Upon retirement, employer agreed to reimburse former employee for his monthly, private health insurance premiums. Employer sends former employee a check, employee pays the premium out of his personal account and then sends former employer a receipt. Is the premium reimbursement excludable from former employee's income under Code Section 106(a)? Based on my review of PLRs and Revenue Rulings (PLR 9347008 and Rev. Rul. 61-146), it appears that premium reimbursements are excludable from a retired employee's gross income under 106(a), provided that the employer requires an accounting, or other safeguards, to ensure that the funds are actually used to purchase coverage.

I believe that the situation described above could satisfy IRS requirements for the exclusion. Agreed? But, how does this arrangement constitute an "accident and health plan" under 106?

Thanks in advance.

During 2000 a terminated plan participant in a qualified retirement plan rolled his vested balance into a traditional IRA. Subsequent to this transaction, it was discovered the participant was not fully vested in the employer portion of his account. From the reading I have done, I see that the plan sponser needs to make the plan whole again. To do so, the sponsor will attempt to obtain the non-vested portion from the former participant. It is unlikely the participant will authorize a distribution from the IRA to return the funds. My questions are as follows: (1) The sponsor needs to issue a corrected 2000 1099-R to show the invalid (non-vested) portion of the rollover as taxable and subject to the 10% early withdrawl penalty - correct? I presume this will mean the participant will need to amend his 2000 Form 1040? (2) Is there an excise tax issue (or other penalties) for the sponsor for incorrectly distributing the non-vested dollars?

Any cites would be appreciated.

An IRA was left to my wife by her father who recently passed away. He was one month short of 59 1/2. What are our

options for the money. Do we report it as income and pay taxes at our tax rate (hopefully not)? Can we just leave it in the IRA? Do we need to change the name on the IRA if we leave it alone?

In what ways is non-required "education" seen as a "Settlor" function and therefore non-reimbursable from plan assets? [Example: Eer sends out a newsletter on diabetes to medical plan participants].

I know that there is recent guidance from the DOL and published hypotheticals but they do not specifically address this issue. It also seems to be that in the 401(k) and Pension side, education is more readilly accepted as a trust expense even for general non-required financial education.

The plan document defines compensation as W2 for all plan purposes. The last paycheck for 2000 was a bonus check. All employees (HCEs and NHCEs) received a bonus, but no salary deferrals were taken. The bonus wage was included as compensation when the 2000 ADP / ACP test was run.

I cannot seem to find any answers on this type of operational failure. If the contributions were made, the ADP / ACP and Top Heavy test results would not change significantly.

Any suggestions?

An employer would like to have two separate health plans for employees based on the date of hire. The date of hire will not be used to differentiate the employees for any other reason. The employer wants to create a new plan because of cost. The group of employees (about 30 people) that would be effected have almost finished the waiting period for the existing plan. Would creating new plan violate HIPAA's nondescrimination rules?

I am employed by a NFP and am enrolled in a 403(B)...TIAA-CREF to be exact. I am planning to leave my employer in the near future, and I am wondering what/if any options exist that would permit me to access the funds in my 403(B).

A prohibited transaction occurred when a loan was given to a partner who had an interest of more than 10% in the capital or profits interest of the partnership. If the partner is unable to repay the loan, how can this be corrected? Any creative ideas out there?

I have 2 IRAs, one traditional and one roth. I contribute $2000 a year to each, for a total of $4000 a year. My accountant now tells me this is bad and I could be penalized. He tells me a max of $2000/year can be contributed to IRA, that doesn't sound like much.

I contribute to both of them directly from my bank account so I have already paid tazes on what I am contributing.

I thought it was $2000/yr for each IRA.

Am I wrong?

What is the maximum number of IRA accounts one can have?

What is the TOTAL/maximum amount of money that can be contributed to one's retirement per year?

Here is an outline of the surrounding issues:

In dealing with permissively aggregating three plans together in order to satisfy NOND testing. Assume that the plans are all designed the same with matching benefits, rights, and features...

Three members of a control group Plans A,B,C.

I assume that mandatory aggregation is applicable here for the HCE's and NHCE's combining eligibility and all the rest, which could increase the count for NHCE's.

I don't understand how the HCE's would look on paper. Meaning, assume an employee is considered an HCE based upon 5% owner. This person has comp of:

Plan A $40,000 defers - $2,000.00

Plan B $100,000 defers - $5,000.00

Plan C $20,000 defers - $1,000.00

When looking at this person under permissively aggregation scenario would the following be true?

The person would be an HCE and counted one time on the aggregated test. The comp would be totaled and the deferrals as well? 160,000 and 8,000 giving 5% deferral%?

How would this look if mandatory aggregation was applied to these plans being tested separately? Any way to avoid combining comp/deferral amts. for the HCE's?

Thanks for any help!!!!!!!!!!!

Matt

I am hoping someone can clear a few questions I have up about the options you have for running Coverage and ADP/ACP testing for related employers, for which I am making an attempt to detail below:

Here is an outline of the surrounding issues:

I am testing three members of a control group and this first discussion deals with trying to get the plans tested

separately AND without having to apply mandatory aggregation of the HCE's.

Here's my understanding of the rules, generally speaking related employers are always treated as single employer for NOND and coverage testing. It is allowable to test each separately if they have separate workforces and maintain separate 401(k) plans. However, the HCE's are subject to mandatory aggregation combining their deferral amts in each plan they participate in order to calculate their deferral %'s in each plan. Backtracking a bit, to determine who are HCE's for related employers 415 comp is considered the employee's compensation from any member of the the related group.

Three questions about this...

1. I found an exception to mandatory aggregation in some of Sal Tripodi's materials that the HCE's do not have to be mandatorily aggregated if the arrangements are part of plans that are disaggregated for coverage. Does this mean that as long as you disaggregate for coverage that mandatory aggregation of HCE's does not apply? Unfortunately, I am also having a hard time understanding what it truely means to disaggregate for coverage purposes

2. Assuming that mandatory agg. is applicable, then when combining deferrals to come up with def% in each plan is compensation combined as well?

3. Is this only compensation from which the employee was eligible?

------------------------------------------------------------

The second discussion involves permissively aggregating the three plans together in order to satisfy NOND testing. Assume that the plans are all designed the same with matching benefits, rights, and features...

Three members of a control group Plans A,B,C.

I assume that mandatory aggregation is applicable here for the HCE's and NHCE's combining eligibility and all the rest, which could increase the count for NHCE's.

I don't understand how the HCE's would look on paper. Meaning, assume an employee is considered an HCE based upon 5% owner. This person has comp of:

Plan A $40,000 defers - $2,000.00

Plan B $100,000 defers - $5,000.00

Plan C $20,000 defers - $1,000.00

When looking at this person under permissively aggregation scenario would the following be true?

The person would be an HCE and counted one time on the aggregated test. The comp would be totaled and the deferrals as well? 160,000 and 8,000 giving 5% deferral%?

How would this look if mandatory aggregation was applied to these plans being tested separately?

Thanks for any help!!!!!!!!!!!

Matt

As a result of several acquisitions, an employer maintains 3 VEBAs. The assets of each of the VEBAs currently provide benefits for active and retired employees. The employer wants to accomplish 2 things: (1) merge the 3 VEBAs into one, and (2) use the VEBA to provide only retiree medical and life benefits.

Are there any tricky issues to be aware of in merging VEBAs?

Is it OK to stop using a VEBA to provide certain benefits (in this case, benefits for active employees)?

Would a PLR be recommended?

Should the employer file Form 1024 for the new VEBA structure?

Anything else the employer should consider?

I made the full $2,000 contribution for the year 2000.

The income reported on my W-2 form is only about $1,700, but I did earn just over $400 in self-employed tutoring in 2000. So theoretically, I'm OK.

The problem is that when I come to line 4 of schedule SE where I multiply my self-employment income by 0.9235 (which brings the number below $400), I am told to NOT file schedule SE.

My question is, if I do not file form SE, how does the IRS know that I earned at least $2,000 in 2000?

Should I just inflate my self-employed income enough to require me to file SE? Or should I file it with the right amount, even though I am told not to?

Thanks,

Robbie Geary

401(k) PSP document allows for forfeitures to be used to reduce ps contribution for that year. If no contribution is made, is there any regulation that "requires" the plan to make a contribution (thus the contribution for the year would be exactly the amount of the forfeitures for the year).

We have carried over forfeitures until the year a ps contribution was made- however, were recently told by an attorney that he was under the impression that there was a regulation that would disallow this....that even if no contribuition was made, we would still need to allocate forfeitures.

Anyone?

Thanks

Lisa

Is it neccessary to report an ineligible tax year 2000 Roth contribution and an ineligible tax year 2000 conversion from traditional to Roth (AGI = 115,000) if I plan to recharacterize them into a traditional IRA before Oct 15? I plan to file my 1040 by April 17 (I'm in Massachusetts; Patriots Day Monday).

I need to know if I am able to view my previous employers "summary plan description" in order to find out if "disability insurance" was part of my plan.

Employee in coma. Family consists of only brothers out of town. Employee elected sufficient funds to cover his unreimbursed medical bills, but family advises they cannot get an emergency guardianship or power of attorney due to element of certainty that our employee will die. How will i be able to remit these funds to the vendors without his (or a qualified guardian's) signature on the checks?

If a self-insured health plan fails the discrimination test of 105(h), can the plan simply add a provision that automatically provides "catastrophic" health coverage to all individuals who do not elect other coverage under the plan? The catastrophic coverage will have a very high deductible, in the range of $15,000, and is only available if an employee does not elect other coverage under the plan? This seems like a shady way around the discrimination rule, but I can't find anything prohibiting it.

At the very end of the proposed Regs, the Plan Aggregation and Restructuring rules (Regs. 1.401(a)(4)-9) are amended to comply with the new gateway requirements. In particular, the Plan Aggregation changes only deal with DB/DC aggregation. It appears that ordinary aggregation of 2 DC plans remains unchanged by the proposed Regs.

So why not have 1 plan for HCE's and another for NHCE's? The plan for NHCE's would not have the gateway requirement, since it does not cover any HCE's. You would then aggregate the plans for 410(B) and 401(a)(4) testing.

Am I missing something here? Will the IRS close this loophole in the final Regs? By the way, do IRS officials read these message boards? :-)

Mutal fund hedge transaction- Has anyone heard about the pending PLR on the mutual fund hedge transaction? The concept is being used by a few firms, albeit small. It works like this, if a pool of mutual funds are purchased to informaly fund a nonqualified deferred compensation plan, and the company received dividend distribution and/or re-balance, the proportion of mutual funds held (triggering what normally would be capital gain event)they can defer those taxable events until the mutual funds are used to pay the nonqualified liabilities. This transaction is being based on Code Section 1221 and 446, and the regs related to both.

It's my understanding, that from an accounting standpoint, you can not record the asset on the balance sheet, as it does not run through the income statement, but runs through equity.