If a previous employee does not pay their portion of the fee for COBRA benefits, how long must an organization continue to provide the benefits. Or, in the event that the employee does pay his/her premium but the check that he/she issues has bounced, approximately bounced checks since December 2000, how would you suggest the employer handle this situation. Please note that each time a check bounces, the employer does incur the bounced check fee.

Hi Everyone,

A very common transaction of the last few years is an IRA Trustee/Custodial Transfer of Assets of a Deceased IRA Owner by a Non-spouse Beneficiary.

When successfully completed, the IRA resulting from the transfer is usually titled referencing the original owner as being deceased with the resulting IRA existing for the benefit of the non-spouse beneficiary. For Example: "XYZ Firm as Trustee of the IRA of John Smith (deceased) for the Benefit of John Jones, Beneficiary".

No doubt this has become a commonplace transaction recently with many IRA fiduciaries sending and receiving these transfers routinely without giving it a second thought.

Over the past several months I have become aware of an increasing number of these transfers being refused by a variety of financial institutions. They base their refusal of this kind of transfer on the lack of legal qualification of a non-spouse beneficiary to execute an IRA Plan Document (Form 5305/5305A and such) in the name of or on behalf of a now deceased IRA owner (this assumes that the deceased IRA owner did not have an established IRA at the organization receiving the IRA transfer).

While I know on no instances where the IRS has recently shown concern or interest over this matter, it is interesting to note that in earlier times, the IRS did see fit to issue a proposed regulation permitting an employer to execute an IRA Plan Document on behalf of an eligible SEP participant who was unwilling or unable to open an IRA to receive employer SEP contributions. (Prop. Treas. Reg. 1.408-7(d)(2). No doubt, these base circumstances are very different but, it appears to address the apparent need at that time to legally enable someone other than the participant to execute IRA Plan documents on their behalf.

I would be interested in any of your thoughts or discussions on this matter. A "Tempest in a Tea Pot" issue? Perhaps.

But with these kinds of transfers happening routinely these days, I would not want to be first on my block to have a high balance decedent IRA transferred by a non-spouse beneficiary disqualified on a document technically, remote that those circumstances may be.

Cordially,

David

As we were discussing amendments for our clients, we realized that for BEGINNING OF YEAR defined contribution (money purchase, target) pension plans, the 100%/40,000 limit will not kick in until plan years beginning 2003. Here's how it works:

The BOY plan has a valuation date of 1-1-2002. It therefore uses a limitation year beginning 1-2-2001, and ending on the valuation date of 1-1-2002. Since 415 limits are actually for limitation years (which normally coincide with the plan year, but not always), the increased EGTRRA 415 limits for DC plan will be for LIMITATION years beginning after 12-31-01. If you look at the example above, for such BOY plans, the limitation year beginning after 12-31-01 will be 1-2-02, and will be applicable to the PLAN year beginning 1-1-2003. Be careful with your illustrations or what you tell clients on such plans.

The above scenario applies to DC plan only, as the DB plan limitation year date is for limitation years ENDING after 12-31-2001.

I am self employed and operated at loss this year so i had no taxable income can I still make my yearly contribution to my Roth IRA?

Folks:

Am hoping for some feedback on this subject. Working with small company. Owner wants to keep his existing SEP plan and have the lone employee set up his own SEP. Each would remain within the limits provided by the plans. Also, no doubling up - just a plan for you and another plan for me.

Does this cause any particulars problems. And is illegal for any reason??

Many thanks.

Scott

Because Plans--apparently--have to affirmativly the types of transfers and rollovers they will and/or will not allow under the new EGTRRA portability rules, are there types of rollovers or transfers that a governmental 401(a) DC Plan and a 403(B) Plan should NOT accept? If so why not?

As one example, if an employee's former Plan allows after tax contributions should, should the current employer say no to the transfer or rollover of the after-tax portion of a current employee's rollover from that employee's former Plan?

As a second example, what would be the downside of a Plan Sponsor saying that ANY transfer or rollover of ANY sort from ANY other IRA, TDA or qualified plan is allowed?

A client just returned from a seminar on Form 5500s and asked whether use of a TPA's disbursement account to pay claims could adversely affect the self funded status of their health care plan (which has less than 100 participants).

The client sends fund to the TPA who pays claims on behalf of and reimbursements to participants from the TPA's own account (on the TPA's own check stock).

The seminar materials said "if the checking account was titled in the name of the TPA, the DOL may not consider the employer to be paying benefits exclusively from its genral assets. A separate checking acccount may give the employees the impression that the plan has an independent source of funds guaranteeing the payment of benefits."

Using a TPA's disbursement account does not strike me as something that should make a self-funded plan funded, but I seem to recall some concern about this a few years ago, and would like to hear if anyone can point me to something to reassure the client. Thanks for the help.

What software do people use to create SPDs? I have investigates the Corbel software and am looking for other options. Does everyone just cut and paste?

How long do cafeteria plan records need to be retained?

My mother's company recently went out of business. She carried Blue Cross and Blue Sheild Insurance. She is 63 1/2 years old and is now going to work as an Independant Contractor. She has several preexisting conditions. She has chosen to elect Cobra to cover her until Medicare age. Blue Cross and Blue Sheild advised her that she had to convert to an individual policy because the group policy no longer existed due to the Company's Closure. Best I can tell, she has to convert to an individual policy under Cobra because there is no longer a group policy under her company. The premium is outrageous. Has anyone had any experience with Cobra after a Company closes vs. an employee just leaving. Also, is it correct that the Insurance company can force you to convert to an Individual policy because her Company closed?

A former employee remained on its employer's partially self-insured group health plan, at the company's expense, for 15 years following termination of employment. The company tried to purchase individual insurance for the former employee but found he was uninsurable, hence kept him on the plan. Some time after the individual reached age 65, and elected Medicare Parts A & B, the company agreed to pay for a medigap policy for one year. The medigap coverage is less extensive than the employer's group policy. Even though the former employee's medigap coverage is a unique situation and not a "group health plan" doesn't the Company have a COBRA obligation when its subsidy of the medigap policy ceases?

I'm preparing a 5500 on a CASH basis for a profit sharing plan. The contribution for the plan year was deposited after the end of the year. The end-of-year assets on the Sched I does not reflect this contribution. I have several new employees who had no money in their accounts as of the end of the plan year since the contribution was deposited after year-end. Am I right to NOT count them in Item 7g as "participants with account balances"?

My question pertains to an employer who leaves a PEO midway through the Plan Year. If this employer was top heavy, are they required to provide the minimum contribution to their employees?

I remember reading somewhere that, unlike a single employer who terminates their plan, the adopting employer under a PEO who leaves is still required to provide the top heavy minimum. This is because the "Plan" of the PEO is not terminated, just the adopting employers relationship with the PEO.

Another argument was that, since the PEO was the "Employer", and their "Employees" were not employed on the last day of the plan year, no minimum is due.

Does my memory serve me correct, or do they need to provide the minimum?

Thank-you in advance for your replies.

How will the new portability rules apply to SIMPLE plans? Will you be able to roll SIMPLE plans to 401(k)'s or vice versa? I haven't been able to find anything in writing that mentions SIMPLE's only 457 plans.

Does anyone happen to know if there is a Federal or IRS requirement, regulation, etc., as to the number of days, a 401K plan administrator has to perform a direct transfer of a clients funds into his/her newly designated IRA account...Especially if the original 401K account's funds have been previously removed?

I'm guessing it is seven.

Thanks!

Mark

I understand that loan repayments should be suspended when a participant files for bankruptcy, but I was wondering what date should be used as the cessation date for repayment. Specifically, if a plan administrator receives a bankruptcy notice in August indicating that the participant filed for bankruptcy in May, is it possible to treat May as the cessation point and refund loan repayments that have ben made since then?

Has anyone ever been involved in a DOL prohibited transaction penalty proceeding pursuant to which the 502(i) excise tax has been imposed or waived? Thanks.

A not for profit company wants to amend their DC plan to use a cross tested allocation formula. There are no Highly Compensated or Key employees, and there will never be any.

In the most extreme example, if they have 40 employees, could they have 40 rate groups with different contributions for each group? Essentially, giving a different contribution amount to every plan participant?

At least one retirement planning "professional" has told me that an employee-owned S-corp cannot set up a 401(k) plan if it only has one employee, who also happens to be the sole owner, or if it only has two employees, who are husband and wife, one or both of whom are 100% owners of the business. The others I've spoken to don't have a clue.

I would like to know for sure b/c, starting next year, one should be able to accumulate far more under a 401(k) plan (with employer contributions of up to 25% of compensation plus employee deferrals of up to $11K per employee) than could be accumulated under any other qualified plan (e.g., non-401(k) profit sharing plans, SEP IRAs, and SIMPLE IRAs). I've done the math. Over the long term, the additional tax deferral benefits far outweigh the administrative costs charged by groups such as 401keasy.com or the 16 hours or so a year I will have to spend administering it and filling out a 5500.

Is what these "professionals" say true, and if so, could someone point me to the applicable Internal Revenue Code provisions (U.S.C.) or IRS regulations (C.F.R.) that stand in the way?

As a result of EGTRRA, it appears we now have the ironic situation where 403(B) participants who have been contributing under the "catch-up" rules (the additional $3,000, for a max of $13,500 in 2001), will be restricted to $12,000 next year ($11,000 402(g) limit plus the $1,000 new catch-up for those age 50 or more). In short, these people will worst off. I could not find anything in the Committee Reports or the Act which "grandfathered" those doing the extra $3,000 catch-ups, so I am assuming next year they will be subject to a lower contribution limit.

Is anyone aware of any relief provisions for 403(B) participants in this boat?