I have a client who employs a lot of Hispanic workers for their quarry. One of the things I've encountered is employees using the same SSN, changing their name, etc. There's also a great deal of rehire activity. Most of these people don't meet eligibility (21 & 1, semi), but some do. Those that do, very few actually contribute.

I think the employer does make an effort to verify the information and SSN. My contact has mentioned talking to the SSA about these issues. I have asked the employer for clarification on many people, but sometimes wonder how much follow through is reasonable. I only think this based on the low number that do meet eligibility and the low number that contribute. If the plan were ever to be audited, how might the Service view this situation?

Thanks in advance for any insight on this.

Has NY and CA adopted EGTRRA?

I have read several things since the Technical Correction that says the SEP limit is now 25% of "grossed-up" compensation. What does that mean?

For the self-employed, is it 25% of includible compenation, after the contribution (or 20% of compensation before the contribution), as figured previously?

I am told that when a participant in a 401(k) plan has wage less than the limit for the social security wage base of $84,500 (i.e., @$72,000), the participant should not maximize the elective deferral because a reduction in the participant's salary would take it below the social security wage base would be best since employer contribuitons are not subject to employment taxes. Does this mean that the participant should not make the maximum elective deferral of $11,000 (and $29,000 for employer contribution so as not to exceed the annual addition limit) but instead, maximize the employer contribution (@$39,000 is availble to him)?

This does not make sense to me because while elective deferrals are included in the social security wage base, nevertheless, they reduce the income tax so is it not still better to maximize the elective deferrals?

Please, can someone explain it to me, a novice in the field? Thanks.

Caroline.

Can someone please advise me on the following question about qualifying dental expense status under our Medical FSA:

Employee has chipped front tooth and there is a noticeable color difference between the exposed chipped tooth and the enamel of the other teeth. Employee would like to use her FSA to pay for "laser power bleaching" performed in dental office by Dentist in conjunction with the repair to the chipped tooth. This combination of procedures would ensure that the repair of the chipped tooth is unnoticeable in her smile. Is this dental expense reimbursable by FSA?

Thanks so much for your help!

Would it be possible pursuant to a QDRO or otherwise for a former spouse to be designated the beneficiary of a life insurance policy held by a plan, for the life of the partiicpant spouse?

I am aware of the following thread:

http://benefitslink.com/boards/index.php?showtopic=4395

If someone did not receive compensation in a year can they be deemed to have performed service for SEP eligibility? Owner of an S-Corp received no compensation in 1999 he received his first compensation in Feb. 2000. In 2000 he also had another employee start work. This employee was terminated in Feb 2002. The S-Corp owner wants to set up a SEP with a two out of the immediately preceding 5 year service requirement count his 1999 service and therefore exclude the other employee that started in 2000. What determines performed service?

It's my understanding that plans may not be aggregated for nondiscrimination testing unless they have been treated as permisssively aggregated for coverage purposes (see Treas. Reg. §1.401(a)(4)-9(a)). To be permissively aggregated, the plans must have the same plan year (see Treas. Reg. §1.410(B)-7(d)(5)).

So, now Company A and Company B are part of a controlled group. Company A's 401 (k) plan year ends June 30 and Company B's 401 (k) plan year ends December 31. If I'm understanding the regs correctly, I should never combine ADP/ACP tests for both plans. Does anyone have a different view of the regs?

Also, when performing the coverage tests under 410 (B), if I cannot permissively aggregate, what is the approach for testing coverage of the two plans?

Thanks to all that can help.

May a plan document allow a participant to make a one-time opt out of plan participation for all purposes OTHER than salary deferrals?

I am looking at a prototype adoption agreement that appears to allow this, but something does not seem right.

We are now engaged in terminating a profit-sharing plan for a small corporation. The plan was terminated in April 2001. We received the IRS determination letter on March 1, 2002. Currently, we are preparing a termination package for the participants containing the required tax notices. In the personnel files, we find old signed QJSA waiver forms for some participants. Some of these forms are several years old. Are these old wavier forms still valid? Must a participanct re-excute a QJSA?

much confusion surrounding interpretation of the new Safe Harbor plan ADP "testing":

An Early Entry Eligible participant is someone who hasn't met the 1 yr./age 21 reqs......that person is eligible to contribute 401k after 90 days, and will get the safe-harbor match after one year of service.

How should this be "tested"? (assuming calendar year plan ending 2001) Does an employee need to be included in the "test" if he reaches his 1 yr at any point in the year (making the assumption that if he received SOME match, therefore he doesn't need to be tested.)

Or would we have to "test" just the first part of the year in which he wasn't match eligible? Also, how would this effect who would be considered an HCE? (I'd still look at the lookback comp to determine, right?).

Our plan RK is advising us one way, and our attorneys another. Please help if you have any tips! Thanks.

I am currently working on a plan for a large healthcare network. 20+ locations. According to a message posted previously there was an opinion that a 457(B) tax-exempt (top-hat) plan could not be set up under a master trust.

In the case I am working on, there is a master trust in place with each location submitting their respective payrole deductions for the qualified savings programs. They want to establish a 457(B) plan for the highly compensated employees and there intent is to operate one 457(B) plan and allow the select group of employees from each location to participate. CAN THEY DO THIS????

This sounds like a master trust arrangement to me.......

Before I suggest that this may not be a viable option with the new Pension Reform regulations I would like your opinion. Hopefully I have communicated this situation clearly enough for an opinion to be formed. Thanks in advance for your feedback!

Great Site by the way!!!

We have a self insured health plan and about 18 HMO's as well

We are in the process of rewriting our Health Benefit Plan SPD for new SPD rules

Will our HMO's be required to write SPD's now that the prior exemption forHMO's doesn't exist?

We get certificates of coverage outlining HMO contract benefits, etc...

Would this suffice as long as our main SPD included other necessary stuff like QMSCO, COBRA, etc... language?

What are others doing who are in same boat?

Thanks

Background - Client A currently has DB plan and would like to terminate the plan and start a 401(k). Their current actuary has told them that the termination process is between 18-26 months and they will not be able to provide the funding liability nor their cost until well into the process. I am not very familiar with DB plans and assumed much like a DC plan that once a sponsor decides to terminate that the hard cost can be determined up front. I also believed that once the process began and accruals have ceased the funding liability could be determined.

My questions are this:

What is the typical time frame to terminate a DB plan?

How soon into the process should the employer know what liability they have to terminate the plan? Including the actuaries cost.

What is the basic process for terminating a DB plan?

Thank you for your help and responses.

JimJ

An acquaintance is faced with deciding for himself whether he should convert from his existing pension plan to a new cash balance plan, both under his current employer. I've been away from administration for way too long to help him myself, so I offered to post a message here for him. Before you ask for details, I know that he is 40 with 20 years of service, but I know no details about either plan.

1) Where can he go for some objective advice? For example, which category(ies) in our Yellow Pages should he look into?

2) If I recall correctly, it used to be that the employer bore the responsibility for providing comparison calculations. Is this still true? What questions should he be asking? I get the impression that his HR dept is leaving him high and dry with this.

Many thanks,

Franklin Evans

Idaho and West Virginia seem to have conformed their income tax codes to reflect the EGTRRA amendments to the Internal Revenue Code.

Idaho: http://www3.state.id.us/oasis/H0492.html

West Virginia: http://129.71.164.29/bill_status/2002sql/H...t-First_Sen.cfm (bill number 140)

Thanks to Paul Young of Union Bank of California's SelectBenefit ® Online for this information! URL: https://www.selectbenefit.com

An LLC member receives guaranteed payments throughout the year and defers from those payments into the company's 401(k) plan. However, the member's portion of the LLC ordinary losses netted with these guarenteed payments renders a net loss for the year. Is earned income the net of the LLC loss and guarenteed payments or just the guaranteed payments when considering how much someone can defer?

Situation:

Employer sets eligibility at 1 year. The employer hired a new employee on October 1st, 2001. It is now Oct 2, 2002. The employee is eligible to participate in the SEP. As the employer I made a SEP employer contribution on behalf of my other two eligible employees who have been with the company for awhile, do I have to make a contribution to the third employee for the year 2002. Wouldn't the entry date for the new employee start in January of 2003? Is there any ruling somewhere on this????

Employer wants to adopt a profit sharing formula of a set percent of compensation, reduced by any matching contributions a participant receives. Is this a permissible profit sharing formula?