billfgrady

Q-7, A-7 of Notice 2004-2 indicates that a self-insured medical reimbursement plan sponsored by an employer can be a high-deductible health plan. How does this work? Is it enough for the participant to pay the deductible and out-of-pocket expenses using the medical reimbursement plan for insurance offered by the employer? Can anyone who has set something up explain what they did?

Section 223, which governs Health Savings Accounts (HSAs) is silent as to whether a discrimination test applies when an employer makes a contribution to the HSA of an employee. Notice 2004-2 provides that if "an employer makes HSA contributions, the employer must make available comparable contributions on behalf of 'all comparable participating employees' (i.e., eligible employees with comparable coverage) during the same period." Notice 2004-2 is silent as to how to apply this test in an affiliated service group setting. Is there any further guidance out there at this time on discrimination testing for employer contributions to HSAs? I assume that the discrimination rules contained in section 105(h) do not apply here.

All are HCE by comp (and the majority also by ownership). There is no last day of the plan year requirement.

That's what I suspected. Thanks, Mike.

The ratio percentage test requires that the percentage of NHCEs benefiting under the plan be at least 70 percent of the percentage of HCEs benefiting under the plan. What is the ratio percentage in a setting where you have 19 employees, 17 of which are HCEs who participate in the plan and 2 of which are NHCEs who are excluded because of years of service required? Is the answer really 0% ((0/0)/(17/17))?

Actually, given that the name of the plan was different from either of the existing plans (as I understand them to be) on the last filed 5500-EZ (see my above modified post on this on 5500-EZ and DFVC), I cannot be confident that I have everything. But you're right, at some point we need to terminate the plan with what we've got.

I should clarify: this is a 5500-EZ setting, not a 5500 setting. My understanding is that DFVC program is not available for filers of the 5500-EZ. Is there another alternative program? Do we just file the delinquent 5500-EZs? I'm not worried about the plan(s) not having a prior determination letter. It's just that a determination letter might help me shed some light on whether the plans have been merged and/or amended and restated since 1994. Is there any way to find out whether an employer has submitted for a letter in the past?

We represent a client who asked us to update his qualified plan for GUST and then terminate the plan. Among other problems, the client does not have a copy of the plan document, as this and all documents relating to the plan were apparently lost at some point. We were able to track down the firm that restated the qualified plan in 1994. Fortunately, that firm was able to provide us with written copies of a Profit Sharing Plan and a Money Purchase Pension Plan. That firm also confirmed that the documents were created by Sungard Corbel. They were uncertain whether the either of the plans had a favorable determination letter. We also contacted the accountant for the Plan, which last filed a Form 5500 some five years ago. This 5500 reflects that no contribution was made to the plan for the 1999 Plan year. However, this 5500 shows a different plan name (and there is only one, not two 5500s). No 5500s have been filed in the interim, on the basis that the Employer did not pay its sole employee any compensation for the years in question. Accordingly, we cannot tell when the last contribution was made. Our firm, relying on this limited information, merged the plans and amended and restated the surviving plan for GUST prior to September 30, 2003. We are now in the process of filing Form 5310 with the Service. Anyone ever encounter a situation like this before? Any advice?

We're talking about the elimination of a section 411(d)(6) protected benefit, aren't we? If the employer decides to apply for a determination letter (and assuming it does so on Form 5300), how would you answer question 12a on Form 5300, "Does any amendment to the plan reduce or eliminate any section 411(d)(6) protected benefit, including an amendment adopted after September 6, 2000, to eliminate a joint and survivor annuity form of benefit?" I'm of the opinion that, in the setting we've discussed where all of the participants get the equivalent benefit in terms of a contribution from the 401(k) PS plan that they had accrued under the MPP from September 1, 2003 through January 15, 2004, and, assuming that the plan does not do away with the QJSA with respect to the MPPP funds, you could answer this question "no." Take a look at Reg. 1.411(d)-4, A-2(a)(2): "A Plan may treat a participant as receiving his entire nonforfeitable accrued benefit under the plan if the participant receives his benefit in an amount determined under the plan that is at least the acturial equivalent of the employee's nonforfeitable accrued benefit payable at normal retirement age under the plan." Does this apply here or am I off base?

Under these circumstances, how would you answer question 12a of the Form 5300?

What would happen if, as in Blinky's last example, there was no allocation requirement for the MPP, you restated the plan into a 401(k) PS Plan as of September 1, 2003 and all of the participants (who are HCEs) contribute the 40,000 maximum for the plan year ending 8/31/04? Are you saying that a MP contribution is required based on comp. earned between 09/01/03 and the date of the amendment? What about the overall contribution limits?

So in a plan using the prior year testing method, I'm not stuck with an nhce avg. of zero if the only nhce (looking at prior year comp.) does not defer in the current year?

With respect to submission for a GUST determination letter, Corbel indicates that evidence is required if a plan is amended for GUST after the end of the 2001 plan year (the GUST remedial amendment period). Corbel goes on further to say that a plan sponsor should include either evidence of adoption, before the expiration of the GUST remedial amendment period, of an M&P or volume submitter specimen plan OR a copy of the certificate, executed before the end of the GUST remedial amendment period, of the employer's intent to restate its plan by adopting a GUST approved M&P or volume submitter specimen plan. I thought that the GUST remedial amendment period (not the extended GUST remedial amendment period) was February 28, 2002. My understanding is that the extended GUST RAP deadline was September 30, 2003. Does an employer need to submit evidence if it amended and restated its plan for GUST on February 28, 2002 (and the prior plan was a volume submitter plan)? If the answer is yes, is a copy of the amended and restated plan document sufficient "evidence"?

What I meant to ask is whether there is any extension beyond January 31, 2004 coming down the pike?

I remember reading that the Service was considering another extension to the January 31, 2004 deadline for submitting for a determination letter speaking to GUST. Anybody see anything about this?

If you have to consider one (and only one) NHCE for a given testing year but that NHCE has terminated prior to the start of the testing year (and won't receive any compensation) what is the nhce adp for that year?

GBurns: Did you mean to say that HRAs and FSAs (not HSAs) are Section 105(b)? I'm not aware that Section 105(b) applies to HSAs.

I'm not so sure that is correct. My understanding is that the Code Sec. 105(b) exclusion for reimbursements of employee health expenses (which applies to over-the-counter drugs as provided under Rev Rul 2003-102) is broader than the Code Sec. 213 deduction for medical expenses (which does not apply to over-the-counter drugs, as provided under Rev Rul 2003-58). Isn't it Code Sec. 105(b) that is driving this issue?

An employer sponsors a money purchase pension plan (volume submitter), which it amended and restated for GUST on September 30, 2003. The MPPP is a calendar year plan. The employer would like to terminate the plan as of 12/31/03 and then apply for a determination letter speaking to the termination and the GUST amendment prior to the deadline for submitting for a GUST determination letter of January 31, 2004. Pending the receipt of a favorable determination letter, the employees would start rolling their funds out of the plan as soon as is administratively feasible. Subsequently, the employer would file a final Form 5500 for 2004 (short plan year). When does the employer need to issue ERISA 204(h) Notices to Plan participants? Is the plan really terminated as of 12/31/03 because there are consent minutes of directors saying that the termination of the Plan is effective as of that date and that the employer won't make any further contributions? Or is the "termination" effective when all of the participants funds are rolled out of the plan? Appreciate that there are no employees who will qualify for a contribution in 2004 (end of the year requirement).

Is a plan sponsor required to give ERISA 204(h) notices to participants in connection with the termination of a profit sharing plan? What if a money purchase pension plan was merged into the profit sharing plan at some time prior?

What about Archer MSAs or HSAs? Are OTC drugs covered?

Can HRAs be created outside of a cafeteria plan setting? My understanding is that they MUST be stand-alone because there can be no connection with salary deferral.

Is it sufficient for a determination letter request to be in the mail on January 31, 2004 to satisfy the extended GUST RAP deadline?

Revenue Ruling 2003-102 provides that over-the-counter-drugs can be paid for with pre-tax dollars through health care flexible spending accounts. This is old news. But what about HRAs?

That sounds about right for HRAs. What about FSAs? I think that contribution limits are also plan, as opposed to statute, driven.