KIP KRAUS

I assumed you were talking about STD payments. I wasn't thinking about 401(k)disability payments. They of course are treated diferent. I'm not sure,but I think they are taxable but the 10% penalty not applied. If taxable a 1099R would probably issued.

STD benfit payments are fully taxable in the year recieved. They are subject to FICA and federal taxes, and in states with income taxes they are subject to state taxes. W-2s must be issued and filed on form W-3 as well. The exception is that they are only taxable to the extent that the employee does not pay the premiums. Any percentage of premiums paid by the employee are exempt. Therefore if the employee pays for instance 30% of the premiums only 70% are subject to tax, but the total is subject to FICA. If the plan is insured the insurer should be witholding FICA and reporting it to the SS Administration and the employer so the employer can pay its portion and report it. The insurer may prepare the w-2s, but not always. Contact the insurer for their procedure. [This message has been edited by KIP KRAUS (edited 02-08-2000).]

PatM: Thanks but no thanks. Those references are the most convoluted bunch of glittering generalities I every seen. It just goes to show you how twisted the minds are that write the tax laws. jlf: My response politely to you is so what? As long as the taxes get paid the government shouldn't care. And while we're at it,what is the rationale of having fica taxes apply to 401(k) contributions and not Section 125 contributions? We all love the benefits from not paying fica taxes in our 125 plans, but how many billions of dollars are being diverted from the Social Security System through these plans? I haven't been able to find out. Anyone know?

PatM I don't think the law makes a distinction regarding an alternate payee(not the participant)having children or no children. I may be wrong, but as far as I know, the law simply exempts alternate payees. I see alternate payees named in QDROs all of the time in divorce cases where no children are involved. I've never seen a QDRO reference a settlement as child support either. Child support,to me is a whole other issue.

I think enough has been said. Tax Reform Act of 87 does sound right. It's hard to keep up with what happened at what time. At least they didn't tack it on to the end of some totally unrelated major trade or tarff legislation. It's nice to know that this special breed looking out for my best interest. I wonder what a person with a real job would do???????

DOOK: First off, you can click on my profile and find out where I live. If the 10% penalty for early distributions is not arbitrary why did it take 15 years to decide that this provision was needed? I was contributing to 401(k) plans way before this usury tax was applied. How ironic that this provision was added under the Taxpayer Relief Act of 1997. It’s no relief for people who need some of their money to survive on during hard times, like extended unemployment, which happened to me because of a corporate buy-out in 1997. However, the morons did exempt people in the following classes from the 10% penalty: 1. Distributions on or after age 591/2 (why not age 50 or even 59) 2. Beneficiaries at death of employee (makes since) 3. Employee’s disability (makes since) 4. Equal periodic payments for life of employee (who really cares?) 5. After termination of employee after attainment of age 55(What’s the difference in this than getting it at age 591/2? You have to be terminated to get a distribution from most plan at any age except 701/2) 6. Stock dividends of a corp. described in Section 404(k). (don’t really care) 7. Employee medical expenses up to max allowed as personal deduction under Sec. 213 (makes since) 8. Payments to alternate payees under QDROs (my personal favorite exemption. I guess the morons figure that the alternate payee didn’t have any financial advantage while living with the employees who was taking advantage of the tax deferrals???????) 9. Distributions to unemployed persons to pay health insurance premiums. (Another one of my personal favorites. I guess it doesn’t’ matter that a person could lose their house while unemployed as long as they have health insurance and stay off the Medicaid dole?) Of course this usury tax is arbitrary. And just because it was passed by congress doesn’t make it legal. It’s not tested yet is all. I don’t mind rendering unto Caesar what is due Caesar. I paid the state and federal taxes on my contributions, employer match and earnings thereon, that’s not enough? PatM, you think the marriage tax will ever get resolved? I hope so, but I doubt it. Why should the government give tax relief to married people who do nothing but produce future taxpayers and bring stability to the system? We need more than married penalty relief, we need total tax relief.

TRAMMER: "active work" or "actively at work" are more typically an insurance company's requirements for coverage to be effective. A plan document need not contain, and most commonly does not contain, these kinds of insurance company provisions. A plan document, i.e. a "Wrap Document" will typically reference the SPDs, and insurance contracts as providing the details of the plan or plans covered by the Wrap Document, and are named in an Appendix to the document. In addition, most SPDs should refer back to the plan document with regard to any descrepencies between the SPD and plan document, and that the plan document will govern in such cases. The document should also reference any insurance contracts with regard to having the authority to govern the operation of the specific plan benefits, unless the plan document has specific authority to govern, i.e eligibility to participate. It would be impracticable to include every provision of an insurance contract or self-insurance document in a plan document. I have dealt with various ERISA attornies over the years who have taken this position. Unfortunately, I have no other authority to site. However, I would think that some ERISA section would verify this position. Hope this is some help.

Does anyone know of a court case or otherwise where the 10% early distribution penalty under IRC Section 72(t) has been challenged? Or do you know of a tax case where a ruling has been made? I have always thought that it is an arbitrary/illegal tax, and may want to fight it unless it's already been decided.

mmasciola: I couldn't find RFPs that I had done, but if you can find a copy of "THE HANDBOOK OF EMPLOYEE BENEFITS" published by Dow Jones-Irwin, 1984 there is an APPENDIX 48A starting on page 796 where you will find some sample bid specifications that are helpful. Even the most recent CEBS Textbook may have something similar.

As I said before, unless the promotion provided the employee with different benefit options by putting him into a different benefits classification, i.e being promoted from hourly to salaried where benefits may be different, a promotion does not change his employment status. The change in employment status typically applies when your eligibility for benefits changes(spouse also), or you actually change employers(spouse also). It doesn't sound as though this employee's benefits elibibility has changed? In which case,I would tell the employee flat out they he must wait until open enrollent unless any of the above loosely apply.

See the answers posted on the Miscl. Benefits topics board.

Very good jreddi, not bad for a California benefits manager in one of the other statutory DB states. I would add a few things for NancyG to consider. Remember that your eligibility to recieve DBL payments will be based on your DR's certification that you are unable to perform your job. You may also find more information, including a DB 450 Form and a DB-271S Form that you employer is required to provide to you on the following site http://www.wcb.state.ny.us/ The DB271S describes your rights to statutory benefits on the following web site. Your employer is either covering your DBL benefits through the New York State DBL Fund or through an insurance company. Ask your accounting department who they are paying premiums to. By the way, the maximum statutory weekly benefit is currently $170/wk. Good Luck.

mmasciola: My experienc has been that few employers have a benefits person who can write a comprehensive set of RFPs for a medical and/or dental plan. In addition to plan design information/alternatives to be included in the RFPs there is a ton of technical information that needs to be included such as current and prospective underwriting/financing methods,claims/premium histories,plan changes during prior years, participant fluxuation during prior years and so on, and so on. For a copmany your sized RFPs would also contain at least 15 to 20 pages of Q&As for bidders. The only source, other than from consultants, that I have seen was in the CEBS course I text book back in 1986 or so. I think I still have a copy at home. I may also have a set of specs. that I have prepared in the past that I will e-mail to you if I can find them. Having said al of this, which no way covers the subject, let me say that for a group of employees of 1,200 you should be able to hire a consultant to prepare the RFP and quote the coverages and still save money. The ultimate expense of using a qualified consultant may end up being a wash on what you can save in the long run especially if it has been at least 3 to 5 years since you have reviewed these plans. If you have any questions, feel free to e-mail me.

jnoel: Does not sound like it meets "change in Family Status' to me. I'd say no. However, if the promotion put this person into a different class, with different benefits, it may be a qualifying event.

I'am confused. A person takes a loan from a pension plan, pays himself back plus interest and gets to take a tax deduction because the loan is for a primary residence? I didn't think this was allowed? Can someone enlighten me.

As long as you have all of the appropriate information in the SPD, there is no requirement that each plan have a separate SPD. Pension plans of course should have separate SPDs.

If the employee became covered by new employer plan, I would tell them to elect COBRA coverage under new employer Plan. I'm not aware of any provision that says a person has to be covered for a certain mininum amount of time in order to elect COBRA????

Try this IRS site. I think letters can be found here. http://dir.yahoo.com/Government/Law/Tax/

If the children are minors, notification to the employee and spouse is suffucient. A parent must make the selection for a minor child. If the dependent is not a minor, it's recomended to send notice to the child. For instance, some coverage ends for dependents at age 23 in which case the notice should go directly to the dependent even if the dependent is living with the parents. If minor dependent children do not live with the employee, notice for the children should go to the employee and parent with custody, if known just to be safe.

120 days from the date the plan becomes subject to ERISA. See Section 104(B)(1)of ERISA.

dm: I don't know what the insurance markets are like in Arizona, but if the Blues are available you should at the very least contact them. Commercial carries have varying underwriting requirements regarding the size of group they will write a medical plan for, and in your case, with less than 50 participants you could run into problems. Commercial carriers are going to be expensive and may require you to purchase Group Life in order for them to write medical. In addition, most commercial carriers will not deal direct with clients as small as you are. My advise, contact an independent insurance broker who deals in group insurance and ask them to handle your case. They will work for commissions that the insurer will pay them. Call some of the other employers similar in size to you in your area and find out who they are using as a broker/health insurer. RFPs in your group size mean little in the commercial medical market, because what will be available to you will be limited in plan design. If there are any community rated HMOs in the area, you should also contact them. If you have any questions, feel free to e-mail me.

Dawn: I agree that you cannot use an insurance contract as your ERISA plan. However,if written properly, a SPD containing all ERISA requirements, including coverage exclusions and limitations, you can refer to the SPD in your "Wrap" document as containing the entire plan of benefits. I have a SPD that has been written in this manner and I will e-mail it to you. I also have an ERISA check list that I'll e-mail. The list is fairly inclusive and includes items such as HIPAA, FMLA, Medicare Info and QMSCOs. You still might want to check with your legal council after drafting your documents to be sure that there are no other legal issues.

In twenty years I have seen few insured, or self-funded STD plans that did not specifically deny benefits if illness or injury was work related. The plans I have seen have been for some union employees and salaried employees. I also agree that an employer who has a salaried continuation plan can do what it wishes, and often times does supplement workers' comp. payments. I have managed such a plan. However, most STD plans do specifically deny benefits related to WC claims, I would not assume that just because a person does not want to come back to work after being released under WC that the person can then turn around and decide to take time off and recieve STD benefits. Like I said before, check your STD policy/document/pay practices(insured or un-insured). What makes this person less able to work under the STD plan than under the WC plan any way? I also agree that LTD plans, on the other hand do typically off-set benefits for work related illnesses and injuries. But because this is commonly true with LTD plans, one should not assume that it is also commonly true with STD plans.

Melissa: Why not see if you can find a a way to contact Charles Givens and ask him how his theory works. In fact, I might try to contact him and see if he can get me back the illegal 10% (yes folks, I think it's illegal) penalty I had to pay to use my 401(k) money when I was unemployed for 16 months.

If the policy is a typical group term dependent policy covering the the employee's legal spouse I doubt that the insurer is going to pay a death benefit, regardless whether or not the death happend in the same month as the divorce. In fact,I'm almost positive they will not pay a death benefit.