How many amendments to a 401(k) plan are allowed before the IRS states you must rewrite the entire plan?

Situation:

An employee was covered under the voluntary long tem disability plan in 2000, elected coverage again in 2001, but was somehow (by employer) dropped from coverage. Employer is not sure how it happened.

It is clear from the enrollment forms that the employee elected coverage in 2001 and the employer and or insurer dropped the ball.

Employee elected coverage for 2002 and due to "break in coverage" insurer requires either medical underwriting (blood etc) or payment of back premiums for 2001 - when employee was apparently not covered under the LTD plan.

Questions:

1. Is employee entitled to coverage in 2002 without paying either 2001 premiums or going through medical underwriting?

2. What happens if employee becomes disabled before medical underwriting is complete?

3. What happens if after going through medical underwriting, the insurer denies coverage? Can employee then pay 2001 premiums and still be covered?

thanks

How can you find out if an employer made a Top Hat filing on time without asking the Employer to prove it. Can you confirm the Filing with the DOL?

Carol V. Calhoun wrote a fantastic article entitled "The Tax Law and the Nonqualified Variable Annuity" on her website at http://benefitsattorney.com/annuity.html. After reading this article I am very interested to hear opinions regarding the following situation.

Say an individual purchases a nonqualified variable annuity (as the owner and annuitant) with $100k for purposes of making a profit. The following day the market crashes, the value of the variable annuity drops to $75k and the individual surrenders the entire variable annuity for cash. Please note that this contract was not annuitized (e.g. Life & cash refund, Life & 20 year term certain, Life annuity) - it was simply liquidated for cash. Would you view this transaction as a:

1) Capital loss

2) Ordinary Loss

3) A loss deducted as a miscellaneous itemized deduction subject to the 2% AGI limit (Schedule A, Form 1040)

4) No loss at all (for tax purposes)

According to Tax Facts, under IRC Sec. 165, an "ordinary loss" could be claimed if a taxpayer sustains a loss upon the surrender of a "refund annuity" contract. Then Revenue Ruling 61-201 is cited. What if the surrender of the contract was not distributed as "refund annuity" over a predetermined number of years - but as a lump sum surrender where no prior distributions were made? I believe the definition of a "refund annuity" was defined in Reg. 1-72-7.

Others have argued that the tax treatment of variable annuities and nondeductible traditional IRAs are similar IN THAT, as discussed in Publication 590 under paragraph titled: "Recognizing Losses on IRA Investments", "If you have a loss on your traditional IRA investment, you can recognize the loss on your income tax return, but only when all the amounts in all your traditional IRA accounts have been distributed to you and the total distributions are less than your unrecovered basis, if any. Your basis is the total amount of the nondeductible contributions in your traditional IRAs. You claim the loss as a miscellaneous itemized deduction, subject to the 2% limit, on Schedule A, Form 1040." It is widely believed that this philosophy could be applied separately to the aggregate of an individual's Roth IRAs, Education IRAs, or 529 College Savings plans too.

Yet, others argue that a nonqualified annuity is like holding a bond IN THAT the earnings (interest) generate ordinary income (when distributed); however, the sale of the underlying instrument is a capital transaction (just like the sale of the bond itself) and gives rise to either a capital gain or loss.

If it is determined that a profit sharing plan does not incorporate the 401(a)(17) comp limit by reference, and the plan has no last day requirement, and it is amended mid-year to incorporate EGTRRA's $200,000 comp limit, is this a cutback for other employees?

If so, is the IRS contemplating any relief under 411(d)(6)?

This question is discussed in more detail on Corbel's website here:

http://www.corbel.com/news/pensionupdatesd...tail.asp?ID=157

Opinions?

What responsibility does an employer have to educate defined contribution (401(k) and ESOP particularly) participants as to diversification when the employer match is company stock? Is there a different answer if there are no restrictions on selling the company stock, even for matching contributions?

Class action suits may answer these questions.

Our company health care plan states that "employees who reach age 60, with 30 years service, are eligible for continued coverage at the same premium, until age 65 (when they are eligible for Medicare)"

We now have an employee who is retiring and his spouse is age 69 and already on Medicare. Under present law, she has been covered primary by our Plan and secondary by Medicare. As our employee will now be "not active", I have taken the position that his spouse will now be offered COBRA and at the most be entitled to secondary coverage under our Plan. The spouse has countered that if she is secondary on our Plan she should be eligible for Dental and Prescription Drugs, just like an active employee, even though she will be filing her regular medical claims through Medicare as her primary payer. I am drafting a letter to tell her she is not covered for Dental and R/X.

Am I OK here or should I reconsider?

Terry O

I just want to be sure I understand this correctly. Will someone please confirm.

If 12/31/01 is the determination date for the plan year beginning 1/1/02 I use $130,000 officer comp, 1 year look back and ignore ten largest owners for test.

If 12/31/01 is the determination date for the plan's first plan year, I use $70,000 officer comp, 5 year look back and include ten largest owners.

When originally offering COBRA continuation to a qualified beneficiary (QB), is an employer required to give the QB the option of changing health plan options? For example, should we give rates as well as the option to enroll in any of the three health plans we offer or can we just give them the rates and information for the plan that they are enrolled in as of their termination date?

Do Statutory Employees have to be included in a 401(k) plan?

For former resident aliens of U.S.- 401K distributions sourced to U.S. job received when individual is resident of Great Britain (country of residence)- is that taxable at time of receipt (after U.S. residency ended). Are there any exclusions?

Hello All! Just a qucik survey type question. What are the ranges you are planning to charge to restate documents for GUST. And will it also include the EGTRRA amendments.

We are sponsoring our own prototype for the first time and would like to see if there is a "normal" range for this process. Any answers are greatly appreciated.

A calendar year 401(k) plan has its December, 2001 401(k) contributions deposited in January, 2002. Must these contributions be tested in the 2001 ADP test, or can they be tested in the 2002 ADP test?

I've always assumed that they get tested in the 2001 test, but what about so many daily and bundled providers that do plan admin. on a cash basis? If you are recordkeeping on a cash basis, does it make sense to test on a cash basis as well? I doubt it, but I was hoping someone could confirm.

Thanks

After being terminated from a privately held company with an ESOP plan, was told because of the termination the plan manadated distribution within sixty days of the end of the plan year. Plan year ended November 30, 2001 therefore by January 31, 2002 I had to notify them with how the funds were to be distibuted. They now tell me that I'll have to wait another sixty days until after an auditor calculates a new share price. In my opinion the reason for the wait is because the share price is likely to go down. Can they legally wait when the plan MANDATES distirbution?

If an employer already sponsors a 125 Plan (calendar year) that currently offers Dependent Care FSA, and employees have already enrolled for the current plan year, can the employer amend the plan during the current year to allow for Health Care FSA with out effecting the election of the Dependent Care FSA?

Thanks,

Joe

I made contributions totaling $2250 in 2001 towards a ROTH IRA. I didn't realize that I contributed too much until I recently reviewed my checkbook.

I believe I have to take a disbursement and pay some penalty and then report this on my 2001 tax return. If I don't fix it now I will have big problems in the future.

Can anyone tell me what I actually need to do?

Thanks in advance for your assistance.

J.

I have a client that is employed by a state university and has access to both a 403b and 457 plan. I know 403b and 401k annual deferral limits of $11,000 are coordinated for 2002 but am unclear on whether or not he can defer into a 457 plan over and above what he is putting into the 403b plan. In addition this person is eligible for the enhanced 457 catch up available to those within 3 years of retirement. Can he do the 403b PLUS the 457 plan and not be held to one $11,000 limit?

I have a client that is employed by a state university and has access to both a 403b and 457 plan. I know 403b and 401k annual deferral limits of $11,000 are coordinated for 2002 but am unclear on whether or not he can defer into a 457 plan over and above what he is putting into the 403b plan. In addition this person is eligible for the enhanced 457 catch up available to those within 3 years of retirement. Can he do the 403b PLUS the 457 plan and not be held to one $11,000 limit?

A Flexible Spending Account plan client has asked me to administer their self insured vision plan for 1100 ee's and 3000 dependents.

What legal issues should I be concerned about, that are not present in my 125 administration practice.

And does anyone know of an affordable software program that will handle the administration. It would need to be able to track individual limits as well as family limits, something not required of my 125 administration software.

I would really appreciate any thoughts you may have.

In other words, can a professional service corporation with 5 doctor shareholder/employees and no other employees set up a cafeteria plan? Wouldn't appear to be any discrimination because there are no non-highly's employed by the corp. Am I missing something or is it time to call it a night?