12/31/2002 is approaching fast, which is our GUST deadline based on our prototype sponsor, and our firm is running into potential issues that we would like to head off.

1. All of our clients received material at the beginning of the year regarding GUST, along with an invoice and authorization form for us to begin the process. Naturally, we have a handful whom have not responded to our letters or reminders. Any suggestions for "scare" language other than "failure to amend can result in plan disqualification" - this quote does not affect them. We would like to avoid resignation as well.

2. Just like everyone else, we'll receive new business/takeover plans up until the last week of December. Some will be amended for GUST, others will not. For those that are not amended for GUST and because of the 12/31/2002 deadline, is it possible to provide the plan a Resolution for the Trustee to sign until we are able to provide the client with a GUST document? What are other TPAs doing in this situation? Can a document be sent in 2003 but back date the signature for 2002?

3. Number 2 assumes that the client we take over was using a provider that has reliance from the IRS and is posted on the IRS website. What if the client's prior TPA's document or document sponsor is NOT on the list and has not receive reliance? Is a correction program the only option?

The MPPP document defines "compensation" (for computing employer contribution) ... as "W-2 wages subject to federal withholding".

The calendar year MPPP decides to terminmate by 12/31 of the current year. In August , the employer notifies participants that ... "all benefit accruals will cease on 09/30 and that the plan will terminate sometime thereafter (but no later than 12/31)".

Salary is paid monthly, which means that the salary earned by participants in month of Sept .... will not be paid to them uintil Oct.

MY QUESTION:

Must the "Salary earned by participants in Sept, be included in eligible COMPENSATION" for determining this short-year MPPP required contribution ?

Company has a full cafeteria plan (125) with a plan year of 1/1 thru 12/31, all insurance contracts, but for one, renew on 1/1. Company also has a fully insured health insurance policy with a renewal date of 7/1. Insurance Company only permits election changes (absent a QE) at the time of renewal.

Employee does not elect heath insurance when first eligible, and has no qualifying events. If the employee wishes to elect health insurance for the following plan year, must the employee elect coverage prior to the start of the 125 plan year (to satisfy the 125 regs) and then wait until 7/1 for the coverage to become effective (to satisfy the health insurance contract)?

Treasury Reg 1.125 - 2 Question 6 seems to cover premium increases without issue, but what about new enrollees and/or participants changing beneficiary coverage without a QE?

Our document provider has supplied us with 2 versions of the EGTRRA Amendment - the Sponsor Version & the Employer Version. What version are people using? To me, they appear to be identical except for the fact that with the Employer version each employer must adopt the amendment and with the Sponsor version it only needs to be adopted if certain elections are made. Any suggestions?

Does anyone have any experience, good or bad with Security Financial Life's insured medical reimbursement plan. They will not provide specimen policy in advance.

I have a group that needs to provide additional benefits for the president only ie reimburse deductibles and coinsurance etc. This plan at $200 a year and 109% of claims seems like it would work. And apparently gets around IRS discrimintation requirements because it is "insured". Therefore I can cover classes of employees and keep reimbursements non taxable.

Are there any other insurance companies that provide "insured" medical reimbursement plans?

thanks

There seems to be alot of confusion on this issue. does anyone know how to deal with severance pay and its affect on vesting and hours of service? our plan document seems to be silent on the issue except for a statement that severance pay after separation from service is not included in compensation. basically, our client terminated several employees and paid them six months of severance pay (payable each payroll period). They allowed the employees to defer a portion of this into the 401(k) and they would like to know if they should receive credit for these hours of service for the severance period.

It is my feeling that they should not have been permitted to defer of this money. in addition, i believe they should not receive credit for hours of service. does anyone know the answer to this?

Under the presumptive method of computing a withdrawing employer's share of the unfunded vested benefits of a multi-employer plan, there are three parts that must be allocated: the pre-1980 piece, the post -1980 piece, and the reallocated piece.

Why does the law specify separate treatment for the reallocated piece?

It seems that the employer's share of the total unfunded remains the same whether the post-1980 piece and the reallocated piece are designated separately or or combined together

September's CPI has just been released. It is 181.0

So, based on my understanding of the regs, this gives us the following limits for 2003:

Comp limit 203,180, so we stay at 200,000

415 limit 40,636, so we stay at 40,000

DB limit of 162,544 so we stay at 160,000

guess there will be no changes for 2003.

Based on the numbers, I figure the CPI index needs to be 182.3 for the comp limit to be 205,000 and the 415 limit ti be 41,000.

It is reasonable to expect that should easily happen for 2004.

I'm trying to run through all of the possible consequences for this problem. Plan was effective 1/1/1994 but the adoption agreement wasn't signed until 8/1/1995. I know the following would be true, but what else?

1. ER Contributions are not deductible until participants are vested. This occurred in 1994-1995 so the statute of limitations has expired for the corporate return.

2. Contributions are taxable to participants when made. Once again, statute of limitations has expired on participant returns.

3. Trust is taxable. Is the portion of the trust related to the 1994 contribution taxable until distributed?

4. Distributions from the 1994 contributions, are not "qualified" for rollover. If rolled into any IRA or other qualified plan, could have a problem.

What am I not considering? Thanks.

We sponsor a mid-sized self-insured medical plan and medical spending account benefits. While we do not pay claims, we electronically transmit enrollment information. Based on what I have read, it does not appear that we are considered a group health plan for HIPAA compliance purposes. Has anyone else reached the same conclusion for a similar situation?

Does a 1 man DB plan that has all plan assets in nonqualified funds require a small plan audit for 2002 or the 100% bonding?

Is artificial insemination considered an eligible expense for reimbursement in an fsa?

Target contributions for safe harbor plans are based upon benefits that satisfy the fractional accrual rule of 1.411(B)-1(B)(3)(ii)(A).

The fractional accrual benefit definition there is contradictory in terms of whether the benefit is based upon average compensation at the determination date or average compensation at NRD assuming pay remains constant to retirement age.

For someone more than 5 years from retirement age, then, one approach would base contributions on a benefit derived from average compensation, and another approach would use current compensation (i.e. projected average compensation).

Two firms, related to a takeover case, are arguing that different methodologies are correct for plan intended to be a safe harbor.

Was this contradiction addressed in a Q&A somewhere? Is one correct and the other incorrect, or is each approach arguably correct?

I have a client that has a very low basis in his employer stock in his qualified plan. He turns 70 1/2 this year and has not taken any prior distributions. The RMD that has been computed is greater than the amount of his basis in the employer stock. He is contemplating taking a lump sum distribution that would enable him to take advantage of the special tax rules on NUA and simply pay tax on the basis. If the RMD is greater than the taxable distribution(Basis), does he have to take an additional RMD for the difference?

I just wanted to know some of the rules of cobra ,as i recently got into a problem.How long does it cover even after i discontinue with cobra is there anything like they mite cover one month after we discontinue like some of the insurances have.Any answer is appreciated .

Thanks in advance

I have a client that is interested in terminating its 401(k) plan. The Company was told that it could not create a sucessor plan until the end of the 2003 if the current plan was terminated. Has anyone heard of this? I can't find any authoratative literature on this topic. Thanks.

Company A maintains a 401(k) plan and a traditional defined benefit plan. The defined benefit plan has included accumulated deductible employee contributions ("ADECs") (which allowed a $2,000 per year deductible contribution for employees between 1982 and 1986). As part of a transition to a new 401(k) recordkeeper, the recordkeeper will track the assets in the ADEC, but only if it is made part of the 401(k) plan.

This raises the following issues: (1) can the 401(k) generally provide for a single beneficiary designation for both the 401(k) and the ADEC (with possible exceptions for certain separate beneficiary designations needed to comply with the general rule of providing the death benefit to the spouse)? (2) for purposes of determining the $5,000 involuntary cash-out threshold, can there be a single threshold for the 401(k) and the ADEC, or must there be separate thresholds for each?

Your response to this posting would be appreciated.

Form W-2 does not make reference to the reporting of nonqualified wraparound plans. If an individual makes deferrals to the nonqualified plan in 2002, those deferrals will be reflected in the 2002 W-2.

Box 1 Wages -The deferrals will not be included

Box 3 SS Wages - Are the deferrals included or not included???

Box 5 Medicare - Deferrals included

Box 12a - No Code so not included

If in Box 3 the deferrals are included and FICA taxes paid, the ER really doesn't need to reissue a W-2.

If in Box 3 the deferrals are not included, you would need to reissue the 2002 W-2 since 401(k) deferrals are subject to SS. The SS taxes will be paid in 2003 and will be reflected in the 2003 W-2???

In 2003 when the ADP test is run, the ER will need to reissue the 2002 W-2 in oder to correctly reflect the deferrals that were moved from the nonqualified plan to the 401(k) plan.

Box 1 Wages - Not included

Box 3 - Included

Box 5 - Included

Box 12a - Code D and $ amount

Any clear guidance on how to fill out the form will be very appreciative.

We have figured out that if a plan always stays over 100 but under 120 participants (and isn't a new plan), that they fall under an exemption that does not require them to provide an audit with their 5500.

However, we cannot figure out what is supposed to be done if a plan goes above 120 (therefore requiring an audit) one year but then drops under 120 the next. Do they still need to have an audit since they are over 100- or do they fall under that exemption again?

Any advice is greatly appreciated!

Thanks,

Rachel

When I was with my former employer, they withheld part of my pay as an "automatic enrollment". It only came to about $10 or so, but I told them I didn't want to do that going forward and they stopped. I left my job and forgot about this money. Since then it had gone down in value to about 5 dollars or so. I called up looking for the money, but only to be told that the employer "forfeited" the amount to the forfeiture account as they do for any vested balances under $15. Is this legal? What recourse do I have? They said they thought it was just a residual balance that was left over due to a trading error or residual earnings.