FACTS: Employees of Company are enrolled in an HMO. Company pays 80% of premiums to HMO; other 20% must be paid by the employees. Until now, the employees were paying the 20% on an after-tax basis (the Company has not established a 125 plan).

The Company will now establish a Treas. Reg. 1.105-11 Medical Reimbursement Plan to provide pre-tax reimbursements to employees for co-pays, deductibles, etc.

Question: Can the Company provide for reimbursements under the Plan for the 20% HMO premium?

I would think yes, since Section 105 refers to 213, and 213 includes premiums as "medical expenses."

Can anyone else confirm my analysis?

Anyone aware of any continuing education courses out there that are specific to 403(B) plans? My firm consults on several hundred ERISA 403(B) plans, and I would like to further the 403(B) knowledge base of my staff. Although there are many reference materials specific to 403(B) (e.g., 403(B) Answer Book, et. al.) there don't seem to be many courses out there that are 403(B)- specific.

Any thoughts in this regard would be greatly appreciated!

If you're 65 years old and made conversions from your standard IRA to Roth IRA in years 1999 $10,000, in 2000 $10,000 and in 2001 $10,000 a total of $30,000. This total amount appreciates to $45,000 in 2003 which is a 5 year waiting period since 1999.

Can the whole amount of $45,000 be withdrawn in 2003 without penalty? If not how much can be withdrawn in 2003?

Does an insurance carrier need to provide a Schedule A to a plan that exempt from filing a Form 5500?

two employees were Key in 2000 under the Top Ten Owners rule. their balances were included at 12/31/00 to determine that the plan was top heavy for the 2001 plan year. those two employees are no longer Key in 2001 because of EGTRAA. are they entitled to a minimum top heavy contribution for 2001 because they are not Key or are they precluded from the minimum because their balances were included to determine the Top Heavy status for 2001?

Have a client who remitted $2,305 during 2001 as a contribution for tax year 2001. He contacted me in February, 2002 to indicate that he put in too much money. What he would like to do is redesignate (note: NOT recharacterize) $305 as a contribution for 2002 tax year. He has not yet filed his tax return for the 2001 tax year.

1. My analysis of the above situation is that an excess contribution has not occurred because he redesignated the $305 prior to the due date of the filing of his 2001 tax return.

2. No 6% penalty applies because the $305 has not met the technical definition of an "excess" contribution.

Do you agree or disagree?

In my research of the code, it indicates clearly that excess contributions are not subject to the 6% if the funds are physically withdrawn from the account prior to the due date of the return, plus extensions. Since I am redesignating the funds as a contribution for 2002 and not for 2001, these funds haven't met the definition of an "excess" contribution.

I am interested in your thoughts.....

One of our clients has a traditional IRA to which she made both deductible and nondeductible contributions. In January, 2001, she used this IRA to purchase a single life immediate annuity. She is trying to calculate what the nontaxable portion of her distribution is using form 8606. However, in order to complete that form, you need to know the fair market value at the end of 2001. Once she purchased the annuity, the fair market value went to zero.

Publication 590 makes it clear that the taxpayer must calculate the taxable/nontaxable portion of any distribution from an IRA with nondeductible contributions on form 8606. However, if there is no fair market value, form 8606 can't be used.

Should the client calculate the nontaxable amount using Section 72 annuity formulas with the nondeductible portion as cost basis?

Does anyone know where I can find a 127 plan document?

If an employee participated in the dependent care plan for 2001 and relized after the end of the Plan year that his daycare expenses were not eligible because his wife did not work, how do you handle rectifying the problem.

Do you issue him a 1099 for 2001 based on the amount withheld for daycare? Can you issue him a 1099 in 2002 for the 2001 calendar year? What is the correct procedure?

Thanks...

I have a company that has two PS plans. This ocurred because there are multiple locations and lack of communication, eg two plans were not the intended result. One PS plan, established years ago is only a PS plan and has no k provision. The second plan, only a few years old, has a k provision. The first plan has had no contributions for many years (so we don't have 415 limit issues etc).

The company desires to terminate the first PS plan and distribute the assets in accordance w/ the participant's wishes. Please forgive me, I do not have a lot of familiarity w/ the successor plan rules. In my reading, I have come across several references that the successor plan rules only apply to k deferrals. Is this correct? If that is the case, then I assume I can distribute my first plan w/o having to merge the assets into the second plan (the employer wishes to maintain the second plan).

Thanks for any help.

Does anyone know the number of active 401(k) plans in America today?

We have some relatively old documentation for our TSA Annuities. I am looking for more up to date forms that are used for TSA annuities.

I have visited with someone at the IRS, and he was as helpful as he could be. He did turn me on to this forum. Anyway, he let me know that some information was required in a plan document, but could only provide me some general information. I am looking for some guidance on what needs to be attached to the policy to make the annuity a 403(B) annuity.

The IRS man explained that the plan document should include contribution rules, rollover/portability rules, distribution rules, matching rules including top heavy testing criteria and eligibility rules.

Our old form had an Employee-employer compensation agreement, an employee request for Purchase of Tax Sheltered Annuity Retirement Plan, and Annuity Purchase Agreement and an acknowledgement.

I know some of the items referenced in the old form are way out of date. Can I get some feedback on what other companies have on their forms?

Thanks,

Facts: the plan is safe harbor for testing for 2001, but has an after tax source that must be tested in ACP. They Document states Prior Year Testing Method. For 2000 the ACP test included After tax and employer match.

Question: Using Prior Year Testing Method , comparing Current Year HCE ACP , which consists solely of after tax contributions, to Prior Year NHCE ACP, which consists of after tax and employer match, the ACP test passes. Is this Okay, since we are not comparing same sources of money? I haven't found anything that says it is not. The Test will fail miserably using Current Year method, and will fail in 2002 using Prior Year NHCE ACP ....the plan has mostly HCES contributing to After Tax.

I am looking at a plan that uses a J&50%S as the Normal Form. I am not the signing actuary. The document states that "For purposes of determining the joint and survivor benefit, the Normal Form of Benefit will be caclulated assuming that the Participant is married to a spouse the same age as the Participant. However the form of distribution of such benefit shall be determined pursuant to the provisions of Article 7." Article 7 describes the optional forms of benefit, including lump sums, but does not contain the actuarial equivelances.

My question is, shouldn't the lump sum include the value of the spousal death benefit? If I remember my EA-1 exam, to determine the value of the deferred J&S, you need to value each component seperately. Which would mean value a deferred life annuity to him, 50% defferred life annuity to her and subtract 50% joint deferred annuity if they are both alive at RA.

I don't think its as easy as determining the J&50 factor at NRD (assuming both same age) and hitting it w/ a Dra/Daa (based on the participant) to get the lump sum. It's much more complex, isn't it?

Does anyone else work with plans using J&S as the Normal Form?

The trustee-to-trustee transfer method may be used if one wants to use 403b funds for the cost of purchasing prior service credit in a governmental DB plan. Because it is deemed to be a "transfer" and not a "distribution" no triggering event is required. This transaction basically has no time constraints. It simply must be done prior to receiving a DB pension from the governmental plan that will accept the purchase.

Now for the rollover provisions of EGTRRA Sections 641-644:

Tens of thousands of active 403b participants are also accruing benefits under their current employer's qualified 401 plan which includes but is not limited to governmental DB plans. According to EGTRRA Sections 641-644 one may rollover 403b funds to a 401 plan. In a practical sense, how could a rollover, which requires a distribution event, ever take place if the 403b holder must first satisfy a triggering event of: death, disability, separation from service or the attainment of age 59.5? Upon "death", one for an obvious reason cannot effectuate a rollover. Upon becoming "disabled" a rollover to the employer's 401 plan may not be allowed because the plan may require active status. The same holds true upon "separation from service". The 4th and last triggering event that allows for a distribution and, thus, a rollover is attainment of "age 59.5". But once again, the employee must be active at age 59.5 if he chooses to rollover his 403b funds to the employer's 401 plan.

I understand the IRS is having some trouble in effectuating the rollover rules authorized under EGTRRA Sections 641-644. Can anyone shed some light on this issue?

Peace,

Joel L. Frank

Takeover case for me today. They do not have enough money to fund the 2001 minimum funding contribution and have exhausted all business and personal loans. The outlook for the company is good, though. My client is deciding whether or not to begin compiling the necessary paperwork to send into the IRS for the waiver under Rev Proc 94-41. They want to know that if they rush around prior to March 15th, will this waiver even be granted? If anyone has applied for a waiver under Rev Proc 94-41, can you tell me whether or not it was granted?

My company has two child care programs. One program is a typical dependent care assistance plan where employees contribute a portion of their salaries to the plan and get reimbursed from the plan after submitting a claim. The other program is a back-up program for occasions when an employee's regular child care provider is unavailable. The back-up program is free to employees and is paid for by my Company.

Could someone confirm or correct my opinion that both benefits have to be combined for the exclusion under Section 129. In other words, combined amounts under $5,000 are excludable and amounts above $5,000 are taxable income. If an employee uses the back-up program, it reduces the amount that can be claimed tax free from the dependent care assistance program.

My company has two child care programs. One program is a typical dependent care assistance plan where employees contribute a portion of their salaries to the plan and get reimbursed from the plan after submitting a claim. The other program is a back-up program for occasions when an employee's regular child care provider is unavailable. The back-up program is free to employees and is paid for by my Company.

Could someone confirm or correct my opinion that both benefits have to be combined for the exclusion under Section 129. In other words, combined amounts under $5,000 are excludable and amounts above $5,000 are taxable income. If an employee uses the back-up program, it reduces the amount that can be claimed tax free from the dependent care assistance program.

I have a question regarding the exception to the 10% penalty for distributions under age 59-1/2. My understanding is that if a person terminates at age 55, they are not subject to the penalty. Does the person have to actually be age 55 at the time of termination? Or, as long as the person turns 55 during the calendar year in which they terminate, are they not subject to the 10% penalty? I just spoke with someone at the Martinsburg Center and was told that there was no such exception.

401(k) plan with dual eligibility/entry - immediate for 401(k) deferrals, 1 Year of Service/semi-annual entry for employer discretionary (no matching). Employer discretionary contribution is cross-tested class allocation.

I am "assuming" (always dangerous!) that for purposes of the 401(a)(4) non-discrimination testing on the employer discretionary contribution that employees who have not met the 1 Year of Service requirement are excluded from testing, even though they are "participants" by virtue of being eligible to participate in the 401(k) component.

This is my first experience with this particular situation and would certainly appreciate any and all input from those of you who have "been there, done that"!

Thanks!