J Simmons

Slow down when you have ice cream.

Hey, Larry, there must be a distinction that I don't get. rbk08 in post #3 asked "Can her husband then use $ from a post-deductible FSA to pay for additional medical expenses?" (emphasis added). What am I missing? What's the difference from a post-deductible FSA and an FSA that by its terms is limited to post-deductible expenses?

I've consulted recipient ERs that wanted to exclude leased EEs from their plans, explaining what the leasing org's plan had to provide in order to ignore those leased EEs. I was on two occasions consulted by leasing orgs that wanted the safe harbor plans. But never drafted one.

It does matter if the leasing org has a plan--at least a certain type of plan. The recipient ER need not take into account the leased EE if he is covered by a 10% MPPP of the leasing org. The 10% MPPP must not use a Social Security integration formula and it must sport full and immediate vesting. The 10% MPPP must cover 100% of its employees that are leased out and earn $1,000 or more during plan year or any of the 3 prior plan years. The recipient ER may exclude such leased EEs if they do not make up more than 20% of the recipient ER's NHCE workforce--regular NHCEs that have worked for the recipient ER on a substantially full-time basis for a period of one year, plus the leased employees. See IRC § 414(n)(5)

Check out Treas Reg §1.125-3, A-3(a) for descriptions of three allowable options: Pre-pay, Pay-as-you-go, or Catch-up options for payment. Even if the disability leave is not FMLA leave, this might be a good practice to use if your plan document doesn't specify something else

Notice 2005-5 was issued on January 18, 2005, so plans with years ending 3/31 had more than 70 days to adopt the amendment.

Yes to the first question above, as QDROphile has already answered. Yes to the second question. Should you, as an employer? I think QDROphile drew out well the limited utility. Coupling the post-high-deductible with use-it-or-lose it will make such FSA of very limited utility. You're doing great based on the questions you are asking.

Only the HSA and Limited FSA Expenses otherwise eligible for FSA reimbursement/payment are not so until the deductible has been met.

ERISAQuestioner, It might be too long if its length alone causes an employee not to read it. After all, there is a readability standard. Seriously, as your question relates to a H&W plan, it likely might include health coverage and be very long. You might consider having eligibility, entry, elections, employer payment of coverage costs, claims procedures, ERISA identifying procedures, WHCRA and other notices you might choose to imbed in the SPD up front, with the description about what types of health procedures are covered, with what co-pays and 'co-insurance' responsibilities be attached in an addendum to the main body of the SPD. That way perhaps the main body (relatively short) has a greater chance of being read, and the addendum used by employees as a reference much like using an encyclopedia.

Take a look at what 4 U.S. Senators have to say about SPD length on page 3 of the attached letter, under "Notice to Participants". Also, here's a case that found that the SPD need not detail every method under which an early payment option might be available under a plan. McCarthy v. Dun & Bradstreet Corp., 2d Cir., No. 05-3828-cv, 3/29/07. Not directly answering your question--I think the length would depend on the provisions of the specific plan at issue--but something for you to 'chew on'.

It's also a pretty good idea to update the plan document, as we are always in one remedial amendment period (RAP) or another.

Usually, your smaller, local banks that have IRAs allow a broader range of investment options (e.g., including real estate) than do the larger, national institutions that limit them to funds, stocks, bonds, etc.

Alex, what is 'People are Strange' by the Doors? What? this isn't Jeopardy?-sorry--bad form.

I agree with Sieve Post #2 and Appleby. There are estate distribution cases that hold if you waive, you then don't share at all in the subsequent residual or intestate distribution.

ERISAatty, I think you are correct. Reaching age 59 1/2 is a distribution trigger (or as Bob likes to say, "access event") that permits the assets to leave the context of a 403b contract despite the continued active employment with the employer. Because the active employee is such, he might be eligible for the 401k plan to receive rollovers into the 401k plan--which by virtue of his age can now be made from his 403b plan. If you're missing something I don't see it, but then I'm only a birddog.

If the B EEs did not become A EEs until 8/1/08 and Plan A is by its terms only for A EEs (which I assume), then it would not seem logical that A could match what those who were B EEs before 8/1/08 deferred to Plan B without violating Plan A's terms--despite no match to Plan B deferrals for 2008. Some plans define sponsoring/participating ER to include any other members of a control or affiliated service group of which the specified ER is a member. If so, then B EEs might have been eligible for Plan A since the 1/1/07 purchase of 80% of B stock by A. It would be a good idea for A to have an ERISA attorney review the documents of both plans A and B, and dig into what notices were given to B EEs when.

Yes, I've read them. And while I respect your inductive reasoning--if the IRS says in a publication (not regulation, proposed regulation, Rev Rul, Rev Proc, GCM, etc) about IRAs that no MRD is required for the calendar year of 70 1/2 if the IRA owner dies after reaching that age but before his RBD on April 1 of the next calendar year, then that's an interpretation that also you also apply to the DC context--I would not base any legal opinion letter issued under my signature on that basis. I'd certainly argue it to the IRS if a client came to me not having taken the MRD for the calendar year the DC plan employee reached age 70 1/2 but then died before his RBD. I'd certainly argue it in a request for PLR or in tax court. But for the death beneficiary seeking my opinion as to whether the RMD for the calendar year of 70 1/2 should be taken by April 1 of the next year despite the employee's death, I would make sure to advise that there is nothing directly on point from the IRS--as well as your inductive reasoning argument. I would also point out that the IRS could claim on the basis of -5 that the MRD for the year of age 70 1/2 is required, and they'd be seeking a 50% penalty tax. I'd want my client to understand both interpretations, the arguments favoring and disfavoring each, and what the consequence of foregoing the MRD might be (to weigh against the loss of further tax-deferral on what the MRD payout amount would be), so that my client could make an informed decision as to what course of action to take. Is that a trick question? Before I answer, I'd like to know what parts of no are there? I think I just did in this post. Will you be answering mine, i.e. Are you opining the IRS wouldn't [assess the 50% penalty] in the DC context? If so and you'd be willing to give death beneficiaries and estates an unequivocal written legal opinion to that effect, I'll know where to send those not satisfied with my drawing out the pros and cons of the two viable interpretations.

You haven't answered my question: Given the statements in IRS publications and the MRD regulations 1.401(a)(9)-2 and 3 and reg 1.408-8, would the IRS impose the 50% excise tax if an MRD is not taken where a participant who attains age 70 1/2 dies before April 1 of the following year? Are you opining the IRS wouldn't in the DC context?

If the S Corp is audited, how will she justify no W-2 prior to this year, and now all of a sudden W-2 wages? Did she not perform personal services for the S Corp prior to this year?

As a result of this thread, I know a couple of sources I can send those who are death beneficiaries of a (former) employee that reached age 70 1/2 but then died before April 1 of the next calendar year for an unequivocal legal opinion on the topic.

Although stated declaratively, that Sieve's opinion. Mine is different. The situation of the OP meets the explicit requirements of both -3 and -5, nothing in the regulations provides that if -3 applies then -5 cannot. My position is that both apply to the OP situation. Ignore -5 at your own peril--or get a legal opinion (so you might have malpractice recourse if need be).

ERISAnut, So which 403b contracts are included in an ER's 403b plan? (Rhetorical inflection.) It would seem a real stretch to say that 403b contracts that are not included in an ER's 403b plan are nevertheless assets of that 403b plan that must be distributed in a reasonable time in order for there to be a 403b plan termination (an "access event" as Bob terms it for those active EEs under age 59 1/2). Bob concedes that not all post-2004 403b contracts will be successfully included in an ER's 403b plan (and that's okay for the non-included 403b contracts, so long as the ER made a reasonable, good-faith effort to include them). So do the assets of the non-included 403b contracts prevent a 403b plan termination if all of the assets of the included 403b contracts would otherwise be timely distributed? Would it belie the claim that the ER made a reasonable, good-faith effort if in trying to include the post-2004 403b contracts the ER asked the vendor and EE to subordinate those 403b contracts to a plan document that were to give the ER the unilateral power to terminate and direct payout? (I realize Bob says that the model plan language of Rev Proc 2007-71 that the ER can terminate, but only subject to the individual contracts--but what if I don't include that clause? The regs do not require that clause. Rev Proc 2007-71 does not require that clause?) What is the IRS' motive in introducing a dramatically new regulatory scheme but then hamstring the ERs that operated under the old one from being able to terminate? Is it to punish them for having operated a 403b plan under the previous scheme? Actually, ERISAnut, all the foregoing questions are rhetorical. Chalk if up to practical frustration with regs and guidance that are not even internally consistent. I'm use to better (albeit not perfect) from Treasury regulations.

For post-2008 contributions to a 403b contract to be tax deferred (or treated as after-tax Roth), that 403b contract must be "maintained pursuant to a plan". Treas Reg § 1.403(b)-3(a) and -3(b)(3). That plan may allocate administrative duties to other parties, other than the sponsoring employer--except that no such duties may be put on the participating employees. Treas Reg § 1.403(b)-3(b)(3)(ii). The 403b regs do not describe what steps or characteristics must apply for a 403b contract to be "maintained" pursuant to a plan as compared to a 403b plan that is not. Rev Prov 2007-71, section 8.01 requires an employer to make reasonable, good faith effort to include in the employer's 403b plan each 403b contract to which any post-2005 contributions have been applied. Bob has repeatedly said that the effort does not have to be successful. Ergo, there could be some such 403b contracts that are not successfully included in the employer's 403b plan. While section 8.01 describes what a reasonable, good-faith effort is, there is no explanation of when a 403b contract is successfully included in the employer's 403b plan or under what circumstances a 403b contract is not. To assure compliance of those duties that the plan places on the 'selected' 403b providers, the plan's sponsor needs some contractual assurances from those 403b providers that will receive those post-2008 contributions that the 403b providers will take those steps necessary as to their 403b contracts in compliance, regarding, for instance, issues involving loans, distributions, exchanges, etc. That requires that there be information sharing between the sponsor and the 403b providers, such as about how much the employee might have out in loans from other 403b contracts maintained pursuant to the plan. Unfortunately, the closer we get to 1/1/2009, the more that it is becoming apparent that the 2007 regs and Rev Proc 2007-71 do not provide adequate guidance for employers to achieve compliance.

I would look to the language of the old prototype plan, any agreement between the old prototype sponsor and the ER, and any letter/notice from the old prototype sponsor to the ER to determine how much "tail" time there might be. The more critical issue is whether the deadline for an amendment has occurred from the time that the old prototype adoption ended and before the new prototype is adopted. In that interim, a mandatory amendment deadline might have been missed and you'd possibly need an EPCRS correction for interim amendment failure. That's because even if the old prototype's sponsor timely signed the mandatory amendment for its prototype, but that was not so signed until after the adopting ER-prototype sponsor relationship had ended, then the old prototype sponsor's so signing that amendment would not apply to the ER's plan.

Since the plan did not sell the RE, it is logical that the plan has not realized any gain to be UBTI prior to the distribution. If the RE is transferred as part of a distribution to the participant, subject to the mortgage, the plan is being relieved of an obligation beyond the value of the RE. That could be taxable income to the plan per IRC 108 and thus possibly UBTI under IRC 512-514. I've never run across that situation, but following that logic, would the UBTI liability follow the property out of the plan into the hands of the participant?