I have a client that overfunded his 1998 SEPP by $3,200 in February of 1999. The CPA figured that they would just use it towards the 1999 contribution.

When I met the client in July of 1999, he told me he didn't have a qualified plan and wanted to put in a profit sharing plan which we did.

Now I have found out about the SEPP. As it was a model SEPP, I believe that he is not allowed to have another plan for that year.

Am I correct? If so, how should we go about fixing this problem?

Thank you.

An Employer had a SARSEP plan in place for the first half of the plan year. The Employer terminated the SARSEP and set-up a 401(k) Plan for the second half of the plan year. Would you include the salary reduction contributions made to the SARSEP to perform the 401(k) ADP test? Would you consider all contributions (salary reductions & discretionary) from both plans for the 415 limits? To determine the limits on deductible contributions would you back out the salary reductions made to both plans from the total ER contribution allocated or just the back out the salary reductions under the 401(k) Plan? Thank you!

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Jean Blackwood

I have been retained by a group of doctors who are merging their two separate medical practices. A new SC is being formed and both the current SC's terminated. I've be told that this is for legal reasons.

Both the current SC's have mpp and p/s plans. My first thought was to have the new SC adopt one the terminating SC's plans, and merge the other two plans. After discussing with the docs, they seem more comfortable terminating all four plans and starting fresh with two new plans for the new SC. Participants could then roll over into the new plans.

Does this make sense to anyone? Would it also work to merge the four existing plans into the two new plans? All plans are standardized prototypes. If termination rather than merger is pursued, should the terminations be filed for approval? Any thoughts would be appreciated. Thanks.

There are a number of software programs designed to help the practitioner do DISTRIBUTION PLANNING for IRAs and qualified plans, and more are being developed. They're getting MUCH stronger and MUCH more sophisticated. Unfortunately, that also means they're getting more COMPLICATED.

Would there be interest in a discussion area devoted to looking at the programs available? As one who is rather heavily involved in this subject (I'm doing CE seminars on it), I'd be happy to contribute - and learn from folks who've found things I missed (or hadn't thought about).

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John L. Olsen, CLU, ChFC

Olsen Financial Group

St. Louis, MO

314-909-8818

I have a nondeductible IRA that I have been filling out a 8606 for and in 1999 I started a Roth IRA. Do I have to include the Roth IRA on the 8606 form also?

If a 401(k) plan with a cross tested profit sharing allocation excludes participants with less than a year of service from the ADP test, must they also be excluded from the 401(a)(4) cross testing. Most of the participants with less than a year of service are young and are not deferring. They hurt the ADP test, but we need them for the cross testing. May they be excluded from the ADP test and not excluded from 401(a)(4) testing.

[This message has been edited by Richard Anderson (edited 02-18-2000).]

I am looking for an overview article discussing the tax treatment of fringe benefits particularly the new, trendy perks. Anyone seen anything like this?

I have read Q&A 117 and 118 and still have some additional questions.

Plan year equals calander year, entry dates are 1/1 and 7/1, maximum deferral percentage is 15% of W-2 comp.

Participant (NHCE) was excluded for the first two months of 2000. Is the proper correction to allow for contributions in excess of 15% to make up for being excluded for the first two months. This would then need to be monitored so that total contributions do not exceed 15% of compensation for the year.

Thanks for any help...

HIPAA does not apply to limited scope dental and vision benefits. However, under IRS and DOL regs., a dental or vision plan IS subject to HIPAA unless (among other things) employees are charged a separate amount for participation in the dental or vision plan. So, if the employer carries the entire cost of coverage, its dental plan would be subject to HIPAA. It matters in that some dental programs have preexisting condition limitations on e.g. the replacement of missing teeth.

My question is -- Have you heard anything about the IRS and DOL revising the definition of "limited scope" dental and vision benefits under DOL 2590.732(B)(3)?

I unknowingly received a salary overpayment at the end of 1998 and I also left the position. All taxes including FICA were taken out of the amount. Now they want the money (over a thousand dollars) back or they threaten a collection agency. I am unemployed and used the money to pay my 1998 income taxes. What can they do? Can they freeze my bank account or what else? Will I have to file an amended tax return for 1998 or how can I get back my overpayment to the IRS?

[This message has been edited by Cay (edited 02-21-2000).]

[This message has been edited by Cay (edited 02-28-2000).]

Say a person has a SSNRA of 66 and retires at age 55. Say his accd ben is the limit of 135,000 and the 415 early ret maximum benefit is 60,000. It appears that we then would have to compute the plan early ret benefit and limit it to 60,000. However, should I take the 135,000 and multiply it by an early ret factor and compare to 60,000 or should I reduce the 135,000, since the plan NRD is earlier than SSNRA and then multiply the reduced amount by the early ret factor and compare it to the 60,000? Curious to hear any thoughts on this.

Beg. 1/1/2000 all plans must comply w/ the 417(e)(3) Gatt requirements. If a plan has yet to actually amend the plan do they just comply w/ Gatt operationally or do they still grandfather the PBGC rates as well as applying the GATT rates? Or does anyone have other thoughts?

Under an ERISA Plan, if an employer wishes to add an early retirement window, is the employer permitted to pick and choose any employees to whom the window will be open, provided the employees do not violate the HCE requirements of ERISA? Or must it apply to a certain class (age, years of service, etc.) of employees? If the window must apply to a certain class, are there any limits to such class, other than HCE?

We are new to the idea of health care coalitions and want to see if they are a possibilty to access health care.

We are a 70 person firm based in Maryland with employees in several locations across the US.

Any information or advice is greatly appreciated.

Is a 415 adjustment allowed for a variable annuity paid from a db plan? EG the monthly payment has increased, because of the stock market performance to greater than the db limit. Can that increase still be paid out of the db qualified plan or must it be paid out of the excess plan?

I understand how claims and confirmation of coverage is handled during the 60 election period and the 45 days allowed for initial payment and we have that in place. My question deals with the 30 day grace period available each month for the premium to be paid and still be rec'd in a "timely manner".

What is the widely accepted method of handling claims during that period? To suspend all claims payment as of the first day of the 30 grace period until payment is received? To pay claims during the 30 day grace period, just as you would pay claims for any other "similarly situated employee" in that group during that 30 day grace period?

One of our concerns centers around our RX drug card...we provide an eligibility report weekly to the drug card company, if we suspend claims, their card would be canceled, as soon as the premium is paid we would have to reinstate the drug card and they would receive an updated report and automatically issue a new card. This could go on every month, depending if they access their grace period.

I am looking for options that other COBRA administrators would be using to handle this problem. As I understand the regulations, we need to provide "coverage" during the grace period...my question is "coverage" , is that verifying coverage or paying claims during that time period.

Any help would be greatly appreciated!!

[This message has been edited by Carol (edited 02-18-2000).]

[This message has been edited by Carol (edited 02-18-2000).]

We have a DC plan with Safe Harbor Hardship Withdrawal language only. We have received an IRS levy on an active employee's account. Our company legal group is saying we must honor the IRS levy; the legal group with the recordkeeper is saying we cannot honor the levy. Has anyone ever had this problem? Help!!!

I have a situation with a VEBA in which a Form 1024 was filed within teh applicable time period (i.e, 15 months rule) and a dtermination leter was recieved recognizing teh VEBA's tax-exepmt staus. Now, teh VEBA is going to be amended (in conjunction with the plan it funds). Should we file a new 1024 to ensure that the tax-exepmt status of the VEBA remains intact after the changes?

I find the language in the regulations to be unclear. For a cross tested DC plan, at what age are contributions converted to benefits when a plan, for example defines NRD as later of 62 and 5 years of participation. Assume a new participant becoming eligible at age 61. Is testing age 62 or 66? What about year 3 when the participant is age 63 but has a NRD of 66?

I know this is the wrong Board, but would the answer be different for a DB which gives post NRA actuarial equivalent increases?

If the plan had a QJSA as the normal form of benefit simply because the plan was drafted in that manner (in other words the plan otherwise meets the QJSA exception for defined contribution plans (see IRC 401(a)(11)), then changing the QJSA to simply an optional form of benefit should be okay.

There is no guidance in terms of regulations blessing this change but the issue has come up multiple times at the ABA Joint Committee on Employee Benefits (most recently at the May 1999 meeting). (I don't have their website handy but you should be able to find it and access the Q&As from that meeting.)

If changed to an optional form of benefit, the spousal consent requirement then becomes effective once the participant actually elects an annuity. See Treas. Reg. 1.401(a)-20 Q&A 3 and 4 and, with respect to loans, see Treas. Reg. 1.401(a)-20 Q&A 24.

Note, the plan's outside counsel may be more conservative about the issue of changing from "normal" to "optional." If there is hesitation, the change could be disclosed as an intended change on the IRS submission to be effective once the plan received a favorable letter from the IRS.