I am looking for someone to audit our TPA for a self-funded health plan. We average about $35 million in claims paid each year. Our management does not want to use our normal auditors for business reasons. Does anyone has a references that have performed this type & size of audit for your company before? Thanks!

Have the employer adopt 2 profit sharing plans:

Plan 1 covers the "targeted group" and excludes everyone else.

Plan 2 covers everyone else and excludes the targeted group.

Aggregate the plans for 410(B) and 401(a)(4) (most likely utilizing cross-testing).

Would the IRS debunk this based on their proposed Regs?

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Andy Treece

Employee chose to let her coverage lapse during FMLA, spouse lost eligibility for his coverage due to employment termination. Employee returns to work from FMLA and is reinstated for coverage. Is the Special Enrollment period extended past 30 days because the employee was on FMLA at the time of the HIPAA Event?

I understand the maximum contribution is $2000 or up to the earnings for a given year.

How about non-working spouses? Do they get

to contribute $2000 even though they had no

earnings?

The only cite I can find for a participant being able to elect more than 10% withholding on a nonperiodic distribution is IRS Publication 15-A - January 2000 Employer's Supplemental Tax Guide." Does anyone know of a more permanent cite (like an IRS requlation)?

Can allocations of ESOP stock from an existing ESOP Trust be considered as "contributions" to meet the 401(k) safe harbor for matching contributions?

I realize this section is for "multiemployer" plans as opposed to "multiple employer," but I thought my question might pertain to the former as well.

SCENARIO 1: Companies A and B have adopted the same plan; they are unrelated employers. Employee X makes $50,000 for each company. X is not an HCE for either company, correct?

SCENARIO 2: Same facts as above - Employee Y owns 10% of A and 0% of B. Y is an HCE for A, but a non-HCE for B, correct?

SCENARIO 3: Same facts as above - Employee Z earns $100,000 from A and $0 from B. However, Z performs services for B, and B reimburses A $50,000 for those services. Is Z an HCE for A and B, or just for A?

Any insight would be much appreciated.

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Andy Treece

1)A sole proprietor lawyer has a net Schedule C of 3 year average of $220,000 (after subtracting the pension plan contributions)in a three person husband/wife/brother DB plan. The lawyer also has another totally unrelated business. Do Schedule C losses on the other business count towards reducing earned income for the calculation of the 3 year average pay limit of IRC 415(B)(1)(B)?

2) The plan permits in service distributions upon atttainement of NRD and prior to retirement. Non-periodic distributions have been made every year since he attained NRD 60 to current age 71. Assume a 12/31/99 freeze date for Old Law benefits. In determining the remaining permitted benefit under 415 at age 71, do you adjust the pre-age 65 distributions forward to SSRA 65 using the 75%, 80%, 86.67%, and 93.33% factors; then actuarially increase them using the pre GATT basis from SSRA 65 to age 71; then subtract such from the actuarial equivalent of the $130,000 12/31/99 COLA maximum benefit at SSRA 65; then add the GATT determined lump sum of the actuarially increased $5,000/year 2000 COLA increase?

Last, you test the total age 71 benefit (including the AE of prior distributions) for the 100% of 3 year average pay limit of $220,000 (w/o regard to 401(a)(17))?

3)The wife terminated 12/88 with 3 year pay of $50,000, and the brother 12/31/99 with a 40,000 3 year pay; but have not been paid. The plan will be amended 1/1/2000 to add a post termination COLA to the three year pay per 415(d)(1)(B).

a) the increased benefit is a post 12/7/94 increase, so is subject to GATT lump sum maximums, right?

b)Anyone have the rates for the post termination COLA, per 415(d)(2) and (3)?

The other day, a friend of mine sent me a few questions on conversion of benefits to other types of plans versus getting payouts in cash. Her questions spurred me to post them here:

1. Do you allow employees who resign (and are due vacation pay) to convert the vacation payout into a deferred compensation plan? If so, is their a "tax" issue since paying it out would be taxable? Also, is there an issue for unemployment comp since the former payout is treated as wages earned?

2. For employees who might lose vacation and/or sick leave once they have reached the maximum, do you allow the cash value placed in their 401k, 403b, or 457 plan?

3. Do you allow those retiring to convert vacation pay out into a special pre-tax medical or post-retirement account for purposes of payment of medical expenses?

Bob Carter

Guilford County Government

Greensboro, NC

I am filling out my first Sch D for a Manulife plan for 1999.

The way I read the IRS instructions and Manulife's interpretation of how to fill out Sch D is that you have to fill out the name of the PSA (I have pooled sep accts), the name of the sponsor entity, the EIN, the PN, the entity code, and the value of the PSA interest as of the last day of the plan year, for EVERY PSA the plan invests in. Manulife currently offers about 40 PSA's. Hence Sch D data has to be filled out 40 times. This seems extremely onerous.

I would love to just fill out the basic info once, and then attach an excel-generated schedule listing all the PSA's and the year end balance, but I know the 5500 processor the gov't hired will not read attachments.

Am I right about what has to be done w/ Sch D or is there a better way?

Thanks for any help.

Employer maintains an Attendance Bonus Plan wherein an employee is paid a bonus if s/he does not miss more than 8 days a year. If an employee is on FMLA leave, can the leave count against the 8 days (e.g., if the employee misses a total of 9 days in a year and the 9 days were all missed on FMLA leave, can the bonus be denied)?

We are taking over a plan from another firm, where the other firm completed ADP/ACP testing for the year ended 12/31/99. However, instructions to issue refunds weren't provided until after 3/15, so the 10% excise tax applies. This other firm (the local office of a national firm) insists they have official guidance (I assume from IRS or DOL) that the excise tax applies only to the allocable income and not to the returned contributions themselves. Anyone ever hear of such a thing? What advice would you give the client relative to their reliance on this advice?

We have a premium only plan where we offer employees medical coverage only. First, is this considered a cafeteria plan? Is it governed by section 125? Second, can an employee drop dependent coverage without a qualifying event? If so, is COBRA required?

Facts: Employee of Corp. A terminates employment with Corp. A and moves to Canada to become employee of Corp. B. Corp. B is a wholly-owned subsidiary of Corp. A. Employee participated in Corp. A's 401(k) plan and wants to take a distribution. Has employee separated from service from Corp. A (ie, is employee entitled to a distribution of his elective deferrals)? Note: Corp. B employees are not eligible to participate in Corp. A's plan. Corp. B has its own retirement plan established under Canadian law. Any citations

would be greatly appreciated.

This New Comparability plan has three groups. The document says to reallocate forfeitures comp to comp, but is silent about which group or groups to allocate the forfeitures to. I think that forfeitures from group A should be allocated to group A only, otherwise I don't know any logical method to allocate between groups.

Can I allocate the forfeitures only to the group that originated the forfeitures, or must the document be amended to be more specific.

I'd like to use the 5% safety valve which permits the plan to satisfy 401a4 amts testing if up to 5% of the HCEs are treated as non-benefiting.

The regs state that this is available "if the Secretary determines" certain conditions to be met.

Does this mean that I actually have to apply for a ruling to use this method? If so, does anyone have any experience with how to do this, what type of documentation is needed, etc?

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The sole employee retires after NRD, and starts taking a life annuity. 2 years later, the plan terminates, and he would like to have the remaining value of his annuity paid to him as a lump sum and transferred to an IRA.

Can this be done?

(The plan can be amended accordingly on plan termination if needed.)

In the news stories about the sale of the stock of the former employer/now competitor from the qualified plans, the discussion focused upon the investment decision and whether the sale was made based upon the interests of the employer rather than the interests of the participants, and whether the participants should have been given the opportunity to roll the stock into their own IRAs.

But I didn't see any discussion of the special tax treatment for employer stock.

Is or could that also be an issue in the case?

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Bruce Steiner, attorney

(212) 986-6000 (NY office)

(201) 862-1080 (NJ office)

also admitted in FL

I am working with a 403(B) plan for an employer who offers two fringe benefit programs. The programs pay out lump-sum benefits for vacation or sick days earned by the employee, but not utilized. The payments for the vacation days are available at retirement only; payments for the sick days are available at the end of the calendar year.

My question is this: can a participant in the employer's 403(B) plan elect to defer payment of a portion of these fringe benefit payments into his or her 403(B) plan, subject to thier existing 403(B) salary reduction election?

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AVS

getting conflicting viewpoints on whether we can have 2 roth ira's for our 1 income family (have 401k and make less than 100k). need clear answer and possibly a source to print for backup for tax files. thanks a bunch.

LL - nashville