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?

I have just received an interpretation (NOT from the IRS) that Section 642 of EGTRRA does not allow IRA assets to be used to purchase service credit, but merely to rollover into an employer's retirement plan's 401(k) plan.

Is that the reading of that provision that you'all get?

Thanks

A cash balance plan doc says interest credit is 4%. However, every year since its inception they have added an ad hoc amendment to provide for an interest credit of 8%.

Should this now be a permanent plan feature or amendment? i.e. any precedent? Or could this be considered a 411 forfeiture in accordance w/ 96-8?

Any comments out there?

My sibling and I inherited a traditional IRA last year (2000). My sibling wired their 1/2 of the fund to a personal account out -of -state and I left my half intact. A year later, my 1/2 is still intact, accruing interest. Questions:

1) my bank says I can leave it that way indefinitely as

long as I take out at least the minimum distribution

yearly. (they claim that my sibling taking 1/2 out last

year qualified for that). Is this true?

2) My parent was issued the 1099 for the amount of

funds withdrawn by my sibling. Was this correct? My

sibling says this was wrong. Should have been

made out to him and that my bank officials were

uncooperative to make the change.

3) How am I going to be taxed on this - should I have

received some sort of 1099?

With money purchase plans effectively becoming obsolete under EGTRRA, many employers that are sponsoring 2 plans (a MP and a PS plan) are interesting in merging the plans into 1 plan. Let's say that an employer's goal are:

1) To maintain only 1 plan going forward;

2) To eliminate the annuity provisions of the former MP money in the profit sharing plan (if the plans were merged);

3) To avoid 100% vesting of former MP money; and

4) To keep leakage (participants taking premature distributions) of the former MP money low.

It seems to me that a plan merger solves issues #1, #3 (maybe) and#4. Termination of the MP plan solves issues #1 and #2. However, what solves all four?

Maybe an employer could utlize the liberalized EGTRRA elective transfer rules and give all participants the option to transfer their MP balance to the PS plan, thus cleansing the former MP money of the annuity rules. Assuming that 95% of the participants actually make this election, that would leave a couple people with balances in the MP plan. Could the employer then terminate the MP plan, make these remaining participants 100% vested and force distribution of these accounts? What potential problems do you see here?

What are other employers requiring for pre-65 retirees' continuance under health plans? Any employer contribution?

Thanks

Ned Strain

National YMCA Employee Benefits Plan

Who pays the sanction associated with obtaining a Walk-in Closing Agreement for a multi-employer pension plan?

Can a brokerage affiliated Trustee of an ESOP purchase stock from the broker/dealer's inventory where the only market in the stock is from the broker/dealer? Our thoughts were that a disqualified person under an ESOP can sell stock to the ESOP as long as the purchase is at fair market value. We normally only process agency trades for qualified plans purchasing company stock except in this case our inventory is the only source of stock.

Anyone have any thoughts?

I was granted Phantom Stock from my prior employer (ESOP Co) because my ESOP allocation was reduced as I had contributed the maximum allowable to the 401k plan and therefore hit my 415 limit. The amount of my Phantom Stock grant was equal to the number of shares I did not receive on my ESOP allocation due to the 415 limit. At the time, the Phantom Stock plan stated that it would be paid out in the same mannerism as the ESOP distributions. The ESOP plan (co is a S corp) converts my company stock to other investments (similar to those provided in a 401k plan) and allows me to rollover these investments out of the ESOP and into a qualified retirement plan over a 5 years period ($25k per year for up to 5 years).

Now I am being told that the Phantom Stock will not be paid out until after my ESOP investments are distributed (IE, in the fifth of 5 years), and that the funds will not be invested at all during these years (the $ amount is frozen).

Had I known this, I would have reduced my 401k contribution because these Phantom Stock funds will not be invested over a 5 year period and are at risk of being lost if the company goes bankrupt...are there any rules governing modifications to the distribution policy of nonqualified plans? Does the state law (California) protect me at all in this instance?

Also, doesn't the Phantom Stock payment need to be treated as Ordinary Income with income taxes withheld? (They are proposing that they will issue the check after five years with no taxes withheld).

A client will be shifting to a PPO. The client wants to encourage certain employees to opt out of medical coverage. Accordingly, if employees elect to opt out of coverage, the client will give them a certain amount of cash (all or a portion of the employer-portion for PPO coverage). The client has a cafeteria plan. Must these payments be treated as taxable benefits under a cafeteria plan (under the argument that all employees basically have flex dollars)? Alternatively, can these amounts be paid outside the cafeteria plan?

On another note, may the client pay different amounts to different employees under this opt-out provision?

It would appear that these amounts would be paid under the cafeteria plan. If so, the client would need to worry about non-discrimination requirements if different amounts were paid.

Thanks in advance. Ed