Moe Howard

Mr X is a participant in his own Keogh Plan-PSP (he's self employed) ..and.. also Mr X works for a state agency which has a 457 plan which Mr X participates in too. Mr X contributes $40,000 to his PSP account and also he deferrs $12,000 of his state salary to the state's 457 plan. Ooops! That means that his annual additions to all his plans is more than the $40,000 IRC 415 maximum limit. (Is there a problem with this ? Or does the fact that "his sole-proprietorship & the state agency are two separate entities and he owns an interest in only one of those entities", mean that his total account additions to all his retirement accounts is allowed to exceed the IRC max limit?)

Carol, the HIIPA rules you quote only apply to those employee's that have the group coverage. Those rules do not force an employer to allow an employee to have the group coverage.

What special HIPPA enrollment rights are you thinking of? I don't know of any HIPPA rights that will change things.

Carol, it is perfectly OK for an employer to prevent certain employees from participating in fully insured medical coverage. In your situation, the employer says that anyone who did not enroll by a certain date, will never be allowed to have coverage. This violates no IRS nor DOL rules. For those select (lucky) employees that are allowed dental coverage by the employer, those that meet the employer's odd-ball (but perfectly legal) rule of being allowed coverage because they enrolled by a certain date, they most certainly may pay their dental premiums on a pre-tax basis.

I am unemployed. I have never been employed. I live off of inheritance funds. I have my own individual medical insurance policy. I am 35 years old. I personally pay my medical insurance premiums each month. In other words, my coverage is not through an employer sponsored group plan. I realize that I have no rights under ERISA. But do I have any rights under HIPPA ? I realize that my medical providers and insurance company must obey the HIPPA confidentially rules regarding how my private medical records are handled. But what about stuff like the HIPPA "no more than one-year waiting period for preexisting condition" and "new born & maturinity rules" ? ...... even though I am not a participant in a group medical plan, don't these kind of HIPPA rules apply to my insurance coverage also ?

Can anyone refer me to some good reading material on the new IRS split-dollar insurance rules effective 01/01/04 ?

Blinky, so you are saying that the plan can be written either way? Meaning that the "cross tested plan document" can be written to allocate on either "only age & compensation" --OR-- "only job classification" ?

I've read that the purpose of cross tetsed plans is to be able to allocate a higher portion of contribution to certain employee(s) based on their older age and higher compensation . I've also read that the purpose of a cross tested plan is to be able to allocate a higher portion to certain employe(s) based on their job classification. So which one is it? Does the ability to favor certain employees, over other employees, in regards to contribution allocation, come from the [1] age & compensation status ..... or from the [2] job classification status ?

When a MPPP is merged into a PSP, those former MPPP assets then become owned by the PSP. I had heard in the past that the PSP still has to continue to maintain a separate accounting (by participant) of those merged MPPP assets. So that someday if a participant terminates employment and wants a lump sum distribution from the PSP, the PSP must be able to tell how musch of his distribution is from the former MPPP assets. Can any one justify why such extra recording keeping is necessary? Is the PSP really required by law to be able to know how much of a distribution is from former MPPP assets? Can someone direct me to messages concerning this ? thanks

mbozek, thanks.

A tax client (employer) of mine has two separate plans. One is a money purchase pension plan and the other a SEP-IRA. I recently read that a employer cannot sponsor a SEP, Simple 401k, or a SIMPLE IRA at the same time that it sponsors any other type of qualified plan. Can this be true ? I knew that a Simple plan could not be sponsored if another qualified plan was also being sponsored ...but I never knew that a SEP-IRA could not be sponsored with another plan. Is this a new rule? How long has this rule been around?

OK guys thanks. But as you can tell ... I must be confused. So, what is the differences between "partial termination (frozen plan)" and "termination" ? Is it simply that a partial terminated plan has to continue to file the Form 5500 each year uintil it is actually terminated ? The one thing that both have in common is that all active participants are 100% vested .... right ?

Who do I think would be 100% vested? ... Those participants with 5-years of service, that's who.

Blinky, thanks for your reply. But you never answered my question. Do participants continue to vest in a plan that is partially terminated , but not terminated? Partial termination does not result in immediate 100% vesting by all active participants .... but termination does. The plan could remain frozen for several years and then benefit accruals could start again. Do participants continue to vest during those frozen years ?

Participants in a PSP vest under a 5-year cliff vesting schedule. The plan sends notice to participants that benefit accruals will cease on 01/01/04. The plan does not terminate, nor does it intend to terminate (in other words ...plan assets will not be distributed by 01/01/04). Benefit accruals are simply frozen. So, I guess you could say that there is a "partial termination". The plan started 10 years ago. My Question: Do participants with less than 5-years of employment (less than 100% vested) as of 01/01/04 ..... continue to vest?

New adoption agreement for existing PSP says that the existing MPPP will be merged into PSP on 01/01/02. Participants are provided with an ERISA 204(h) notice on a timely basis. However, the MPPP assets are not transferred out of the name of the MPPP ... and into the name of the PSP until July 2003. I realize that a Form 5500 (for year 2002 & 2003) has to be prepared for the MPPP .... because assets still existed in the name of the MPPP during 2002 & 2003. MY QUESTION: Does the employer still have to make MPPP contribution for" full year 2002" and "partial year (Jan -July) 2003" ? (Any ERISA or IRC literature you can direct me to as support will be appreciated. I have a board meeting in two days and I have to present this matter). THANKS!

Employer has established a 401(k) plan. Employer tells all participants that they can only defer 12%, and that he will match no more than 5%. An employee gross salary is $50,000 per year. He wants to defer 24% ...( $50,000 x24% = $12,000). But employer tells him that the plan document/ adoption agreement says that no more than 12% can be deferred. Employee thinks that the new tax law (egtrra) allows him to defer up to 100% per year, as long as he defers no more than $12,000. Who is correct ? (The employer or the employee).

Employer has "standardized" profit sharing plan. An employee met the eligibility requirements on 04/17/03. His entry date will be 07/01/03. Same employee terminated employment in Oct 19, 2003. Plan document says that in order for a participant to share in the allocation of employer's discretionary contribution ... he must work over 500 hours during the year or be employed on the last day of the plan year. He worked 960 hours in 2003 ( 01/01/03 - 06/30/03), prior to his 07/01/03 entry date ... AND worked 480 hours in 2003 (07/01/03 - 10/19/03) after his entry date. Can he share in the employer's 2003 contribution? (True that he worked more than 500 hours (namely: 1440 hours) during the plan year 2003 .... but most of those hours were worked prior to his entry date. He worked less than 500 hours after his entry date and he was not employed on the last day of the plan year 12/31/03)

Are Flexible Spending Arrangements still subject to the "use it or lose it" rules of Sec 125 ? A few years ago, Congress proposed HR 63 and HR 167 which (if passed) would have allowed participants to cash-out (as taxable income) their unused FSA account balance (at the end of the plan year) .... or carryover their unused account balance to the next year. What ever became of HR 63 and HR 167 ?

Oriecat: What is the IRC consistency rule ? .... and how does the fact that the plan does not require (from participant) a prompt notification that a change in family status has occured, cause the consistency rule to be violated ? The SPD specifically lists several events that it deems as "change in family status" which the SPD specifically states will allow a participant to opt-out. One of those events specified in the SPD is marriage. For example: She gets married Apr 1, 2003. The next regular open enrollment is Jan 2004. Suppose she informs the plan on Oct 15, 2003 that she got married (4/1/03) and that she wants to opt out Nov 1, 2003. She continues medical coverage through Oct 31,2003 ... and effective 11/01/3 she is removed from coverage. (She has no right to, nor does she request, retroactive opt-out back to 4/1/03). How does this example violate the IRC 125 consistency rule?

True that the plan is not required to offer a mid-year opt out. But the plan does offer it, according to the SPD. It's just that the plan requires no time limit. The fact that the plan requires no time limit for the mid year opt out ....does not negate the fact that the plan allows mid-year opt out. Under the reasonable man concept .... one could safely assume that a federal judge would agree that she can opt out any time she wants (prior to the next open enrollment).

The SPD says that a participant can elect out during the plan year... if there is a change in family status (marriage). But the SPD gives no time limit as to when the plan must be informed (by the participant) that a change in family status has occured. I would guess that the SPD's failure to specify a time limit, means that the SPD must be interpreted in favor of the participant who says that she "can elect out at any time she so desires, prior to the next annual open enrollment date". Unless HIPPA, ERISA, or IRS has a required time limit. (Which was the purpose of my question)

Participant in her employer's fully insured medical plan got married on April 01, 2003. She can be covered on her new husband's employer medical plan. How many days after her marriage does ERISA/IRS allow her to wait before she must inform her employer that she wants to elect out of her employer's cafeteria plan (medical) because she got married ? Can anyone direct me to the paragraph of IRC 125 that states the number of days (after marriage date) that she has to inform her employer. It is my understanding that if she waits too long, then she is prohibited from electing out of the plan ....until the next regular enrollment date.

Does anyone know how the DOL may penalize an insurance company that does not comply with the new claim regulations ? I have read the DOL new claim procedure regulations over and over .... and they make no reference as to what might intice an insurance company to follow the regs.

Employer has a 401(k) safe-harbor plan. Three kinds of contributions go into the plan. 1) Elective deferrals (withheld from employees' paychecks). 2) Required 3% employer match (required for safe-harbor status). 3) 11% employer discretionary contribution to profit sharing plan. I realize that 1) & 2) are immediately 100% vested. But what about 3) ? So, my question is .... Does a discretionary contribution to a profit sharing plan have to be 100% immediate vested, just because the profit sharing plan happens to have a "safe-harbor 401(k) feature" ?