made distributions to its shareholders, including the ESOP - these are the only contributions it made in the year.

I think the answer must be yes since the ESOP is a qualified plan, but I am not all that sure. By the way, the "Retirement plan" box was not checked on the employee's W-2.

My 401k contributions are not taxed. I can borrow funds from them anytime and as long as I do not default on repaying them, they still are not subject to taxes. In repaying any borrowed money from my 401k, I repay both principal and interest to my account. My question is if I took $3500 from my 401k and deposited it into my Roth IRA and held on to it (Roth IRA) until my retirement in 7yrs at age 62, will I have avoided paying any tax whatsoever on my Roth IRA funds that I have over time been transferring from 401k to Roth IRA?

For employees who are participating in a cafeteria plan that offers FSA accounts, how should these accounts be handle for employees that get called up during the Plan Year for active military duty?

Thanks for your suggestions.

We have an hourly employee who is currently drawing down on his life insurance premiums (Permanent and Total Disability is what we call it). He has requested that we stop this benefit as he is trying to apply for Medicaid. While our policy limits the employee from cancelling this policy (once you start it, you cannot stop it until it runs out - 11/06). We are looking at trying to adhere to his request, however, we need to document his request in a legal contract), with several stipulations. Does anyone have a sample that they can provide.

We are a small church in New England. We currently have an interim senior minister; associate minister, P/T admin asst. ; PT Music Director; and F/T super of buildings and grounds this was PT until this year.

Because of budgetary reasons, we just revised our personnel policy manual last year to NOT provide any directly paid support for insurance for staff other than our called/interim ministers. Our grounds staff had been on governmental medical but by going to F/T status, no longer qualifies and is now asking for our help.

We are trying to come up with a way to support his obtaining private insurance. He would like to be able to pay for this before taxes (have the monies deducted from his paycheck prior to his taxes being computed). We do not have any 125 plans per se and the called/interim ministers have this as part of their whole compensation package that is negotiated from the start.

I am curious how others with small churches do this.

If you find that a participant has received a loan for more than the allowable limits under section 72(p) and the loan is only secured by the participant's vested interest in the plan, is the excess treated as a prohibited transaction subject to an excise tax? I know the the excess is considered a deemed distribution and the participant is taxed. Are there any other consequences to the plan or the plan sponsor?

A plan is sponsored by Employer A. Due to reorganization of the employer, the legal entity known as Employer A cannot sponsor the Plan. The Plan Sponsor/Employer needs to be changed to Employer B with a new EIN. The same employees are covered under the Plan. The Sponsor/Employer address is unchanged as well. The name of the Sponsor/Employer and the EIN will change.

My presumption is that we just need to amend the Plan's definition of employer.

Am I missing anything? What about the subsequent 5500 filings which will be under a EIN different than the past? Will this raises questions from the DOL and if so, what do we do to address proactively?

From my reading of Section 213(d) and my understanding of flexible spending accounts, is it fair to say that monies contributed by an employee to an FSA may be used to purchase individual health insurance?

Thank You,

tl

Does a plan have any affirmative duty to notify its contributing employers when the actuary has determined the plan has significant withdraw liability? More specifically, I am referring to employers that plan to continue in business and contribute to the fund...not those who may actually be considering stepping away from the plan.

I've been looking at helping a physician group install a plan. An HRA will be used and we evaluated two high-deductible options: 1) a guarantee issue high deductible group plan and 2) a series of individually issued underwritten plans.

As you would expect, the underwritten plans offer far lower premiums and work well provided everyone is "sufficiently healthy". My question concerns HIPAA and my understanding that it precludes an employer from using individually underwritten plans. Or more precisely that the use of these plans do not receive the same tax benefits as the group plans.

Is this true? And if so, how about where the premiums are paid through a Section 105 employer-sponsored HRA?

Thank you in advance.

tl