Hi all, I'm usually over on the retirement plans side of the boards but have a question about my own health insurance plan. There are just two of us on the plan, and I'm about ready to start a high deductible plan with an HSA for myself, and keep my employee on a more traditional plan (if you can call the ugly mess that the plan has become traditional...and yes, we're in NJ so we're allowed to split the plans as long as we are with the same carrier). Is there non-discrimination testing on the HSA part, as there would be for a POP plan or full cafeteria plan? Does it matter if the HSA is employer or employee funded or some combination? (I haven't looked at it for a while but I think it is problematic if more than 25% of the "benefits" go to HCEs.)

Sorry for my ignorance and thanks for any help.

What are TPA's doing regarding RMD's for 403b plans (perhaps TIAA in particular). Because a participant can take the RMD from any of the 403b accounts held by a participant, it is basically impossible to say with certainty whether or not the RMD rules have been complied with.

TIAA apparently just sends out a letter on the date they turn 70.5, but that is it.

My client who is an ER directed only plan, has an EE going out on military leave. The plan provides for a profit sharing contribution with a 1000 hrs requirement. When the EE returns to work my client doesn't think that this EE will have met his normally required 1000 hrs. for the profit sharing contribution.

Is the client required to give them credit for 1000 hours of service while on Military leave to qualify for the profit sharing contribution?

In light of recent revelations concerning IRS practices over the past few years, I can't help but think I may have a client that's been similarly targeted.

It's a Cycle E plan that was filed on the last day of the cycle (1/31/11). I've checked in with the IRS a few times to check on the status, and the last time I did so (early April, 2013), the plan still had not even been assigned to an agent for review. It's an on-cycle filing that's been sitting on a shelf for more than two years, and nobody's even looked at it yet.

When I called, the agent I spoke with explained that this was just their normal timing and it wasn't unusual. I understand their queue is pretty backed up, and I get that filing on the last day isn't the best way to get a quick determination letter, but this still didn't sound right; particularly since the filing in question was sent in the same folder as half a dozen other filings; all of which have received letters at this point (some in less than a year from the filing date). I've yet to find an explanation for why plans are being treated so differently.

But before I get too paranoid, I wanted to see what others' experiences have been.

1) Does anybody else have on-cycle Cycle E filings that have yet to be assigned to an agent?

2) Is there any non-tinfoil hat reason a Cycle E plan would be unassigned for so long?

3) Have you been getting letters on Cycle A plans, yet?

4) Has anybody else had clients with multiple filings that were treated this disparately?

Any input/feedback would be most appreciated.

Okay, I recently got confused...which is not too hard for me.

It may not matter, but client has an individual, trustee-controlled 401K plan. He initially is funding the plan with a rollover/transfer. The account, while trustee-directed, is maintained at a national financial services company (e.g,. Merrill Lynch).

I have always told clients that when they are moving funds into a 401K plan that they MUST report the rollover via thei 1040 tax return for the same year via line 15A/B or 16A/B....the difference between the two line items on the 1040 being whether the rollover funds are coming from an IRA (line 15) or other qualified plan (line 16). Also, the IRS wants one to write rollover in the margin and attach a note of explanation of what they did.

In a recent conversation with the financial services company and their department that deals with rollovers, they stated if the funds from custodian 1 are sent to the new 401K plan at company #2 via ACAT, that a 1099 will not be prepared by company #1 and, as such, it is not a rollover but rather a direct transfer. They stated that the key is that it is an ACAT transfer and, if so, company #1 will not prepare a 1099 coded G (for rollover) and the individual does NOT have to report the event on their 1040 tax form.

IF this is correct, great. Maybe I have been too conversative, but I have always operated that when funds come into a 401K, the event (rollover? direct transfer?) MUST be reported on the 1040 tax form. If the client doesn't have to, great...but I would feel more comfortable getting feedback from others?

Any help out there? Thanks.

With recent mastectomy news (Angelina Jolie), I have been asked about mastectomy benefits and have come to learn there is a law requiring annual notice of such reconstructive benefits. I for one have been covered by these benefits for years by multiple employers but have never seen such a notice. Are these notices being done? Are they being combined with other types of annual notices? Who seems to be taking responsibility for guiding employers about this requirement?

I've read that a participant can continue to defer and receive match on compensation over the annual comp. limit as long as they don't exceed the 402g limit, and the plan's match formula limit.

I have a participant though that has not deferred all year, their compensation so far in 2013 is over $255k, and they now want to start deferring and receiving a match. Can this person "start" contributing on comp. over $255k?

I was thinking that if they weren't contributing prior to reaching $255k that they couldn't then start on comp. over $255k.

Anyone have a rational explanation for the changes TIAA made to how they are reporting defaulted loans? They're driving me nuts with this topic

We have client filing 5500-EZ (just husband and wife). In one plan year, they deducted $4,000 more than they contributed. The next year, they deducted $4,000 less than they contributed. Net deductions and contributions are the same. Accountant is aware of this (we don't know if he is doing anything about it or not).

Any concerns from the stand point of the plan that we, as TPA need to address?

I was talking with our client's representative at a well-known investment company's retirement department. They will be helping our client make a correction to a couple of errors that occurred last year relating to employee deferrals. (The client's spreadsheet was off a line, so a deferral from one participant went into the account of the next participant on the spreadsheet.) We talked about VFCP and I asked if they would prepare the submission to the DOL. She responded that this is a voluntary program, the correction is made and documented, but nothing is submitted. What? I guess it makes sense now why I felt like her side of the conversation meandered back and forth between the EPCRS Self-correction program and the DOL's VFCP. I was having a hard time keeping up, even though I've been doing this stuff for a long time. Even her e-mail communication to the client was lengthy -- and very disjointed, discussing both EPCRS and VFCP interchangeably, which was why I wanted to have a verbal conversation with her. Stuff like the withdrawal part of the transaction comes under VFCP, but the deposit side comes under EPCRS (or visa-versa -- my head was spinning, so I'm not positive which way she said it). So, now I'm starting to second guess myself. We do need to submit an application to the DOL when we use VFCP, right? And, when she talks about the deposits and withdrawals to make the correction coming under different programs? Holy cow. Where have I been? If you tell me she's right, I'm putting in my papers because clearly, I shouldn't be doing this any more.

Model allocations are vey common in our plans. Most of the time the funds within the models are different than the core options.

We are in the process of updating the models which means fund replacements and changes to the target allocations.

Is the plan sponsor required to provide a fund change notice 30 days prior to fund changes to the model.

Participant A elects the Moderate Model. The investment strategy does not change even though the funds that make up the model change, so I do not see why a notice must be provided.

If a notice is required, can it be sent elecotnronically and then mailed to those particiapnts without email addresses?

This seems like a ridiculous question. However, I'm suffering from pre-holiday brain cramp...

Suppose your plan defines comp as W-2. Further suppose that the employer buys shoes for its factory workers, and, I don't know, maybe something like gym memberships. The employees don't have the option to receive this money in cash, but it is still taxable compensation, and included on the W-2 because it is a "nonaccountable" plan according to the employer's CPA. I proffer no opinion as to whether that is correct or not - I'm assuming it is correct for purposes of this question.

From a practical viewpoint, how would this be handled when calculating the deferral amount to come out of the employee's paycheck? I assume this is really a payroll/employer problem. For example, base pay that would otherwise be paid to the employee for the year is $10,000, and employee defers 5%. But, there is TAXABLE fringe benefit of another $1,000, and the employee's W-2 is going to show $11,000. Does the employer/payroll company, at some point, have to withhold another $50 from the employee's paycheck? Or, since the employee could never have elected to receive this compensation in cash, is it simply ignored for deferral purposes?

Participant took a loan out in 2010 and the repayments were so small they did not even cover interest (new client, mind you ).

Does anyone have a problem with the participant taking out a second loan to get "caught up" on the old loan as part of the correction? We're doing a VCP submission to ask for tax relief (the participant got a letter from the IRS b/c the old recordkeeper sent out a 1099 defaulting the loan). Purely reamortizing the loan does not work because the participant would not be able to "survive" on what would remain in their net paycheck. So we want to pay-down part of the loan with a new loan. Making a lump-sum catch-up payment is clearly provided for in EPCRS, but what they don't address is whether or not a new loan might be used to come up with the lump-sum payment.

A participant turns 70 1/2 11/30/13. He is terminated. Since it is the first one, he can extend until 4/1/14. If the participant takes a lump sum distribution in August 2013, which is before he turns 70 1/2 but in the same plan year he turns 70 1/2, will it count towards the RMD for 2013?

We are looking at a cash balance proposal by a firm that involves 401(h) accounts and insurance within the plan. I have researched the issues a little but looking for someone to shed additional light. The proposal is for a law firm with five partners and about 45 common law employees. The law firm already sponsors a 401(k) plan with 3% safe harbor nonelective.

Q1. None of the partners are hitting their 415 limit. In which case what is the benefit of the 401(h) account -- is it simply that those contributions are made on a deductible basis by the employer and are not taxable to the participant when distributed to pay retiree medical benefits?

Q2. Under what circumstances is it appropriate to provide life insurance policy within a DB plan and to what extent? What are the pitfalls to avoid -- such as springing cash value, etc.?

We are a little nervous because part of the proposal involves product sales and not merely administration services. I am sure if done right all these pieces work, but I am trying to understand the nuts and bolts to determine if it is in fact appropriate for this client's situation or if the desire to sell product overshadows the needs of the client.

Thank you for the help!!

A dummy DB plan with the following assumptions:

• NRA 62
• 100% participants receive lump sum distributions (aka fund to lump sum)

Let's assume this is a 1-man plan who is age 60. His PVABs are as follows:

• AEQ LS: $350K
• 417(e) LS: $420K
• 415 limited LS: $380K

The current funding target, calculated by our 3rd party software is about $420k. My question is, should the funding target be limited to the 415 max? It seems odd to me that if this person were to put in $420k, and then terminate the plan, his lump sum would be limited to $380k. I've looked in quite a few places and cannot find anywhere that the funding target should be limited by the 415 max lump sum amount.

Any help, citings, etc. would be greatly appreciated on this one. Thanks.

The PBGC has indicated that a letter of credit held in escrow satisfies the bonding requirement, but it also said that it is within a fund’s discretion as to whether a given institution is an acceptable party to hold a letter of credit in escrow. See PBGC Opinion Letter 1981-32 (addressing buyer’s bond, but I believe same rationale would apply to seller’s bond). Are funds reluctant to agree to letters of credit? Is it the normal course to approach the fund for permission to use a letter of credit?

I have a client who is an employer participating in a "level funding" welfare benefit plan. This is a self-funded plan. The employer provides a monthly payment to the TPA based on projected claims amounts for the year, and if at the end of the year, there are amounts left over from their participants' claims, the employer will receive a portion of the excess amount.

The payments are kept in the TPA's own account (not the employer's account). Checks to participants are also written from this account. I understand the TPA (a major insurer) has had this type of plan in existence for 8-10 years.

How can this satisfy plan asset requirements? As this is not a fully-insured arrangement, wouldn't a trust be required as soon as the assets were segregated from the general assets of the employer into the TPA's account? What am I missing?

Thank you in advance for any guidance!

When an traditional IRA is transfered between trustees, which trustee (transforor or transforee-or are both) is required to file Form 5498? The instructions to Form 5498 state "File form 5498, IRA Contribution Information, with the IRS by June 2, 2013 for each person for whom in 2013 you maintained any individual reirement arrangement..." However, the reporting is based on the FMV on December 31, 2013. If the transferor trustee no longer holds the IRA it would not know the FMV at the end of the calander year. I understand that Form 5498 need not be filed upon transfer; but what about at the end of the calander year? If the transforor trustee is required to report, then how should it obtain the value infomration required?

Any direction would be much appreciated!

Here is my question: what is a "reasonable direct cost of processing and delivering the distribution" under EPCRS and the related "cost of making the distribution" under VFCP?

Under EPCRS, Rev. Proc. 2013-12, Section 6.02(5)(b).

under VFCP, Section 5(e).

Does this include the time spent in figuring out the amount of the distribution? Or does this calculation begin after all of the heavy lifting is done and you need to cut a check? If the distribution is to come from the plan, I suppose that normal TPA fees for making distributions would apply, but how about time spent by the employees of the plan sponsor? Attorney time in the application process?

I am not aware of any of these claims about the cost of cutting a check have been kicked back by either the IRS or DOL, but I don't want to find out the hard way.

Thanks.