An employee's dependent loses full-time student status and elects to continue her coverage under COBRA. While on COBRA, the dependent has a baby who is enrolled as a COBRA participant. Subsequently, the employee's dependent elects to return to school on a full-time basis and becomes eligible to be covered by the employee as an active participant. The employee wishes to add the dependent back on to her coverage and to continue COBRA coverage for the grandchild.

My understanding is that the newborn (employee's grandchild) is not a qualified beneficiary under COBRA, and that coverage is tied to the parent's status (employee's child). Does this mean that if the child is no longer a COBRA participant the grandchild loses COBRA continuation rights? Any help would be appreciated - thanks!

I think preparation of the 5500's has gotten to me as I'm feeling our admin fees are too low! Has a survey ever been conducted here? If not, is this of interest to any admin firms? Let me know your interest and ideas on how this could be conducted. Thanks.

Professional Corporation, loan proceedures allow terminated participants to continue to pay on their loans. One term participant has a loan that has been habitually slow pay but never in default. We have been advised that the participant can only pay on the loan once a quarter. They want to re-amortize the loan for quarterly payments, which would not extend the loan beyond the due date of the original note. Would this change be considered a new loan (plan does not allow for new loans to terminated participants) and should the loan be current prior to re-amortization? Thanks for any advice.

Compensation Test

If a plan uses a definition of compensation that is not a safe harbor definition, does it need to run a comp test (average percentage of total comp included for the HCEs as a group does not exceed the average percentage of total comp for NHCEs by more than a de minimis amount - 1.414(s)-1(d)) if the plan only has deferrals and matching contributions? For example, a plan excludes bonuses and overtime from compensation for purposes of deferrals and match, but when testing the plan a 414(s) definition of compensation is used. If the testing comp is safe harbor is the comp test necessary?

I know a test is necessary if a profit sharing contribution is to be allocated on the basis of that compensation definition, but I am unsure if it is required in the absence of a p/s contribution.

If a plan with only deferrals and match fails the comp test, would the correction call for a QNEC in the amount of the deferral percentage on the excluded comp? and it's corresponding match?

I have been asked to work on an Employee Stock Purchase Plan and have a question about the possible tax issues surrounding the difference between participant purchase price and the fair market value. First, some key plan info:

--The plan is not intended to satisfy IRC sec. 423 although it has many similar provisions as a true 423 plan.

--Employee contributions are deducted on an after-tax basis

--This plan provides a 15% discount via imputed, taxable income at the payroll level. EX: Each payday ptpt has $100 deducted after-tax and employer increases pay by about $15. The $15 is also deducted after-tax and added to ptpt contribution so that a total of $115 worth of stock is actually purchased.

--The plan makes quarterly offerings to it's U.S. employees and sets the purchase price to be the NYSE closing price on the first or last market day of the calendar quarter - *whichever is less*. EX: Price is $50/sh on Apr 1 & $70/sh on Jun 30. Plan purchase price is set at $50/sh.

QUESTION: Is there any immediate taxable event at the time of purchase as a result of the actual market price being $20/sh greater than the plan participant's purchase price?

Cole Stevenson

Voluntary Life Insurance - can an employee drop or cancel coverage because they do not want to pay increased premium due to reaching birthday that carries increased premium 0- example, turns 50 and rate for 50 - 55 is greater than rate for 49.

Does the IRS maintain PDF versions of Form 5500 and the instructions for years BEFORE 1999? If it does, how do you find the 1998 Form 5500 instructions on the Web?

Well, I can see this is a popular forum! My TPA firm has grown from about 400 clients to 700 clients over the past 3 or 4 years, and I suspect there are those of your out there with similar stories. My question is- have you changed the structure of your business as a result of the growth? What I mean is, have you added levels of management or created "teams" or started creating task-oriented positions? When we had 400 clients, we had six administrators who did all of the work for their clients and two of us were the "checkers". As we grow and the ministerial garbage (withdrawal forms, loan forms, participant calls, etc.) increases, I find my adminstrators somewhat bogged down. Are there any steps you have taken to streamline your processes?

thanks.

We have acquired (thru a recent merger) a small legacy 401(k) plan with about 100 balances. Almost all are associated with terminated employees. For this reason we want to terminate the plan.

Under this plan's rules, the nonvested portion of participant balances are forfeited *only* at the time participant takes a distribution. So, we have a handful (maybe 20) of non- or partially-vested participants who terminated employment anywhere from one to seven years ago and have plan balances which still reflect employee and *all* employer money. (They voluntarily elected to leave their money in the plan.)

Question: Upon plan termination, are we required to fully vest the non-vested portion of these balances?

Thanks in advance for anyone's two cents worth.

Cole Stevenson

We have acquired (thru a recent merger) a small legacy 401(k) plan with about 100 balances. Almost all are associated with terminated employees. For this reason we want to terminate the plan.

Under this plan's rules, the nonvested portion of participant balances are forfeited *only* at the time participant takes a distribution. So, we have a handful (maybe 20) of non- or partially-vested participants who terminated employment anywhere from one to seven years ago and have plan balances which still reflect employee and *all* employer money. (They voluntarily elected to leave their money in the plan.)

Question: Upon plan termination, are we required to fully vest the non-vested portion of these balances?

Thanks in advance for anyone's two cents worth.

Cole Stevenson

Person was denied individual health coverage due to her excessive weight? HIPAA implications?

Has anyone set up a cross-tested MPPP? I have a client that wants to max contibutions at $30,000 for the two HCE's, but only has two NHCE's. Comp for each HCE is $120,000. The plan passes discrimination with a 25% contribution for each of the HCE's and 10% for the two NHCE's. Obviously, this won't work under a p/s plan due to section 404. What about MPPP requiring 25% for HCE's and 10% for NHCE's? Would the plan need to be amended if employee demographics change? Are there better ways to accomplish my client's goals? Am I being too aggressive? Thanks.

The company I work for is looking to expand into New York. Can anyone tell me where I can find information regarding New York laws on Short Term Disability?

I have a corporate client (Company A) who acquired a couple corporations (Company Y and Z) during 1999. Each of these entities sponsored a 401(k) plan. The Plans sponsored by Company A and Y were standardized prototype plans, neither of which were amended prior to the corporate transaction to specifically exclude participation by employees of other members of the controlled group. It seems to me that walk-in CAP asking for reformation of the plans would make sense, since each group was covered by a 401(k) plan. Anyone have any experience with a situation such as this?

I am trying to determine the implications of impelementing a 401(k) plan given the following circumstances:

1) Parent company owns 100% each of 42 separate companies.

2) My prospective client is one of the 42 wholly owned subsidiaries.

3) My prospective client wishes to implement their own 401(k)plan, independent of any of the other companies.

My question is whether all the employees of the 42 companies must treated as if they are employed by the parent company for qualification requirements, coverage, vesting, benefit/contribution limits, nondiscrimination, and top-heavy testing? I believe that a number of the other 41 companies have their own plans, and I do not get the impression that anyone is looking at all 42 companies as a whole.

Thanks for your help!

An employer is thinking about establishing a cafeteria plan that is entirely funded by the employees. The employer will not pay for any premiums. All contributions will be made by the employees' pretax dollars. Can this be done?

An employee cancels her health care plan during our open enrollment and enrolls with her husbands plan from another organization. Several months later the employee is notified by her spouses employer that she must go back to her own employers health care plan. The reason listed is that her employers plan requires less than 50% employee contribution. If she fails to take advantage of her employers plan she will receive only 20% coverage under her husbands plan.

Is it legal for the husbands employer, a state government agency, to only offer 20% coverage ?

Would the employee be able to re-enroll immediately with her employers plan under the family status change guidelines ?

Am retiring from public school service next year at age 47. What are the tax consequences of distribution of 403(B)(7) monies at that time? What does section 72(t)(2)(A)(iv) state? Thanks.

I own a TPA firm that has grown from about 400 clients to almost 700 over the last 4 years. I expect there are many or you out there fortunate enought to be in a similar situation. We're still very good at what we do, but are having some difficulty managing the growth. Our structure is such that we have 13 administrators, 4 secretarial staff, 2 actuaries and my partner and me. Each administrator handles all aspects of his or her caseload and the average is about 60 plans each. We've never had any middle management and I'm not sure that's still the right approach. I am thinking of going to a "team" approach, perhaps better utilizing the strengths of each of my staff. Finding quality candidates is also tough. For those of you out there who have gone through this, what advice do you have? Are there changes you made as your business grew that really worked well? Have you created any task-oriented positions, such as a "5500-guy"? Any suggestions would be most appreciated.

If an employer filed the first Form 5500 for their Section 125 plan and used plan #999 or 001 instead of 501, should I try and correct the error or just let it go? Since the plans are tracked by EIN and plan number, I am afraid any attempt to get IRS to correct the number will just cause an additional plan to be created without removing the wrong number. Is there a number at the IRS to answer questions like this.

How about a number to find out if a Form 5500 has been filed?