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)?

We're considering implementing one of the safe-harbors. We have a union environment. What experiences have you had using one of the safe harbors? Any plusses or minuses you can share with us? What landmines should we look out for?

I'm 25 and am interested in opening a Roth IRA. How does one go about opening one? Is it necessary to shop around for rates? How is a Roth different from a 401(k) (which I don't qualify for currently)?

Also, I'm unclear as to how a Roth can be tax-free unless compensations come out of one's pay check before taxes are withheld.

Just to confirm, it is NOT an acceptable shortcut around COBRA regulations re: deriving premiums for a self-insured plan, for the plan to get a COBRA premium quote from an insurer applicable to plans of comparable size/claims experience?

I have a client whose ins. broker is insisting that this is a widely-accepted methodology.

Regarding Cafeteria Plans and COBRA:

We have someone who has been participating in our Flex. Health acct. through COBRA beginning in Sept. She sent payment for Sept., but has not paid for October. Yesterday I received a reimbursement request for a service rendered 9/28/01. Does date of service still matter if the person is partcipating through COBRA? Basically, my question is, even though she hasn't paid for October, do I still need to reimburse her for a service rendered in Sept.? Some regulations I read made me think I do NOT have to--because by not paying for October, she is effectively no longer participating in the plan. Does anyone know for sure?

Can a person make a donation to a charitable organization, more specifically a church, by transfering money from their 401k plan without being charged penalties or taxed?

Is anyone aware of any law that will require Social Security Numbers to be removed from benefit statements in the future?

Going to ASPA next week.

Anybody else?

Our 'fearless leader' Dave Baker is giving a talk Wednesday!

I have a water/mutual irrigation (gov't) company that is moving ahead with establishing a new 401(k) plan under the new 501©(12) rules, but now they want to know whether then can combine the plan with their existing 401(a) Thrift Plan. The Thrift plan is a money purchase pension plan set up to provide for 10% contribution after mandatory 4% employee contribution. This scares me, because generally MPPPs aren't allowed to have CODAs; however, can this CODA be included with the MPPP in this case because it is a "rural cooperative plan" under the new 501©(12) rules? HELP!!!!

What does everyone think about the following scenarios involving a DC plan that is restated effective January 1, 2001 but that is requesting a GUST determination letter filing?

a. Plan received a determination letter in 1994 and has been amended 3 times since then (1996, 1998 and 1999), including amendment for ALL necessary GUST changes which were incorporated in the 1999 amendment with an effective date of January 1, 1997. In 2001, plan adopts some design issues and restates. All the prior language in the plan relating to effective dates "e.g., the August 5, 1997 effective date for increases from $3,500 to $5,000" is wiped out (since this would be unnecessary in a 1/1/01 effective date plan). What do I do when I submit for a GUST determination letter request? Is attaching the old plan submitted in 1994, all amendments thereto and a copy of the 2001 Restatement good enough? Doesn't the IRS require in Rev. Proc. 2000-20 that I restate for GUST? Have I messed up by making the effective date of the new Restatement 1/1/01 and not 1/1/97? Was I supposed to go in to the 1999 Restatement and put "effective 1/1/01" for all the design-based changes I wanted to take effect in January 1, 2001?

b. Plan has a restatement effective January 1, 1997 that incorporates all GUST changes necessary for a GUST I determination letter. Plan receives a GUST I determination letter in 1999. Plan is restated on 1/1/01 and submits for a GUST II determination letter. Do I have a problem (assuming the same issues above) because the new restatement is effective 1/1/01 and not January 1, 1999 (the date non-GUST I GUST provisions take effect)? Does anyone think the IRS will have a problem with this?

As another question, what is the true effect of the GUST remedial amendment period? If I submit a determination letter request on December 30, 2001 and the IRS tells me that my USERRA provision is not exactly right, how long do I have to amend the plan to fix my USERRA provision? I ask because it seems like we are outside of the general 401(B)(1) "remedial amendment period" and are in a special "statutory (i.e. GUST) remedial amendment period." Am I in trouble if there is a mistake found after 12/31/01? Will the IRS argue that I was supposed to have submitted my application earlier (say in April), so that I'd have plenty of time left in the GUST remedial amendment period to make any corrections should any errors be found?

Thanks all!

Two questions regarding funding a QTIP with traditional IRA:

Consider married couple, second marriage for both, with "his" and "her" adult kids. Fairly typical A/B plan: Family by-pass trust and QTIP marital trust for wife. Husband is owner of traditional IRA. Husband is 68 years old, but in very poor health.

1) If the husband/IRA owner dies before his RBD, will the QTIP be considered a "qualifying trust" under the new proposed regs - so that surviving spouse can then use her life expectancy to calculate the RMDs?

2) If not, and the IRA is used to fund a non-qualifying trust (whether the QTIP marital or the Family "by-pass" Trust), so that a 5-year payout plan is required, then:

If the spouse is entitled to all income from the QTIP marital trust, will each year's one-fifth payout from the IRA be considered "income" and thus be payable on demand to the spouse?

Or can the trust language be drafted to limit the amount of IRA distribution that is to be "income", with the balance of the distribution being trust "principal"?

I'm sure the answer is out there and I've just missed it. We have a client who is currently receiving RMD's. He wants his 2001 and possibly 2002 distributions under the '87 regs. Can he adopt the model amendment in 2003 for distributions in 2003, provided the new regs have not yet been finalized?

IRS Announcement 2001-18, in correcting its first model amendment, states "With respect to distributions under the Plan made for calendar years beginning or or after January 1, 2001 (ALTERNATIVELY, SPECIFY A LATER CALENDAR YEAR FOR WHICH THE AMENDMENT IS TO BE INITIALLY EFFECTIVE)...." [capitalization is from the IRS]

This is not the alternative amendment from Ann. 2001-82, but a correction of the first model.

So back to my question, if, in 2003, the client wants to switch, may he do so by adopting the first amendment, as corrected above, in 2003 and specifying the calendar year 2003 as the initial effective date? This is obviously after the GUST RAP.

Thanks for any insight.

Profit Sharing Plan with CODA is Top Heavy for the Plan Year.... There was no discretionary profit sharing contribution contributed to the plan and the employer match is also discretionary. The Key Employees do not contribute to the plan (EE Def.). Since there were no contributions made to the plan on behalf of Key Employees, is a top heavy contribution required to be made to Non-Key Employees?????