Terminated employees are receiving severance pay for a period of 1 to 1 1/2 years. Could a 125 plan provide that the COBRA premiums can be deducted from severance pay on a re-tax basis?

An employer put in money each pay period to a discretionary profit sharing plan (single pooled account) at a rate of pay (say 4%) for all. Now, after PYE, he is told that some of the ees are not eligible. He still wants to allocate the 4% to the eligible employees. He could allocate everything deposited, but he doesn't want to. He would rather take it back or carry forward to fund next year's 4% contribution. Can he get the money out? Since this is not a true excess contribution, I can't find guidance on whether he can back it out, or what his options are. Any help?

I've been reviewing IRS Publication 503 regrading allowable Dependent Care expenses and don't quite get one thing in particular.

Under 'Expenses Not for Care' (subheading of 'Care for a Qualifying Person') the publication states 'Expenses to attend 1st grade or higher are not expenses for care.'

This means to me that expenses to attend kindergarten would be allowable.

However, under example #2 it says that money paid for kindergarten is not allowable,only the portion of money paid for the after-school program.

Is this contradictory or am I not getting it?

A DB plan has 7/1/99-6/30/2000 plan year. Plan defines comp as average of high 5 calendar years of comp.

Participant retires 10/2000 and earns $200,000. Is his comp limit for 2000 $160k or $170k?

Would the answer be different if he retired 6/30/2000 (and earned over either limit)?

Would it be of significant advantage for a small business employer (3 ees) to age-weight his PS and MP plans to minimize the contributions to the non-key ees? What kind of testing is necessary besides 415© and 401(a)(4)?

From my reference materials, the use of a spouse or child as a broker on either a self-directed IRA or a self-directed brokerage account in a qualified plan would be a prohibited transaction. I think PTCE 97-11 might make this situation OK for an IRA or self-employed plan, but what are the reduced cost services? Can any fees be charged in this situation?

This plan is not a self-employed plan and it allows self-directed brokerage accounts. An employee who is a stockholder in a C corp wants to move his account to his son who is a broker. As far as I can see this is at least a prohibited transaction under self-dealing. Does anyone have any good cites for this situation?

Taxpayer had an IRA. The IRA was payable to a Marital Trust and a Family Trust under a formula contained in the beneficiary designation. Taxpayer died before his RBD. IRA was divided into two shares (one for the marital trust and one for the family trust). Surviving spouse is oldest designated beneficiary, so all distributions are coming out over her life expectancy.

We want to further divide the Family Trust portion of the IRA into 3 parts, one for each kid, liquidate the family trust, and distribute to each kid directly his or her right to receive payments from the IRA subaccount.

I talked with an IRS guy today who said he'd ruled favorably on a similar transaction. He thought late 1997 or early 1998. I cannot find this letter ruling and it's driving my bonkers!!!! Does anyone have any leads or comments?

Thanks!!

A member of one of our self-funded medical plans has apparently purchased an individual policy on his own 9first tiem I have seen this). There is now some confusion as to who will pay prime. If anyone out there knows this one off the top of their head, I would appreciate it. Also: could anyone refer me to an online source for regulation covering order of benefits in general?

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Are employers restricted from changing employee contribution rates more than once each year?

Thanks for any help you can give me!

Robyn

I have a self-funded medical plan that inserted the following language in their SPD:

Federal law requires an employer's group health plan to provide "COBRA" continuation coverage, for certain persons who would otherwise lose their coverage. In addition, most states require the insurers issuing the underlying group policy to allow persons who are losing their group coverage (and who have used up their COBRA) to "covert" to an individual policy.

Here are my questions:

1. Would these state "conversion" rules ever apply to a self-insured group health plan?

2. Do employers with self-insured health plans ever chose, as a design matter, to make conversion policies available, even though they are not required?

3. If so, why? Wouldn't it be easier for the employer to just provide extended continuation coverage, beyond what it required by COBRA?

Help! Can anyone point me in the direction of some good, easy to understand explanation of the HIPAA administrative simplification requirements? I would prefer a seminar, but printed material is OK too.

I have been asked to do an overview of this and set up a plan for one division of our organization. However, the structure of this organization leads to many difficulties. I work for a TPA that is under the corporate umbrella of a health care foundation. Other entities beside the TPA are a hospital, 2 licensed insurance companies, an HMO, a federal HMO, a Medicare plus choice program, provider network, etc. I'm pretty sure some divisions of the foundation have started their own independent analysis and corporate culture does little to encourage coordination among the departments.

An ee receives a lump sum. plan provides for a COLA tied to the increase in CPI. What is a reasonable future COLA assumption when determining a lump sum. At this point it seems an employer can exclude the COLA on the groiunds that there is no way to say if the COLA will be positive or negative.

Curious to hear any comments.

One suggestion is to take a long term avg of past annual changes in the CPI.

Is the compensation limit for 3/31/00 $160000 or $170000?

I'm trying to correctly calculate the exclusion allowance for a person who only will work a partial year. Is the formula supposed to be calculated with an annualized salary, or the pro-rated salary that the person will actually receive?

I am new to this position and I don't think this qualifies as a status change. I believe the participant is still an employee while she's out on STD.

A friend of mine who works for a small local TPA was told by an IRS representative that separate TIN's for retirement plans and trusts were no longer needed and that plans should, instead, use the plan sponsor's EIN to report withheld taxes and distributions.

The reasons given were (a) form 945 identifies withheld taxes as coming from a qualified plan, thus eliminating the need for a separate EIN for the trust, and (B) TIN's that are not used for an (unspecified) number of years become inactive and are purged from IRS records. The IRS representative also asked my friend why she thought TIN's were ever needed for retirement plans and/or trusts.

The IRS representative refused to give more specific information (Rev Proc, PLR, form instructions, etc.) stating that she was "too busy" and that my friend should "look it up herself". It sounds to me like my friend has run into a representative who does not have a very good understanding of retirement plans.

Since I work primarily in the small plan area, the IRS representative's second point concerns me a bit. It is not unusual for some of my clients to go several years without making a distribution. If their TIN is purged because they haven't used it to report distributions, I would expect problems when they attempt to use it.

Anyone else been told that separate TIN's are no longer needed or that some TIN's are purged?

Has there been a recent IRS ruling or document on plan term fees being paid from the plan for DC plans?? My understanding was that settlement fees could not be paid from the plan. Thanks.

I have been hearing a few rumors. The last thing I hear was that they may require a "safe harbor" contribution of approx 3% which would be fully vested immediately. I realize no decision has been made but want have some of you been hearing. I appreciate the information! Thank you!

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Cathy,

Look at lines 4d and 4e of the Schedule T and the blank lines provided, then refer to the instructions. Does this answer your question? (I believe that there is no need for attachments as long as there are 4 or fewer disaggregated parts of the plan).