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PLR 9929043 concludes that financial counseling services provided to surviviors of terminally ill employees are income, which I agree with.

However, all the commentary I have read states that the same services, if provided to an employee, would be excludable under IRC Sec. 132. I thought these expenses would not be excludable under IRC Sec. 132 because they are Sec. 212 expenses.

Please let me know your thoughts, with cites if possible. Thanks.

Thanks for the responses to my first questions.

I understand that a trustee to trustee transfer is not a distributable event, but can an employee in a 401(k) plan transfer his/her assets to another plan for any reason?

Has anyone seen a good comparison marketing piece on these three types of plans I started to do one and realized I might be recreating the wheel.

Prior to GATT, Plan used PBGC rates at time of dist. Plan amended to use GATT as of April prior to plan year. Transition technoque is to use GATT rate as of 2 months prior to dist. (correspond w/ pre GATT timing) and as of April prior to plan year of dist. Whichever rate produces higher benefit.

Say plan was amended 11/1/96 and adopted 8/14/97. If person is to receive lump sum as of say 12/1/96 should it be computed using pre GATT basis, since it was not yet adopted? My undetstanding of law is that you use new GATT technique transition from 11/1/96 through 8/14/98, but how could one use GATT technique prior to adoption of amendment? Any thoughts out there?

Can anyone provide some perspective on why benefits under an ESOP can't be tested for nondiscrimination using cross testing? I am trying to get a handle on both ESOPs and cross testing and struggling some. I'd appreciate insight.

We've got a client with a non standardized document with an allocation formula stated as follows: a) 16.5% of each eligible participant's compensation during such plan year up to $150,000; plus b) 5.7% of each eligible participant's compensation during such plan year in excess of $60,000, up to $150,000. Does anyone see a problem with this formula? They happened to receive a determination letter.

Please help. I am heavily in debt, 70K school loans, 19K credit card and 18K in 401K loan. This doesn't count home mortgage. If I could get a hardship withdrawal which would take care of the 401k loan and the credit card, I could get by. If not, I may need to file bankruptcy. My plan administrator is rejecting my request due to the fact that my problem does not fit neatly into 4 of the reasons listed in the plan, medical, purchase of home, foreclosure of home and upcoming tuition. There is a #5 and it refers to "other events provided for in rulings, notice or other documents published by the IRS" Can you refer to any of these? Please help, I don't want to file bankruptcy when I have the money if they would just give me access to it. Thank you.

We are a record keeper who is considering changing record keeping systems. The data conversion could require a black-out period of some kind, for plans with participant investment direction. I am aware of plan sponsor driven balck-out periods. What about black-out periods driven by record keeper. Has anyone been through a system coversion requiring a black-out of participant access for participant directed plans?

Seems to me there is a great deal of liability associated with being involved in an ESOP? In what capacity do you serve for your clients? Trustee, Custodian, Recordkeeper, etc.?

What are your thoughts on the amount of liability involved and how have you dealt with it?

For those of you that do recordkeeping for ESOP's how do you train your staff since they operate so different from a 401(k), p/s, mpp, etc.

Posted on behalf of Becky Miller:

I was curious about the ramifications of the elimination of Section 415(e)(5) for people who had made elections under IRC Section 415©(4)©.

Doing business a block from the Mayo Clinic and in many college towns, we get a lot of business with persons with complicated histories for the exclusion allowance. Frequently the employer will prefer to calculate the exclusion allowance using the 415 rules as permitted by 403(B)(2)(B). We also have individuals who wish to make the © election because they have outside income as coaches, physicians, consultants, etc.

It has been my understanding, that where the 415©(4) © election and the 403(B)(2)(B) election are in place and 415(e)(5) applies, the 403(B) plan is aggregated with the employer (say Mayo Clinic) and the outside practice/football camp(!) stands alone. However, in reading the regs. at 1.415-8(d)(2), it seems to say that under these circumstances the 403(B) plan is aggregated with the employer and with any outside practice of the individual. Is that only if 415(e) doesn't apply, i.e multiple DC plans involved or, heaven help me, have I misunderstood this rule for years?

I have only done this in the context of defined benefit plans, thus the 415(e)(5) language tended to sustain the disaggregation of the individual's plan from that of the institutional employer. But, without 415(e). I don't know if I can rely on that. For example:

LTR-RUL, UIL No. 403.04-00 Taxation of employee annuities, Annuities purchased by section 501©(3) organizations, Letter Ruling 8833047, (May 27, 1988) Section 1.415-8(d) of the regulations provides, generally, that the participant on whose behalf a section 403(B) contract is purchased is considered to have exclusive control of the annuity contract. Accordingly, the participant, and not the participant’s employer, is deemed to maintain the annuity contract. However, pursuant to section 415(e)(5) of the Code, the participant’s employer is considered to maintain the contract if the participant elects under section 415©(4)(D) to have the provisions of section 415©(4)© apply, or if the participant has the control of the employer required under subsection (B) or © of section 414 (as modified by section 415(h)).

This came up because an American Express guy who is trying to sell our person some investments for his 403(B) told him that he couldn't put anything in a 403(B) and should have another investment vehicle instead. He said that there was a recent court case/ruling/IRS settlement for a football coach that held this way. I can't find anything on this, so I thought I would post the message to the web and see if others had heard. (I ran it through CCH Access, not Lexis or Westlaw. I checked for 403(B) and 415© and got nothing.)

But I figured you might be interested. Especially if this is an unanticipated consequence of the elimination of 415(e).

What constitutes the child being a dependent? In the situation I have with an employee, the baby was born on the 20th of February and the couple gained legal custody of her before the adoption was final. However, according to the court papers, the legal custody papers weren't signed until February 24th. Four days after the birth. The employee wants to claim the birth expense on his medical reimbursement plan. His insurance co did cover their share of the birth expenses. I'm not sure if this expense should be allowed or not. Any comments, suggestions would be greatly appreciated!

Would anyone be willing to share examples of the engagement letters they use for new clients and for ongoing clients? I can be reached at: jay.scholz@padgett-cpa.com

I curious as to whether or not LASIK eye surgery or Laser Keratetomy can be considered for 125 reimbursement.

Most of the health insurers we work with disallow charges for these procedures stating that they are elective.

I am interested in the interpretations of other Cafeteria plan administrators on how they process these claims.

Thanks for your assistance.

I left my place of work, and I would like to know how soon I can receive my ESOP monies? I was 100% vested, and I am 38 years old. I was told that it will take a year or more before I receive it. Also am I not entitled to a Summary Plan Description? My last official day of employment was July 26th.

Does an employees intent, and/or discussion with an employers retirement plan representative about increasing her/his voluntary contributions to the plan constitute a legally binding Salary Reduction Agreement?

12/31/98 is the first plan year end of a 401(k) plan. Based on the account balances at 12/31 the plan is top heavy, but plan failed ADP test and some HCEs (also were keys) took back refunds of deferrals on 3/15/99. If the refunded deferrals are deducted from the account balance in the top heavy test, the plan is not top heavy. It sounds logical to reduce the account balances by the refunded deferrals, but I can't find a specific reference saying it is OK. Any thoughts on this???

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I need to know what an Equity Increase is and what a Structural Increase is.

If an employer sponsoring a cafeteria plan adds a new benefit during the plan year or expands eligibility for an existing benefit, can participants modify their elections to add the benefit or add eligible dependents? Any IRS guidance on this?

A plan sponsor discovered that a terminated participant received a lesser 401k plan distribution that he was entitled due to using an incorrect vesting percentage. The plan sponsor would like to correct the distribution. The investment return has been negative since the initial payout. Should the plan pay to the participant the principal amount of the shortfall as of the date of distribution, or should the plan sponsor attempt to calculate the investment loss attributable to the shortfall, and reduce the distribution accordingly?