A: Severance of employment (voluntary, involuntary or retirement), death, disability, the attainment of Normal Retirement Age (as defined in the plan) and Qualified Domestic Relations Orders (QDROs) are the only universal reasons for distributions to participants. Plans can optionally provide for Early Retirement benefits, in-service distributions, financial hardship distributions and participant loans. There are various income tax ramifications for each type of distribution. If you have any questions regarding the types of distributions allowed by your plan, please contact us.

I. Information about FACTS, inc.

1.	Q: Is FACTS affiliated with any investment provider or do we sell any product?
	A: No. Our belief is that our independent status allows us to best serve our clients’ needs, regardless of the funding vehicle used for their plans. Our only revenue stems from the services that we perform directly for our clients. Our business has always been, and will continue to be, built on providing quality, personalized service at a reasonable cost. For more about us, please click here.

II. General Information about Qualified Plans

1.	Q: What are the important dates for qualified plans?
	A: To see a list of deadline dates for calendar year plans, click here.
2.	Q: What are the current dollar limits for qualified plans?
	A: To see a list of the current limits, click here.
3.	Q: What is a “qualified retirement plan”?
	A: A qualified retirement plan is a program sponsored by an employer and/or employee organization that provides for tax-deferred retirementincome accumulation for employees. A qualified plan is subject to rules established by the Internal Revenue Code.
4.	Q: What the primary incentives for an employer to sponsor a qualified plan?
	A: A qualified plan primarily provides attractive tax incentives unavailable elsewhere. Employer contributions are deductible when funded, employees’ accumulations are tax-deferred, and plan distributions can often be given favorable tax treatment. In addition, qualified plans comprise a valuable part of sponsors’ benefits packages that help attract and retain employees, as well as provide incentives for employees to help themselves accumulate funds for their retirement.
5.	Q: What are the types of qualified retirement plans and what are the differences between each type?
	A: There are two basic types of qualified plans – defined contribution (DC) and defined benefit (DB). The benefits provided by a DC plan are related to the amount of contributions and earnings that accumulate for the employees over time; funding levels by the employer and employee (if allowed) are generally discretionary. The benefits provided by a DB plan are set forth in the plan document; the funding levels are required and are determined actuarially, generally on an annual basis.
6.	Q: What are some types of DC plans?
	A: Profit sharing, money purchase, 401(k) and employee stock option (ESOP) are the most popular DC plans. Some 403(b) plans are qualified, depending upon the tax status of the sponsor.
7.	Q: Are all types of qualified retirement plans available to all employers?
	A. There are certain restrictions depending on your type of business. Please contact us for more information.
8.	Q: What governmental agencies have authority over qualified plans?
	A: The Internal Revenue Service (IRS) and the Employee Benefits Security Administration (EBSA), a division of the United States Department of Labor (DOL), have separate and somewhat equal authority over qualified plans. Each agency has its own rules and regulations with regard to qualified plans. The EBSA was previously known as the Pension and Welfare Benefits Administration (PWBA). Please refer to the links section for shortcuts to the websites of these agencies.
9.	Q: What is a plan document?
	A: A plan document is a required written instrument through which a qualified plan is legally established. This document outlines the various mandatory and optional provisions that control the operation of the plan. The document must comply with the various retirement plan laws and regulations in order for the plan to maintain its tax-qualified status. Due to ongoing retirement plan legislation, regular amendments and updates to the document are a necessity. The optional provisions in the plan should be reviewed on a regular basis to ensure that the plan best suits the needs of the sponsor.

III. Operational Questions for Qualified Plans

1.	Q: What types of questions should be directed to the plan’s investment advisor(s) rather than FACTS?
	A: Your investment advisor(s) should be contacted for questions regarding statements from the investment company and management of the funds held by the plan. FACTS should be contacted for administrative questions. Some examples of administrative issues are governmental or ERISA guidelines, loan and hardship issues, withdraw procedures, and document issues.
2.	Q: When submitting census data, are all employee names submitted, or just those who are participating?
	A: The names of all employees on the W-2 payroll must be submitted. FACTS will then provide status updates to you regarding eligibility and vesting. Additionally, all eligible employees must generally be considered in plan testing regardless of whether they choose to participate.
3.	Q: When submitting census data, why are birth dates necessary?
	A: a)Plans generally have an age requirement for eligibility and/or vesting; b)The tax consequences can differ for employees who terminate after certain ages; and c)Owners and their immediate family members are required to take minimum distributions from the plan when they attain age 701/2.
4.	Q: When submitting census data, why is the number of hours     worked for each employee necessary?
	A: 1)Most eligibility and vesting rules are determined by hours worked; and 2)Some employer contributions are only given to participants who meet a specific hour threshold.
5.	Q: When the hour of service method is used, what does a year of service mean for eligibility purposes?
	A: An individual must be employed twelve (12) months from the original date of hire and work a minimum of 1000 hours during those 12 months. That employee will then be eligible to enter the plan according to the entry dates in the plan document. If the employee does not meet the hours worked requirement, that employee will not become a participant until that requirement is satisfied in a subsequent eligibility period. Subsequent eligibility periods for most plans will be keyed to the plan year rather than the employment anniversary date.
6.	Q: If a participant terminates and is rehired, is that person eligible to participate immediately upon re-employment?
	A: Generally yes, but you should contact your administrator to discuss the specific timing details and related vesting issues.
7.	Q: What if a terminated participant moves without a forwarding address?
	A: In the event that former participants cannot be found through good faith attempts, most state governments will allow you to transfer their balances to the state. Under certain conditions, there are private firms that offer alternatives. Refer to our links page to access the websites of several such firms.
8.	Q: How are immediate family members of the owner(s) treated in the plan?
	A: In most cases, the Internal Revenue Code requires that all lineal ascendants and descendants be treated as if they were also owners for all Plan purposes.
9.	Q: What is the bonding requirement?
	A: All fiduciaries (persons who have at least discretionary control over a qualified plan or its assets) must be bonded for at least 10 percent (10%) of the total plan assets at all times. Bond coverage amounts below $1,000 or above $500,000 are unnecessary.
10.	Q: What are the deposit timing deadlines for plan contributions?
	A: Deposits for employer contributions and employee contributions have separate limits. This is an area that is currently under intense scrutiny by IRS and EBSA personnel. Please contact our office for further explanation.
11.	Q: Under what circumstances can an employee withdraw funds from a qualified retirement plan?
	A: Severance of employment (voluntary, involuntary or retirement), death, disability, the attainment of Normal Retirement Age (as defined in the plan) and Qualified Domestic Relations Orders (QDROs) are the only universal reasons for distributions to participants. Plans can optionally provide for Early Retirement benefits, in-service distributions, financial hardship distributions and participant loans. There are various income tax ramifications for each type of distribution. If you have any questions regarding the types of distributions allowed by your plan, please contact us.
12.	Q: What are Roth 401(k) deferrals, and how do they work?
	A: First available for plan years beginning in 2006, Roth 401(k) contributions are salary deferrals that are made on an after-tax basis instead of the pre-tax basis of traditional 401(k) deferrals. The tax treatment of the two types of deferrals is similar to that of traditional and Roth IRA contributions, although there is no income limitation in determining eligibility to make Roth 401(k) deferrals. Roth 401(k) deferrals are aggregated with traditional pre-tax 401(k) deferrals for all plan limits and testing purposes. The Roth 401(k) regulations are somewhat complicated and impose several additional rules on retirement plans. The attached chart prepared by the IRS provides a brief overview of many of the similarities and differences between Roth 401(k) deferrals, traditional pre-tax deferrals, and Roth IRAs. If you would like more details on this optional plan feature, please contact us.

IV. General Information about Flexible Spending (Cafeteria) Plans

1.	Q: What is a cafeteria plan?
	A: A cafeteria plan is way of providing valuable benefits, as well as significant tax savings, to covered participating employees. Depending upon the provisions of the employer’s plan, benefits may include medical expenses not covered by insurance and reimbursements of dependent care expenses.
2.	Q. How does a cafeteria plan work?
	A: Participants select the benefits desired from the cafeteria plan menu. The primary benefit of participating in a cafeteria plan is that participants are not taxed on the compensation that they redirect into each benefit account. To learn more about the operation of this type of plan and to see a sample participant calculation, click here.

V. Operational Questions for Flexible Spending (Cafeteria) Plans

1.	Q: Can participants change their election amounts during the year?
	A: Yes, but only those participants who have experienced a “change of status”. Examples would include changes in marital status, number of dependents, employment status and dependent care providers (if applicable).
2.	Q: Is there a limit for dependent care expenses?
	A: Yes, the maximum annual amount is currently $5,000.
3.	Q: Is cosmetic surgery a reimbursable medical expense under a cafeteria plan?
	A: No.
4.	Q: Is laser eye surgery a reimbursable medical expense?
	A: Yes.
5.	Q: Can over-the-counter (OTC) drugs be reimbursed through the cafeteria plan?
	A. Yes, a recent ruling by the IRS allows non-prescription drugs such as pain relievers, allergy medicine, cold medicine and antacids to be reimbursed.
6.	Q: Can a participant turn in expenses to be reimbursed after the end of the year?
	A: Yes. Most cafeteria plans allow 30-to-90 day windows to present claims for covered products or services purchased or performed during the previous year.
7.	Q: If a participant has not claimed the entire amount elected for the year, can it be used for products or services in the next year?
	A: No. The amount elected for the year can only be used to reimburse expenses for products and services purchased or performed during that year. Any unused amount is forfeited.

   

Disclaimer | Privacy Policy
© Copyright 2004