Any comments on adapting a self-funded medical expense reimbursement plan (Code 105(h)) to permit reimbursement of retiree medigap insurance premiums, only (not medical expenses themselves)? If you are aware of any other documentation options please comment.

Note: this message also posted in Health Plans Bulletin Board

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Retirement Plan Distributions Q&A 194 seems to indicate that, if the plan document allows for it, a non-5% owner who reaches age 70 1/2 while actively employed could make an annual election of whether to take the amount that would be an RMD for a 5% owner, or to defer receiving a benefit to a later date. It also seems to indicate that a participant in this situation could choose to take the distribution one year, defer the next year, and then start distributions again the third year.

In practice, does anyone send elections to take a distribution or defer annually? Or does everyone have participants complete a one-time, irrevocable election to either commence distributions or to defer distributions until termination of employment?

A person reaches 70 1/2 in 1999 and is required to take a minimum distribution. He has several IRAs and has an account in his employer 401(k) Profit Sharing Plan (with match). He's still working but wants to take his minimum distributions. The IRS Prop Reg §1.401(a)(9)-1, Q&A H-1, requires that each plan to separately satisfy IRC §401(a)(9), but Notice 88-38, 1988-1 C.B. 524, allows IRAs to be aggregated for purposes of determining his RMD. I can't find a rule the prevents the distribution from the 401(k) from satisfying the IRA RMD rules. It seems clear the distribution has to come out of the 401(k) but less clear that a distribution from the 401(k) wouldn't satisfy the RMD for the IRAs. Any thoughts, or more specifically, sites why the participant couldn't do this?

[This message has been edited by mfuentes (edited 12-06-1999).]

A single employer maintains 2 separate plans:

1) 401(k) with match

2) New Comparability Profit Sharing

Both plans pass 410(B) on their own. Both plans cover the same employee group.

Is it necessary to include deferrals and match in 401(a)(4) testing for the New Comp. plan?

Thanks.

Just curious if anyone knew of any court cases in which a plan sponsor tried to recover an overpayment to a participant in a defined contribution plan?

It is my understanding that plan documents can provide that profit sharing, nonqualified matching, and some (unrelated) rollover account balances can be part of a hardship distribution.

It also seems clear that there is no safe harbor for determining that the distribution is necessary to meet the hardship in this case, and so the plan sponsor would have to meet the facts-and-circumstances standard to determine if the amount was necessary to meet the need.

Could the plan document still use the safe harbor for determining that the participant has an immediate and heavy financial need (medical, residence, etc.?), or would this also need to use a facts-and-circumstances standard?

Are there any other considerations pertaining to hardship distributions from profit sharing, nonqualified matching and unrelated rollover accounts?

We have a 401(k)plan that has a 9/30 plan year. In December 1998, the employer sent a notice to all participants that it intended to terminate the plan effective December 31, 1998. For purposes of ADP/ACP testing, can the plan only count compensation for the period 10/1/98 through December 31, 1998, or must it count compensation from 10/1/98 through 9/30/99?

What is the policy regarding uncashed checks for missing participants. We have issues related to participants that we cannot locate. We have tried many search organizations with no luck. To make matters worse some of the missing participants were part of terminated plans. In some cases we can not even locate the plan sponsor. I have heard about escheating to the state? Is this viable? Any input would help.

Thanks!

Assume two 401(k) plans are being maintained by Company A and Company B which are in the same controlled group and that Company A's PY is 1-1 to 12-31 and Company B's PY is from 10-1 to 9-30. How is controlled group testing done for 410(B) purposes? Would a 410(B) test be run for Company B at 9-30-99 based on data on Company B at 9-30-99 and data on Company A at 9-30-99 and then a 401(B) test would be run for Company A at 12-31-99 based on data on Company A at 12-31-99 and Company B at 12-31-99?

Also, can anyone recommend a comprehensive book/resource that covers 401(k) testing issues in great detail (with examples, etc.)?

I would like something that goes beyond a citation of the regulations.

[This message has been edited by beth beaube (edited 12-07-1999).]

Is anyone using PCAnywhere with QT 4.3? 5.0?

We're still at 4.3 trying to work out a few hiccups. The biggest problem is with remote user locking up and host not resetting session.

We'd like to make this work to avoid going with terminal server and additional licensing $$$. We'll probably be going to 5.0 early next year.

Any input would be appreciated.

Meghan

What is the going rate to handle all aspects of amending and restating qualified plans for GUST???

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Any comments on adapting a self-funded medical expense reimbursement plan (Code 105(h)) to permit reimbursement of retiree medigap insurance premiums, only (not medical expenses themselves)? If you are aware of any other documentation options please comment.

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A client with a money purchase plan dislikes the wording on the "Notice of pre-retirement survi. annty" form. She specifically thinks the wording of "the Plan will use 50% of your Account Balance to purchase a pre-retirement annuity for your spouse" is misleading and particpants want to know what happens to the other 50% of the account balance and can that be wriiten into this notice. Any thoughts?

My employer will take vac.time i use if i leave before the end of the year.Ithink this is against the law.He said that what the ten people that are in the union agreed to.theres about 80 people working there.Is this not stealing.I am leaveing the first of the year. But i have worked there many years.Made many friends there.Iwas wondering is there anything i could tell them.Its like he steals one week of pay from you.Hardy nobody stays at one job for life.

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RyanBowlin

Greetings,

I have a client who wants to retire at age 55. He has pension benefits kicking in at age 60, and social security will kick in at age 66. Between age 55 and 60 he will need to dip substantially into his IRA capital. Can he take penalty-free distributions that are much greater than the three IRS approved methods (minimum distribution, amortization, or annuity)? In other words, as long as the payments are substantially equal, and last for 5 years and until he is 59 1/2, can the payments be much larger than specified by the three IRS approved methods?

If a privately owned company decides to sell to an ESOP who runs the company if the owner sells:

1. 30% ?

2. 49% ?

3. Over 50% ?

4. Who appoints new president if original owner sells out? or how is this determined? Can employees vote in a new president or board if they own over 50% ?

Has anyone had experience in merging 2 or more VEBAs maintained within the same controlled group of corporations? Are there any tricky issues of which one needs to be aware?

I was recently told by a plan administrator that it is not possible to terminate a 403(B) plan! In this case, a church-sponsored plan has stopped using their 403(B) and adopted a 401(k) plan. The participants were only allowed to roll accounts to annuity contracts and not to rollover IRAs. The reason given was that it was not possible to terminate the 403(B) plan and none of the other qualifying events had taken place (separation from service, etc.) I don't work with 403(B) plans, but this seems pretty strange.....you can start a plan but never terminate it? Any comments and cites appreciated.

I'm confused as to whether 402(g) excess deferrals that have not been refunded by April 15 have to stay in the plan as provided by Reg. 1.402(g)-1(e)(8)(iii), or should or must be returned under APRSC as provided in Rev. Proc. 98-22, Appendix A, .04. Did Rev. Proc. 98-22 supercede Reg. 1.402(g)-1(e)(8)(iii) - which says that the excess deferral must stay in the plan until a distributable event named in 401(k)(2)(B) has occured? If the deferral has to stay in the plan, do earnings still have to be returned?

The language of each section reads:

1.402(g)-1(e)(8)(iii) (not yet amended for GATT)

(iii) Distributions of excess deferrals after correction period. If excess deferrals (and income) for a taxable year are not distributed within the period described in paragraphs (e)(2) and (e)(3) of this section, they may only be distributed when permitted under section 401(k)(2)(B). These amounts are includible in gross income when distributed, and are treated for purposes of the distribution rules otherwise applicable to the plan as elective deferrals (and income) that were excludable from the individual's gross income under section 402(g). Thus, any amount includible in gross income for any taxable year under this section that is not distributed by April 15 of the following taxable year is not treated as an investment in the contract for purposes of section 72 and is includible in the employee's gross income when distributed from the plan. Excess deferrals that are distributed under this paragraph (e)(8)(iii) are treated as employer contributions for purposes of section 415 when they are contributed to the plan.

Rev. Proc. 98-22

APPENDIX A - OPERATIONAL FAILURES AND CORRECTIONS UNDER SVP

.04 Failure to distribute elective deferrals in excess of the section 402(q) limit (in contravention of section 401(a)(30)).

The permitted correction method is to distribute the excess deferral to the employee and to report the amount as taxable in the year of deferral and the year distributed. In accordance with section 1.402(g)-1(e)(1)(ii), a distribution to a highly compensated employee is included in the ADP test; a distribution to a nonhighly compensated employee is not included in the ADP test.

Is there a GUST Model Plan Amendment, and if so, where can I get it?