MARYMM

True, but might be the lesser of evils. I wonder about the circumstances surrounding the plan termination. This appears to be a very large policy, perhaps for an owner; is there a change of ownership? If the idea is to get rid of the MPP might it better be simply restated as a PSP? Otherwise Bill Presson's suggestion of borrowing out some or most of the cash value before distributing or buying the policy is good, just be careful because a stripped-out policy can be expensive to maintain. (When I was new to the business, I asked my boss, a life insurance salesman/TPA "why should life insurance be in a qualified plan?" His answer: "To make a commission." That is really the only reason; it pretty much stinks at the end of the road for the participant.) Yes, the company is being shut down and merged with a hospital group, so there will be no restatement. The few doctors that have policies and need to keep the coverage are just considering to keep the plan frozen and pay the annual admin fees. Technically the practice will be in existence for the next 5 years. The face amount is appx $800,000 and the csv $311,239 I agree life insurance has no business being in a qualified plan. You can earn more using other products. My dad always said that and he was a life agent. When I was in the law firm's Plan, I invested in the whole life insurance for a while. I was a single mother at the time and the life insurance option allowed me to leverage my Plan account balance. I invested say $1200 a year in a life insurance policy that had a death benefit of say $200,000. In the event of my death, that investment was more beneficial to my child than the $1200 staying in the Plan. I did cash it in once he went to college (12 years ago) and invested the proceeds in the other Plan options. YMMV

I don't think rollovers are allowed. The participant can purchase the policy, however. Apparently there was some new guidance on determining FMV that was issued right around the time I stopped working at the law firm whose Retirement Plan included whole life policies as an investment option. I found this summary of the guidance which has links to the source info: http://www.fjplife.com/pdf/IRS_Releases_Ne...e_Insurance.pdf You might want to consult your ERISA counsel on this.

Do they have some sort of "retirement/partner withdrawal" provision in their partnership agreement ? The law firm I worked for did. The retiring partner (with the requisite # of years of service) rec'd a % of the WIP or AR at the time of retirement. Some had been there for many years prior to the establishment of the Retirement Plan (HR-10) and this was a way to provide for them.

Its been a few years since I've handled this sort of thing (and at another job, so I don't have access to my checklists/procedures), but IIRC, the only options are for the participant to 1.purchase the policy from the Plan (for current CSV) or 2. cash it in - the proceeds go into the Plan and are then available for rollover

I overlooked gains/losses in this scenario. Any takers on this ? Thanks.

Employer has 401(k) and 403(b) Plans. Same investment options in both. Per diem employees are excluded from participating in the (k) Plan. When an employee's status changed to per diem in the spring of this year, employer did not discontinue (k) contributions . Also didn't advise employee that they could continue deferrals but to the 403(b) now (same investments but no employer match). Is it OK to fix this as follows ? : Recordkeeper removes deferrals (say, $5000) and match from participant account in (k) Plan and puts in Forfeitures. Employer has employee execute salary deferral election for 403(b) Plan Employer corrects payroll records to reflect that deductions are for 403(b) not 401(k) so W2 will be correct Employer sends $5000 to 403(b)Plan for deferrals I think the alternative is for the recordkeeper to return the deferrals to the employee who then has increased taxable income and may not have enough earnings for the remainder of the year to be able to defer that $5000 Thanks !

Is the part-time employee in a class that is excluded from the Plan, as specified in the Plan Document ?

I asked the question here : http://benefitslink.com/boards/index.php?showtopic=49527 Recordkeeper's failure to notify us that certain new hires were to be automatically enrolled. We are in agreement on the correction method, but they are saying that they will fund it in the participants accounts. That doesn't seem right to me. Shouldn't the employer be the one to fund it and be reimbursed by the recordkeeper ? Thanks !

Here is a link to the IRS website: The Fix Is In: Correcting Plan Mistakes - Correcting a Failure to Implement the Plan’s Automatic Enrollment Provisions http://www.irs.gov/retirement/article/0,,id=212043,00.html Hope this helps. We have encountered a similar situation but in our case, our recordkeeper was supposed to notify us to enroll the newly hired employees and did not. So they are going to fund the corrective contributions. This does not seem right to me. I didn't think the recordkeeper could make contributions to a Plan. I thought that we should make the corrective contributions and they would reimburse us in some fashion. Am I wrong on this ? Aren't we ultimately responsible for the proper operation of our Plan ? Thanks in advance.

I'm not aware of anything in Federal law/regs similar to 401(k) rules on timely deposits. So this could be governed by State laws. For example, in CT any withholdings sent to a third party are supposed to be remitted within 3 working days.

Are these "per diem" employees ? IOW, employees who don't have regularly scheduled hours ? This is common in hospitals and they are usually paid a higher hourly rate. They are not eligible for H&W coverage. They also don't qualify for paid time off/vacation/sick time. We recently excluded them as a class from participating in our 401(k) Plan but allowed them to be in the 403(b) Plan which does not have any employer contributions.

Correct. At the law firm where I used to work, we offered life insurance as a investment option at one of our Plans.

All of them - if they are all available to active employees. COBRA beneficiaries have to be offered the same options (and enrollment/change rights) as active employees.

Probably a poor choice of words. I was using the word "legally" to differentiat from the scenario you just outlined. I interpreted this situation differently because one of the "partners" quit and took employees elsewhere. When a partner leaves the partnership is usually dissolved, which requires that start of new business. The partnership is not necessarily dissolved. I think it depends on the partnership agreement. The large law firm I worked for (in administrative capacity) had defections, I mean departures, frequently and there was never a dissolution. The departing partner was paid out according to the terms of the agreement and life went on as usual for the remaining partners. Amendments were made to the agreement when new partners joined.

Masteff is correct. Here are the 1099 MISC Instructions: Deceased employee's wages. If an employee dies during the year, you must report the accrued wages, vacation pay, and other compensation paid after the date of death. If you made the payment in the same year the employee died, you must withhold social security and Medicare taxes on the payment and report them only as social security and Medicare wages on the employee's Form W-2 to ensure that proper social security and Medicare credit is received. On the Form W-2, show the payment as social security wages (box 3) and Medicare wages and tips (box 5) and the social security and Medicare taxes withheld in boxes 4 and 6; do not show the payment in box 1 of Form W-2. If you made the payment after the year of death, do not report it on Form W-2, and do not withhold social security and Medicare taxes. Whether the payment is made in the year of death or after the year of death, you also must report the payment to the estate or beneficiary on Form 1099-MISC. Report the payment in box 3 (rather than in box 7 as specified in Rev. Rul. 86-109, 1986-2 C.B. 196). See the Example that follows. Enter the name and TIN of the payment recipient on Form 1099-MISC. For example, if the recipient is an individual beneficiary, enter the name and social security number of the individual; if the recipient is the estate, enter the name and employer identification number of the estate. The general backup withholding rules apply to this payment.

Does the participant have dental insurance, an FSA or HSA or HRA that would cover this ? If so, I think you need an EOB showing the employee's portion and copies of the FSA/HSA/HRA account statements to demonstrate that there are not sufficient funds available there. Does the dentist require payment in full prior to starting the procedures ? Can the hardship distribution check be made payable to the dentist ?

HSA's are IRS Code Section 223. But you need to have a Sec 125 Plan (with the HSA contribution as a benefit choice) in order to have them taken out pre-tax from employee's pay.

What is the reason why non-standard pay would result in a delay? Barring something that makes it signficantly different, then I'd say the timing for deferrals on regular pay sets the standard by which all deferrals should be deposited. That said... if non-standard pay is an "off-cycle" and/or manual event and nearly impossible to report out separately from the next regular cycle, then you might have a case. For example, if I did a manual check today, the data would be added to the next payroll run and everything (FICA, deferrals, withholding) would be indistinguishable from my other report totals for that run (not to mention that FICA and withholding wouldn't actually be remitted to the govt until that run). Aren't your payroll tax deposits for the manual checks technically late ? When I used a payroll service, my process for manual checks was the same as yours. Now I use an in-house system and when I do manual checks, I do additional tax deposits. I do wait to transmit the deferrals until the next regular bi-weekly payroll, though. So, I guess those could be considered to be late.

We were advised by counsel to do it this way. We use the single premium cost as the Fair Market value for each non-tax dependent covered. Using the COBRA cost was another option given to us.

When we switched to only offering an HDHP, we implemented an HRA for the employees who were on Medicare and thus ineligible for the HSA. Under that plan, we reimburse their qualified medical expenses up to the amount we would have contributed to the HSA. We elected not to allow them to carryover from year to year, so it could cost us less than the HSA would have. Since you offer them another health insurance choice, I don't think you need to do an HRA - but that is up to you. If it is cheaper to have them in the HDHP plus provide the HRA, you may come out better cost-wise.

I think that a partnership can allocate costs to partners any way the partners agree to. The company does not "keep the $5 for administrative costs". If this is truly a partnership, they are reducing the firm's health insurance expense by that $5 which in turn increases the profits which are then allocated to the partners. Or if characterized as an admin fee, they are increasing revenues which are then allocated to the partners. So what is the purpose of doing this ? Am I missing something here - asks someone who calculated partner distributions for a very large law firm for many years ?

The employer is definitely over 20 employees. I am just not sure how to handle the premium payments made this year and also the premium payments made in prior years. Does it need to be re-categorized as income to the employees? If so, does the employer need to issue revised W-2s and must the employees file revised tax returns? I would be talking to counsel if I were the employer. An employer cannot offer a Medigap policy let alone pay for it if Medicare is supposed to be secondary. <snip> Group Health Plans (GHP) An employer cannot offer, subsidize, or be involved in the arrangement of a Medicare supplement policy where the law makes Medicare the secondary payer. Even if the employer does not contribute to the premium, but merely collects it and forwards it to the appropriate individual's insurance company, the GHP policy is the primary payer to Medicare. <snip> https://www.cms.gov/MedicareSecondPayerandYou/

Nor could someone begin deferrals during the year if they had already earned $245,000 that year. There needs to be a YTD match limit computation in the payroll system (updated when applicable) if that is where the match is being computed . That's what I discovered was missing here when I came on board to process payroll. We had to remove excess matches from the accounts of several employees. This is a subject that causes a lot of confusion and consternation among payroll people. I'm going to add the link to this discussion to my 401(a)(17) resource document - which also contains the infamous preamble.

They sound like what we call "per diem" employees in the healthcare field. They are called in as needed based on our staffing needs. They don't get benefits and they are excluded from our 401(k) Plan (which has an employer match) as of 1/1/11. They can defer in our 403(b), though. It used to be a challenge to track their eligibilty each year for the k plan since some of them didn't hit the 1,000 hours of service in a year threshhold for many years.

There might be something helpful at this link about the ability to drop the kids http://benefitslink.com/boards/index.php?s...amp;hl=medicaid