Participant has a 401(k) balance of $2,500. This is $2,000 contributions and $500 earnings. Participant takes a loan for $1,250. Particpant's balance has experienced a loss and the account is now worth $800. Participant wants to take a hardship distribution. Any ideas on how to calculate the eligible hardship amount? Thanks.

Plan document allows for different definitions of compensation for deferrals, match & p/s and has an option for determining whether or not deferrals are taken from bonuses.

Client has elected to allow 401(k) deductions on bonuses but wants to know if they have to match those contributions? Can bonus comp. be included for deferrals but excluded for match and p/s purposes and the plan not run into problems?

At a future date would they be able adopt safe-harbor provisions to avoid ADP/ACP testing if this exclusion were allowable and in place?

In determining who a key employee is, what is the definition of an officer?

If an employer provides long term disability coverage paid 100% by the employer, are the amounts of the premium considered taxable to the employee?

I understand the whole pre and post tax employee contribution tax requirements, but was not sure on the employer provided coverage.

Okay--first plan year is 2000. Employer elected to use the 3% default for ADP testing. Then, in 2001, they amended to use an safe harbor match (notice requirement met). Now, for 2002, they want to know about eliminating the match. I will advise them to simply not provide the annual safe harbor notice and amend the plan to use current year ADP testing, correct? Anyone see any problems or is there anything else we need to do to get "out" of the safe harbor?

I will also advise them that they can wait until sometime during 2002 under Notice 2000-3 guidance, but I think they are looking to get out before.

Thanks!

A SIMPLE plan is terminating and a true up contribution is due to the plan. However, the plan's only 3 participants are the owners. No other employees have chosen to defer and participate in the plan. My feeling is the company would not have to make these true up contributions since it would only be going to the three owners. But I cannot find any cite or reference supporting my logic. Has anyone else run into a situation like this before? What have you done?

A dependent of an active employee is also covered as a COBRA participant under the dependent's former employer. The dependent is also covered under the spouse's plan. Which plan would be primary? The dependent's plan document states that that plan is secondary when a COBRA participant is covered under another plan in which an employee or dependent is active. The employee's plan only states that the plan that pays first is the one that covers you as an employee. This is stated under COB provisions and not mentioned under COBRA.

Do experience gains from a Health FSA have to be "kept within the Plan?" What I mean is that I have gotten conflicting information that on one hand (i.e., DOL information) that excess funds that are forfeited by participants in a plan year for a health FSA can either be used to: 1) defray administrative costs by the employer; 2) be returned to participants uniformly in the form of cash subject to income tax; 3) be used to reduce future premium amounts in the next plan year; or 4) be used to increase the annual maximum for the next plan year. The DOL states that the monies received by the participants are "plan assets," so any excess must be used for the strict use of the Plan and cannot be arbitrarily used by the employer any way they choose. On the other hand, I have been told that the IRS is silent regarding the excess funds, and that since they were forfeited by the participants then those funds are the employers to do whatever they want to. Any help, especially specific IRS or DOL regulation information, would be most appreciated. Thanks!!

It's my understanding that if one plan is properly merged into another before the remedial amendment period expires, only the surviving plan has to be restated,provided that the appropriate language is contained in the restatement. Where can I confirm this? What is the appropriate language?

Can the IRS go back an unlimited number of years to force RMDs? If there is a limit, how many years can they go back?

I've heard that the proposed regs. stating that 5% ownership status never went away, even after divesting oneself of any ownership interest -- were repealed. Therefore, you would only be considered a 5% owner for the next 5 years. Can anyone varify that?

An employer would like to do away with their health insurance and instead put money into the employees' medical spending account so they may purchase their own health insurance. The employees would then be reimbursed for the premiums from the medical reimbursement part of the cafeteria plan. The question the employer has is can an employees' unused employer money be carried over to the next plan year? I know employee money is always "use it or lose it" but what about employer money?

Can a group health plan require participation in a wellness program or a wellness assessment as a condition to participation in the plan?

My company is composing a letter for our shareholders who attained age 70 1/2 this year and are required to begin taking their RMDs by 4/1/02. Someone sneaked the following Q & A in and I am not sure it is entrely correct:

Has the timeframe changed for when I need to begin taking RMDs?

The new proposed regulations have not changed the timeframe. If you have an IRA or participate in a Qualified Retirement Plan, you must start taking distributions no later than your required beginning date, and continue to take distributions over a period that does not extend beyond either (1) your life expectancy or (2) your life expectancy and that of your designated beneficiary.

After reading UPI's materials (I was not the one to attend the recent conference this month), I understand that the old rules still apply for beneficiaries inheriting an IRA before RBD, correct?

What about AFTER RBD? Can't the benficiaries in turn stretch out the IRA to THEIR beneificiaries? Does that make the point in the Q & A above incorrect?

Please help!

Can you tell me if your company pays for your employees' continuing education and exams and what kind of rewards you offer for successful completion? Bonuses, raises, etc.

The proposed regulations on catch-up contributions released this week do not require that a participant have made elective deferrals in excess of an otherwise applicable limit in order to be a catch-up eligible participant. They give an example where a participant is allowed to make elective deferrals in an amount PROJECTED to exceed the otherwise applicable limit.

There is also a "universal availability" requirement where participants must be given the same "effective opportunity" to make catch-up contributions. An example is given where the plan provides participants with an opportunity to make catch-up contributions on a payroll-to-payroll basis.

Additionally, there is a provision stating that the amount of the elective deferrals in excess of an applicable limit is generally determined as of the end of a plan year.

Do all of these provisions, read together, allow an employer to make catch up contributions at the participant's election without having to determine if they are currently exceeding a limit, and without having to project if they will exceed the limit, so long as at year end the catch-up contributions that do not exceed an applicable limit are included in the ADP test?

There is no guidance in terms of having to obtain a specific catch-up election by the participant. If a participant elects 20% of comepensation, can the employer automatically contribute an extra $1,000 as a catch-up once the employee hits the 402(g) limit??

My 84 year old father passed away in May of 2001, leaving me and my brother the beneficiaries. My father had not completed his RMD for this year---the year of his death. I have been informed that his RMD MUST be completed before the IRA's are split between me and my brother.

My question is: will the required minumum distribution be reported as income (distribution) on a 1099-R to me and my brother or will it be reported as a distribution to my father?

Julie

If the IRS is reviewing a 5310 and the plan administrator has discovered an operational defect after the filing but before a determination has been made by the IRS, is there any advantage or disadvantage to informing the IRS of the failure when it could most likely be corrected through SCP?

Would there be a benefit to waiting until a determination letter is received?

I am reviewing a draft QDRO for a conventional DB pension plan. The date of divorce is after the participant's date of hire, but prior to the participant's date of participation. Upon participation, the participant gets a full year of credited service back to January 1 (which precedes the date of divorce). Got the picture?

Specifically, it awards X% of the participant's accrued benefit "as of date of divorce" to alternate payee. Does this have any force? Could it (assuming all other provisions OK) be a valid QDRO but with an award of zero dollars? Could it be construed to award part of the benefit which has not yet been earned as of date of divorce? What responsibility does the plan sponsor have to point out these issues?

(Sorry, that is kind of open ended.)

Can vacation days be "sold" in a 125 plan and then used to fund childcare (129)?