E as in ERISA

I would think that this is becoming much more common for single employer plans. It was my understanding that most mutual funds won't cut check to individual participants. A plan can use these "fee-for-service" trust companies to cut the distributions. Then the plan doesn't have the cost of a full service bank trustee and it can avoid the issues associated with having the employer make the distributions.

http://www.benefitslink.com/taxregs/cashba...e-2002-prop.pdf

I don’t know what the final answer is, but I don't think that it's as clear cut as that. Note that in the IRS' Pub 502, it says that you can "include in medical expenses amounts you pay to entitle you...to receive medical care from a health maintenance organization." You don't have to actually receive any services – you just have to be entitled to receive the services. (The amounts are "treated as medical insurance premiums.") An HMO then usually charges a small “co-pay” at the time of service. I realize that this situation is not the same. But there are some similarities. I also note that Pub 502 says that you can include “amounts paid to a plan that keeps your medical information so that it can be retrieved from a computer data bank for your medical care.” I presume that this doctor is maintaining a medical file on this patient?

Has anyone seen any interest in adding deemed IRAs to plans? If so, what types of clients are asking for them? And why do they want them?

Your choices might also depend on what is meant by an "asset sale." For various tax reasons, it is not uncommon today for corporate structures to include LLC subsidiaries. In fact many times LLCs are set up specifically for the purpose of a corporate transaction. The LLCs are frequently "disregarded" for tax purposes. The transaction will be discussed as an "asset sale." The IRS generally likes the company to be treated the same for both plan purposes and other tax purposes. But this would actually be the acquisition of a separate legal entity. If the LLC is the sponsor of the plan, then it is likely that the sponsorship of the plan would actually automatically follow the LLC to the acquiror's group even if the agreement doesn't specifically provide. That is different from a true asset sale where the plan is left behind unless sponsorship is specifically transferred as part of the deal. I don't believe that there is published guidance about how the plan is affected for various purposes when there is the transfer of an LLC interest that it treated as an asset sale. But I believe that this would be treated as a "stock sale" for at least some plan purposes. The bottom line is that I'd make sure that you and your plan advisors are aware of the exact nature of the transaction (don't rely on a simple description from the transaction advisors about whether its a "stock sale" or "asset sale"). And try to get specifics about what happens to the plan into the agreements.

On its face, it appears that each plan passes coverage independently. There are fairly equal percentages of both NHCE's and HCE's excluded from the match. Or to be more specific, it appears that the first plan benefits 76% of the nonexcludable NHCE's and 83% of the nonexcludable HCE's (a 91% ratio). And the second plan benefits 24% of the nonexcludable NHCE's and 17% of the nonexcludable HCE's (a 141% ratio). But make sure that you are looking at the plans' eligibility terms and correctly classifying all the employees as excludable vs. nonexcludable for coverage testing.

Section 83 governs the taxation of property transfers -- so the reference is probably being used in reference to a restricted stock plan or stock option plan.

So you basically have someone who can't afford to really use the catchup provisions, but can't understand why her regular contributions are not being characterized as catchups?

Section 414(v)(4)(B) indicates that you are supposed to aggregate all plans, including both 403(B) and 457. However, there are no limits that apply to both 403(B) and 457 plans. E.g., 402(g) limits apply to both 403(B) and 401(k) but not 457. So based on how a catchup works, you could potentially make them to both a 403(B) and 457.

Now that I think about it, I bet that one of the reasons that the auditors want monthly reconciliations is to help them find the late deposits of contributions (those that miss the 15 day rule). There is a schedule of prohibited transactions attached to the audited financials. That schedule will include late deposits. In the post-Enron environment, there is increased pressure on auditors to verify that all prohibited transactions are reported.

Yes. That is what I was saying -- that they have a laundry list of "good ideas" that they pass on to everyone -- and that this idea doesn't necessarily apply to this plan. But I disagree that a "daily valued" plan is automatically reconciled daily. The purpose of the reconciliation is to identify deposits or withdrawals to the trust that have not yet been posted to the participants' accounts (or vice versa). Are you aware of the difference between "trade" date and "settlement" date? In a daily valued plan, the contributions might be posted to the participants account on the trade date (at that day's value). But the trade may not be settled in the trust on that date. So there will be discrepancies. There are similar discrepancies with loans going in and out and with distributions. The end of year balance in the trust rarely equals the end of year balance on the participant statements.

It could be that your auditor is just trying to pass on information about practices recommended by the Department of Labor. Advisory Councils of the Department of Labor have made this same suggestion. See http://www.dol.gov/pwba/adcoun/3dparty.htm. It includes the following comments: "No mandatory reconciliation of participant records and trust records. There is no current requirement that there be a reconciliation of participant records and trust records. … Barbara Uberti (Wilmington Trust) noted ..."if the bank account and book got reconciled every month, you would know if something were missing". Arguably, it would be the essence of imprudence for someone to never balance one's checkbook, yet qualified plans are not required to do so. Advisory Council Member Marilee P. Lau, a member of the Advisory Council and an Assurance Officer with KPMG Peat Marwick LLP, stated at a full Board Meeting that such reconciliation should be done monthly, otherwise it would be, "like reconciling your bank account once a year. You've got to close the bank account in order to be able to do that."… Mr. Greg Barton, who also appeared for Vanguard, said that "What you'd really be looking at for the small mom-and-pop, 20-employee [establishment], is a requirement to provide an annual statement, and at the bottom of that statement would be certification under penalty of perjury by the plan administrator that the assets were reconciled". Ian Dingwall (PWBA) also suggested improving the summary annual report, "the things that they actually get in their hands". …Consequently, it is our recommendation to mandate reconciliation of participant records and trust records and require a certification by the plan administrator that the reconciliation was done in the summary annual report. We submit that the Secretary is specifically empowered under ERISA sections 103(B)(5) and 104(a)(2) to require such a certification."

Under the controlled group/common control rules of 414(B) and ©, the dentist practice and realty company would generally be treated as one employer -- and the plans would have to be tested together. Under the constructive ownership rules of 1563, the dentist would generally be considered to own any stock owned by the wife. There is an exception if all of the following are met: (1) The dentist does not directly own any stock of the realty company; (2) The dentist is not a director or employee -- and does not participate in any of the management of -- the realty company; (3) Not more than 50% of the realty company's gross income is from rents, dividends, interest, royalties, and annuities; and (4) The wife's right to dispose of her interest is not limited a way that benefits the dentist and children under 21. Under 414©, these rules generally apply to non-corporate entities (such as sole proprietorships and partnerships). Also note that if the couple has children under age 21, then the children's constructive ownership interests may be attributed to their parents.

Did the participant make any elective deferrals?

Contributions for January 1, 2002, to December 31, 2002. See Section 404(a)(3) that says the contribution is deductible in the company's taxable year they are paid, provided they are paid into the trust and the company's tax year ends "with or within" the taxable year of the trust. Also note Section 404(a)(6) provides that the contributions may be deemed paid in the company's taxable year if paid on account of the taxable year and are made by the due date of the company's tax return (including extensions). The November 30, 2002, fiscal year ends within the December 31, 2002 year of the plan/trust. The contributions are made on December 31, 2002, which is before the due date of the company's return.

No. It's based on what they do with the 403(B) arrangements themselves.

Qualified plans have to be adopted by end of year. IRA-based plans can be adopted by due date of return.

Why do you consider these "general health" expenses? I don't know what the answer to your question is. But I think that you should consider the comments in Publication 502, relating to Medical and Dental Expenses, which indicates that the following are deductible under 213 (and therefore should be reimbursable under an FSA): "Nursing Services. You can include in medical expenses wages and other amounts you pay for nursing services. Services need not be performed by a nurse as long as the services are of a kind generally performed by a nurse. This includes services connected with caring for the patient’s condition, such as giving medication or changing dressings, as well as bathing and grooming the patient. These services can be provided in your home or another care facility."

I don't think that this is a simple matter of one employer accepting assets from another employer's plan. This is a merger situation. Plan A will continue in existence in the form of Plan B. At some point an affirmative decision has to be made to eliminate the investments in Plan A.

It’s settled law that decisions to establish a plan, amend the benefit structure, and terminate a plan are "settlor" decisions that do not create fiduciary responsibility. I don't disagree that Hughes v. Jacobson, Lockheed v. Spink, and the Curtiss-Wright case would support that conclusion. But none of them involve a decision to amend plan provisions relating to the investments held in the plan. In fact, in deciding that there was no fiduciary responsibility in the Hughes case, I think that the Court actually based it decision on the fact that the amendments related to the “composition or design of the plan” as opposed to “administration of the plan’s assets.” I'd be very, very comfortable standing before the Supreme Court and making that distinction.

Social security benefits? See http://www.ssa.gov/OP_Home/handbook/handbo...dbook-0311.html

After the employer amends the plan, then the fiduciary will have to sell the investments. Those cases may protect the employer's act of amending the plan. But what will protect the fiduciary when it sells the investments? Answer: Performing due diligence before selling the investments....

Are the employees' premiums pre-tax? If so, then the employees are also signing up for the 125 cafeteria arrangement when they enroll in the medical and dental plans. They generally have to stay in the plan for the rest of the year.

I should have said "What requires you to test for nondiscrimination on the rate of match after 402(g) excess deferrals are removed?" The section I cited says you test the rate match for nondiscrimination after excess contributions and excess aggregate contributions are removed. It doesn't say anything about the rate of match after excess deferrals are removed. I don't have it handy, but I thought Sal Tripodi's ERISA Outline book agreed that you don't consider the rate of match after excess deferrals are removed.

I always start with the W-2 definition, which uses taxable compensation reported on the W-2 and which applies in most cases. It's also the one that most people understand. Then I describe the differences between that definition and the 415 definition and the withholding definition (stock options, group term life insurance, etc.). Sal Tripodi's ERISA book describes the differences (I think that it's at the end of the definition of compensation).