I have a client who currently sponsors a 4K Safe Harbor Plan for his employees. He recently bought another company, for which he owns a 100%, and would like to set-up a seperate 401(k) Plan for those employees.

I know for testing purposes, both company's will be combined as one employer. However, how would you handle the ADP test since one plan is a 4k Safe Harbor?

I understand the new claims rules apply to health plans. Do these rules apply to other types of plans such as disability, AD&D, life, etc...? Any responses greatly appreciated!

Client wants to terminate his Keogh plan prior to the end of the year and roll all funds into an IRA. He turned 70.5 during 2001 and wants to delay his first required minimum distribution until 2002. Financial institutions are telling him he must take his MRD in 2001 or they cannot accept rollover. Any guidance to support or argue this would be appreciated.

If an employee of a Sub-S who is not a 2% shareholder enrolls in an FSA Plan at the beginning of the year, but then has the opportunity to become a 2% shareholder mid-year, how will this effect his eligibility for the Plan Year?

Hi - I have a plan year-end 9/30. The plan failed the 415 test. Two participants are getting refunds (one participant is getting just employer match money and the other is getting employer match and employee deferral). All of the money will be refunded after the two and half month limit. Does the company owe excise tax on the refunds even though it's the 415 test they failed?

THANK YOU!

In a FSA when employee contributions are forfieted what options does an employer have with respect to such forfietures. I understand such amounts can be allocated to participants (basically pro-rata and not to the participant who forfeited such amounts) or used to pay reasonable administrative expenses. But it appears these forfeitures are plan assets and as such may only be used for the benefit of participants.

An employer has asked if he can set up a "compassionate use" fund to pay expense such as medical travel or wigs for cancer patients for plan participants or all employees and use the forfieture amounts to pay this?

My gut feeling says no but has anybody dealt with this.

I have a client that started a 401(k) plan effective 1/1/2001. In November, they transferred all of their employees to a PEO. The PEO has informed them that they have the option of keeping their current 401(k) program or changing to the 401(k) program of the PEO.

The PEO has assured the client, the TPA for the current plan and I that, even though the employees no longer work for the client, the 401(k) program which was originally set up can continue to be maintained, with the client signing off on forms provided by the PEO.

Is this reasonable (I thought the employees became leased employees at this stage), and if it is, can someone point me to a reference which allows it?

Thanks in advance.

Our current 401(k) document has quarterly entry points. We are considering going to monthly entry points. Has anyone else done this? Glad you did or whish you hadn’t? If anyone has any thoughts, I would love to hear them. Thanks!

Our employee eligibility provision use to state that employees may enroll on the first day of the month following sixty continuous days of being actively at work for the company. Due to HIPAA we changed this to eligible fot enroll on the first day of the month following sixty days of employment. An employee must have actually begun work before coverage may become effective. Is this verbage permissable under HIPAA or does anyone have a good example of how eligibility requirements can be worded in the SPD? We also took out the definition of actively at work?

401(k) plan. employees immediately eligible to make deferrals but must wait a year for profit sharing and match. If the plan is top heavy, does the employer have to provide a top heavy contribution to those who are eligible to defer but ineligible for ps/match?

Plan document provides for a discretionary match and employer notified employees that match for the plan year would be 25% up to 6% of compensation. Matching contribution was deposited every payroll period. After valuation report for the plan year was completed, it was discovered that the matching contribution that was deposited was 25% with no limit on compensation. No one exceeded the annual addition limit. Employer wants to know if they can withdraw the matching contribution in excess of 6% of compensation since it was communicated to the employees that the matching contribution would be limited to 6% of compensation. Participant statements have already been distributed but corporate return has not been filed. Can employer take “excess matching contribution” from the participants? What other options does the employer have?

We have an over age 65 employee who has Medicare A & B and is currently covered under a Medicare HMO plan. The HMO is dropping the Medicare plan in the county where she resides and she has requested to enroll in our group plan. Our open enrollment takes place in July and this would be a mid-year enrollment. Because the 125 regs specifically state it must be loss of coverage provided by another employer to allow a mid-year enrollment, we denied her request. She's gone to the DOL who claims a loss of other coverage (even personal) entitles the employee to a special enrollment period under HIPAA. (I've confirmed this with out local DOL office).

Because this disagrees with the 125 regs, I've been trying to get some guidance from the IRS and have been on hold for over 35 minutes with various departments. I'd appreciate any guidance or suggestions anyone may have. Or a phone number of someone at the IRS who may be able to help.

I have an employee with alopecia (hair loss). She would like to submit her charges for a hair weave under her FSA account. Is this an eligible expense?

What, if any, are the notice requirements for amending a plan to eliminate age 70-1/2 in serive distributions?

I've reveiwed the various IRS notices and announcements as well as the IRS regs and the preamble, but found no special notice requirements. Should the plan follow the notice requirements as if it were eliminating an optional form of benefit?

1. Must a DB Plan using annuity payments to satisfy RMDs offer optional forms of benefit (assuming participant still active)or may the plan use the normal form calculation?

2. What is the measurement date for the annuity calculation since the DC method is not used? I assume it would be based on the vested PVAB as of the latest valuation date in the calendar year prior to the year 70-1/2 is attained. The payments would be the same thereafter.

Any comments, thoughts are appreciated.

Due to the rising costs of health insurance, a public school district changed insurance plans to a plan with a $1,000 deductible. The school district is considering reimbursing administrators up to $3,300 for out-of-pocket expenses, such as co-pays and amounts paid toward the deductible. The district is wondering if they have to set up some sort of separate plan for this reimbursement arrangement or if they can simply W2 the employees for the amount they are reimbursed.

Client employed new tpa to handle 401(k) plan. All plan funds to be moved to new investment manager/company. Employer directed old investment co to cut check to move the funds. Employer sent check to tpa so tpa could get money to new investment co as per tpa's request. TPA lost the check and did not tell employer for some time. Employer talked to tpa and tpa gave excuses as to why the money had not shown up. Meanwhile, employer got stop payment orders for the checks and had the old investment co to cut a new check. The funds have been uninvested in any manner for 2 months. Also, deferrals have not been invested for that same 2 month period. The VFC Program addresses the deferrals issue, but is there anything that addresses correction of the nonivesting of the plan assets? Any other suggestions appreciated.

Has anyone seen any guidance as to how recordkeepers will have to track new rollovers. For instance, will a 403(B) rollover have to be segregated from a 457 rollover, or can they be lumped into a mass rollover bucket? Any thoughts and/or specific links to written guidance would be appreciated!

How does a fiduciary who is being sued for breach of fiduciary duty settle the matter and obtain a release from all participants in a plan?

Assuming that the plan's Trustee is empowered under the plan document to settle litigation on behalf of a plan, does the Trustee's execution of the Settlement Agreement also bind the participants?

I have clients that have full Cafeteria Plans and, for the first time, the question came up about unpaid leave (esp. FMLA) and how the cashed-out portion of the plan needs to be handled, if at all. (e.g. if a participant only uses $300 of a $350/month contribution and she takes the remaining $50 as taxable income.) Does the employer need to figure out some way to pay that $50 extra as "benefit dollars" versus regular pay?

Any insight is appreciated! Thanks!