IRS has finally issued Notice 2002-45 and Revenue Ruling 2002-41 that discuss the tax laws and regulations as applied to a “health reimburse-ment arrangement” (or “HRA”). In a nutshell, those rulings permit HRAs to be excluded from employees’ income under certain limited circumstances: (1) The HRA may be used to reimburse only IRC section 213(d) medical expenses; (2) No other related benefits may be provided directly or indi-rectly (such as paying a sev-erance bonus to the employee where the amount is related to the unused HRA); (3) Amounts in the HRA must be exhausted prior to amounts in an flexible spending account (or “FSA”) under an IRC sec-tion 125 plan; (4) Long-term care benefits may not be provided if the HRA is an FSA; (5) The arrangement may not permit employees to use salary reductions directly or in-directly to fund the HRA.

A copy of the Notice is found at http://www.benefitslink.com/IRS/notice2002-45.pdf

Q&A-27 of Treas. Reg. 1.401(a)-20 provides an exception from spousal consent rules where a legal guardian has been appointed for an incompetent spouse. Practically speaking, how does a plan deal with an incompetent -- or questionably competent -- spouse where the expense of going to court to appoint a guardian is prohibitive?

I would appreciate any thoughts.

Is compensation for a self employed person in a Simple 401(k) calculated in the same maner as a Simple-IRA?

Or in the same manner as non-Simple 401(k)?

Thanks.

In a 401(k) profit sharing plan where all plan participants make maximum compensation under 401(a)(17) and all participants want to "max-out" with $40,000 pension contributions, the plan contributions can be structured in one of two ways in 2002: (1) $40,000 PS contributions and $0 401(k) elective deferrals or (2) $29,000 PS contributions and $11,000 401(k) elective deferrals. Taking into account catch-up contributions, 414(v) does not seem to prohibit a catch-up contribution to participants in the first plan setting described above (i.e., $40,000 PS and $0 401(k)). In other words, can a catch-up contribution of $1,000 be made to the 401(k) account of a participant in a 401(k) PS Plan where the participants are not otherwise deferring compensation at all because they've reached their respective 415 limitations with PS contributions?

Is the following situation a controlled group or not?

Two companies: A and B. B is a subsidiary, wholly owned, by A.

two sets of parents where each set owns .20% and 23.08%.

There 14 children, all above 21 yeard of age except for one. Each sonn/daughter owns about 6%.

Any help would be greatly appreciated.

I have a profit sharing plan. The census shows that pretty much all the eligible participants have been terminated in the same year. All of them are not fully vested. Most of them are only 20% vested.

Is this considered a partial plan termination, where everyone is automatically 100% vested?

Even if the participants voluntarily terminated, is it not considered a deemed partial plan termination because all the forfeitures will be allocated to the owner?

If it is considred a partial termination, how does this effect future plan years.

I could use some infput on this issue. Thanks!

I understand that when a tax-exempt employer is maintaining an eligible 457 plan, the plan is now subject to the same required minimum distribution rules as qualified plans. Would a participant then who is required to commence taking required minimum distributions also have to comply the constructive receipt rules and be carefull to make an election prior to RMDs commencing regarding the period over which their retirement distributions amounts will be paid to avoid being taxed on their entire 457 plan balance or if no formal election is made as of the participants Required Beginning Date would it just be the required minimum amounts that are includable in income?

Current MPPP is integrated with Social Security. E/er also has a PSP. E/er considering terminating the MPPP within the next year (e/er does not want to terminate and distribute assets now given the market fluctuations). Also, both plans are to be amended for GUST shortly. As e/er is considering eventually terminating the MPPP, e/er wants to amend the PSP to add integration with Soc. Sec. It would seem that if e/er froze the MPPP (allocation formula to 0% of compensation...) the e/er should be able to amend the PSP to add integration with Soc. Sec.. I have yet to research it but this would not seem to run afoul of the "only one plan providing for disparity" rule. Any suggestions??? Thanks.

I have a Roth IRA which I opened 3 years ago. Due to losses in the market, the total value of the account is less than the total of contributions I have made. If I withdraw part of the money in the Roth, are my deductions subjet to income tax and penalties. I heard a seminar that, since I have already paid the tax on this money, I can take out any amount less than my total contributions with no tax and penalties even though the withdrawal is not a qualified withdrawal.

Does anyone know if I can really do this?

I seem to recall reading somewhere that EGTRRA included a provision to eliminate key employee deferrals from the definition of minimum contribution received by a key employee. This would eliminate the need for a top heavy minimum contribuiton where the only money going into the plan for the year was employee deferrals. Is my memory correct or is this just something congress was considering but never enacted? Thanks in advance for you help.

Dean

I realize that a 403(B)7 is setup through a custodial account arrangement and there is no Trust vehicle involved. But is there anyway to have a Trustee involved with this type of plan?

Is Rev.Proc.2002-35 available for a new plan adopted in 2000? Service provider just didn't get the determination letter request filed by the Feb.28 deadline. I'm concerned the IRS will find some technical defect or omission in something related to TRA'86, UCA, etc. and say it is ineligible for the cheap fix because it was never "amended" for TRA'86, etc. Any insights would be appreciated.

I know the answer is in my EBIA manual, but I can't locate it just when I need it! I have a participant who was fitted and billed for a hearing aid in the old plan year, but won't actually take receipt of the hearing aid until the new plan year. For which plan year can she claim the expense? I believe the correct answer is the old plan year, since that is the year the expense was actually incurred, but someone else said perhaps she has a choice of plan years?

Thanks! Carolyn

This is a somewhat trivial subject but has been bothering me. We are a 401(k) recordkeeper and work in an unbundled environment. We send out quarterly 401(k) statements for our clients. The Plan sponsor of one of our big Plans would like the statement package to include a one-page summary of the performance of the funds available in the Plan, and we agree.

Their Plan offers funds from several fund families, and there is a Registered Investment Advisor that oversees the funds available, makes recommendations to the retirement committe, etc. Each quarter the RIA sends the Plan sponsor an inch-thick report of fund performance. The Plan sponsor asked them for a one-page summary to include in the quarterly statements, and the RIA told them that we as recordkeeper should cull through their quarterly report and put together the one-page summary.

I don't think we have the expertise to do this. We are not money managers or financial experts. We think the RIA should prepare this information, but they have somehow convinced the Plan sponsor that we should do it. This has become a small bone of contention that I'd like to resolve. However, I want to make sure we're on firm ground here so I thought I'd "poll the audience" to find out what others out there are doing or think about this subject. Are we off base here?

Thanks!

During the enrollment of my husbands medical/dental benefit plan, his company asked him to provide certain documentation. This documentation included: children's birth certificates, marriage license, wife birth certificate, and social security cards for children and wife. I have never been asked for information to this extent before, so I did not feel that we should comply. Do this company have the right to ask for this documentation in order to provide us with medical/dental coverage and if so, why.

We have an employer situation. Our client who had been operating under one name as a C Corporation with a certain EIN changed the form of operation to a Mass. business Trust utilizing the same EIN but with a new name. He then formed a new C Corporation using the old name with a new EIN.

The Business trust files a consolidated return taking the plan deduction however all the employees are paid out of the "new" Corporation.

We filed previous 5500's using the old name and the EIN which now belongs to the trust.

The question now is who do we show as the employer on the 5500 ie. which emopoyer name and EIN should we be using?

Any thoughts will be greatly appreicated.

1) If I have terminated from my 457(B) plan for a non-profit entity, what are my options for distribution? I will be working for a for-profit entity in the future.

2) Can I let it sit in the 457(B)?

3) Do they have the right to kick me out if my account balance is less than $5,000, like in a 401(k)?

4)Can I take installments out of the 457? If yes, are they penalized at 10% if I'm not age 59 1/2?

What typically makes the most sense?

An ESOP has been terminated and payments were made to participants. A portion of the ESOP was held in escrow and now the 2nd and final payments are to be made. about 80 participants will receive less than $1 dollar. Is there a de minimis or small amounts rule which would allow the employer not to distribute these small amounts. It will cost more to process the checks....doubtful, but would appreciate any insight (and citations)...

Thanks...!!!

An ESOP has been terminated and payments were made to participants. A portion of the ESOP was held in escrow and now the 2nd and final payments are to be made. about 80 participants will receive less than $1 dollar. Is there a de minimis or small amounts rule which would allow the employer not to distribute these small amounts. It will cost more to process the checks....doubtful, but would appreciate any insight (and citations)...

Thanks...

We have a Group Welfare plan, fully insured by the employer, employees do not pay anything. It has over 500 participants (large plan). Is it required to file either schedule H or I?

Thanks in advance.