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?

I am just curious. Does anyone know if there is a Relius Defined Benefit User's Group??

401(k) Participant died. Ne was never married, but has a minor child. Participant designated only his child as beneficiary. He also verbally expressed his desire not to allow the mother of the child to get access to the money. His benefit is over the $5,000 threshhold. What, if anything, can the Trustees do to carry out participant's wishes. Or are they limited to just distributing the account to the mother as legal guardian "for the benefit of" the minor?

I'm pretty sure I know the answer to this one, but wanted to see if anyone can back me up...

First plan year for a 401(k) PS Plan - they have 118 eligible ee's at the beginning of the Plan Year. Can we get away with doing a Schedule I?

Can a spouse who is the alternate payee under a QDRO roll the assets to any qualified plan or only to an IRA?

It also happens that the spouse in question is also a participant under the plan the QDRO will be paid from. Can she roll the assets into her plan participant account?

I am getting some very conflicting information regarding our flexible spending credits. The company gives employees who do not have health coverage a certain amount each pay period in a flexible spending account. The employee can then choose to use that money in a medical reimbursement account or a dependent care reimbursement account.

Last summer when we put this plan into place, we were told that the employee had the right to the full amount from the beginning of the plan year, just as if the money was coming out of the employee's paycheck. So, if the total of the flex credits for the entire year was equal to $1200, the employee could claim the $1200 whenever he or she had accumulated the medical expenses.

Now we are being told that we can set up our plan so that the employee is only entitled to the amount accured in the plan. So, if the same employee has $1200, which is $50 per pay period, he or she can only receive reimbursement for whatever was put into the plan. For example, if the plan year begins on January 1, that employee would have $650 in their account now.

Is this true? If so, has this always been true or put into effect recently? Help!!!

Husband and wife own business. Do we aggregate their ownership percentage, or allocate each to his/her own?

Does anyone know what the 2002 income crossover point is beyond which it becomes more beneficial to take the child care tax credit rather than participate in an employer's dependent care reimbursement plan?

As many of you know, the legislation is intending to make assets held in a rabbi trust currently taxable to executives. What are people seeing as the alternative? Also, the new "executive loans" will have a major impact on split dollar life insurance, what's everyone doing?

Has anyone come across a copy of Rev. Proc 2002-47 (the revised EPCRS procedure) in something other than .pdf format?

I'd even be happy with HTML, just something that I can copy & paste into Word to make it searchable.

Thanks.

Anyone see a good sample claims procedure for health plans that complies with the "new" DOL regs?

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Does anyone have any idea (or reference source) of how many employers are allowing the supplemental accident & health plans other than Cancer plans that are being sold?

The main plans are apparently the Sickness & Accident and the STD plans.

It would be nice to find out employer paid versus employee paid and pre-tax versus after tax premium patment.

I thought that these plans were quite popular, but during this week alone I have had 2 benefits attorneys fron top 100 (possibly top 50) law firms and 1 HR Director at a college tell me that they have never heard of these plans and were not aware that such plans could even exist that paid benefits for injuries etc.

Can a Plan Sponsor set eligibility for participation at 1,000 hours and 6 months of service?

I understand that if an Employee fails to work 1,000 hours, the eligibility then reverts to 1,000 hours and a Year of Service.

Can a more than 5% owner in a 401(k)/Profit Sharing Plan who is still actively at work and has begun taking the required minimum distributions (RMDs), sell his ownership interest, continue to be actively at work as a non-owner and stop taking RMDs if the plan allows?

We are looking into promoting our 401k) plan to get our participation up. With the stock market down and people losing money, I can see this being a hard sell for those employees who are not in the plan yet. I can see even losing people in the plan. We also have a portion of people who live paycheck to paycheck, so even $5 is hard for them to give up.

I'm looking for things you have tried that helped. Any suggestions would be appreciated!

A participant paid off an outstanding loan, but now wants to reverse that payment. In other words, he wants to assume the loan payments again.

Is this okay?

Can an employee get reimbursed for medical and/or dependent care expenses incurred by a domestic partner of that employee?? I assume that the answer is depends on whether or not the domestic partner is a "dependent" under the Internal Revenue Code but wanted to get thoughts on this. Is there a ruling or case on this? What if the flex plan defines "dependents" to include domestic partners - could the FSA be disqualified?? ANY thoughts/cites/articles would be appreciated.

Participant (doctor) in PSP of medical practice elected to direct the investment of his account with a broker other than the broker handling the general fund. Now, she's unhappy with her broker and wants the broker handling the general fund to also handle her directed investment account. General fund broker has said he won't touch it since the account does not meet their in-house threshold for directed investment accounts. Doctor now wants to cease directing the investment of her account and get back into the the general fund. I would assume the plan document would not have any prohibition against the doc coming back into the general fund, but from the admin/record-keeping side wouldn't it be prudent to switch gears at or close to plan year end? Any thoughts on this? Thanks...