We have an employee who currently has an election under the Dep. Care Flex but his spouse just started working nights instead of days and he wants to cancel. Same job, same hours... just different shift. It would certainly make sense, but I want to make sure it's within guidelines.

Employee Jane requests a change in her medical election under our Sect 125 plan. She states that her husband has enrolled himself and their children under his medical plan (he recently changed jobs). Jane wants to drop the medical plan for spouse and children but keep her coverage here because it is cheaper.

It would seem to me that dropping coverage altogether would be consistent with her husband's new eligibility as he could add her to his plan. He chose not to.

I'm really on the fence on this one. If I was jane's friend (as opposed to being the decision maker here) I would advocate on her behalf. Any thoughts would be greatly appreciated.

[This message has been edited by Steven7 (edited 06-01-99).]

I just need a quick confirmation on a proposed safe harbor formula. The employer wants to match 400% of 1% of pay. Is this safe harbor? I know that the aggregate match equals 100% of 4% but it does not seem right.

All responses are greatly appreciated.

When we completed the ADP test last year we utilized our right to exclude eligible participants who were not eligible by statuatory requirements (1 yr. & age 21). This moved the ADP % from 5.03% up to 5.33%. If we are using the prior year testing method when completing this year's test which ADP % can I use? Does it matter?

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Robb

I plan to concentrate my writing on different aspects of planning for retirement plan distributions.

My last few articles were on the (now repealed) grandfather exemption from the penalties on excess distributions/accumulations (2/96 issue of Estate Planning), spousal rollovers where the spouse was not the named beneficiary (10/97 issue of Estate Planning) and avoiding the penalty on pre-59 1/2 distributions via substantially equal periodic payments (scheduled for the 12/99 issue of Estate Planning).

Any suggestions as to topics for future articles would be appreciated.

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Bruce Steiner, attorney

(212) 986-6000 (NY office)

(201) 862-1080 (NJ office)

also admitted in FL

What is the ADP for the HC gropu for 12/31/97?

-ER makes a QNEX totalling 3% of eligible comp to all eligible ee's including HCE, to satisfy the top-heavy minimum required contribution.

-ER Makes no other nonelective contributions

-Plan does not allow employee after-tax contributions

-Gross comp is used for testing

-All NHCE are nonkey

Part, deferrals, Comp

A, 9500, 200000

B, 0, 130000

C, 4000, 80000

Answer is 6.65 Help

What is Part. A allocation of ER contribution for 1997?

-profit sharing plan

-Calendary year

-top heavy

-all eligible participants, including key-employees, are entitled to receive the top-heavy minimum contribution

-Maximum permitted disparity allowed by IRC 401(l)

-Integration level is TWB for 97 $65,400

-ER contribution is $9,500

Part, Key Employee Status, Gross comp

A, Key, 150000

B, Key, 98000

C, Nkey, 15000

Answer is $5,662. Help?

What is the excess contribution amount to be refunded to Participant D to satisfy the ADP test for 12/31/97?

ADP for HCE = 4.5

Max ADP which allows to pass test is 3.7

Part, Deferrals, Comp

A, 4500, 150000

B, 7000, 140000

C, 3000, 100000

D, 6300, 90000

Answer is 1,240 Explanation??

For situations in which the qualified plan beneficiary is a minor child, the plan would like to make an administrative practice of making the payee name the actual child beneficiary's name. Will the guardian have any difficulty negotiating such a check? Would using the child's name be a good or poor practice?

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Is vested employer money available for hardship withdrawal (provided no limitations in document)? Thanks

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How does the master trust business advertised by large banks differ from the single-sponsor master trust arrangements which are required to be reported on the 5500? More specifically, how do large master trust arrangements work?

[This message has been edited by genfre (edited 06-01-99).]

[This message has been edited by genfre (edited 06-01-99).]

If COBRA covers a self-insured medical expense reimbursement plan under Code Sec. 105(h), but is very unlikely to be invoked (due to fact that "premium" for COBRA coverage will cost 2% more than the reimbursements themselves)how best to handle COBRA notification requirements - without confusing employees as to what "benefit" they would receive from COBRA?

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What is the employer's maximun deductible discretionary profit sharing plan contribution?

- Total eligible compensation $1,000,000

- 401(k) deferrals - $50,000

- Matching contributions - $25,000

Answer $67,500 ?????

What is the amount of non-deductibel contributions for the profit sharing plan as of 12/31/96?

-Profit sharing plan was established on 01/01/94

-Plan provides for a discretionary employer contribution and employee voluntary after-tax contributions.

-Employer has sponsored no other qualified plans.

-Plan satisfied all nondiscriminiation tests since establised.

-NO contributions have been returned to ER.

The Plan has ahd the following compensation and contributions:

Compensation for deduction:

1994 100,000

1995 140,000

1996 160,000

Employer Discretionary Contribution

1994 13,000

1995 25,000

1996 22,500

Employer Voluntary Contributions

1994 5,000

1995 5,000

1996 5,000

Answer is $2,500??????

What is the refund (exclude earnings) to be paid to HCE 2 to enable the plan to satisfy the ADP test?

-None of the HCE are related.

-PY is 96 calendar year

-No matching or nonelective contributions.

-Gross compensation is used for testing.

EE, Gross Comp, Elective Deferral

HCE1, 150,000, 9,500

HCE2, 100,000, 9,500

NHCE1, 40,000, 1,600

NHCE2, 30,000, 1,500

NHCE3, 20,000, 1,200

Answer is $1,830.00 ???????

What is the maximum annual addition Participant A could receive in the limitiation period?

-Part. A participates only in the plan sponsor's profit sharing plan.

-Limition period for the plan is Jan 1, 1996

-Part. A. has gross compensation of $58,000 for the limitiation period.

Answer is $13,750. explanation?

What is the total QNEC required for the NHCE in order for the plan to pass the ADP?

-None of the NCE are related

-The plan year is 1996 calendar year

-No other matching or nonelective contributions

-All HCE are elgiible for QNEC

-Gross compensation is used for testing

EE, Gross comp, elective deferral

HCE1, 150,000, 9,000

HCE2, 100,000, 8,500

NHCE1, 50,000, 2,500

NHCE2, 50,000, 2,500

NHCE3, 25,000, 625

Anwser is 862.50. Can't get there.

What is the maximum deductible discretionary profit sharing contribuiton the meployer may make for 1997?

- ER sponsors a money purchase and a 401(K)

-Employer's tax year and both plan years are calendar years.

- money purchase contribution = 5%

- Profit sharing plan provides for employee elective salary deferrals, a matching contribution equal to 50% of each employee's deferrals and a discretionary profit sharing contribution.

-NO forfeitures in 1997

Employee, 97 gross comp, 401Kdeferrals, 401 K match:

A, 200,000, 8,000, 4,000

B, 100,000, 5,000, 2,500

C, 30,000, 0, 0

D, 20,000, 2,000, 1,000

Answer is $22,950

HOW?

What is the amoun tof excess contribution to be refunded to HCE Part. A:

The total amount of excess contribuiton that must be refunded is $4,700.

HCE deferrals:

HCE A 9,500

HCE B 8,600

HCE C 4,700

Answer is 2,800. Need explanation.

What is the amount of matching contributions that may need to be forfeited to maintain the matching contribuiton rate of highly compensated participant A at the level provided for in the plan document?

- Part. A deferred $9,500 in 1997

- Part. A compenstion is $100,000 for 1997

- Part A received a distribuiton of excess contributoins of $2,500

- Plans matching formula is 50% of the first 6% of comp. deferred.

Answer is $0.00.

Need explanation