I have seen several references to using the idea of simply sending

small account balances on participants unable to be located directly to the IRS for credit to the respective taxpayer's account.

The term "100% back-up witholding" is the phrase I've been hearing. This sure would simplify matters alot and who could complain?

Any thoughts on this are appreciated

Anyone know if government agencies are exempt from the written plan document requirement for cafeteria plans (125 plan). I believe that government agencies are required to have a written plan document, but someone tells me otherwise. Also, are government agencies required to file a form 5500 schedule F? I understand that governmental plans are exempt from filing a form 5500 for pension and welfare plans but not a form 5500 schedule f for fringe benefit plans. Thoughts anyone?

My understanding from Notice 2000-3 is that an existing 401(k) plan cannot convert to a safe harbor format in the middle of a plan year, but that the employer can create a "new plan" with a short plan year and institute safe harbor testing, SO LONG AS (a) the short plan year is at least 3 months long, and (B) the new plan is not a "successor plan" as defined in Notice 98-1.

Now, the definition of successor plan in Notice 98-1 is very broad. I thought I recalled a narrower definition of successor plan that required that the predecessor plan and the successor plan have the same plan year.

If this is the case then can't an existing plan with a CODA start a new plan, with a new plan year, and use safe harbor rules for a short plan year of at least 3 months?

Hello again...the question I have today is this:

When adjusting claims for daycare expenses, our policy has alway been the same as for medical expenses: Claims can only be reimbursed AFTER the expense has been incurred (dates-of-service NOT date-paid). HOW would you suggest handling pre-registration fees for summer daycare programs? Often the provider requires the registration fee over a month before the program begins. To complicate this more, most of our accounts have a July through June year...which means the pre-reg fee is required in one year and the dates-of-service fall within the following year. And to play devils-advocate...are registration fees even eligible since they are not the actual fee for care?

I look forward to all of your replies. Thanks!

Is it permissable to have separate plans or plan years for the premium conversion vs. unreimbursed medical/dep. care portions of a 125 plan? The employer's health plan renews in August and will require an adjustment to the premiums withdrawn pretax from employee salaries. They would, however, like to continue allowing employees to make changes to their flexible spending accounts on a calender year. Any information on what the regs say about this? Believe it or not, their current 125 administrator doesn't know the answer to this.

I received a request from an employee to cease Dependent Care FSA contributions because a relative will now be caring for her child and she will not be incurring day care fees.

Is this an eligible change? According to the final regs it may not be since the cost change was not "imposed by a dependent care provider who is not a relative of the employee"?

I'd appreciate your opinions on this.

I have had two employees now that are not getting in their required minimum of 30 hours per week to receive full time benefits. At what point do you reduce them to part time and revoke their benefits? Are there any legalities involved in this? This particular employee would lose paid vacation, holidays, and health insurance benefits. Thank you for your help.

A COLI policy on an executive is likely to generate more proceeds than needed to fund a rabbi trust being set up in connection with a NQDC plan for the executive. I would like to arrange to pay to the spouse of the executive any proceeds from the policy in excess of that needed to fund the plan. Can this be done by (i) irrevocably naming the trust as a beneficiary of the policy to the extent needed to fund the plan and (ii) also irrevocably naming the spouse as a beneficiary of the policy to the extent of any excess, so that the policy pays the proceeds as their interests may appear?

I am being told by an administrator of a health plan that an employee cannot "drop" their health coverage at any time. It must be done during open enrollment. If an employee participates in a voluntary health plan with employee contributions, can they waive out at any time?

Does anyone know anything about a concept being marketed as a "secured trust" From the little I know about it, it appears to be secondary plan or trust that only comes into play if the primary nonqualified plan/rabbi trust cannot pay the full benefit due to insolvency of the employer.

Please see attached

Can anyone confirm that IRS released final RMD regs today, 4/16? I heard they did, and I would like to get a copy.

We are in the process of converting to a 3% employer contribution plan (from an employee deferral plan only).

We have one management employee who is over 75, makes under the HCE limit, and adamantly does not want to participate. Is there any way around this?

Thank you

Construction Companies A and B are a control group. The owner receives compensation from both companies. In order to land a large contract, Company A has been unionized. The owner falls under the contract for work done with Company A. The current 401(k) excludes union employees. Can the owner still contribute based on compensation received from Company B, or is he excluded completely because he is part of a collectively bargained contract?

Does anybody have any idea how the regs treat a spouse who has been released from prison? Can the employee add the spouse to the health plan?To the Cafeteria Plan? Did the former inmate "lose" coverage, because the gov't is no longer paying for the medical expenses? Do the health insurance companies have to allow this person on to the plan? What about pre-ex. Medical records would be impossible to obtain. Thanks for any input.

Clarification on EBAR testing: I read somewhere that if the EBAR for any HCE is greater than the highest NHCE EBAR, the test will not be passed.

Is this a correct statement? If so, why?

I don't think there's any guidance in this area, so I would like to know what common practice is in the following area:

How do you treat money of an alternate payee for top-hevy purposes?

If the money is segregated from the participant to the alternate payee, for top-heavy purposes: do you treat the money as if it still belonged to the participant, as an in-service withdrawal, or how do you treat the segregated money for top-heavy purposes?

If the money is distributed to the alternate payee, for top-heavy purposes: do you treat the money as if had been distributed to the participant (in-service withdrawl if participant is still employed, "regular" distribution if participant has terminated employment), or how do you treat the distribution to the alternate payee for top-heavy purposes.

The prior threads I found on this topic were:

http://www.benefitslink.com/mbmirror/11195.html

http://www.benefitslink.com/mbmirror/9220.html

What are your practices regarding how alternate payees are treated for top-heavy purposes?

Employer J maintains a 401(K) Profit Sharing Plan. Under the plan, an eligible employee is entitled to an employer match contribution of 100% of the employee's deferral up to 3% of compensation up to the §401(a)(17) limit. During the 1994-2000 plan years, an eligible employee, Employee W, inadvertently was credited with an employer match contribution based on compensation above the §401(a)(17) limit. resulting in an improper allocation for seven plan years. My correction for this defect based on Rev. Proc. 2001-17 would have been to take the improperly allocated match amount from Employee W. and place it in an unallocated account, similiar to a suspense account, to be used to reduce future employer match contributions in suceeding years. I have been told by some that the excess employer match contribution made to Employee W. should have been allocated to the other employees in the year of the failure under the Profit Sharing feature of the plan. Though the plan does have a profit sharing feature (discretionary), it has never been utilized by the employer since the plans inception. What is the most proper way to fix the defect described above?

I would appreciate a little education...

I converted an IRA in 1998 to a Roth (still active);

I also have a 401K with my employer...

Can I open another IRA and if so, are there any restrictions?

Thanks in advance

I made a $2000 Roth contribution in January 2001. Just learned our income went up to $158,000 so I guess I'm not eligible. Of course, as usual, I lost money on the $2,000 investment. It's now worth $1500. Am I correct that I need to withdraw the $1500 by the time I file my return (I extended) to avoid a 6% excise tax? Can I deduct the $500 loss on my 2002 return?