DTH

A participant terminates, part of the account balance contains after-tax contributions. Can the participant directly rollover the taxable portion and keep the after-tax contributions (no earnings) or does the 72 pro rata rules apply?

A PEO is sponsoring an 401(k) multiple-employer plan. A new client of the PEO is a non-profit client organization with a 403(b). Can the multiple-employer plan contain both 401(k) and 403(b) provisions?

A plan's termination date is same as the last day of the plan year, 12/31/02. If the plan liquidates participant accounts and sends checks on 12/31/02, have the assets been distributed and the last Form 5500 will be for the 2002 plan year? OR does the plan have "wasting trust" assets and Form 5500s will continue to be filed until the assets in the trust completely liquidated (i.e., until the checks are cashed)? Thanks!

I work as a health care claims advocate for plan sponsors that have fully insured group health plans. I have two scenarios I would like some feedback on: 1. Patients call the plan sponsor directly to resolve claims issues. The plan sponsor forwards the claims issues to me to work directly with the insurance company. The plan sponsor will need to either: (a) obtain authorization from the patient to use and disclose their PHI (that flows through to me), or (b) the plan sponsor needs to amend the plan and certify to the plan administrator that the plan document has been amended and the plan sponsor agrees to comply with the amendment. If the plan sponsor amends the plan document, no business associate contract is needed since I do not work for the covered entity. Since the plan sponsor must agree to comply with HIPAA privacy through the plan amendment, I would think that the plan sponsor would want some sort of agreement with me where I will also comply (e.g., through the service agreement). 2. I work for the plan sponsor and patients call me directly to advocate their claims with the insurance company. I work directly with the insurance company to get the claims issues resolved. If the insurance company denies the claim, I then go to the plan sponsor for resolution. I assume when the patient calls me directly, there is no PHI so no authorization is needed. If I need to go to the plan sponsor and I only provide them with summary information, I do not need patient authorization. If I need to provide the plan sponsor with PHI, either I need to get patient authorization or the plan sponsor needs to amend the plan and certify to the plan administrator that the plan document has been amended and the plan sponsor agrees to comply with the amendment. Do you agree with my assessment? Any feedback will be most helpful. Thanks!

Do IRS reg. 1.104(a)(4)-5(B)(3) restriction on distributions apply to governmental and non-ERISA electing church plans?

Are there any notice requirements for a DB plan disability benefit payment where there is no optional form of benefit (i.e., life annuity until reaches NRD, then can elect a form of benefit)?

Does the state of New York require an employer headquartered in New York_to provide_to all employees, including employees who work outside of New York, short term disability insurance. _ Example:_ ABC company headquartered in NYC._ Division X is in the mid-west .. does the employer use the NY insurance rules for employees in_the mid-west state?_ The mid-west state does not require_employers to provide short term disability. _ Could you also provide me with the NY cite and, if applicable, regulation. _ Thank You!

Is payment of unused sick time a fringe benefit or supplemental wages?

This plan has a discretionary match contribution, which is determined for the entire plan year (not on a payroll period) basis. At the beginning of the plan year, employees were informed that effective for the plan year beginning January 1, 2002, and for each plan year thereafter, until modified by resolution of the Boards of Directors, the corporation shall match XX% of a participant’s salary reduction contribution, up to a maximum XX% of a participant’s compensation. At the end of the 2002 plan year, the employer now wants to increase the match for the plan year. Can the employer do this?? I was under the impression that the employer must disclose the match formula for the plan year so eligible participant can consider the match formula in making their salary reduction elections. Also, I and trying to find any regulations, notices, etc. that says the employer must disclose the match percentage before the plan year begins. ERISA 2520.102 is vague. Thanks!

Thanks Mbozek. So .... my withholding scenaio #5 applies. I just want to confirm that the individual needs to provide the payor with Form 8233 for the reduced treaty rate. If U.S. graduated rate is lower than treaty rate, the individual provides form W-8ECI. Thanks!

This plan has nonresident aliens who live and work in the U.S. while participating in the plan. If the participant terminates employment and the individual is residing in the U.S., the normal U.S. withholding rules apply. If the participant has contributions and earnings that are all effectively connected income (worked and contributed to the plan after 12/31/86) and moves back to their resident country can the individual claim a lower treaty rate on effectively conntected income? How does the payor withhold? 1. Normal U.S. withholding only; 2. 30% withholding only; 3. 30% withholding unless there is a lower treaty rate. For the individual to request a lower treaty rate what form does the individual provide the payor ... Form 8233??; 4. 30% withholding and can request a lower U.S. graduated rate by providing payor with Form W-8ECI; or 5. 30% withholding unless there is a lower treaty rate (same as #3. above). If there is no lower treaty rate, the individual can request the lower U.S. rate (using Form W-8ECI). Help! Thanks

Have you been reporting the net amount for the excess deferral too? In other words, using my example, do you tax report the $900 as gross and taxable on Form 1099-R, provide a letter to the participant indicating they must report $1000 as income on the 1040 and the $100 loss as a bracketed amount on on line 21??

This always confuses everyone!! IRS Notice 89-32 and Form 1099-R instructions are clear that if you distribute a loss on a 402(g) excess deferral that the taxpayer may include the loss on Line 21 of Form 1040. Example: $1000 excess deferral, $100 loss, check for $900. Tax report $1000 as taxable in 1099-R and inform the taxpayer about the loss in a letter or as an *in the blank box on the 1099-R. How are you handling ADP/ACP excesses? Does the taxpayer eat the loss, as they would do with a regular distribution? I am having a problem with not allowing the loss reduction on ADP excess (K) contributions where the IRS allows it for excess (K) deferrals. Example: $2,000 ADP excess contribution, $200 loss. Would you tax report like the excess deferral - $2,000 taxable or $1800?? I'm assuming the latter. Thanks!:confused: :confused:

If a loan was tax reported as a "deemed distribtion", do you need to tax report it again when a distributable event occurs. Example: Participant defaulted on a loan in 2000, there was no distributable event and the defaulted loan was tax reported as a "deemed distribtion." The participant did not make any repayments on the loan after the default date. The participant terminated in 2002 and has left the cash in his account. The loan note can now be foreclosed and the note assets are offset by the distributable event. Do you need to tax report the "actual distribution" of the note? If yes, the 1099-R Box 1 would show the loan default amount and Box 2a would be left blank. Thanks!

Form W-2 does not make reference to the reporting of nonqualified wraparound plans. If an individual makes deferrals to the nonqualified plan in 2002, those deferrals will be reflected in the 2002 W-2. Box 1 Wages -The deferrals will not be included Box 3 SS Wages - Are the deferrals included or not included??? Box 5 Medicare - Deferrals included Box 12a - No Code so not included If in Box 3 the deferrals are included and FICA taxes paid, the ER really doesn't need to reissue a W-2. If in Box 3 the deferrals are not included, you would need to reissue the 2002 W-2 since 401(k) deferrals are subject to SS. The SS taxes will be paid in 2003 and will be reflected in the 2003 W-2??? In 2003 when the ADP test is run, the ER will need to reissue the 2002 W-2 in oder to correctly reflect the deferrals that were moved from the nonqualified plan to the 401(k) plan. Box 1 Wages - Not included Box 3 - Included Box 5 - Included Box 12a - Code D and $ amount Any clear guidance on how to fill out the form will be very appreciative.

I have an interesting scenario someone presented me. Can anyone confirm the finding below and what Code site they came from? If a participant terminates and the actuarial equivalent vested accrued benefit calculated as of the date of termination does not exceed $5,000, the plan administrator will automatically distribute such amount to the terminated participant in a lump sum. Note that it does not look at the "small annuity rule". If a terminated participant elects to withdraw employee contributions plus interest, participant and spousal consent is required if the present value of the TOTAL benefit (employer and employee) is greater than $5,000. [Okay so far.] After the terminated participant withdraws employee contributions, if the amount remaining is less than $100 per month a lump sum payment will be made in accordance with the small annuity rule. Note that before you get to the small annuity rule, the remaining benefit must be less than $100 per month. Thus, if it is greater than $100 per month, but the present value is less than $5,000, you DO NOT go to the small annuity rule. If the remaining benefit is less than $100, the small annuity rule provides that the plan administrator will pay the amount in a lump sum PROVIDED that participant and spousal consent is required if the present value is greater than $5,000. Thus, if you are in the small annuity rule (i.e. less than $100 per month) but the present value is more than $5,000 and the participant and spouse will not consent, the lump sum value cannot be paid out. [Do you concur? What is the Code site? Couldn't find anything in 1.411(a) or 1.417(e).] Thanks!

I guess I am confused because of one of the HHS Q&As. It says... Q14: How will one covered entity know whether another covered entity with which it does business has submitted a plan? A14: Each covered entity should communicate directly with its own trading partners to determine which ones have submitted plans. This information could be included in establishing schedules for the testing activities that are to begin by April 16, 2003, culminating in a migration to the new standards that meets the needs of all trading partners. Q15: I believe I will be fully compliant by October, 2002. However, I know that some of my trading partners are requesting extensions and will continue to use nonstandard formats after that date. Do I need to submit a compliance extension plan so that I can continue to communicate with these partners using nonstandard transactions? A15: No. A covered entity is not required to conduct compliant transactions with covered entities who are not yet required to be in compliance and therefore would not need to submit a compliance extension plan. The reqs. don't define a trading partner, just the trading partner agreement. It appears, in the Q&As, that trading partners are another covered enity. Covered entities are required to file their own extenstions. Whereas a business associate would not file for an extension, they would fall under the health plan's )or other covered entities) extension complaince plan??? :confused: :confused:

Under HIPAA, what is the difference between a business associate and a trading partner?

A DC plan participant signed retirement distribution paperwork before retirement. The plan administrator put the paperwork into the participant’s file until his retirement date. The plan administrator forgot to send in the retirement paperwork to the record keeper upon the retirement date. The distribution was finally made after 90 days and the investment funds lost over $30,000. The participant wants the loss put into his plan account because he wants to use favorable tax treatment. The employer would like to make a contribution to the plan to make the participant whole. 1. I assume the distribution was impermissible since it was paid after the 90 days. If the payment is reversed and reprocessed with new paperwork, the loss is even greater. I think the plan administrator can use the SCP program.. 2. Can the employer make a non-deductible contribution to the plan to make the participant whole (i.e., replace the lost funds so the participant can use favorable tax treatment). I don’t think so unless the participant brings a fiduciary breach lawsuit against the plan administrator. Please let me know your thoughts. Thanks!

Thank you ... I won my bet!

When determining the small benefit cash-out amount in a DB contributory plan are employee contributions part of the vested accrued benefit. If not, could you direct me to the Code site.

I have a plan that is trying to exclude seasonal employees. These individuals do not fall into any excludable classification. Could they exclude them if they are hired through a temp. service?

Any timing around the notice to change the loan policy?

The current SPD indicates that participants can have two outstanding loans. Would changing the number of outstanding loans the plan allows (i.e., from two to one) require an SMM? If not, is there any requirement to disclose the change to participants?

Thanx Pax. Let's assume there is still have an account balance at the end of the 2nd year and no beneficiary has come forward.