J Simmons

If you are a control group, then my referenced info would not apply to your situation. You'd be a single employer plan rather than a multiple employer one--terms of art.

See this thread for some info: http://benefitslink.com/boards/index.php?s...amp;hl=multiple

Ouch. Back to the drawing board for a Plan B. Thanks Blinky.

Situation: Co A is owned 100% by Z. More than 1/2 of Co A's business is providing management services to Co B owned 100% by Y. We have an affiliated service group. Co B sponsors a DB plan for Y, the sole employee of Co B. In determining if Z can waive participation without causing a discrimination testing problem, we need to determine if Z is a 'key employee' (since Z is not by earnings alone an HCE and we'd not want to have to make top-heavy minimum contributions for Z if he waives). The key employee question resolves into what ownership percentage is Z considered to have. The relative revenues of Co B to Co A are 10:1. So, in deciding if Z is a key employee with respect to the plan, how do we determine what percentage Z is considered as owning of the affiliated service group? Is it 100% ownership because Z owns 100% of Co A, one of the constituents of the affiliated service group? Is is 9.09% (1/11) based on relative revenues generated by the companies? Or is some other measure the appropriate one?

Hip shooting here, Suzie, as I recall the notice only had to be given to those that could otherwise receive a payout before the later of age 62 or the plan's normal retirement age. For anyone younger than that, I think you'd yet need to provide the notice. One of the Congressional purposes was to encourage employees to hold off spending the distributable amount until retirement, when they will likely need the funds to live on.

Is the employer finding that providing the QJSA notice and requiring the former employee (with spousal consent) to opt for a lump sum all that difficult to deal with that they'd go to all that trouble? For that very small number that might opt for the QJSA or not elect out of it, just use their benefits to buy a commercial annuity with the QJSA rules built in and then distribute the annuity contract to the former employee. Doesn't seem all that onerous, particularly when they'd have to go through this process all at once when terminating the spin-off anyway.

Just make sure that you don't have a HIPAA discrimination problem in drawing that distinction. That will depend perhaps on the health status of the excluded attorneys as compared to the included staff. From a tax perspective, no problem.

Look at ERISA sections 4(b)(1) and 3(32).

Yes, "Taxpayers may rely on [the proposed] regulations for guidance pending the issuance of final regulations." Federal Register Vol 72 No. 150 (Aug 6, 2007) p. 43944, under the italicized heading Proposed Effective Date.

If the inclusion of the domestic partner does not involve a cost of coverage increase over that for covering the employee and proper dependents for tax purposes, then there would be no part of that cost of coverage that would be taxable. Only an increase in the cost of coverage due to coverage for the domestic partner (or a dependent who does not qualify as such for health benefit tax purposes) needs to be deducted on an after-tax basis.

I think it is so PROFOUND that plan documents often specify that participation ends when you die. (Without such a clause would the proper application of the plan document continue the dead person's participation?) Anyway, an interpretation that doesn't completely ignore that clause but tries to give significance to it along with the other provisions of section 2.7 appears to be that only expenses incurred prior to the employee's death are eligible, but that for the rest of that plan year claims may be submitted for expenses incurred prior to the employee's death. What about expenses incurred for health care for the spouse and beneficiaries during the remainder of the plan year? An interpretation that the spouse and beneficiaries expenses for health care provided them after the employee dies would render the first sentence of section 2.7 ("If a Participant dies, his participation in the Plan shall cease.") to be meaningless. However, there's a little wiggle room probably in the fact that the plan document probably also specifies a run-out period for ongoing participants--so many days after the plan year ends to submit claims for expense for health care provided by the end of the plan year. If the spouse and beneficiaries of a deceased employee could only submit claims for health care provided them before the employee's death, why limit the time frame they can submit the claims to the end of that plan year? Why not also give them the post-year run-out period? Since there is no obvious reason that the spouse and beneficiaries should not have the post-year run-out period suggests that perhaps the provisions you quote from 2.7 were intended to allow claims for health care to the spouse and beneficiaries after the employee died and before the end of the plan year. The plan administrator has an interpretive call to make, and then follow thereafter in other, similar situations. There would also be COBRA implications, if the employer is not too small. If COBRA applies, then the spouse and children could likely continue the medical reimbursement for expenses incurred through the end of the year, provided the remaining annual cost is paid for.

401a17 compensation and 415 DC-plan benefit accrual limits would also be useful to know.

I think that the co-pays do not qualify for reimbursement while there remains a palpable possibility that the EE will be reimbursed by the insurance company. If negotiations break-off with no settlement is reached, then I think that the co-pays would be eligible for FSA reimbursement--but if she eventually does recover after that, the plan's subro/recovery clause (if the plan has one) would likely kick in.

Without an ERISA wrap pulling them all into one 'plan', and the only plan documents are the policies themselves, perhaps you should file a Form 5500 for each policy as a separate ERISA plan.

Happy 61st Birthday, Vebaguru.

The Plan, however, is aware of the second husband's claim that his signature was forged. Having this knowledge before the payout to the designated beneficiary/son is made puts the plan on notice that perhaps the signature of the second husband is not valid. If the plan hazards payment under such circumstances to the son and later cannot retrieve it from the son, then the plan might have to pay the benefits again, this time to the second husband. The cloud of doubt has been cast over the validity of the signature of the second husband. I think this points to interpleader being the better course of action for the plan to take.

When you say the "Individual Rate Group for the 3 HCE's Pass", does that mean each of the 3 HCE's separately tested rate group passes? Is that passing the 70% ratio percentage test or the modified ratio percentage test? If each HCE's separate rate group passes the 70% ratio percentage test, you should not need also to pass the average benefits percentage test.

If an EE has made after-tax EE contributions to a QRP in which he/she also has pre-tax benefits, may he/she withdraw just the after-tax EE contributions (and not be taxed due to the basis), leaving the pre-tax benefits and investment earnings in the QRP for later withdrawal? or are any withdrawals deemed to be proportional between the after-tax employee contributions and pre-tax benefits, with just a proportional amount of the basis applying?

Sorry I have no citations, but about 15 years ago I researched the question about the duty (or not) to file an amended return. I found two federal court cases (I believe one from that 1950s and another from the late 70s or early 80s) that addressed the question, and no others. Both held that if the original return was filed under a good faith belief of the accuracy of the information there presented but that later it was discovered to be erroneous, there was no duty to file amended returns. Again, I apologize for not having citations to provide for those cases.

Hey, Mike, EBSA changed its earlier position (the one against charging for QDRO processing) on May 19, 2003. EBSA Field Assistance Bulletin 2003-3 permits the expenses to be assessed against the specific plan accounts involved. Surprisingly few plans take advantage of this FAB.

Suppose an ER has an HRA under which EEs accrue $400/mo. Each EE may either direct the application of HRA dollars accrued to his or her benefit to pay for medical insurance premiums or apply for reimbursement of out-of-pocket medical expenses. ER has a group health policy that EEs can either accept or waive coverage. EE turns 65 and becomes eligible for Medicare. EE had previously been having the entire $400/mo applied to pay for his or her coverage under the group health policy. Now EE stops the application of his or her HRA dollars, and instead directs payment of $150/mo for a Medicare supplemental policy. Is the other $250/mo accruing to EE and available to EE either to reimburse out-of-pocket expenses or pay for other, ancillary health coverages an inducement in violation of Social Security Act section 1862(b)(3)©?

Joel to JSimmons: "Why haven't you included section 415© in your analysis?" There are two contextual references in IRC § 415© to IRC § 457. One refers to rollovers not being taken into account as benefit accruals subject to the 415© limit. IRC § 415©(2). Another includes an employee's elective deferrals under IRC § 457 in the definition of compensation for purposes of applying the 415© limit. IRC § 415©(3). Neither reference in IRC § 415© to IRC § 457 specifies that the IRC § 415© limit applies to 457 plans. If it did, the more specific limits in IRC § 457 would nonetheless apply and limit the 457 plan amounts to $15,500 in 2006. Keep in mind, IRC § 415© is a limitation, not a safe harbor. The logic you want to apply would mean that since IRC § 415© also refers to IRC § 402(g)(3) 'elective deferrals' (IRC § 415©(3)(D)(i)), then employees may electively defer up to $45,000 this year into 401k plans (because of the reference to them in IRC § 415©) rather than the specific limits applicable to 'elective deferrals' found in IRC § 402(g) ($15,500 in 2006). If you are unpersuaded, good luck in the audits--you'll need all the luck you can get because logic and argument won't help you on this issue.

Hey, Joel-- You might want to check out Treas Reg § 1.457-2(a) and (b)(1). Subsection (a) defines amount(s) deferred as annual deferral(s), which paragraph (b)(1) in turn explains is "the amount of compensation deferred under an eligible plan, whether by salary reduction or by nonelective employer contribution". Then go to IRC § 457(b)(2) where the amounts that may be deferred are limited to the lesser of the applicable dollar amount or the employee's compensation. Then IRC § 457(e)(15) limits applicable dollar amount to $15,000. So, tracking it back, the $15,000 applicable dollar amount is a limit on the amount of deferrals into a 457b plan if it is less than the employee's compensation. Amounts are considered deferred under an eligible plan whether due to salary reduction or nonelective employer contribution. Thus, the $15,000 limit applies to the combined amount of salary reductions and nonelective employer contributions. This regulation is also consistent with the implication of the statutory language. Deferred compensation is the terminology used, particularly in the limitation language of IRC § 457(b)(2). The statute defines as a subcategory nonelective deferred compensation (see IRC § 457(e)(12). So it would not be logical that the more generic deferred compensation somehow excludes the subcategory of nonelective employer contributions. I think your 'buddy' is right.

The excerpts are from the adoption agreement, not the prototype itself. I would suspect that the prototype, lead document itself was required (before the IRS issued an opinion letter for the prototype) to include language that if a time period (like a number of months) was selected in an employer's adoption agreement for minimum service rather than 1 or 2 "years of service" that the elapsed time method applies.

I don't know of anything directly from the IRS, but you might look at Sorensen v. Saint Alphonsus Regional Medical Center, Inc., 118 P.3d 86, 141 Idaho 754 (Idaho 06/24/2005). It is a state law case where an in-service distribution contrary to terms of the plan was made and caught by the IRS on audit. The IRS and employer agreed on two alternate resolutions from which the employee involved could pick. The employee didn't like either, and filed suit. If I recall correctly, there's discussion in the opinion about why the IRS concluded she had not separated from service.