DTH

Forgot to mention that the Health FSA has more than 50 participants.

I have a self-funded self-administered health FSA. All claims are done in paper and sent to one person in the company to pay claims. Participants send claims information to the FSA administrator via interoffice mail or through the administrator's fax machine. No one other than the administrator has access to the information. Only the FSA administrator pays claims and discusses claims only with participants. Does HIPPA Privacy apply? Thanks.

I have an unusual scenario and would like run this by for your expertise. Plan A allowed for deferral and a match. The plan was frozen in 2002. In 2003 the employer adopted a multiple employer plan and participants began to contribute to the multiple employer plan. The assets from Plan A were merged into the multiple employer plan. Plan A and the new multiple employer plan uses prior year testing (ugh). The employer does not want to switch to current year testing. Is Plan A considered a successor plan for testing purposes? If yes, then the ADR and ACR would be 0%, which means the HCEs can only have 2% deferrals and 2% match. If Plan A is not considered a successor plan, I assume the adoption of the multiple employer plan is the “first plan year” and the ADP/ACP for NHCEs for the prior year is 3%. Thanks!

IRS Publication 590 (IRAs) provides that an individual cannot elect out of withholding for any payment that is delivered outside the U.S. [Note: The same rule applies when a distribution is sent to a P.O. Box address.] The individuals the Publication refers to are U.S. citizens and resident aliens (has a green card or meets the substantial presence test). The rate of withholding for a U.S. citizen or resident alien is 10% for this instance. I'm looking for anyone who has experience dealing with nonresident alien withholding. Do you withhold at 30% unless there is lesser treaty rate or 10%. Thanks.

Sorry. I meant when the nonresident alien IRA owner subsequently takes a distribution from the IRA, what are the withholding requirements?

A nonresident alien, who worked and lived outside the U.S., is participating in a U.S. qualified pension plan. If the participant terminates employment and directly rolls over the U.S. qualified pension plan dollars into a U.S. IRA, how does the withholding work? IRS Publication 590 only refers to withholding on U.S. citizens and resident aliens who receive a distribution outside the U.S. Thanks!

I didn't want to re-post this .. but bring it to anyone's attention that has experience working with payroll venders on this issue. The payroll vender I am dealing with says all payroll venders are treating cathc-up contribution this way. Helppppppp. I'm running out of time to get the make up deferral deducted before the end of the year. Thanks.

Thanks. Could you provide me with a cite for this.

Some colleagues and I are having a lively debate about elective deferral compensation. Here is the scenario: The payroll period runs from December 28, 2003 through January 10, 2004. An individual makes $100 a day The individual works Monday through Friday. The individual is eligible to participate in the plan on January 1, 2004. The individual signs and submits to the plan administrator the elective deferral agreement on January 5, 2004. The individual made: $300 through December 31, 2003 $300 from January 1 through January 5, 2004 $400 from January 6 through January 10, 2004 $1,000 total compensation for the pay period What amount of compensation do the elective deferrals come from? (a) $1,000 (pay period compensation) (b) $700 (compensation from date of eligibility) © $400 (compensation from date of signed and accepted elective deferral agreement) Thanks!

Thank you for your response. I have a copy of GCM 39310. As it applies to my issue, it is my understanding that the GCM refers to participants who terminate and are not 100% vested> When rehired the participant may be allowed to buy back the non-vested services performed while employed. My issue deals with allowing individuals to buy service credits while s/he was NOT employed (i.e., the time between termination and the rehire date). I do not think this is an allowable plan design. Any other comments?

I have a plan that allows for catch-up contributions for participants age 50 or older up to the maximum allowed by law ($14,000 for 2003). The payroll vendor caps the participant at the 402(g) limit first ($12,000 for 2003) and then in the NEXT payroll cycle will begin catch-up contributions. This may be okay for a participant who reaches the 402(g) limit early in the year since s/he will have time to contribute the maximum allowed by the end of the year. For participant who reaches the 402(g) limit in December, this could pose a problem. Example: Participant elects to defer 25% of pay. The individual makes $3,000 gross pay per pay period and his/her deferral is $750. In the November 30 pay check the participantl reaches the $12,000 402(g) limit. The amount deferred in the November paycheck was $200 ($550 not deferred because the payroll system cut off at $12,000). Payroll will defer $750 in the December 15 and December 31 paychecks. Due to this method the participant will only defer $13,500 for the year. If payroll had not cut off the deferrals (i.e., the $550) in November the participant would have deferred $14,000. I assume that since a participant has an elective deferral agreement in place, the payroll vender must defer the percentage elected. I assume this would be considered an operational defect unless payroll is adjusted in December. If this payroll vender method of treating deferrals in disclosed so participants have time to adjust their elective deferral election percentages, would it still be considered an operational defect? How do other payroll venders treat catch-up contributions when the participant reaches the 402(g) limit. Thanks for your input.

Has anyone seen a plan design where a individual is rehired, within a certain period of times after separation from service, and is able to "buy back" the missed service from the time the participant terminated until the date of rehire? The plan provides that if a participant is a vested term or began payments and repaid the plan the amount s/he received, within a certain period of time, the rehired employee can purchase "service credits" of the time s/he was out of work. Example: Participant terminated 12/31/00 with 10 years of service. The participant was rehired 1/2/03. The participant may purchase the missed service between 12/31/00 through 1/2/03. I know that under EGTRRA, state and local governmental plans (403 and 457) can allow participants to purchase service credits, but I think this is done while the individual is employed. If this is a valid design, could you please provide me a Code cite. Thanks!

The plan allows married employees to choose a single rate or a family rate. The plan does not allow the employee to elect a single rate and the spouse to elect a single rate (not plan does that I know of). A married participant terminates and has no children. Each qualifying beneficiary has the right to make a separate COBRA election. Can the former employee choose single COBRA coverage and the spouse elect single COBRA coverage (i.e., two single coverages). I looked at 4980B(f)(2)(A) and 4980B(f)(5)(B), and my answer would be no. The COBRA coverage must be the same as what was offered before the qualifying event (i.e., single for employee only or family rate). If there is one person requesting COBRA, the qualifying beneficiary may elect the single rate (i.e., if the former employee did not elect COBRA the spouse may spouse choose single COBRA coverage). If both the former employee and spouse elects COBRA it must be the family rate. Please let me know your experience on this issue. If the former employee and spouse can both choose single coverage (two single coverages), can you please provide me with the basis with that conclusion (e.g., reg. code site, etc.) Thanks!

Does anyone know of a good resource that compares state health care continuation laws vs. COBRA. (Preferably free.) Thanks!

I have a plan that terminated and all assets were disbursed in early 2003. Do I need to provide SARs for the 2002 plan year? All participants received notice that the plan was terminating in 2002 (i.e., NOIT and NOPB). Technically, the DOL regulations do not provide for this exception, but from a practical stand-point it does not make sense to provide the SSA for 2002 or 2003.

If a leased individual meets all the requirements under 414(n) to be considered a "leased employee" for eligibility and testing purposes but is terminated after completing 1500 hours during an 11 month period and then is rehired a month later.... I assume the individual is not a "leased employee". Example: Hired as a leased individual January 1, 2002, completes 1500+ hours, is terminated November 30, 2002. Rehired as a leased individual December 15, 2002. The individual's consecutive 12-month period begins on December 15, 2002. The only reference I can find on this issue is Notice 84-11. This appears to be a sneaky way to get around the eligibility and coverage rules. Does anyone know of any other clarification?

I have gone a little squirrelly looking for this.... I have a non-electing church plan that offers annuities with a life contingency only (no lump sums or certains). The plan does not have QJSA language. The plan has several terminated vested individuals. These participants did receive the term vested notice at termination letting each one know what benefit options they have at NRA. Since the plan is not subject to ERISA or QJSA notice requirements, where in the Code or regs. does it say that the plan is responsible to contact each participant when they are approaching NRA to elect their benefit? The only thing I could find where it is inferred is the lost participant regs. under 1.401(a)-14(d). Thanks!

Plan participant was excluded from making deferrals (and receiving ER match) in 2002 and 2003. The plan sponsor will be correcting the operational defect with a QNEC. The particiapnt is a NHCE. The plan passed ADP in 2002. For the 2003 plan year. Do I include the QNEC in the ADP test? How do I handle the matching dollars? Thanks!

Plan provides that participants may only have one outstanding participant plan loan at a time. Principal residence loan terms cannot be longer than 15 years. A participant currently has a 5-year principal residence loan. Can the participant extend the loan to 10 years? Thanks.

If an employer establishes a VEBA to allow their employees to contribute post tax contributions for the purpose of funding the premiums for retiree medical upon retirement, would there be restrictions on the types of investments that would be available under the VEBA? Do employees get to 'pick' the investments, or would the employer pick them for everyone? Thanks!

The plan allows participants to take a principal residence loan for a term of 15 years or less. The plan only allows one principal residence loan at a time. A participant requested a principal residence loan for a term of 5 years. The participant has requested the loan term be extended to 10 years (no additional dollars). Can this be done or would it be considered a separate loan and thus not allowed by the plan. Thanks and Happy 4th.

I have a plan that is going to replace their DB plan with a DC plan. They are going to freeze benefit accruals in the DB plan. Is it possible to freeze the accruals at different dates for different employees. I have combed through the regs. and found nothing that says they can't do it (other than a possible 401(a)(26) problem). Also, I assume they can design the freeze where new employees will participate in the DC plan only and the current DB plan participants can opt-out of the DB plan to participate in the DC plan. Any design issues here? Does anyone have Code sites that can direct me to any opt-out rules? Thanks!

I heard there is a minor exception to the anti-alienation protection. Discretionary contributions (i.e., discretionary profit sharing contributions) which have been made to the plan within 90 days of the employer filing bankruptcy may be undone by a bankruptcy court if they deem it to have been made as preferential treatment to a creditor. Does anyone know where I can find this exception n the Code or ERISA. Thanks!

I heard there is a minor exception to the anti-alienation protection. Discretionary contributions (i.e., discretionary profit sharing contributions) which have been made to the plan within 90 days of the employer filing bankruptcy may be undone by a bankruptcy court if they deem it to have been made as preferential treatment to a creditor. Does anyone know where I can find this exception n the Code or ERISA. Thanks!

I remember that there is a special rule that where an employer has more than one plan it must use the same method for determining HCEs for each plan. I am driving myself nuts trying to find this in the regs. Can ayone point me in the right direction? Thanks!