I have a Governmental Organization that is interested in setting up a VEBA for Post Employment Health Benefits. Are there any limits on how much an employee and/or employer can contribute on an annual basis?

What is the order for correction when a participant violates more than one limit?

(AA limit, 402(g)limit, 415 limit)

Also when violating the AA limit, does the money get adjusted for the ADP test or is it left in the test?

A competitor for providing bundled DC Plan services recently approached a client with the offer of free ancillary services for senior executives. Basically they told the client that if they moved their DC plan they, the competitor, would provide senior executives of the company with free comprehensive financial advise. This advice would cover both plan and personal investments, as well as insurance needs. This seems to me to violate ERISA particularly with respect to using plan assets for the sole benefit of its participants. I explained to my client that if the competitor provided the advice to all plan participants there would not be a problem. However, by limiting it to a particular subset of the plan population I believe a violation would occur Was I right?

In reading a response to another question, Carol Ringwald mentioned that having IDA's in a plan can cause headaches with 5500 filings.

We have several daily plans that allow some employees to have a PCRA (Personal Choice Retirement Account or IDA)while everyone else is participant directed. This is the first year we have done this. What kind of problems will we encounter with the 5500's for these plans?

I am looking for an employer who covers InVitro Fertilization (IVF) in their health plan. Any ideas as to how I may conduct my search? As IVF coverage is expensive and unusual I was hoping benefits professionals may be able to help.

Thanks in advance,

Steve

We have a plan that the plan sponsor went out of business without notifying the plan recordkeeper. Participants are requesting distributions from the plan but we are unable to locate the plan administrator or plan trustee. It appears that the plan should be terminated but we don't have the authorized signatures to start the termination process and distribute the assets. Has anyone else had this situation and know how to proceed?

A participant has a deferral account balance of $6,000; $4,500 in deferral and $1,500 in earnings. He takes out a loan for $2,000.

Some time after the loan he is eligible for a hardship distribution. Assuming the account balance has not changed, how much can he take as distribution? The account now has $4,000 other investments and $2,000 loan balance. Can he take the full $4,000? $6,000 account balance less the $1,500 earnings is $4,500. Or, is he limited to $2,500? $4,000 in other investments less the $1,500 in earnings.

Just came across this interesting little tidbit in Reg. 1.415-6(B)(7)(ii), relating to whether an employer contribution made to a retirement plan (401(a) or 403(B))counts toward an individual's 415 limit for a particular calendar year:

"If, however, contributions are made by an employer exempt from Federal income tax under section 501(a), the contributions must be made to the plan no later than the 15th day of the sixth calendar month following the close of the taxable year (or fiscal year, if no taxable year) with or within which the particular limitation year ends."

Yet we have Code Section 412©(10), which tells us that employer contributions to dc plans must be made within 8 1/2 months (2 1/2 months, extended by regulation to 8 1/2 months) of the close of the plan year.

Let's say a tax-exempt sponsors an ERISA 403(B) plan with a annual discretionary contribution, and makes its 1999 contribution on 7/1/2000. Even though the Code deadline for that contributions is technically satisfied, does the contribution now count toward the 415 limit for 2000, not 1999, since the contribution was not made by 6/15/2000 (a potentially huge 415 limit trap for the unwary)? Or am I missing something?

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Mike W.

A participant terminates at age 65 with a high-3 compensation limit of $4,000 per month, obviously well under the dollar limit. Because he is terminated, his $4,000 can be increased with cost of living, say to $4,100. Therefore, his monthly benefit can actually be higher than his actual high-3 year average.

Can this cost-of-living-increased 415(B)(2)(B) amount (eg $4,100) be paid out in the form of a lump sum, or would this only be payable in an annuity form?

Thanks for any input!

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?