To avoid the 10% penalty, an employee must separate from service after 55.

Do this mean that, in order to aviod the 10% penalty, he must wait until he is 55 to leave employment ? That is, if he leaves employment at age 52 but waits until he is 55 to start taking distributions, can he avoid the 10% penalty?

If an employer sponsors both a 401(k) and a 403(B) and a participant wants to roll his money from the (B) plan to the (k) plan what has to happen besides for the (k) plan accepting rollovers. I was under the impression there had to be a distributable event of some sort. the money is currently invested in a 403(B)(7) custodial account arrangement.

If a person on COBRA later gets married or has a child, can the COBRA participant add the new family member to their coverage?

I represent local government defined benefit plans that want to change their disability benefit to compy with the ADEA. The disability benefit in these plans is determined by projecting service to normal retirement age, which according to the EEOC and the 9th Circuit (Arnett v. CALPERS) violates the ADEA. Two disability benefits that comply with the ADEA are (1) a benefit of x% (usually 50%) of final average salary and (2) the benefit accrued to date, with no actuarial reduction for starting before normal retirement age. Please post suggestions about any other disability benefits that comply with the ADEA.

Has anyone had any experience with negative enrollments? I'm looking for feedback as to dropout rates and general participant feelings about the process. I have a plan that is thinking of using negative enrollments as a way to increase participation.

I have a client who wants to know if they can include premiums paid for a cancer policy which requires premium to be paid for 10 years and then if not used a full refund of the premiums paid. Is this a type of coverage that can be offered in a cafeteria/health care reimbursement plan?

We have a client who filled out distribution paperwork from her old 401(k) plan and planned to roll it over. She marked Total Distribution signed and dated it. She did not mark cash out, rollover etc.- nothing else. They sent her a check with the 20% withholding taken out - basically they cashed out her account. She had $21,000 in the account. At the bottom of the distribution sheet there is a disclaimer that states 'Any portion of your request which you do not designate as a direct rollover will automatically be paid directly to you, subject to any applicable taxes and penalties.' She did not want to cash out and did not indicate on the sheet that she did - but she also did not indicate that she did not. Do we have a leg to stand on here? Can they do that? She would of course like to put the money back and have it redistributed - the check has NOT been cashed. Any Ideas??? Thank you.

It is my understanding that, a health FSA is exempt from HIPAA if coverage under the health FSA does not exceed the greater of:

(1) $500 more than the participant's elective contribution; or

(2) Twice the participant's elective contribution; and

(3) The covered person has other group health coverage available (and that other coverage is not exempt from HIPAA).

Assuming that all of the contributions to the health FSA are employee contributions, there are more than 50 participants in the health FSA and/or it is not self-administered and the employer also sponsors a fully insured medical plan (which is subject to HIPAA), are the employer's only obligations under the HIPAA Privacy Rule to comply with the no retaliation and waiver requirements and amend plans documents (i.e., the employer's group health plans are not "covered entities")? Even if the health FSA were a covered entity, would the medical plan a covered entity (assuming that the employer only receives summary and enrollment information)?

An employee has terminated his catastrophic coverage through his spouse and now wants to enroll in our medical, dental and vision plans. I don't believe that this would be a qualifying event but wanted to get someone else's opinion.

Any thoughts are appreciated!

Do the prohibited transaction rules in 4975 apply to Roth IRAs? 4975 does not specifically include Roth IRAs in the definition of a "plan." But 408A(a) states that Roth IRAs will be generally be treated like IRAs (except as described in 408A) which suggests that 4975 still applies.

Here is the situation: officers and directors of a new limited liability company issue ownership units of that company to their Roth IRAs. Gains and losses are reported to the Roth IRA-owners via Form K-1. The company issues significant cash distributions to the IRA-owners. Upon retirement of the officer/director, the Roth-IRA ownership units are purchased by the company. Distributions are then taken from the Roth IRAs at a future date, according to the Roth IRA rules.

Hoped for result? Earnings from the company pass to the Roth IRA and then to the beneficiaries tax free (other than corporate income taxes).

Thanks all.

A participant in a 401K plan died and had an outstanding loan. I have a few questions about how to handle this. Her husband is also a participant in the plan and wishes to roll her account balance over. He does not want to pay off the loan. He also wants the least tax liability. If the loan is deemed a distribution at the participant's death then the 1099-R is issued under her name because it was her loan. How would I code the 1099? 4 & L? What if any tax penalties would apply? I have never had this happen before and would appreciate any help.

I almost forgot to ask, do I need to withhold taxes from her account before her husband rolls it over? Thanks.

Just when I think I have it down...

I looked for past threads but cannot find this exact example:

Straight PS Plan - 2002 is first plan we are using cross-testing to increase the HCs. Plan is not top heavy. Forfeitures are being allocated to those over 1000 hours (no last day rule). Participant is deferring and has 849 hours. She is not receiving a forfeiture allocation. She did not terminate. Prior few years she has not received PS or forfeitures because < 1000 hrs. but has continued to defer. Do I have to give her the 5% that the rest of the lower group is getting? The plan passes everything without her. Any help is appreciated!

Patti

An employee has begun to receive LTD payments. The premiums were paid by the Employer. Are the payments subject to FICA?

Thanks.

Will someone please provide some basic information regarding a "reverse QNEC". I thought I read some information at one point that stated these are not even allowed anymore.

I have a client who has a X-tested PS plan, the two key employees are fairly young (41,35) so this may not be the best scenario for this, but we are looking at the possibility of adding a DB plan on top of the PS plan. My question has to with comp for testing . The PS plan uses compensation while a participant for allocation purposes. I know i can use participation comp for testing the PS plan. If i add a DB plan with standard 21,1yr elig, 1/1, 7/1 entry dates, can i use the same participation comp for testing the DB accruals???

To determine top heavy, can I include ALL NHCEs that had a balance on the determination date? Or only those still employed on the last day of the year?

ALSO, can the HCEs take distributions to lower their benefit level to satisfy the top heavy (which is the lessor of 3% or the most any HCE benefits)? In this case the employer absolutely DOES NOT want to add more to the plan for anyone - other than the annual match contributions already made.

An employee was allowed to make deferrals before he was eligible. He is still employed, and is now eligible and making deferals. Do we have to incorrect his incorrect deferrals and match?

I am looking for any information regarding a 105 medical plan.

Has anyone had any experience with the following type of situation:

Company A is spun off from Company B. Company B operates a 401(k) and leveraged ESOP in which Company A participates. Under consideration is whether Company A can or should move the Leveraged Stock its employees hold in Company B plan when the assets are spun off to a new unrelated plan for Company A's employees.

Company A is inclined not to retain the Employer Securities of Company B in its new plan but rather sell the stock of participants and maintain the new plan strictly with mutual fund offerings.

Any experience and feedback with this type of scenario would be appreciated.

Andmik

It is my understanding that if a participant has a term date of 12/31/2002 for a 12/31/2002 plan year end, they are looked at as being there on the last day of the plan year and would be entitled to any kind of employer allocation. That is assuming all other requirements are met and if the client has elected to exclude ee's due to the last day rulle.

Can someone please clarify this?