I have a top heavy DC plan that adopted a safe harbor plan in 2000. The plan allows for deferrals, has a fixed match that satisfies the safe harbor basic match contribution (starting in 2002) and has a discretionary profit sharing contribution option.

If the sponsor opts to make a profit sharing contribution in 2002, would we need to be sure that all eligible non-deferring participants receive at least 3% of compensation in order to meet the top heavy minimum contribution requirements?

Health plan has received OMSCO requiring coverage of an employee's child. Employee is eligible to participate in the health plan, but does not do so. Can the plan force the employee to enroll as a condition to enrolling the child pursuant to the QMSCO? Or must the plan accept "child-only" enrollment?

Reference to concrete source material, if available, would be greatly appreciated. Thank you.

May a SIMPLE plan invest in a closely held corporation?

Can anyone provide some insight into their experience with defined contribution health plans? Is this a "fad of the year", or are employees really better managers of health care dollars under this environment? Does anyone have any long term experience with this type plan?

Thanks

Is there any new rule in a 401(k) plan that says you have to have immediate eligibility for deferrals even if the wait for match is one year? I don't think so, but I am starting to doubt my knowledge.

Has anyone heard of a plan for semiretired teachers that allows them to opt out of paying FICA and pay into this plan instead?

I am converting a straight PS to a Cross tested Plan. The PS has been actively funded since 1986 at about 15% of pay. The owner is about 50 and two NHCE are also about the same age. When we ran the a(4) test using Annual method, the plan would only support a small increase for the owner. Since the two NHCEs have less service than the owner, we wanted to use the Accrued to date method. Three questions:

1. Regs say to include years the employee benefited. For HCE, I assume we use 15 years (1986-2001) or must we only use years for the cross tested plan effective date? (The plan is being amended)

2. If plan recognizes services before inception date, are you still restricted to limit the denominator years to inception date ("benefiting" service forward?

3. If the plan had several years in which it were not funded, can you still count those years?

Can anyone give me some insight into the effect the proposed regulations for section 457 have on the ability of not-for-profit entities to offer phantom option plans as a form of deferred compensation?

Hi -

I am fairly new to this field and am thinking about going the NIPA or ASPA route. What is more widely recognized and respected throughout the country NIPA or ASPA?

Thanks!

Do the "controlled group" issues apply to Section 125 Cafeteria Plans as they do in retirement plans?

A question about loan refinancing. Facts are as follows:

Participant A takes Loan #1 for $11,000 in 2/99; loan fully amotized in 2/03.

Participant A takes Loan #2 for $10,000 in 10/01; loan fully amortized 9/06.

Participant A refinances Loan #1 & Loan #2 into Loan #3 in 2/02; loan fully amortized 9/06.

Participant A wants to take Loan #4. I am fairly certain that for purposes of 72(p)(2) that we currently have 2 outstanding loans, Loan #1 and Loan #3. Loan #2 would not be considered outstanding because it was refinanced into Loan #3 and the amortization period was not extended.

I am easily confused with multiple loans, is my analysis correct?

Thanks for any guidance.

Assume a company has two plans (a DB and Safe Harbor 401(k) plan). Does the addition of catch-up contributions have any impact on the safe-harbor status?

I assume that if a plan has only the safe harbor match (100% match on first 3% deferred and 50% match on next 2%) and no excess matching contributions, it doesn't actually matter whether or not the catch-up contributions are matched because it would never apply. E.g, an HCE earning $200,000 or more contributing 5% (and getting the full match) would be contributing only $10,000. Therefore, to max out and make catch-up contributions, he would have to be making un-matched contributions. (Note that I am ignoring potential differences depending on the timing of the contributions during the year). So I conclude that a safe harbor plan can permit catch-up contributions, whether matched or unmatched, without blowing their safe harbor status (and it would be administratively easier to make the contributions matched). Do you agree?

A last aside, any guesses when the proposed catch-up regs might be finalized?

In calculating the 25% of compensation limit for a governmental plan (2001 limitation year), is compensation capped using the special gradfathering rules under 401(a)(17)?

I have a 401k client that has told me he has heard of an employer-contributory plan that provides supplemental medicare benefits. He would like to know the feasibility of doing this and the costs.

I assume what he is meaning is that the employer contributes tax deductible amounts to the plan, the earnings on those deposits grow tax deferred, and then eligible participants are able to use the plan funds to pay medical costs that are not covered by medicare.

I'm not familiar w/ such an arrangement (I don't practice in this area). I'd like to help him, but I don't know where to begin.

Can anyone tell me if 1) such a plan exists and 2) is there an article I could read or a reference material that anyone is familiar w/ that would allow me to educate myself about these plans? I'm not likely to attempt the work on my own, but the least I can do is provide w/ him the necessary information to move forward and then recommend another service provider if necessary.

This question is being posed by a two-person law firm (one owner, one add'l ee) if that makes any difference. Thanks for any help.

How are administrators handling loans that are defaulted???

For example, consider the following:

A plan does not provide for post-tax contributions. HOWEVER, a participant who has taken a loan, defaults on the loan but then decides to repay (for some unknown reason).

I believe this repayment is post-tax money which creates a basis in the plan.

First, is the repayment prohibited because the plan does not permit post-tax contributions???

Second, IF the repayment is NOT prohibited, then it creates a basis - correct??? When is the basis recoverable???

Another question regarding basis.

A plan permits post-tax contributions. The participant does a MAHVELOUS job of investing (in Enron or something) and their contribution of $1,000 is now worth $100. The participant elects to take a distribution of the post-tax money which comes out tax free because his basis of $1,000 covers the distribution. What happens to the remaining $900???? Is it ever recoverable????

Many thanks in advance to any and all respondees!!!!

How are administrators handling loans that are defaulted???

For example, consider the following:

A plan does not provide for post-tax contributions. HOWEVER, a participant who has taken a loan, defaults on the loan but then decides to repay (for some unknown reason).

I believe this repayment is post-tax money which creates a basis in the plan.

First, is the repayment prohibited because the plan does not permit post-tax contributions???

Second, IF the repayment is NOT prohibited, then it creates a basis - correct??? When is the basis recoverable???

Another question regarding basis.

A plan permits post-tax contributions. The participant does a MAHVELOUS job of investing (in Enron or something) and their contribution of $1,000 is now worth $100. The participant elects to take a distribution of the post-tax money which comes out tax free because his basis of $1,000 covers the distribution. What happens to the remaining $900???? Is it ever recoverable????

Many thanks in advance to any and all respondees!!!!

An employee has a change in status April 20th (marriage) and elects to add money to a flexible spending account. Benefits company states the effective date of EE FSC should be 5/20 because that was the date EE signed change form. EE is arguing that change should be 4/20 because that was date of change. Employers handbook does not list which date should be used.

A business is being purchased in an asset sale. The health FSA of the business has a higher contribution rate than the health FSA of the company purchasing it. The buyer is considering allowing the employees from the purchased business to retain the their health FSA with the higher contribution rate. Does anyone know of possible problems with this. It's my understanding that the Cafeteria Plan rules do not address mergers and acquisitions. If the buying group should decide to make the employees subject to the buying groups current FSA, would the employees of the selling group have to forfeit any balance they make have that exceeds the buying groups allowed contribution - or can those balances be refunded to the employees (subject to tax)?

Thanks for any assistance.

Brenda

Has there been a final ruling on the carry over for Health FSA?

I find the proposed as of 11/00 but no final. I also recall reading something that indicated the carry over would be $500.00 for Health FSA but no changes for DCAPs.

Does anybody know if medical expenses incurred in connection with the pre-selection of the sex of a baby (gender pre-selection) would be considered deductible medical expenses for purposes of a hardship withdrawal from a 401(k) plan? I have my doubts about such expenses being deductible under IRC Section 213.