Small self-funded plan with 172 covered lives (107 are active, 65 retired). Retirees over age 65 are on Medicare carve-out. I've searched the ERISA regs but can't get a definitive answer on contribution rates. Could we (the company) contribute a different percentage toward the active's premium vs. the retiree's premium? I know we can contribute differently for ee vs dependents.

Would anyone care to comment from their experience how often or how common it is to have "rank and file employees" serve on a plan adminstrative committee along side the typical HR, Finance, Treasury, management representation?

Thk's EEC

If a flexible spending account plan is established (adopted by the employer) today with January 1, 2002 effective date, are medical expenses incurred prior to today, but during the plan year (January 1, 2002 to December 31, 2002) reimbursable? Or are only expenses incurred after the plan is adopted reimbursable?

I cannot find anything that says the effective date of a 125 plan cannot be retroactive, and the standard for covering expenses is that they are incurred during the plan year.

Salary reductions will be prospective only. i.e., will begin with the next payroll.

We just received a new client and are preparing the restated documentation. The good news is the client did sign the intent to adopt. The bad news is the prior documentation that the former TPA put together does not appear to be accurate.

Instead of using the safe harbor notice, the prior TPA actually incorporated the vesting and matching contribution formula into the document itself. Not in a notice. Now the client has informed me they will not be using a safe harbor in 2003 (calendar year plan). How do you handle a restatement in such a case? They have bound themselves to a vesting schedule that all participants will elect if amended. Agree?

Any advice?

I'm getting frustrated waiting for Support when trying to finish up a 06/30/02 val report... I have a participant who defaulted on his loan in a prior investment vehicle. That investment manager will be issuing a 1099-R next January. When the plan moved to the new funding provider, the loan was not included because it was already defaulted. I already had the loan in my software, and cannot now get it out. How do I default and distribute a loan balance without distributing the participants remaining cash balance? I tried following the Relius help screens, but it didn't work the way I was told to do it; it would default the loan, but also distribute the rest of the participant's balance! Any help is appreciated. (FYI I'm on version 7.1)

How do you handle the continuation of health/dental benefits while a former employee is receiving severance pay?

We currently terminate benefits upon employment termination, and any promised benefits continuation is handled by the company "paying for" the COBRA for the first 3 months, for example. This allows us to be in compliance with our plan eligibility, which would not cover an employee not actively employed.

Does anyone handle it differently, and spell out in the Plan provisions that a former employee receiving severance pay is eligible to continue under the active employee plan, and then COBRA begins after the severance period?

Is anyone attempting to run ESOPs on Relius? We do run our ESOPs on Relius, but do run into several calculations that must be done outside the system. (release of shares, 1042 allocation limits, 415, etc.)

Does anyone have any tips or tricks to make ESOPs easier to run on Relius they would be willing to share through a user's group?

We would also like to simply our statements by combining different stock funds together for particiapnts. (Loan 1, Loan 2, 1042 stock,etc.) They get confused by all these different stock funds.

Does anyone use an ESOP software that "does it all" or close to it?

Is anyone attempting to run ESOPs on Relius? We do run our ESOPs on Relius, but do run into several calculations that must be done outside the system. (release of shares, 1042 allocation limits, 415, etc.)

Does anyone have any tips or tricks to make ESOPs easier to run on Relius they would be willing to share through a user's group?

We would also like to simply our statements by combining different stock funds together for particiapnts. (Loan 1, Loan 2, 1042 stock,etc.) They get confused by all these different stock funds.

Does anyone use an ESOP software that "does it all" or close to it?

We have a client that over contributed to participants in 2000 and 2001 and several participants went over the annual additions limit. The client has computed for each participant the amount of employer contributions that needs to be refunded. However, we need some help in determining the best method to figure losses. The participants can individually direct their investments into any option they choose. Therefore, to compute the earnings/losses on each individual person will be extremely time consuming. Is there any guidance as to how to compute the loss associated with these excess contributions.

My company has proposed providing life insurance at a rate of 2 times annual salary. (Presently, we only provide 20k.) I understand that the benefit above $50,000 is taxable. In order to calculate the taxable amount for W2s, can we use the actual premium or do we need to use the age based IRS table? Thanks.

An employer has changed vesting schedule from 5 year cliff to 3 year cliff effective 1/1/02. A participant terminated in July, 2002 with 4 years of vesting service. I just want to be sure that there is no way to keep this or any other participant on the original 5 year cliff sked or if there is way to keep old and new money on separate vesting skeds. Thanks.

Does a frozen calendar year DB plan need to be amended for EGTRRA in 2002, or does it not need to be amended until 2005? The plan is not adopting any EGTRRA changes at this point because it is frozen. Do we need a good faith amendment by the end of 2002 anyway?

Would like to know how to set up an employee contribution to a pretax medical cafeteria plan in Quickbooks ver 2000. What "tax tracking type" should be used? In the taxes window, I think all taxes should be checked off. How will this be calculated on the w2? I think in box 1,3 & 5 should not have the employees contribution in it. Should there be anything in box 12 & 14?

THANKS

Don

I have an employer that has purchased another entity. The purchase agreement outlines that years of service under the purchased entity shall be included under the defined contribution plan for all purposes. However, there is no limitation on the number of years in the agreement and I know that they have individuals who have been employed for 20 or 30 years in some cases.

I am pretty certain that law limits prior service credit to a maximum of five years. I can't find the statute or locate this in print other than reference in prototype documents at this point. In those references, IRS approval must be given if prior service exceeds five years. Could someone please help by pointing me in the right direction as far as where this lies in the code?

Thank you.

An employer group sponsors a defined benefit plan and a 401k plan. The top heavy minimum is provided in the defined benefit plan and not in the 401k plan. If an employee who participates in both plans has 800 hours and is a year end employee, I have assumed that she does not get a top heavy minimum at all. She does not meet the requirements to receive it in the defined benefit plan. And the 401k plan says the top heavy minimum is provided in the defined benefit. Do you agree with this? Thanks.

If a participant is in a 403(B) and a 403(B) that is an ORP plan that requires a mandatory Employee contribution, are they limited to $12,000 (considering they are age 50) between the two plans? Or can they max in each?

Can a SIMPLE IRA be rolled into a 401(k) account? Here is the situation: Current participant in a 401(k) plan has a SIMPLE IRA account with a major brokerage from a former employer's plan. Participant has been told by the brokerage that he cannot role the SIMPLE IRA directly to the 401(k) but that he could roll it to a Rollover IRA - if it has been two years since the last contribution - and then roll it into the 401(k) from the rollover IRA. This seems like a huge rigamarole for someone who has terminated employment with the employer who sponsored the SIMPLE IRA plan. If it makes any difference, he has always had all of the money in a money market account. Someone please help me understand what the rules really are!

My issue is both technical and arcane. If my fears are correct, the following fact pattern results in reverse discrimination against HCEs. I don't think that was Congess' intent in directing IRS to write the non-discimination rules, so I'm hoping some of you can provide a word of encouragement. Here's the deal:

I'm running the General Test for non-discrimination on a 401(k) plan. Cross-testing does more harm than good, so the test does not employ cross-testing (i.e., the test is based on contributions, not EBARs). I'm concerned about the proper methodology for imputing disparity under the following scenario:

The plan is subject to a 401(k) Safe Harbor Notice/Election which calls for a 3% non-elective contribution FOR NHCEs ONLY. (The employer's reason for not giving a SH contribution to HCEs, is the desire to avoid giving a contribution to HCEs who terminate prior to year-end.)

This year, the employer wants to contribute the following amounts beyond the 3% Safe Harbor for NHCEs:

1. 3% of comp for HCEs who are still employed at year end; plus

2. For HCEs & NHCEs alike, a contribution equal to 3% of all comp plus 3% of comp in excess of 100% of the SSTWB.

Logic (and IRS Notice 98-52) tells me that this is a non-discriminatory allocation, however, I have the following concern:

I know I must not adjust the NHCEs' 3% Safe Harbor contribution for imputed disparity, but MUST I adjust the 3% profit sharing allocation (under step 1 above) for HCEs?

If I must adjust the 3% for HCEs, but not for NHCEs, the adjusted total allocation for HCEs (step 1 & 2 above) will exceed the adjusted allocation for NHCEs (unadjusted 3% SH contribution plus adjusted step 2 amount from above).

This result would defy logic, and result in reverse discrimination! Afterall, if the HCEs got their first 3% pursuant to a Safe Harbor election, everyone would agree that it is not subject to adjustment, and Notice 98-52 indicates that it would not be discriminatory. But, if I give HCEs a less generous 3% (i.e., subject to vesting and last day requirement) AND am required to adjust this 3%, then the adjustment will cause the HCEs' 3% to be valued as something greater than the 3% for NHCEs.

(Note: This concern only arises if the employer's allocation is greater than 3% across the board (i.e., I wouldn't impute disparity if a level 3% was the only contribution). However, any additional allocation, if skewed to integrate with social security, will come out looking discriminatory until the total non-Safe Harbor allocation for NHCEs exceeds 5.7% (i.e., above that level, imputed disparity will have no further impact).

Has any one encountered this problem, and better yet, has any one received word from IRS to the effect that you don't have to adjust the first 3% for HCEs?

I've been trying to learn everything about 412(i) plans before I try one and there are a couple things I still can't figure out.

Does anyone have a good article or written explanation of the difference between determining maximum death benefits under the 100 times rule and the alternative rule in Rev. Rul. 74-307 with respect to whole life insurance?

Also I'm contemplating funding a plan with only life insurance (as opposed to a combo with annuities), can anyone provide a techinical response against the following:

1. A 412(i) can be invested only in life insurance

2. The fact that a plan invested only in life insurance contracts will provide that any death benefits under the policy in excess of the inncidental benefits that may be provided under the plan will accrue to the benefit of the plan.

3. The is no fiduciary requirement for an employer to fund a plan in the most efficient manner (i.e. using annuities at a normal cost as compared to the increased costs of life insurance only).

4. A plan that is funded with life insurance only could provide for the sale of the contract (subject to the IRS ruling on sales of policies from a plan) for cash that is used to either purchase annuities or normal plan investments. At that time, if the plan assets do not satisfy the 412(i) requirements, the plan will be subjsect to the normal funding rules unser Section 412.

Company A and company B are both affiliates and both maintain defined benefit plans. Employees may transfer employment from company A to company B. Employer A would like to transfer the employee's benefit liability from plan A to plan B in such a situation, and plan B has agreed to accept the liability if an appropriate amount of assets are also transferred. Assuming benefits rights and features is not a problem, the employee is properly notified, and that both plans are amended to provide for transfers, what other issues are there?

How should the plan amendment be written? How do you describe the amount of assets that are being transferred?