Larry M

The answer is "it depends" If none of the employees has a benefit in excess of $50,000, there is no taxable income. If the benefits exceed $50,000, then there is income attributable to the portion of the premium which pays for the benefit in excess of $50,000 if some employees pay less than the Table I costs and others pay more. For example, if each of your employees pays an average rate of $ 0.40 per 1,000 of insurance per month, and the death benefits are in excess of $50,000, then all employees who are 50 and older are deemed to have an employer paid benefit for the portion in excess of $50,000. [i am not an attorney, and this is a simplification of the answer.] [This message has been edited by Larry M (edited 04-05-99).]

The Society of Actuaries' Pension Section's newsletter had a fairly good analysis of these plans in a recent edition. Copies of the newsletter are available from the Society for a nominal fee. Attn: Webmaster - Since cash balance plans and other hybrids have their peculiar problems, why not establish a separate discussion board for them? ...and, no, thank you, I am not conversant in them and can not volunter to moderate the board. [This message has been edited by Larry M (edited 04-06-99).]

it is my (non-attorney) opinion, non-core benefits such as vision or dental are not required to be provided under COBRA unless they are part of a indivisible package or the particular state insurance law requires it to be part of a group benefit

[it's been a long harrowing week, so please forgive the confusion...] Doesn't the IRS answer mean that as long as the plan allows the participant to choose a deferral which is either (1) a percentage of compensation or (2) a flat dollar amount, then, EVEN IF the particpant chooses a percentage which takes into account compensation in excess of 401(a)(17) the deferral is okay as long as the total dollar deferral is less than the 402(g) limit?

It is my opinion (I am not an attorney): a. COBRA doesnot apply to group life insurance, and b. most states require a group life contract to have a conversion policy. The notice requirement differs by state, as do other provisions of the policy. In Pennsylvania, for example, Written notice must be given to a person entitled to the issuance of an individual life insurance policy at least 15 days before the expiration date. If such notice is not given, the person has an additional period of 15 days after notice is given, but the additional period may not extend beyond 60 days after the expiration date of the period provided for in the insurance policy. Written notice must be presented to the person or mailed by the policyholder or insurer to the person's last known address. [This message has been edited by Larry M (edited 03-31-99).]

Perhaps you can maintain the insurance company contracts as one of the investments in the new plan until the end of the surrender charge period. Before deciding upon this route, check to see if the projected investment yield under this scenario makes it a sensible decision when comapred to surrendering the contracts and investing in other items.

There are employers paying for and carriers providing continuing health care benefits for surviving spouses and dependent children. Generally, it is a matter of negotiation between employer and carrier. Usually, the surviving dependent benefit is limited to a few months or years - although some plans do provide coverage for retirees and their surviving spouses on a "forever" basis - quite costly. If the company wishes to reduce its costs a bit, it can limit the eligibility to those who have been employed, covered by the plan or married for a minimum length of time. [This message has been edited by Larry M (edited 03-29-99).]

I love hypothetical questions concerning legislation whose details are unknown. However, occasionally I play the game of "what if?" so.... Generally, as with most legislation based upon anecdotal experience, the result will be a big play in the press and by Congess; a lot of "independent appeals groups" formed; lots of additional money going into the newly developed appeals field - and practically no change in the quality of medical care. ..and that's an optimistic view! a more pessimistic view is that it diverts funds from medical care and causes additional aggravation.

see below [This message has been edited by Larry M (edited 03-28-99).]

This question was posed in the Q&A section of benefitslink. The answer there suggests it is a prohibited trnasaction to have the plan sponsor named, directly, as a beneficiary.

this is in response to Robin's question concerning dental care coverage. It is my understanding COBRA splits health care into two categories. The main one is called "core" coverage and includes what most of us consider to be medical benefits. Then the other kinds of benefits are given the name "non-core" coverage, which includes vison and dental care. COBRA requires the employer to provide the same core coverage plus any non-core coverage to a person eligible for COBRA. In effect, this is one "plan" even though the benefits may be provided by different carries. COBRA also allows the employer to NOT provide the non-core coverages (dental or vision) as separate "stand alone" benefits available under COBRA. In your case, the employer is within its rights to allow you to choose either the core medical plan alone or the core medical plan plus the non-core dental as a package. [i am not an attorney and these are my lay opinions.] Now, a question for you - is the dental coverage really an economically sound benefit for you to buy? By paying all the premium yourself, you may end up spending more money than if you took care of the dentist's bills directly.

I agree with pax' answer which assumes (as most of us would) your question concerns a plan which has been negotiated between union and management. If, on the other hand, the "union" plan is the plan for employees of the union, then the definition of compensation may have to be tested for discrimination purposes. It is possible the exclusion of overtime in a single employer plan could lead to improper discriminaton.

Hold on a minute there. Are of you you telling me you wait until you know whether a person is entitled to a benefit and then you determine the proper amount to pay him or her BEFORE you tell the plan sponsor the amount ot be paid - and then you have the sponsor wait until any forms required by law or regulations (those which explain, in simple language, all the complex aspects of the tax laws concerning distributions and the rights of any married participant's spouse) are given to the participant and returned with appropriate signatures before any money is distributed? I suppose you abide by the plan document's provisions as well. Personally, I preferred the good ole days when you gave a benefit only to those employees you liked.....and only when you felt like it...

The "best options" for you are those which provide the closest match to (1)the desires of your company, (its management, and other employees) and (2) the ability of those involved to fund the plans, while (3) maintaining a watchful eye upon the costs of administering of the plan and the investments of your monies. The fact that you are an S-Corp with 11 employees, four of whom are stockholders, just makes the options a little harder to find. [The easiest plan design projects have one owner who makes ALL the decisons - four owners make it a little more difficult to come to a compromise.] You can and should meet with competent plan consultants to help you lay out your goals and your resources, determine the long term effects of various decisions and then let you decide which of the combinations of tools best suits your needs. Bear in mind, whatever course you take should allow you to change as the world around you changes. (my prejudice suggests you hire fee for service consulting actuaries for the palnning stages - but, again, that comment may be biased by what I do.) Qualified plans are a long term project which involve huge amounts of money - eventually. They require and demand a thorough analysis before you enter into them.

Couple of additional comments 1. defined benefit funding can be established in a way which allows you to contribute more than a minimum amount each year. To the extent the minimum is exceeded, it develops a credit balance which can be used to reduce a future year's contribution (to zero if necessary). For example, if you feel your comapny can afford a plan which averages five percent of compensation over the next few years, the funding method could allow you to put in 7% for a few years and build up the extra (with interest) as a cushion against lean years. 2. whatever qualified plan your comapny chooses, it should anticipate making contributions for a number of years. This is true whether it is a defined benefit plan, a money purchase plan or a profit sharing plan

[i am NOT an attorney - so bear in mind this is a lay person's understanding of the situation.] The pension law (commonly referred to as "ERISA") includes sections which are intended to protect the spouses of participants. Therefore, since you are married and the retirement plan provides for annuities as one of the means of paying your husband's benefit, you must agree to any type of payment from the plan (even including a loan) which takes away any of your rights to it. The law requires a spouse to sign this consent. Since the pre-nuptial was signed before you were married, you were not, at that time, a "spouse". In order for you to waive your rights to the annuity, IF YOU WANT TO DO SO, you must sign the waiver while you are married to him. There is a lot at stake here. Consider seeing an independent attorney who is knowledgable in pension law and who does not have a conflict representing you (for example, your husband's attorney has such a conflict).

15% is the limit on total particpant compensation. This is applied to the $34,105.04 in your example. Does total participant compensation exceed $230,000 (approx)? For an individual the limit is 25% of compensation (net after contribution).

Presumably the plans which terminated were in the year prior to the year the SIMPLE plan was made effective. [As I understand the law, a SIMPLE plan can not be established in any year during which the employer maintained a qualified plan in which an individual accrued a benefit. Do you accrue a benefit in a frozen d.c. plan?]

"frozen" in Tampa? just because it gets down to 60 degrees? well, anyway - it is my understanding you can ahve different sets of benefits for different classes of employees. If the hourly employees' benefits are determined by collective bargaining, you have even more latitude

My understanding is that any amendments would have to be made prior to the end of the year. If 1998 hadn't ended, A could have adopted a second profit sharing plan and contribute to it. In 1999, the two plans could have been merged, making sure that each corporation can contribute on behalf of its own employees.

My understanding is the answer to both of your two questions is "yes". You can, if you wish, make a contribution to the older p.s. plan and make the balance of the contributions to the new plan (such that the appropriate groups get their excess only share). Be sure the merger is before the particpants in the old plan earn the right to a contribution based upon the old formula.

the previous responses assume you have a normal 401(k) profit sharing situation. As I read your message, you and your employer agreed to a fixed total amount of compensation. Once you became eligible for the profit sharing plan, the employer contribute 15% of your net compensation - (about 13% of your gross) - and you will show the net as your W-2 wages. This saves both of you some FICA or medicare tax. and the reduced amount is in your profit sharing account where it accumulates on a tax free basis. However, you are subject to potential forfeiture of "your" contribution (technically it will be an employer contribution - but for practical matters it is yours). Thus, if you should leave before the ned of the seven years, some compensation, which would have been given to you previously in cash, will be distributed among those persons who are staying with the plan. You should discuss this with your own accountant and ERISA attorney. All the documents, your employment contract and the spd referred to If, on the other hand, the employer keeps another set of books which reimburses you for the forfeited amount, the plan may not be maintained in a qualified manner and could lead to all sorts of problems for you and the employer. You should meet with your own accountant and ERISA attorney, bringing with you all the pertinent documents (your employment agreement, the spd and the plan document).

EBRI (@ www.ebri.org). Chas. Spencer and the DOL sites may have data in tables which provide some of the information for which you are looking. In addition, the large consulting firms (Segal, Towers, Hewitt, et al) provide this information to their clients and, sometimes for a fee, to others.

There are a number of sources - some of which provide the direct answer and others require you to do some interpretation and manipulaton of numbers. [some provide have additional info at a modest fee] Federal govt - HHS and Vital Statisticsn and many other similar sites there. Society of Actuaries EBRI Dept of Labor Intl Fndn of Employee Benefits Your request raises a question in my mind: to what use are you going to put the data? If, for example, it is determined that, on a nationwide basis, the cost of a particular benefit, say inpatient physicians visits, is $X per month, how will you use that? It is not easily converted to a cost for any particular group.

It is my understanding the only time this might be a discrimination issue is in a section 125 plan IF only non-hce's were affected.