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!

Can someone please help us figure out what is considered excluded stock for purposes of determining controlled groups and how such excluded stock is treated. For example, if 25% of the total outstanding stock is held in an ESOP, it was my understanding that 100% is now replaced with 75% when determing brother-sister ownership. I am hearing people say that the ESOP stock is included in each owners ownership percentage, but I never thought it worked this way.

Any clarification would be greatly appreciated.

Thanks

For the 2002 plan year, if the hce gets $40,000 (20% of $200,000) and the rank & file gets 5%, I thought that the plan passes? I'm getting feedback that this scenario doesn't automatically ensure that the plan passes. What do I have to check on the software results to ensure that the numbers (projected for 2002) will be O.K.?

THAKS FOR YOUR HELP!!!

I know these threads are mainly for employers however, I have a co-worker who has been trying for over four months (almost five months) to have her 401k withdrawn from her previous employer. The $$$ is way under $5k. She just wants a check sent to her. Seems she keeps getting the runaround. What can she do? Is there anything under ERISA that she can do?

I have a solo Dr. and his father, who is the investment broker and an independent contractor with Raymond James on the son's plan. I explained that this is not allowed as the father is a party-in-interest. Besides appointing another broker or appointing a third party trustee (ie a bank), are there any other ideas of how to break up this problem without taking the father out of control over the assets? Thanks

Payments have been received pursuant to a settlement with Executive Life over the last three years. The employer previously paid for related expenses because there was not sufficient funds in the plan. A small final payment has been received. Could the plan now reimburse the employer for the otherwise proper expenses it paid. The plan document permits such expenses to be paid from the plan. Is there any problem with these expense having been paid for as long ago as 3 years?

It seems if it was originally an expense that could have been properly expensed, then the mere passage of time shouldn't have turned this into a prohibitive reimbursement.

May a plan be amended to provide that the sponsor shall be reimbursed by the trust for administrative expennses previously paid by the sponsor. I'm guessing the answer is no, but how is this any different from the trust paying the expenses directly? Any thoughts? Ed

In a new comparability money purchase plan would the following contribution be difinately determinable?

Class 1: 3.5%, however if non-discrimination will not be passed at 3.5%, the percentage for Class 1 will be increased up to the point where non-discrimination testing will pass.

Class 2: 25%

We administer a one participant DB (sole proprietor). The plan was effective 1/1/2000, has assets of about 100K and PVAB of about 90K. He worked less than the required hours to accrue a benefit this year and wishes to freeze the plan.

Is there any problem with freezing benefits, switching to end of year and avoiding required contributions this year? Is it even necessary to switch to end of year to avoid the contribution requirement? He expects the business will be profitable 2-3 years down the road. What happens if he is profitable next year? Is that too soon to unfreeze benefits?

We have communicated that a DB cannot be amended / altered every year and must generally be permenant in its design.

Thanks!

I have been reviewing this forum and have noticed that there is little to the effect of marketing to either employees or employers the benefits of 401ks or 403bs...especially considering the tax changes coming into effect here in the next couple of weeks, though there is plenty about the mechanics and legislation of them.

Reason I am curious about this is because I have been asked to consider creating an informational/marketing resource to be shared with HR depts and employees concerning the tax law changes...and ways to self-direct investment allocations using current technologies.

A friend of mine has created a very nice graphical web-interface (similiar to bigcharts.com but prettier) which can detail exact holdings as well as market momentum and indices. (He is an investment advisor and represents one branch of a multi-tiered presentation sheduled for a large coporation next month, education would fall into my lap with the other tiers being law and accounting.)

Before I really get involved with this concept, I thought I might submit a question or three to the floor:

What is the pain behind marketing 401k plans to employees or is that typically left for the HR dept? Recently PlanSponsor.com surveyed their visitors and found almost no employees had more than 4 holdings in their 401k Click Here for the Press Release which they claimed wasn't good diversification.

Is there any real service to realistically educate employees and HR personell about the ins and outs of 401ks and 403bs? I know that most employees regard 401ks as a pain- even my wife refuses to look at hers to see how it works, and I think we all know deep down that most people would rather not be bothered by their 401k or 403b at all, but current events may be shaping an increased awareness as more americans are nearing retirement and the whole social security fund debacle.

Finally- is anyone willing to share insights about a project concerning the education and marketing or 401k/403 plans?

Many thanks for your time. Feel free to email me for a more private discussion as needed. christian@advisorpage.com

The Roth IRA allows for tax-free deductions if made after 59 1/2 and if the account has been active for a minimum of 5 years. What are the exceptions for first time home buyers? Is there a penalty if I make a withdrawl to buy my first home after 5 years before age 59 1/2??