MARYMM

Yes, I did have PS-58 Costs ( I was the one who had to prepare the 1099's for that !) but they were not much and therefore the tax on it was not much. My employer did give me some term life insurance, but this option gave me a little more. I know it is not the wisest investment in a QP, but it does have some appeal to ee's whose estates are not huge

From another perspective - that of a single parent whose employer allowed life insurance as an option - by electing insurance, I was able to parlay half of my employer's contribution (approx $500) into a $25,000 benefit to my family if I died. Yes, I could have purchased term insurance outside of the plan , but this way I did not have to pay for it out of my own pocket. As soon as the kids reached majority, I cashed in the policy.

This is a concern among older ee's nearing retirement. By electing Sec 125 pretax benefits, their SS wages for the last years of their employment are reduced and they believe that their monthly SS benefits will be reduced.

We are continuing to have a lively discussion about the 401(a) 17 limits on our payroll forum. A participant in the discussion has raised this question: " What is the purpose of the $220,000 wage limit if it is not to stop the deferral? " What was the intent of the 401(a) 17 comp limit ? Thanks

We make employer contributions of 3% of pay to the 401(k) Plan and also a match up to 1% of pay. I understand that the amount of compensation on which we can calculate these contributions is capped at $220,000 for 2006. So the maximum employer contribution we can make this year is $6,600 and the maximum match we can contribute this year is $2200. The 401(a) 17 limits are being discussed on another forum. Someone is contending that the limits also apply to salary reduction contributions. They are stating that if an ee has not reached the maximum salary deferal contribution of $15,000 by the time his/her comp has reached $220,000, the ee is prohibited from making further deferal contributions. In effect, the ee is not allowed to spread the $15,000 evenly over all the payrolls of the year. The poster there stated "Section 401(a)(17) limitation takes precedent over the 401(k) limits and that it is even cross-limited by the Section 415 limits." Is this true ? Thanks in advance for your assistance.

The letter from the TPA indicates that " in accordance with the plan document reimbursement checks are forfeited (or become stale) if they are not cashed." The TPA has sent us a check for the amount of the stale checks. Since ERISA applies to the Plan , the letter states we can use the money to defray administrative expenses or "to pay benefits under the Plan" AP has issued checks to the employees for these amounts even though that is not an option listed in the letter. The letter also advises us to check with our counsel re application of state unclaimed property or escheat laws re these checks. Do those laws supercede the plan document ? Thanks for any guidance you can offer to someone who now wishes she had never seen the AP checks

Thanks. We are a not govt. plan. This is a sticky situation where I have to question something OK'd by HR, Controller and CFO.

Are all Section 125 plans subject to ERISA? We have a letter from the TPA regarding stale reimbursement checks and the way the returned funds are to be handled depends on whether or not ERISA applies to the plan.

My understanding is that if the employee is not overspent, COBRA must always be offered. It is up to the employee to determine whether it is beneficial to do a COBRA continuation or not. For example, if the ee had already incurred expenses equal to their account balance but had not submitted them, there would be no benefit to COBRA participation. If the ee had not yet incurred the expenses but planned to, then COBRA would make sense for them. Some ee's use their FSA's for a "big ticket" item such as Lasix vision surgery or a child's orthodontia. If the ee had not had the services yet, COBRA would be the only way to avoid forfeiting their contributions.

The COBRA statement didn't make any sense to me at first either. Then I realized that the OP might be referring to COBRA eligiblity for the FSA. If the terminated ee's FSA account balance is negative, there is not COBRA offer made ; if there is an account balance, COBRA must be offered. That contribution from the final paycheck could move the balance from negative to positive.

In an FSA, a terminated participant must be making contributions thru COBRA to be participant. If the contributions cease, participation ceases. COBRA participation in an FSA only makes sense when no covered services had been incurred while still employed - "money left on the table" as someone else put it

Shouldn't they keep the deferrals in the Plan and issue W2c's to the affected ee's ? The ee's had a higher income tax liability than they should have had and should be given the opportunity to file amended returns, shouldn't they ?

Yes, PIP, I agree with your interpretation - it is the eligiblity for the Plan. Once the ee is eligible he/she should receive the PS contribution. So, should the company have made a the Tier 1 contribution to the eligible employees for the 1st payroll paid in 2005 ? The controller and I can't understand why a match contribution would be due for that payroll and not the Tier 1 discretionary.

I'm not sure that the language quoted requires that a contribution be deposited separately for each payroll period. I could probably read it either way depending on other pertinent sections of the document. But is a contribution required for each payroll period in the plan year - regardless of when it must be contributed?

Yes, I'm sure....... Section 4.1 (i)For each payroll period, the Company shall contribute a Tier 1 contribution to the Regular Account of each Participant who has satisfied the requirements of Section 3.1(b). Section 3.1 (b) For purposes of eligibility for Company contributions under Section 4.1, an Employee of the Company shall become a Participant on the Eligibility Date coinciding with or next following the date on which such Employee completes 1,000 Hours of Service during the 12 consecutive month period commencing on the Employee's Employment Commencement Date

Company put a 401(k) plan into place on 1/1/05 - that is the effective date in the Plan document. In addition to an employer match , the Plan also provides company contributions to all eligible ee's (those with 1,000 hours of service) whether or not they make a deferral contribution. The company contributions are to be made each "payroll period" - a term that is not defined in the Plan document. The company(which pays biweekly) did not start salary deferrals until the 2nd payroll paid in 2005 (1/20/05) and they did not make the employer contributions for the 1st payroll (1/6/05). I believe that decision was based on the fact that the wages being paid on 1/6 were for time worked in 2004. It seemed to me that the discretionary contributions were due to the ee's for the first payroll paid in the plan year and we raised that point with the TPA. They suggested we consult our ERISA attorney. The response I am getting (filtered thru the HR Director) is that we owe the ee's the matching contribution on the deferrals they should have been allowed to make for that first payroll (plus earnings) But no opinion is being given on the employer contributions. Your thoughts ? Thanks in advance

I'm new to 403(b) Plans - my prior experience has been with 401(k) and HR10 So I am reading IRS Pub. 571 to learn about them. In Chapter 3, the cost of incidental life insurance is discussed. If an annuity contract includes incidental life ins., the employer must include the cost of that coverage on the employee's W2. Questions: 1. Does this apply to non-ERISA 403(b) Plans ? 2. Is this also known as PS-58 cost ? (we used to offer whole life as an investment option in the HR 10 plan and had to issue 1099 R's each year for the PS 58 cost of the term life portion of the policies) Thanks in advance

Thanks, this is very helpful

I am a Payroll Coordinator who is trying to set up salary deferral limits crorrectly in the in-house payroll program. My new employer (a hospital) has several plans. Two Tax Sheltered Annuities have been offered for many years to which no employer contributions are made (non ERISA 403(b)). A 401(k) Plan was established last year to which employer match and disretionary contributions are made. My question is - what is the maximum salary deferral amount for an employee (under age 50) for 2006 ? Is it a total of $15,000 to all 3 Plans ? Or is it $15,000 to the TSA's and $15,000 to the 401 (k) for a total of $30,000 ? I've seen what looks to me like conflicting answers to similar questions on this board. I'm thinking that whether or not the 403(b) is an ERISA plan may make a difference. Thanks in advance