Our firm has a cafeteria plan with the following options:

POP - HCE's, along with their spouses and dependents are fully covered by the employer, thus they do not use this portion of the plan.

MFSA - available to HCE's and NHCE's.

Dep Care FSA - available to HCE's and NHCE's.

Do we need to meet the 25% to Keys on the total, as well as test the DCFSA for the 55%? Is there individual testing for the MFSA? Is the POP okay since no HCE's use it?

JGreen

I recall a number of months ago talk about increasing the maximum contribution to IRA's to near $5000 or higher. Has there been any further discussion or steps taken to pass this idea???

thanks, darren

Does anyone know the final date for compliance with COBRA under the section 125 medical expense reimbursement? Specifically

1) Notification for participants upon enrollment of their right to COBRA.

2) Notification of COBRA eligibility for Section 125 medical reimbursement account participants with funds remaining in their accounts upon termination of employment.

3) Deadline for modifying the SPDs regarding COBRA rights.

In the approval process of a hardship withdrawal under the safe-harbor provisions, can a plan sponsor deny the hardship if the amount available does not satisfy or meet the financial need? For example, college tuition is $7,000 and amount available is only $1,500. The participant has already proven that there is no other source of funding, so do you still approve the $1,500 although it is not enough? The regulations are clear that the amount cannot exceed the need, but does the amount have to meet the need?

We have a 401(k) plan that caps deferrals at 15% of comp. Several participants exceeded the 15% limit raising several issues:

1. I know that 402(g) excesses are included in ADP test for HCE's, but not NHCE's. Does the same rule apply to employees exceeding the plan cap?

2. Are the deferrals in excess of the cap considered annual additions? If the deferrals are annual additions, several of the participants deferring in excess of 15% hit 415 limits prior to receiving an employer profit sharing contribution.

Thanks in advance for any guidance.

Client wants to offer a Savings 401k while maintaining his existing Defined Benefit Plan which consists largely of the accumulated benefits of the owners of the business.

Can the owners contribute fully to the 401k as well as taking full advantage of the DB plan?

In 1997, we amended the plan year end to a fiscal year-end 12/30 (from 12/31) to take advantage of the double tax deduction on employer contributions. (We are currently in Chapter 11 reog.).

Now, after 3 years of administrative headaches and chronic fatigue, we would like to amend back to a calendar year end plan.

Aside from having to create a 1-day plan year (12/30 to 12/31), what other pitfalls and issue should we consider before moving forward with the amendment?

I have a client that will be merging two 401(k) Plans, one of which has a December 31 limitation year end (the surviving plan), and the second of which has a September 30 limitation year end. The merger will take place as of May 31st. Do I need to amend the transferor plan prior to the merger to change its limitation year so it will match the remaining plan? How else would I be able to test for 415 compliance for the transferor plan? Is there written guidance from the IRS on this issue? I know the 415 regulations explain how to change a limitation year. I am just wondering if in a merger situation, is this something that needs to be done.

When do deductions cease if a participant has a change in status in the middle of a pay period? For example, if they terminated April 3, does the April 30 payroll have to include their deduction, or can it be stopped as of the March 31 pay period?

I have a friend who is to receive an under $5000 distribution from a qualified plan. Does anyone know how much time the former employer has to make that distribution to her?

Are public schools eligible to offer 401(k) to their employees, and if so, can this be to the exclusion of the 403(B), or in addition to?

Does anyone have any reports that will print a fee allocation per person, per fund? I can pull the numbers from the Summary of Accounts, but this is a large plan and it is very cumbersome and time consuming. Any help would be appreciated.

We are currently using 5.0, but will be converting this weekend to 6.0.

I was wondering how small TPA's out there go about investigating pre-existing conditions. I am referring to those instances where the exclusion period isn't nicely eliminated by a certificate of creditable coverage.

I have heard of getting the patient's primary physician to sign a statement regarding the lookback period. I always figured the statement should go to the member to sign, since the member is the only one with knowledge of all treatment (in the case of more than one treating physician).

I suppose doing both would be the ideal, but that is double the work with the letters.

Any opinions?

Since Code Section 412 does not apply, the only funding requirement I have found for church plans is in Treas. Reg. 1.401-6©(2), which appears to be a safe harbor but not an absolute requirement. However, it appears that there must be SOME funding for the plan to escape disqualification under Rev. Rul.71-91.

Is there authority on church plan funding that gives more definite guidance than this? Or, absent anything more definite, how do you advise clients on funding of church plans?

Taxpayer in 2000 converted part of traditional IRA account to a Roth IRA, transferring 100 shares of stock of a corporation, having value at time of conversion of $50 per share. In other words taxpayer undertook a conversion to a Roth IRA in the amount of $5,000. Stock has gone up, and the Roth IRA account is workth $7,500. But client wants to recharacterize part of the conversion anyway, transferring 1/2 of the account in a trustee-to-trustee transfer back to the traditional IRA account.

Question #1: Is a partial recharacterization of a Roth IRA conversion possible?

Natalie Choate in her 1999 edition of "Life and Death Planning for Retirement Benefits" states at page 222: "Although the preamble to the proposed regulations stated that 'Any portion of all' of the contribution may be recharacterized, both the proposed and final regulations themselves speak only in terms or recharacterizing 'the contribution' (not 'any portion or all of the contribution'), and the examples given deal only with total rechacterization.

I am confused. Final Reg. Sect. 1.408A-5, at Q-1, A-1, states: "In accordance with section 408A(d)(6), except as otherwise provided in this section, if an individual makes a contribution to an IRA (the FIRST IRA) for a taxable year and then transfers the contribution (or a portion of the contribution) in a trustee-to-trustee transfer from the trustee of the FIRST IRA to the trustee of another IRA (the SECOND IRA), the individual can elect to treat the contribution as having beeen made to the SECOND IRA, instead of to the FIRST IRA, for Federal tax purposes." In my reading of the Final Regs., as stated above - "or a portion of the contribution" - implies that a partial recharacterization would be permitted.

Also, on page 4 of the instructions to form 8606, it states under "Recharacterizations", that there are three types of recharacterizations, including: "You converted an amount from a traditional ... IRA to a Roth IRA and later recharacterize part or all of it back to a traditional ... IRA."

Natalie Choate's word I usually take as gospel, but her 1999 edition may have been written before the final regs were issued or fully contemplated, and certainly before form 8606 and its instructions 8606 were amended.

Any insight you may have would be appreciated.

Question #2. If a partial recharacterization is permitted, how is it reported?

ASSUMING A PARTIAL RECHARACTERIZATION IS PERMITTED:

Final Reg. Sect. 1.408A-5 A-2© seems to state that "the net income attributable to the amount of a contribution [being recharacterized] is calculated in the manner prescribed by Sect. 1.408-4©(2)(ii) (disregarding the parenthetical clause in Sect. 1.408-4©(2)(iii)"

That section in turn states: "The amount of the net income attributable to the excess contributions is an amount which bears the same ratio to the net income earned by the account during the computation period as the excess contribution bears to the sum of the balance of the account as of the first day of the taxable year bears to the sum of the balance of the account as of the first day of the taxable year in which the excess contribution is made and the total contribution made for such taxable year."

So, returning to our example, if the taxpayer recharacterizes 1/2 of the now $7,500 account, the taxpayer would recharacterize $3,750. The amount reported on the (extended) 2000 tax return as the conversion amount would be 1/2 of the original amount converted, or $2,500 (1/2 of the original total $5,000 converted), or so it appears to me.

If this is true, then on Form 8606, line 14a, the amount originally converted would be entered as $5,000. On line 14b, the amount recharacterized (not including earnings) would be $2,500. A statement should also be attached to Form 8606 explaining the recharacterization.

Is this correct?

Thank you.

Has anyone heard of a participant being allowed to rollover

money into his currently employer's 401k from an IRA that contained contributions before the 401k money arrived, that

were not from a qualified plan?

My guy says he doesn't remember if the money is all 401k or not. But he wants to rollover into the 401k plan anyway.

A and B each own 50% of medical practice C Corp. B purchases 100% of medical practice S-Corp. A and B are not related, and there is no sharing of support staff or other services between C Corp and S Corp. Clearly, we do not have a brother-sister controlled group. Legally, I conclude that B gets two section 415 limits, or $70,000 if his comp in each corp can support it. Am I missing anything? It seems too good to be true.

I have a client who incurred a medical expense toward the very end of the last plan year (hospitalization) but was not billed for it until this year. I vaguely remember reading an article that said the IRS would allow such expenses to be reimbursed with current year medical flexible spending account dollars but can’t seem to find it now. Is old age getting to me or does anyone else remember the article?

Has the DOL agreed that a plan adopting one of the interest rates specified by the IRS in Notice 96-8 can avoid making the whip-saw calculation?

If the Treasury stops issuing 30 year t-bills (as a colleague tells me they have been threatening for years - note that the recently stopped issuing 1-year t-bills), do you think that all of the "safe-harbor" rates (that the IRS established to approximate the 30-year t-bill rate) would need to be revisited?

Say an active employee discovers an error in his accrued pension. What remedy is there? Could the employee file a formal claim for additional benefits, even though he has not even commenced benefits? Or is this handled more informally through letters?