PJ2009

Hello All, I recently posted this question, but received no responses. Let me rephrase and hopefully somebody will weigh in. This is a new area to me, and obviously I haven’t found a definite answer in the HSA guidance. The participant elected HSA for 2009 and made a $4,000 contribution early in 2009 to cover the entire year. However, as of April 1 he elected to enroll in the company's PPO, a low deductible plan. 1. Can he remain covered by both plans for the rest of 2009? I’m not sure what benefit this would be, except that he would be able to roll over the entire $4,000 into the next year. 2. In a related matter, can he split his coverage and cover his family under one plan and himself under the other? 3. If he cannot be covered by both arrangements, should he be required to receive a refund of 75% of the $4,000, representing the 9 months during which he was no longer covered by a high deductible plan? Your thoughts would be most appreciated. Any cites would be as well! Thank you.

An employee is a participant in both a single employer DB plan and a multiemployer plan. Both are PBGC insured. Unlikely scenario, but he wants to know if both plans should terminate, would the PBGC pay full guaranteed benefits under each plan or "carve out" some or all of the benefits? I would think the plans would be treated as completely separate, subject to their own PBGC maximum benefits, but wanted to run it by somebody. I couldn't find any guidance on point. Thank you!

I didn't think so, but many plan sponsors are looking to save money! Very helpful. Thank you.

The 401(k) plan is aggregated with a DB plan for meeting the coverage test. The 401(k) is safe harbor match and NHCEs get an additional 7.5% contribution to satisfy the minimum gateway for testing the DB and DC plans together. Question: Can the 401(k) plan amend the safe harbor formula mid-year to become a 3% nonelective and then make a 4.5% additional contribution to satisfy the gateway? I think it would be OK to do this as of the beginning of a plan year, but I am uncertain about whether it can be done mid-year. Thank you!

That was my conclusions as well. However, it doesn't make sense in the case of a 401(k) plan that has no special disability benefits other than the right to receive a distribution upon disability, death, termination of employment, etc. I would have thought the disability claims procedure language would only apply to a retirement plan that had an actual "disability benefit" separate from the other benefits. In any event, I very much appreciate your response and have concluded that the disability claims procedure language is required in ALL SPDs.

Hello, Is there a requirement that a retirement plan SPD must have a separate "claims procedure" for any disability benefits? Isn't it enough to use general language in terms of "benefits" if the same claims procedures apply to all types of benefits? I thought the disability language for claims procedures only applied to H&W SPDs. Thank you!

Many thanks! It's interesting to note that these rules apply not only to SPDs but to other legally required notices as well. However, it appears to be a very tough standard to meet. It almost seems easier to continue to provide SPDs and other notices the old-fashioned way.

Could somebody please point me to the most recent regulation on electronic distribution of SPDs? It's a typical Monday and I'm just not finding it. Thanks much!

I was looking for something similar recently and found this http://www.jacksonlewis.com/articles/1005_Bender.pdf It is a little old Very helpful! Thanks. Fortunately, things in the SPD area don't change much (knock on wood).

Does anybody know where I can find a concise and current "checklist" for retirement plan and H&W plan SPDs? I have the regulations, but would like to work from something more user friendly.

Have the Final 125 regs been issued yet? If not, does anybody have an idea when they will be issued? Thanks!

Here is my thinking, and I welcome any comments. The employee was covered by the HSA for 3 months and should have to pay 25% of the annual contribution that he made. He should be reimbursed the other 75% since as of April 1 he is now covered under the low deductible plan. I don't believe he should be forced to remain in the HSA for the entire year, even though he made the entire annual contribution. So far I have found nothing in the guidance and I have pored over hundreds of Q&As in various rulings! Thanks all.

Rev. Proc. 2008-50 provides a useful Appendix B , Section 3 to help us calculate earnings in the case of corrections. However, that section does not refer to losses, which must be taken into account for some, but not all corrections. Do you think it is appropriate to simply "read into" the language that any losses are to be calculated the same way. For example, if you choose the method that calls for using highest investment return among various funds, you would use the "least loss" where there is a negative return for all funds? On second thought, it is unlikely that the money market fund would actually be in a negative position, so I suppose that fund would be the rate of return to use in calculating earnings/losses to be applied to the contribution. Does this make sense?

Good Morning, The participant elected HSA, made a $4,000 contribution early in 2009, and then as of April 1 elected to enroll in the company's PPO. Looks like a problem to me. Any suggestions? Thanks.

Let's change the facts a bit. In my situation, we have a profit sharing only plan. The employer missed an eligible participant with respect to employer nonelective contributions in 2008. The missed contributions have been made up, but we need to determine if any gains or losses are required. The plan, like virtually all other plans, suffered significant losses last year. Do the rules governing crediting gains/losses on missed deferrals also apply to employer nonelectives? Thanks, everybody. Very helpful line of responses! PJ, Since Rev. Proc. 2008-50 Section 6.02(4)(e) states that it applies to corrective contributions "in the case of a DC plan," I see no reason to make a distinction between a pure profit sharing plan and one with a 401(k) feature (or a stand alone 401(k), for that matter). All of them are DC plans. Yet another question: Section 6.02(4)(a) states as follows: "However, a corrective allocation is not required to be adjusted for losses. See section 3 of Appendix B for additional information on calculation of earnings for corrective allocations." What is the diffference between a corrective allocation in (a) and a corrective contribution in (e)? As you can see, one requires that losses be taken into account while the other does not. Thanks and have a great weekend!!!

I agree. Thank you for the citation. Just one more question - how would you determine the "loss" to be applied to the corrective contribution? Would it be based on the plan's rate of return or the participant's experience in his/her own account? Or some other alternative method? Again, many thanks! pj Let's change the facts a bit. In my situation, we have a profit sharing only plan. The employer missed an eligible participant with respect to employer nonelective contributions in 2008. The missed contributions have been made up, but we need to determine if any gains or losses are required. The plan, like virtually all other plans, suffered significant losses last year. Do the rules governing crediting gains/losses on missed deferrals also apply to employer nonelectives? Thanks, everybody. Very helpful line of responses! PJ, Since Rev. Proc. 2008-50 Section 6.02(4)(e) states that it applies to corrective contributions "in the case of a DC plan," I see no reason to make a distinction between a pure profit sharing plan and one with a 401(k) feature (or a stand alone 401(k), for that matter). All of them are DC plans.

Let's change the facts a bit. In my situation, we have a profit sharing only plan. The employer missed an eligible participant with respect to employer nonelective contributions in 2008. The missed contributions have been made up, but we need to determine if any gains or losses are required. The plan, like virtually all other plans, suffered significant losses last year. Do the rules governing crediting gains/losses on missed deferrals also apply to employer nonelectives? Thanks, everybody. Very helpful line of responses!

Excellent point about being able to prove the separation of assets. I concur with those who favor always applying for a separate EIN for the trust. It's good form.

1. What is the deadline for amending a plan to provide for non-spouse rollovers assuming, of course, that the plan does want to offer them? 2. Is it possible to "retroactively" amend a calendar year plan NOW to permit this option for 2008 and ongoing? The plan is a 1-person plan and the participant died last year, so there are no "discrimination" type issues to consider. Seems low risk to me, but I would appreciate any insights. Thanks, folks!

Thanks much. Now to add one more level of complexity to this issue: Is it absolutely essential that the income be reported on Form SE as self employment income and that the self employment tax be paid in order to properly use the income as a basis for the SEP contribution? I believe the individual has claimed the royalties as supplemental income on his tax return. If the individual has improperly made a SEP contribution, any suggestions on how to clean this up? Would it be possible to go back and amend his tax returns and complete the Form SE and, of course, pay the self-employment tax? Thanks again for any light you can provide.

Does anybody know what the deadline is for turning in expenses for HSAs and FSAs for FORMER employees? I believe both current and former employees who participated in the plan have until the end of the next year, but want to confirm this. thanks!!!

Are annual royalties from a previously published book automatically excluded as earned income for SEP contribution purposes? Does it matter whether the person is currently an author by profession? Where would I find the references? Thanks!!

At this time rollovers to inherited IRAs are allowed under IRS rules but are not required to be made available under a QP. Beginning 2010 all QP will be required to offer a rollover to an inherited IRA. If QP did not offer rollover as an option in 2008, beneficiary had no other option. Follow up question: If this is in fact a lump sum distribution to a non-spouse beneficiary in 2008 (rollover was not permitted under the plan): 1. Is it taxable at the beneficiary's ordinary income rates? 2. Is the taxable amount of the distribution determined as of the date of distribution, or as of some other date? The amount changed significantly over the year due to market fluctuation, and we are trying to help the taxpayer. A significant portion of the distribution was "in kind" stock. 3. Given that this is a sizeable amount and a hardship situation, do you think the IRS would be willing to agree to an alternative tax payment schedule? Thanks again, everybody!

Under the 401(k) plan, key employees averaged deferrals of 4%. The plan was determined to be top heavy and a 3% minimum contribution must be made on behalf of non-keys. But what if key employees had an average of 2% returned to them due to a failure of the ADP test? Would the required contribution only be 2%? I don't believe the regulations address this directly. My guess is that the entire 4% counts in determining the amount of the minimum contribution. Do you agree/disagree? As you can tell, this employer is strapped and looking for some relief. Thank you!

The non-spouse beneficiary took a total distribution at the end of 2008 within the timeframes of the 5-year rule. However, the individual did not realize the he was able to take a non-spouse rollover under law, and I don't believe the TPA made this option clear to him. As I recall, QPs were requried to offer the non-spouse rollover option for PYs beginning on or after 1/1/08, despite lack of specific plan language per PPA. What can be done here, if anything? Tough issue with significant tax ramifications for the client! Just looking for some ideas. Thanks for any input.....