I haven't been able to find a regulation or opinion on the following two situations:

1. Employee's work hours drop below minimum required in DCSA SPD. 4 months after the fact, employee calls wanting to drop from the DCSA. Our benefit plans have an automatic loss of coverage provision that terminates participants due to loss of eligibility (i.e. divorce, dropping out of school, working less than the req'd number of hours, etc.).

My understanding is that the IRS has informally remarked that no election change request by the participant is req'd. The rationale is that the initial election for coverage already encompassed the concept of cessation-and so no "change" is needed. Where the event is discovered after the fact (i.e. after the 30 day window stipulated by our SPD), we are able to terminate coverage retroactively to the date of the event and refund associate contributions on an after-tax basis (consistent with the impossibility standard). Therefore, we can drop her from the DCSA as of the date she ceased to meet the eligibility requirements and refund on an after-tax basis any contributions she has made since then.

The problem? She's submitted and been reimbursed for claims incurred while she was still considered a covered employee. We could request refunds back to the date of loss of eligibility and then pay the contributions back to her on a post-tax basis. Seems like a lot of work for almost the same result, but can't find any informal rule that allows us to just terminate her participation as of the last payroll or date she notified us of the reduction in hours.

2. Employee's spouse loses job, two months later they tell us about it. Spouse is not working so they take the kids out of daycare. We can terminate DCSA due to above mentioned automatic loss of coverage provision. Now they want to know: 1) if the DCSA can remain active (even though their kids are not in day care) so our employee can keep getting payroll deductions and they can make up the money that they are behind and then drop the plan (apparently the expenses incurred were more than they elected) or 2) if they can't do that, if spouse gets a job in the future, can he enroll back into the DCSA in order to make up the money even if they don't put the kids in day care at that time (to get out the money that they already contributed).

My answer to both of the questions in the second case was no, as the DCSA is there expressly to pay for dependent care expenses while the parents work, look for work, or go to school, not to make up for shortfalls in expense planning.

Thoughts? Comments? Opinions?

Can a qualified DB plan allow foreign employees of foreign divisions (e.g. Mexico) to participate? Also, any reference to the code and/or regs would be great.

would someone kindly point me to the regs that prohibit free riding by an ERISA governed fund.

thanks in advance

I have several HCEs participating in more than one 401(k) of an unrelated employer plans. Do I need to aggregate contributions for the purposes of adp/acp testing?

I have a Welfare Benefit Plan that provides participants a plethora of Insurance Companies to choose from. As a result, each Schedule A has a sprinkling of participants.

If I were to total all the employees covered by each of these insurances, I could exceed 100 participants in the Welfare Benefit Plan as a whole.

So what am I counting? Individual Schedule A counts, or total employees participating in the Welfare Benefit Plan as a whole?

What is the deadline to file determination letters for plan documents using a volume submitter plan?

Thanks.

One individual is the sole owner and only employee of multiple incorporated businesses - an obvious "controlled group".

Owner wants to adopt an SEP, especially given the new 25% deduction limit. This cannot be done via a Form 5305-SEP due to the controlled group issue.

Does anyone know if this can be accomplished via a non-model prototype SEP?

Thanks!

Does an employer who has made a 414(q)(1)(B)(ii) election to limit the definition of highly compensated employees to the top paid group of employees for the year include participants who would otherwise qualify as "highly compensated employees" under Section 414(q)(1)(A) as "five percent owners" when determining which employees are in the the top paid group?

To illustrate, a group consists of ten employees, eight of which qualify as five-percent owners AND have plan compensation in excess of $170,000 for the 2001 plan year, and two of which who are not five-percent owners and receive plan compensation of $100,000 and $60,000, respectively. Does the employer include the eight five-percent owners in determining the top 20%? If not, does the employee who receives plan compensation of $100,000 qualify as a HCE (i.e., can the employer round up to 1 although 20%x2=.4)? Any help is much appreciated.

Can a final Money Purchase Plan contribution be deposited into a Profit Sharing Plan following a plan merger?

Is a plan exempt from filing an IRS Form 5500 (sole proprietor with less than $100,000 in assets) on an ongoing basis required to file a final IRS Form 5500 when the plan terminated or merged?

In order for a participant to be eligible for hardship withdrawal, the financial need must be one that cannot be satisfied from other resources. Typically, that means taking out loans, exercising stock options, etc.

Does anyone have a plan or know of a plan that requires participants (by its plan terms or hardship procedures) to: (1) withdraw from the company's employer stock purchase plan and use refunded contributions; and (2) use personal credit cards and show that there is no available credit to satisfy the financial need.

Does anyone think plans should require withdrawals from ESPPs and maximum use of personal credit cards?

JP13 posted previously, but for some reason, the thread is closed. I wanted to repost it for him/her to start the responses. The original post:

401K rollover to Roth

I have a 401k from a company that I worked for a few years ago and since then I have stopped contribution to it. I want to roll it over into a Roth IRA if it is possible. How do I go about doing this and is this a good solution.

I have a 401k from a company that I worked for a few years ago and since then I have stopped contribution to it. I want to roll it over into a Roth IRA if it is possible. How do I go about doing this and is this a good solution.

In reading Pub 590 on p54 it discusses the adverse consequences of a failed Roth conversion that is not recharacterized.

I understand #1 and #2 but am not clear on #3.

"The 10% additional tax on early distributions may apply to any distribution".

The section above it states that the "contribution" will be treated as a regular contribution, which as we know is never subject to tax or penalty. So what distribution MAY be subject to the 10% penalty?

I have no substantive knowledge of VEBAs so please excuse the ignorance. Can a VEBA use contributions of active employees to fund the retiree medical benefits of former employees? What if the former employees were never contributing members of the VEBA? Even if the former employees were former VEBA members, can they receive benefits in excess of what they had previously contributed for? i.e., can employer use "excess" of contributions by actives to fund retiree medical benefits? ANY thoughts would be welcome.

Can a government 457b account be rolled over to an IRA if the employee remains employed by the same employer? If so can the employee continue to contribute to the same 457b plan?

Hello everyone--

One of our readers wrote in with this question:

Joe six pack works for a living. He makes 75k per year and contributes to his 401k, and maxes a Roth IRA for himself.

Joe's wife is a new real estate sales person, who only made about $6 in commissions last year. But her expenses exceeded her income.

Question: Can she contribute to a Roth IRA for herself?

Since she's working, does she qualify for a spousal IRA? Can she open a spousal Roth IRA?

Suppose Joe Six Pack is going to inherit a couple of hundred grand. Does that windfall count against the limitations on AGI for the purposes of determining eligibility?

Comments, concerns, and caveats?

Jason Van Steenwyk

Reporter, Mutual Funds Magazine

We have a client of a single-participant plan who mistakenly made his 2000 money purchase and profit sharing contributions to his taxable brokerage account instead of his retirement account. His checks were made out for the proper amount, the contribution type was written on the memo field and the checks deposited before April 15th 2001. He just sent them to the wrong account. Has anybody seen some relief from the IRS on this type of situation and what types of penalties and correction procedures would he be looking at? Presumably this would not fall under DOL and ERISA jurisdiction.

Thanks

What is the time frame that an employer has to reimburse an employee for dependent care expenses? Our company has always issued reimbursement checks on the same day each week, but recently (on more than one occasion) checks have not been issued and employees have been told that there is just no money in the account.

I am aware of DOL regulations regarding the timing of 401k deposits (as soon as the assets can be segregated from the assets of the corporation, but no later than 15 business days following the end of the month in which the deductions were withheld). Do these same rules apply???

Also, because employer has consistently paid claims on the same day each week for years, are they setting a precedence that claims must be paid on that day, especially if employees are relying on the reimbursement.

Any educational help is greatly appreciated. Thanks.

After 2 years away from good ol' FSA, I have been temporarily pressed back into service until a new person is hired...and I need a refresher course !!!

How do orthodontic claims get paid? Do we have to push for actual dates-of-service? Or, can we reimburse based on the payment plan the patient and provider have agreed upon?

We have providers who charge the full fee up front...how do you handle that?

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ANY AND ALL INPUT GREATLY APPRECIATED !