E as in ERISA

If employees are really paying for the stop loss, then it is possible that you have more than reporting problems. There was lots of discussion about stop loss reported on 5500s several years ago. I think that the DOL was raising some concerns when it saw it reported. I believe that the primary issue was "exclusive benefit." (Plan assets have to be used for the "exclusive benefit" of employees. If the stop loss caps the employer's liability and provides no additional benefit to employees, then plan assets are being misused...) Then I believe that the DOL said that as long as the employer contributions to the plan exceeded the stop loss, then it was generally okay. And that it was not a problem if it was reported on the Form 5500 for tracing reasons (because it was running through the same accounts). The DOL wouldn't treating it as misuse of plan assets. Then I think maybe there were some clarifications based on how the stop loss was structured, who it benefited or who paid for it but I don't recall any of the details.

There could be some risk. That notice indicates "all participants" in the plan must be allowed the grace period. So what does that mean if you have certain participants that are only using the dependent care? Could you claim that they are allowed the grace period with respect to health care -- just aren't using it? Or do the ones providing the grace period only on health have two separate cafeteria plans?

Alf -- Are you just comparing a "solo" 401(k) to a profit sharing plan - with the advantage of the "solo" 401(k) being that 401(k) contributions are not subject to 404 deduction limits. So if a solo practitioner's earnings aren't high enough to get a full $42,000 415 limit (if because 404's limit of 25% of earnings is less than $42,000), then he can contribute part as 401(k) contributions and avoid the 404 deduction limit? If the person makes over $208,000 then he doesn't appear to need a solo 401(k). But I agree it's probably not a bad idea to have it in place so he's already set up if he has a bad year. But then it kind of depends on how the company is set up (W-2 v self employment income) because that affects the timing of the election and withholding of deferrals. Too late if he is a corp with W-2 wages and realizes at year end that he needs to make a large 401(k) deferral but doesn't have much earnings left from which to withdraw them.

We should be clear here that the amount that you restore to the participant's accounts is not necessarily the same as the amount on which you pay the excise tax on Form 5330. The amount you restore is what the participants have lost (based on how the money is invested). The amount on which the employer pays excise taxes is essentially the amount that it has benefited. It doesn't matter how the participants were invested. The employer doesn't get a break on excise taxes if the employees were in money markets that paid nothing or in investments that lost money. The employer pays excise taxes on the commercial value of the loan. Using a business rate of interest. So the AFR is generally used. http://www.reish.com/practice_areas/Techni...s/IRStip145.cfm

That makes sense to me. The primary purpose of the Solo 401(k) is to increase the amount of contributions for those who have lower income and whose total contributions would be limited by the 404 deduction limits (since 401(k) contributions aren't considered). If he has sufficient income to make a full profit sharing contribution, there should be no reason to use the 401(k) mechanism.

No. See page 6 of Publication 502 http://www.irs.gov/pub/irs-pdf/p502.pdf "Car" section. Says you can deduct special equipment needed by a person with a disability. The guy has a doctor's note saying this is medically necessary. He's not asking to deduct the cost of the car or the A/C. Just a small inexpensive device that prevents him from losing his eyesight when he gets into a hot car. And page 5 indicates that ramps and doorways expansions are generally fully deductible. And page 15 says that when something is purchased in special form to alleviate a physical defect, the excess over normal cost can be deducted. It gives Braille books as an example. Oh, and I do understand that if this increases the value of the car that it would not be fully reimburseable. And this is something that any buyer might like not just a disabled person. So in that respect it's more like a pool than a wheelchair ramp. But this is a small convenience added to a depreciating asset. I think someone can make a judgment call and approve it.

I don't want to sound like Tom Cruiser here, but... I'm picturing this poor guy with MS who has on occasion entered into a very hot car and had his vision blurred for about 20 minutes while he waits for the A/C to cool the car down and then for the condition to reverse. It is now stressful for him to go to his car on a hot day. He found this solution with the remote starter. But he can't get it reimbursed with his own money from the cafeteria plan. Meanwhile he sits near another employee who is all hopped up on pain killers or anxiety medication. But whose only real problem is that they don't exercise or eat like they should or they over analyze things and get themselves worked up so they have slightly more pain or anxiety than the next person. But they have no problem getting the meds reimbursed. Possibly through the regular health plan.

But would you say "but for" the MS he would use a remote starter to do that? Probably not. I'm presuming that the reason for the starter is that he is sensitive to temperature. It's a problem to get in a really hot car that has been sitting in the sun or a really cold car in winter? This exacerbates the MS conditions? So what he is actually doing when he starts the car is to start the heat or A/C so that the temperature in the car is moderated before he gets in? Doesn't that meet the "but for" test? If he had a car without heat or A/C and he was asking to get that fixed, then that might have a dual purpose. I know someone with a completely different condition that caused low circulation in their extremeties and getting into a cold car was a tremendous problem because it would take hours to get them warmed up again. So I could see where a remote starter might be medically necessary. Check this out. Heat sensitivity is a common problem and even a slight elevation in temperature is an issue. http://www.nationalmssociety.org/Sourcebook-Heat.asp

Change the discussion to one about how this could be fixed this for future years. Use two plans instead of one? Tested together. But separate reports. That may demonstrate that you are very interested in the client and trying to help do whatever is possible to resolve this reporting issue. But make it clear that does not include falsifying reports. Tell him it that in the event of a DOL audit, it would be best that you not have any copies in your records of the false reports. With normal turnover, it would be very possible that someone might innocently provide the DOL with a copy and it could cause significant problems for him. If he wants to do something like this, it would be best not to have other parties involved.

I have never seen it re-evaluated in that circumstance. But that doesn't mean it's not necessary. Without checking through the rules, I thought that you have to qualify for QSLOB as often as you test. But I don't find QSLOB analysis to be high on anyone's list of things to do.

I have seen situations where the QSLOB status had to be re-evaluated almost every year (various family members involved changing percentages of ownership and/or acquiring or disposing of companies). When the facts are fairly stay fairly constant, it is probably not important to repeat the QSLOB analysis each year. But there are definitely some situations when they have to be updated frequently.

Wait until the new EPCRS comes out. It will be better.

Egelhoff? A life insurance case involving a state law saying that beneficiary designations are voided upon divorce. Determined to be pre-empted but specifically saying it doesn't violate any anti-alienation rules....

I understand the point. But there are some on this board who would probably not actually read that case. And I don't want them to think that the holding in Northwest Airline v. Roemer specifically says that state withholding laws are preempted by ERISA. I believe it says that a state law providing for levy of taxes (a law that doesn't specifically mention levies against retirement plans) is preempted by ERISA. And there are some that would say that case is effectively overturned by Mackey v. Lanier, in which the US Supreme Court said that a state garnishment law (used against a welfare plan) was not preempted by ERISA. Now I'm not saying that your conclusion about pre-emption is wrong. Just that Northwest Airlines v. Roemer is not on all fours here. I'm not sure we know for certain what the Supreme Court would say. The boundaries of the preemption are a little fuzzy. (Many would say that ERISA preempts state wage withholding laws -- but all the automatic enrollment bills include a specific ERISA preemption just to make it 100% certain).

This is not a levy against benefits -- it is withholding on the distribution -- and the state law specifically references the ERISA plan.

Do they have a 125 plan, and can you ballpark it by looking at how many are participating in that? E.g., if there are 250 participating in all three and another 50 participating in only health and life and another 25 participating in health and dental and then another 200 only in life and another 125 only in dental, then there would be 650 paying premiums through the 125 plan?

ERISA section 3. Health plans, etc.

Instead of arguing state preemption, I think that most large administrators just follow the rules. In response to Julie's question, the state's web site says effective July 1 http://taxpros.marylandtaxes.com/

Lots of states already apply mandatory withholding to residents http://www.prudential.com/media/managed/2005SWIS-CB.pdf Won't Maryland just move from the "tell us" to the "we will withhold" box?

Were they earning creditied service on 1/1? Page 16 of instructions http://www.dol.gov/EBSA/PDF/2004-5500inst.pdf If they are earning any hours on 1/1 that would be counted toward vesting or allocation, etc. then they are participants on that day. You don't need assets.

Don't forget that the retirement plan is a taxable asset. That makes it harder to use for an offset against a "nontaxable" asset. Because who will be responsible for paying the taxes? If he takes a hardship for 30,000, it will get reported as a taxable distribution. Will he take out another 6,000 to 18,000 to pay taxes on the amount? Or will he make her pay the taxes on a 30,000 QDRO distribution?

Q 19 http://www.abanet.org/jceb/2004/qa04irs.pdf

Because of this? http://www.dol.gov/esa/regs/compliance/olm...Trusts_Info.htm

ASPPA has now very graciously posted all links to government Q&A '99 - '04 on one page http://www.asppa.org/education/ed_conf_qa.htm And here's the ABA link http://www.abanet.org/jceb/agency.html

Source: http://www.asppa.org/archive/gac/2004/irsannqa.pdf Question 9