Ron Snyder

When in doubt, read the plan document.

We also are in process of selecting a DB system. The above information has been instructive and helpful. Thanks

The NAIC website lists who to contact in each state's insurance department. NAPEO has some materials on their site (NAPEO), but I believe they are restricted to NAPEO members. I also have had to go to the insurance code for several states to ascertain their laws concerning MEWAs. Even if a state has no MEWA law, it may have a statute for aggregation groups (several have healthcare purchasing alliances) or other entities permitted in that state. It may also be smart to ascertain whether a state has a PEO law (about half do) and what is permitted there. A health plan may operate as a MEWA in one state, as a HCPA in another and as a PEO-sponsored health plan in another quite legally. What they all have in common is that each approved group or type of group has to be filed in each state in which it operates. My own feeling that it is easier to get an insurance company to custom-build a health plan that it is to qualify in a bunch of states with a patchwork of inconsistent laws.

1. ERISA provides specific exemption for governmental plans. A tax-exempt entity may not need to comply with some portions of the Internal Revenue Code (dealing with deductions, ie), other would need to be complied with to aviod immediate taxability of benefits to participants. No blanket exemption from ERISA application. 2. As with other plans, a sick pay plan required to have a summary plan description and a plan document. The daughter should make written requests for documents and clarification. She should be careful to preserve her appeal rights and comply with the requirements.

Plan specifically excludes Leased Employees from participating in Plan. This raises serious nondiscrimination issues for a small employer. It is my understanding that all service (6 years) would be counted for vesting purposes (assuming employee generated a benefit in the 4 years when eligible). Your understanding is correct. After 12 months of being employed as a leased employee, all service counted retroactively. However, what if the service was 9 months through the leasing organization and 4.5 years employed by the Plan Sponsor. Then the employee would be credited with 4.5 years of service. Assume leasing organization does not provide the minimum required safe harbor plan benefit. The minimum safe harbor benefit is only relevant to whether there is discrimination as to plan benefits, not eligibility to participate.

It seems to me that the auditor may not be looking to throw out tax deductions (since there were not) but to disqualify the plan, or treat the plan as terminated and the benefits distributed and taxable. Be careful. I'm not sure that I agree with your position. A retirement plan has to have a legal sponsor. A corporation that is in good standing with the state but inactive may not be an appropriate sponsor. My suggestions to you (and my practice with clients in a similar situation) are: 1. If the client has any self-employment income, have him/her adopt the plan personally as the sponsor (amendment & restatement) or as a related adopting employer. 2. If the client has no self-employment income and will not be reactivating the corporation within the next year, roll the funds over into a self-directed IRA.

Regs. 1.410(b)-9 EMPLOYEE. EMPLOYEE means an individual who performs services for the employer who is either a common law employee of the employer, a self-employed individual who is treated as an employee pursuant to section 401©(1), or a leased employee (not excluded under section 414(n)(5)) who is treated as an employee of the employer-recipient under section 414(n)(2) or 414(o)(2). Individuals that an employer treats as employees under section 414(n) pursuant to the requirements of section 414(o) are considered to be leased employees for purposes of this rule. In addition, an individual must be treated as an employee with respect to allocations under a defined contribution plan taken into account under section 1.401(a)(4)-2©(ii) and with respect to increases in accrued benefits (within the meaning of 411(a)(7)) under a defined benefit plan that are based on ongoing service or compensation (including imputed service or compensation) credits.

Why would deemed IRA contributions be any different (under securities laws) than employee salary deferral contributions? I don't believe that they are. The decision to claim an exemption for the sale of a variable annuity to 401(k) plans is fraught with peril. All it takes is one client's plan being operated incorrectly (and therefore, by definition, not "qualified") and the insurance company is in violation of securities laws.

Everyone. Yes. http://benefitslink.com/yellowpages/errors.html

There is no specific problem with your approach. However, you might also wish to tie the forfeiture to hours of service, ie, the end of the first calendar in which the member completes zero hours of service. The HRA rules clearly do not require vesting, although most union plans have been created to provide for full vesting of accounts. However, terminated members should pay their own fees if they are permitted to continue the accounts.

Sound like a good malpractice action against the attorneys for failing to bring up the issues on which they might have prevailed. Perhaps a petition for a re-hearing would be a possibility, but I suspect that the pleadings do not address the new issues/arguments and therefore would be inadmissible even if the rehearing were granted.

If "fully funded" means self-funded, you are subject to discrimination testing under Section 105(h) of the Internal Revenue Code, and Section 1.105-10 of the Regulations. Employee contributions do not trigger the need for testing; the need arose when benefits became self-funded.

That means certain sections of the 5500 needn't be completed, not that the form doesn't need to be filed. See the instructions for form 5500.

IRC Section 105(h) applies to medical expense reimbursement plans. Read it. 1) Sole proprietors (and other self-employed) are permitted tax deductions on their personal returns (form 1040 and Schedule A) rather than on their business returns. Schedule C is for deducting expenses relative to employees only. 2) Subject to complying with the non-discrimination requirements of IRC Section 105(h), this is okay. 3) Same problem as 1) above. Whether children are able to be treated as employees depends on their ages. 4) No, because he is self-employed.

IRC Section 401(a)(2) restricts participation in company-sponsored qualified retirement plans to employees. It does not apply to welfare benefits. Section 79 generally applies to group-term life insurance arrangements. While there are non-discrimination rules for such plans, such an arrangement would not appear to violate them. Moreover, if the non-profit entity is also tax-exempt, failure to comply with a non-discrimination of the IRC (for other than a qualified retirement plan) would result in loss of deduction, a moot point.

You are apparently looking for a hardship. With Beppie, I would liberally interpret the hardship language and permit it. Clearly he couldn't use his qualified plan to purchase the residence without violating the prohibited transaction rules. However, he might consider taking a participant loan from the plan up to $50,000 or 50%. Such a loan could be secured by the primary residence and repaid over a period greater than 5 years, with tax-deductible interest being repaid to his own account.

The IRS, DOL, SBA and US Chamber jointly issued a publication that contrasts the various types of benefit plans: Choosing a Retirement Plan for Your Small Business

I suggest that you ask your software vendor whether your software handles 457 administration. Of course any software that handles DC plans will track the accounts, but you need to be comfortable with your ability automatically to track and check allocation limits, non-discrimination rules and other requirements of 457 plans as well as track account balances. [by the way, the rules and limits are minimal.] Is it a governmental or a tax-exempt 457 plan? The rules are different.

I agree with Chaos. 1. Issue 1-PT. Review IRC section 408(e). Can the IRA obtain a mortgage without someone else lending their credit (such as the account holder)? That extension of credit would be a prohibited transaction. The general rule is that an IRA can purchase that real estate it can pay cash for. 2. Issue 2-CG to ordinary. The other problem is that real estate is a tax-shelter in its own right. Property can be sold with gains deferred through a tax-free exchange. And capital gains, when not deferred, are taxable at lower rates than IRA distributions, which are ordinary income. [Note: this would not apply to a Roth IRA.] 3. Issue 3-UBIT. A mortgage on real estate inside an IRA (even when a mortgage can be obtained without a prohibited) creates the possibility of unrelated business income taxes (UBIT) due with respect to the debt-financed portion of the property. This was addressed in The Motley Fool at http://www.fool.com/taxes/2000/taxes000908.htm

That would likely constitute a violation of state banking laws. Generally, statutory permission is granted for commingling of funds to banks, trust companies, insurance companies, title companies, attorneys trust accounts, and similar accounts. A licenseed and bonded TPA firm may establish a claims payment account in the 15 or so states that license TPA firms.

http://www.deferral.com/dts/default.asp

I don't have a source, but all I did was take a full-blown plan document and eliminated the sections (not the Articles) that were dealt with in the Plan Summary and inserted new sections that referred to the plan summary. I worked through the entire plan document in like manner, leaving in those provisions that were required by law or advisable, and eliminating those that were superfluous or redundant. I kept a separate article for each plan wrapped to refer to it by name. Similarly, I prepared a supplemental page or pages to be distributed with the Plan Summary so that it would meet the DOL's SPD requirements. At the end I was astounded at how incompetent/callous in their disregard for federal law (and for their customers' compliance therewith) certain insurance companies are.

IRS, in their VEBA Manual, has taken the position that there is no such thing as a variable death benefit. However, the recent Health Reimbursement Account rulings permit use of the funds after the participant's death by dependents and beneficiaries. We have seen collectively-bargained, governmental VEBAs that make a non-elective lump sum distribution upon the death of a participant receive a letter of determination letter from the IRS, presumably estopping them from disqualifying the plan (at least for some period of time). My advice would be to submit the VEBA with the language included and ask for a determination letter. The cover letter may even point out the issue for special attention.

From the Temporary Regulations under IRC Section 125: Sec. 1.125-2T Question and answer relating to the benefits that may be offered under a cafeteria plan. (Temporary) Q-1: What benefits may be offered to participants under a cafeteria plan? A-1: (a) Generally, for cafeteria plan years beginning on or after January 1, 1985, a cafeteria plan is a written plan under which participants may choose among two or more benefits consisting of cash and certain other permissible benefits. In general, benefits that are excludable from the gross income of an employee under a specific section of the Internal Revenue Code may be offered under a cafeteria plan. * * * Thus, a cafeteria plan may offer coverage under a group-term life insurance plan of up to $50,000 (section 79), coverage under an accident or health plan (sections 105 and 106), coverage under a qualified group legal services plan (section 120), coverage under a dependent care assistance program (section 129), and participation in a qualified cash or deferred arrangement that is part of a profit-sharing or stock bonus plan (section 401(k)). In addition, a cafeteria plan may offer group-term life insurance coverage which is includable in gross income only because it is in excess of $50,000 or is on the lives of the participant's spouse and/or children. In addition, a cafeteria plan may offer participants the opportunity to purchase, with after-tax employee contributions, coverage under a group-term life insurance plan (section 79), * * *."

You are missing something. Read IRC Sections 414(t) (general rule) and 414(n)(3)© (leased employees).