Apparently, all purchases of prescription drugs, whether retail or mail order, will have local sales tax (based on U.S. residence of consumer) applied to cost-sharing regardless of whether it consists of fixed co-payment, fixed coinsurance percentage, deductible (specific or all perils) or combination thereof. If in fact this comes to pass, is sales tax reimbursible from HSA?

It is my understanding that the Required Beginning Date is the date by which a participant must take his RMD. If the person chooses, he can take his RMD earlier, correct? He does not have to take it on the RBD?

For example, if the RBD = 4/1/2018 but the participant wants to take his RMD prior to 1/1/2018, so it affects his 2017 taxable year, he could. Is this correct?

This is for a Cash Balance Plan, not a DC Plan.

Thanks.

I’m hoping BenefitsLink “heavy hitters” will help me think through an issue intensified by the new market for 3(16) administrators.

An employer (also its retirement plan’s administrator) engaged a 3(16) provider for some plan-administration responsibilities, including deciding claims for a distribution.

A participant submitted a claim for a retirement distribution grounded on her severance-from-employment.  The employer signed a statement, on the claim form, to confirm that this participant is severed from employment.  (For this hypo, assume no other condition could entitle the participant to a distribution.  Also, assume the plan has no provision for a participant loan.)

Through other services, the 3(16) provider has actual knowledge that the participant continues to perform (personally) services for the employer, and knows the employer classifies the worker as a “1099” contractor.  The 3(16) provider believes the employer’s classification is wrong, and was not made in good faith.

To meet its ERISA fiduciary responsibilities, must the 3(16) provider reevaluate or question the employer’s classification of the participant as a nonemployee?

If so, how much “poking” must the claims administrator do?

I have a client who made their final deposit for 2016 (payroll date 12/30/16) and first deposit for 2017 (payroll date 1/13/17) were not processed by the recordkeeper for several weeks; it wasn't discovered for another month or two.  To make good, the recordkeeper reversed the initial transactions and re-processed them as of the date they should have been done, using that dates' share prices (I wonder if the relative share prices made it come up a net positive or negative for the rk?).

So... I presume that this gets us out of having to calculate any lost earnings (presuming that the rk also made sure to correctly credit any dividends or capital gains)?  And how in the world do I begin looking at a 5330?  Any suggestions?

can we set up a plan for a company located in the US VI?  i know PR is complicated but for some reason thought maybe the rules were different for USVI.

I have a 401k participant who came out of retirement to do some work.  While he was retired he was saving $6,500 in his IRA and getting the full deduction.

Now - he is covered by a retirement plan because he is receiving employer SHNE and Profit sharing dollars, and is only getting about $1.5k worth of deduction for his $6,500 IRA contribution each year.

1st - Can he refuse employer dollars?
2nd - if he can refuse employer dolalrs and he does - would he still be considered covered by retirement plan? Or would he not be covered because he doesn't receive any dollars from employer?

The description for Characteristic Code 2A changed a little from 2014 to 2015.   It was just noted when preparing the 2016 return.  I contacted EBSA who referred me to IRS since they created the codes.  Neither EBSA or IRS would commit to a definition of Code 2A.  I am interested in how Code 2A is being interpreted by those of you preparing Form 5500.

In the past, if the plan document had a new comparability profit sharing allocation method, we coded Form 5500 with "2A" regardless of whether the profit sharing component was funded for that year.  Since it was a plan characteristic, we coded accordingly.

The new description reads, "Use this code if the employer contributions in the return year were based on one of the following allocation types-Age/service weighted or new comparability or similar plan, etc.  

1)  Do you interpret this to mean that you code with "2A" only IF the employer makes a profit sharing contribution IN THE RETURN YEAR?

2)  Or do we continue to code with "2A" if the plan document has a new comparability profit sharing contribution provision and it does not matter whether this component is funded in a plan year?

My thoughts are if the plan has the provision, that is how it should be coded.  We don't go back and forth with the code 2K when an employer match is made or not made from one year to the next.

Your thoughts please....Thank You!

Not sure, but I thought y'all would get a kick out of it. I stumbled across it on another board when doing a Google search for something.

"If that is what the publications say, then that is what I would do. If you do not get a good answer here, try re-posting on the BenefitLinks website. That is where the benefits heavy hitters hang out. "

I have a client, age 91, who recently died. He has an IRA annuity which has been annuitized & receiving regular payments. His beneficiaries are his 3 children. I understand the annuity payments would satisfy the RMD requirements of Code 401(a)(9). Upon his death, the IRA annuity stopped making payments & his beneficiaries are entitled to receive a lump sum distribution of his remaining annuity balance.

How is the decedent's 2017 RMD calculated? Would his remaining 2017 annuity payments have to be paid to the beneficiaries? Would the calculation be based as if it was a non-annuitized IRA & divide his 12/31/16 balance by the appropriate life expectancy factor & net his 2017 annuity payments?

Once the decedent's 2017 RMD is distributed from the IRA, can his beneficiaries rollover the remaining balance to separate inherited IRAs? Would the remaining balance be considered not an Eligible Rollover Distribution because it would be considered as one in a series of substantially equal periodic payments which would not permit rollovers to inherited IRAs.

if SH plan is terminating mid year now should 2016 and 2017 contributions be made prior to termination?  or stated another way can you terminate a safe harbor plan where the employer still hasn't funded?

If a participant is out on FMLA can they still take a loan from the 401(k) Plan?

The loan policy states loans are repaid through payroll deduction. Once she is paid her 6 days from her accrued PTO she will not receive a paycheck until she returns to work. I understand  when a participant with a loan is out on FMLA the  loan payments are suspended until they return to work.  However, this participant is already on FMLA.

The loan policy states loans are available to all Active participants. Technically isn't she still considered an active participant?

Thoughts??

We have a Money Purchase plan that has terminated. Plan document required 25% contribution but had a last day requirement and client was making contribution deposits periodically throughout the year.  Upon working through the plan valuation, it was determined that the client deposited excess contributions due to the last day requirement of terminated employees. The plan has now terminated.  How do we handle the excess contributions?  Do they revert back to the employer and if so, what is the reversion penalty or a citation for where I can research such topics?  I am having trouble finding guidance related to MPP operational defects since this type of plan is not as frequently found any longer. 

Taxpayer made a $5,500 IRA contribution for 2016 but withdrew the funds, along with the related investment earnings, before the Form 1040 due date (extended).  So far, so good.  The $5,500 has no tax consequences, but the earnings are taxable in 2016. 

I can't find any guidance about the mechanics.  IRS Publication 590-A has some nice language about the general tax treatment, but it doesn't say where/how to report the numbers.

--  I'm guessing the earnings get reported on Form 1040, Line 15b as a taxable IRA distribution?

-- Taxpayer is under age 59-1/2.  Are the earnings subject to the 10% penalty for an early withdrawal?  (We're talking about 10% of $30, so this isn't material whether "yes" or "no."  I'd like to get things right, though.)

--  I don't believe the IRA custodian will issue a 2016 Form 1099-R?  The money was withdrawn during 2017; as far as the custodian's concerned, isn't this a 2017 distribution?

Person  A dies in 2016 after taking his required minimum distribution.  The beneficiaries are his two children.  As of 12/31/16 the account had not yet been divided into separate accounts.

It is my understanding that for 2017 he RMD is based on the oldest child's life expectancy and that a separate calculation is not required for each child.  Am I correct on that?

Thank you for any guidance.

I have a plan that covers the husband and wife and 3 minor children.  Would it qualify for an EZ?  I know the instruction say owner and spouse and partners.  Are the children considered partners for this purpose?

When calculating the maximum permitted loan after a loan is defaulted, I can't remember if I should add the current value of the defaulted loan (like I would a active loan) to the investment balance before applying 50%? Example: Ptp defaulted on loan in 2015 and has no other loan. The defaulted loan value after adjusting for interest through today is $2000. His vested investment balance today is $20,000. Is his maximum available loan:

A. $9000 =  [($20,000 + $2000) *50%] = $11,000 - $2000

or

B. $8000 = ($20000 * 50%) = $10,000 - $2000

We have a profit sharing plan (12/31 PYE) that currently has an integrated ps formula with an accrual requirement of 1,000 hours and last day.  

The client wants to amend the profit sharing formula to cross-tested and remove all accrual requirements effective January 1, 2017.   

If we are removing the accrual requirements for receiving profit sharing contributions, can it still be amended for the 2017 PY to change the contribution formula?

Two employers in a controlled group (100% common ownership). Effective 1/1/2017, a large portion of the second employer was sold so that no controlled group and/or affiliated service group relation ship exists.  Plan is now a multiple employer plan.  Questions about 2017 testing (just trying to be ready): 

1) How are the HCEs to be determined?  My assumption is that the HCEs would be determined by looking back at the compensation earned in the prior year when it was a single employer plan.  However, I cannot find anything definitive to back this up.  Does anyone have supporting documentation?  If this is not correct, one alternative I thought of is do we need to look at the compensation earned by each individual employer when they were in a control group. 

2) The plan utilizes the prior year testing method for ADP/ACP testing.  My guess (and it is only a guess) is that the prior year NCHE % would be determined by looking back at prior year testing and using that % for each of the two tests.  However, I cannot find anything definitive to back this up.  Does anyone have supporting documentation?  If this is not correct, one alternative I thought of is do we need to calculate a weighted average of some kind?   

Thanks in advance. 

Employer S (Seller) has an HMO and a PPO.  There are COBRA beneficiaries in each.

Employer S will sell substantially all its assets to Employer B (Buyer).  Employer B is a successor employer.  Employer B only has a PPO.  

The parties have agreed Employer S will continue to run the HMO through the end of the year.  Accordingly, Employer S will continue COBRA coverage for COBRA beneficiaries in the HMO plan.  Employer B will continue COBRA coverage for COBRA beneficiaries in the PPO plan under Employer B's plan.

Questions:

Is it appropriate that responsibility for coverage be split up like this?  If not, what are the issues?

When the HMO plan ends at the end of the year, should those COBRA beneficiaries receiving HMO COBRA coverage from Employer S begin receiving PPO COBRA coverage under Employer B's plan?  If not, what is the best way to continue their COBRA coverage?

Thank you for any help!