Kirk Maldonado

In addition to the excellent list of issues provided by Katherine, I would also mention to check to see if there are any "problem" investments (e.g., interests in investment partnerships, and privately held stock).

jpod: What provision in the Internal Revenue Code precludes the employer from subsidizing the premiums of the highly compensated employees more than the premiums of the other employees?

Had you considered terminating the current plan year and starting a new plan year? (I realize that there are some complications with this approach.)

I think Kip and ConceptCorner have provided some valuable advice (that I agree with). I once had a client that adopted a self-funded plan, even though it had less than 50 employees. One employee with a serious medical condition can (and did cause my client) major league problems. Believe me, you don't want to to there!

The IRS has indicated (informally, I seem to recall) that they don't like people deducting interest in a prior year (2001) that accrued in a subsequent year (2002).

No.

JPod: By extension, wouldn't your analysis conclude that there is no prohibited transaction if the employer failed to forward employee contributions to the plan? I think that the DOL would disagree with you on that one.

What about the fact that those participants are waiving their accrued benefits, which isn't permissible under the IRC?

I agree with Appleby.

No, but you have the excise tax on failure to satisfy the minimum funding standards. I seem to recall that this point is addressed in the legislative history of ERISA.

My experience has been that most plans do not allow the prescription co-pay to apply to the deductible or the OOPs limit. (I think that is because most of the employers have separate plans for prescription drugs.)

Alex B: The real reason why the IRS won't attack anybody on the indirect reversion has nothing to do with the legal arguments you raised. It has to do with the fact that the PBGC wants to foster these mergers, because they help to eliminate underfunded plans. If the IRS prevailed on the indirect reversion theory, it would discourage these mergers, leaving more underfunded plans that the PBGC might have to takeover some day. The PBGC's policy arguments prevailed.

The point raised by Death and Taxes could hurt, instead of help, you. Specifically, if the adminstrative fees were spread over the account balances of a number of participants who weren't in the plan for all of the prior quarters, they shouldn't get a full allocation of the prior expenses. Thus, this could cause the amount allocated to your account to increase.

Do you have a ready cite for your proposition that: However, there is legal precedent that an employer cannot take permissible expenses listed in a plan if the expenses are not disclosed to participants?

I'm not aware of them being publicly available anywhere. I'm just sensitive to that issue because I was the person that raised the question (through the ABA).

The IRS dropped the position that a loan could not extend beyond the participant's normal retirement age many years ago. That point was confirmed (by the IRS) to the ABA in 1994.

There are financial planners that are propagating this lie to generate more funds that they can invest for their clients. One such person approached a huge number of employees at one of my clients with this outrageous proposition. He told the employees that the employer was breaking the law if the employer wouldn't let the employees withdraw their funds. Needless to say, he got all of the employees in an uproar. I spoke to the financial plannner who swore that he had an opinion from a law firm that the withdrawals were required by law. I asked for a copy of it, but I never heard back from him. My guess is that if you transfer the funds to such an investment planner, he or she will abscond with the funds. That is definitely the impression I got with the sleazebag that approached the employees of my client.

My guess is that you will prevail, unless your ex-husband has already taken the money out of the plan.

You don't need a PLR, just a determination letter. Full vesting can be more of an emotional than a monetary issue to clients.

My first post assumed that, at the end of the year, any funds remaining in the health FSA would be rolled over into the Section 401(k) plan. I think that arrangement is impermissible, because it thwarts people from incurring forfeitures. Thus, I believe it would be treated as a cash refund of amounts remaining in the FSA account at the end of the year, violating the "use it or lose it" rule.

Unless the purchase or sale results from a "discretionary transaction," it isn't even reportable. You need to review the SEC Rule 16b-3 and the other rules under Section 16 of the Securities Exchange Act of 1934. I'm pretty sure that they are available on the SEC's website.

Are you certain that the "rollover" of the surplus funds into the Section 401(k) plan won't be treated as a "cash equivalent" for purposes of the cafeteria plan rules?

Although I've never done one, my recollection is that you need to apply to the IRS for a private letter ruling disallowing the deduction so that you can get a refund. Absent the disallowance, there can be no reversion.

What is after-bite lotion?

Would the employer consider paying the cost to get a determination letter from the IRS on this issue? That way you get a definitive answer.