GBurns

It is not obvious. The employee has had this same deduction coming out for many months (probably even 2 years or more) and has become accustomed to it. Unless they get a monthly statement showing the loan balance, I do not expect any employee to notice for quite a while. What is more obvious to me is Why did the administrator (or the system) not see the initial $0 loan balance, then for many months not see the overage balance on the loan account? Where in the Plan did the money go ? If any ADP or other periodic tests were done, Did the discrepancy not show up ? I blame the administrator and the system, not the employee.

I thought that in this particular case, it was: If 2 non-married individuals own a C-Corp, say 50/50. 1. They have to file a regular 5500 (not an EZ), and 2. They have to be covered by a Fidelity Bons because there are 2 employees.

It is BOTH your IRA AND your CORPORATION (to a sufficient extent). You have a fiduciary duty to BOTH. Any way you cut it, you are self-dealing and causing actions with the sole purpose of getting a benefit. This is the point of the last few paragraphs of the DOL letter. The action by the corporation is an action by you and/or for you exclusively. Benefits do not enure to the IRA they enure to the owner of the IRA. You cannot separate yourself from either the IRA or the corporation. That is the point that you are missing.

Isn't there a difference between "an individual and his or her spouse" and two individuals (one or more) ? Two individuals do not necessarily mean that they have to be spouses.

In block letters: YOU STAND TO GAIN/BENEFIT. It cannot be simpler.

It would take some time to find one that is not tied to a particular software package. Probably the quickest and easiest way to get the details would be, as suggested by vebaguru, to get it from the training provided by and through the software providers. I would not say that administering cafeteria plans is a quick and easy thing to learn. If this is your outlook, I urge you to reconsider. For opinions on what can be provided and cost etc try some of the vendors who advertise on BenefitsLink. I do not thiink that giving the names of others would be ethical, assuming without looking, that they are not already on that list. In any case, administration of employee benefits plans should NEVER be done by the employer/plan sponsor.

The problem is not the checklist. It is how you accomplish the items on the checklist.

Tom The reason for my questions was just to make sure that all bases were covered in case there was some loophole that no one saw because of some detail. Controlled group, ASG, attributon issues etc not being considered, both you and the corporation are disqualified nor a number of reasons. Rather than go into details, which is what the advisors you have paid, should have and could have easily done, I make a simple suggestion, use Google searches on the terms 4975(e)(2) and "disqualified person IRA" (without the ""). In the mean time read this, especially the last few paragraphs which explain why the corporation is disqualified even with less than 50% ownership: http://www.checkbookira.net/Father_Kids.pdf

For clarification : What type of business entity is it? Are you an employee? Are you an officer ? Are you a Director/Board member ? Is this business part of a controlled group or otherwise related to the other businesses ?

John G makes a good point that " Many tax professionals have no experience in some of these odd areas, so you will need to ask some hard screening questions - and you normally don't pay for advice until you find a professional qualified to help you." The "screening questions" should have established knowledge and ability. So I do not understand how you could be "burning money".

I think that you should place the burden of proof on this brokerage. If they have done so amny, the question must have come up before and the must have provided a proper answer. Bear in mind that a sale rep, by whatever name called, is still a sales rep. He or she has the main (sometime sole) function of selling you the services of the brokerage. A sales rep's opinion is not necessarily that of the brokerage. The brokerage has both a legal dept and a compliance dept. Get an official brokerage opinion in writing. The "fact" that thousands have done something means nothing. Thousands of people do not file tax returns each year and nothing happens. That does not mean that any of us should follow suit. JohnG suggested that you speak to a tax attorney and or accountant (I am sure that he means tax accountant). An ERISA attorney is not necessarily knowledgeable about tax issues. An accountant is not necessarily knowledgeable abou tax issues. Seeking advice from people who do not have in depth knowledge about the particular issue seems somewhat futile. On the other hand, PT and disqualification issues are not really tax issues. So that makes the seeking of advice even more specific. Signing then fighting it out later, could be very very expensive.............

For a better understanding of the various issues involved, you might want to search Google using the term "MERP COBRA" (without the quote marks).

That probably depended on who got audited and items under scrutiny.

I have never heard of anyone having a problem deciding if an item was a listed transaction. It always is that it is either listed or it is not. I find the list to be very clear. However, there could be some difficulty in deciding if an item is a reportable transaction or not. Two different issues. In any case, I do not think that EB professionals are equipped to render advice in this area. It is a matter for a specialized tax professional, and preferably a lawyer rather than an EA.

I have neither seen nor heard anything about the new Proposed Treas Regs announced in August 2007. The comment deadline has passed and while there have been reports on a few comments submitted, things have really been quiet. I do not know what the reason could be since if adopted it would be effective January 2009 which is not so far away. I wonder if there is some pending legislation that would affect employer based health insurance. This would certainly impact section 125. Then again we went through something similar in 1989. I wonder? But what do we really know ?

Why is a requested extension needed in order to amend a filed return ? I do not agree that a correction made (with contribution change) in 2008 can be deducted on an amended 2007 return, but that does not seem to be what the OP was considering anyhow. The expense was paid in 2008 and my opinion is that it was also incurred in 2008 when the results of the tests were known. There might be a funding deadline that might have relevance, but I do not see any relevance of tax return due date or extension date.

Have you considered that you might have wrong addresses ? This could be caused by many things and anything including a software glitch. Have you used the "Address Correction" and/or Forwarding services ? JanetM's advice is good.

For quite a few months it has been a crap shoot as to whether the system recognizes me or not. It does not matter if my last visit was 2 minutes ago.

Don You are flip flopping again, worse than some politicians do. You made precise statements such as " VEBAs are a creation of federal law, passed by Congress in 1928."

AndyH I see mention of contract (which is the same as policy) but do not see "qualified plan" or even "plan". Where did i miss it ? (f) Certain custodial accounts and contracts For purposes of this title, a custodial account, an annuity contract, or a contract (other than a life, health or accident, property, casualty, or liability insurance contract) issued by an insurance company qualified to do business in a State shall be treated as a qualified trust under this section if— (1) the custodial account or contract would, except for the fact that it is not a trust, constitute a qualified trust under this section, and (2) in the case of a custodial account the assets thereof are held by a bank (as defined in section 408 (n)) or another person who demonstrates, to the satisfaction of the Secretary, that the manner in which he will hold the assets will be consistent with the requirements of this section. For purposes of this title, in the case of a custodial account or contract treated as a qualified trust under this section by reason of this subsection, the person holding the assets of such account or holding such contract shall be treated as the trustee thereof.

What is a "telemedicine arrangement" ? If it is offered outside the health plan (and I assume you mean the medical plan), isn't there a risk of medical treatment conflict etc ? Shouldn't both be linked/coordinated ?

Is the policy a life insurance policy or is it an annuity or otherwise? I do not think that a life insurance policy can be treated as a qualified trust. Who holds the assets and the contract? Isn't that person, by default, the Trustee? I cannot imagine the insurance company allowing themself to be default trustee.

Is it that Texas does not use GASB rules or is it that Texas opted out of GASB 45 only? In any case there is no connection that I know of between ERISA reporting and GASB reporting. Two separate issues, two separate purposes.

Don VEBAs are not created by or under Federal law. All that happened in 1928 was the granting of tax exempt status. Corporations, LLC, Associations and Trusts (including VEBAs) are created under state law, but then they each get their tax status from the IRS under Federal law. None are created under Federal law. How would you create a VEBA under Federal law? Where would you file the entity name? Articles? By-Laws? Occupational License etc and anything else needed to operate the entity?

So the apparent problem is that J made pre-tax salary reductions without a section 125 plan in place. But what does "a plan" and "in place" really mean. Apparently the concensus is that there has to be some document i.e a plan document. Why ? The answer that I always get is that the Treasury Regs say so. But that raises the question of Which Treas Regs ? The Proposed Treas Regs? If that is the response then the next question is Since when have Proposed Treas Regs ever had the effect of law? Many court decisions including Grande v Allison have pointed out that the bulk of the Treas Regs affecting section 125 cafeteria plans are "merely proposed". So you are trying to apply something that the law cannot enforce. Has anyone ever seen or heard of a section 125 cafeteria plan failing an audit for any issue that falls under the Proposed Treas Regs ? Personally I canot recall even one. Maybe my experience is not wide enough but all cases have been for other issues. So What is "a plan" under IRC section 125 ? This should be the determining factor for resolving this issue. Is the verbal agreement by the Board (of course recorded in the Minutes of the Board Meeting" along with the general understanding by, and consent of, the participants, sufficient to have established "a plan" Or is a written document with a written Board Resolution needed ?