Beginning with 2013, our employees must be at least .75 FTE to be eligible to participate in our self-funded health plan. At the same time, we have a health flexible spending arrangement that requires only a .5 FTE for eligibility. The health FSA is entirely funded through the employees' salary reduction elections. So, we have a group of employees who are eligible to participate in the FSA, but who are not eligible to participate in the health plan.

I read the section 4376 tax regulations to say that a heath FSA that is an "excepted benefit" is not an applicable self-insured plan, which would mean that for an "excepted benefit" FSA, the FSA-eligible employees (including the .5 - .74 FTE employees) would not be counted for the PCORI tax. The section 9831 tax regulations state that an FSA is an "excepted benefit" if a "class" of participants meets both of two requirements. One of the requirements is that other group health plan coverage must be offered to the "class." My question is this. Is the group of employees with FTEs from .5 - .74 a "class," if we don't identify or define them in any other way as a class for HR and employment purposes? If that group is a "class" then our FSA would be an applicable self-insured health plan and the group's lack of eligibility to participate in our self-funded health plan would require the PCORI covered lives count to include each employee in that group. Correct?

Thanks,

Ken Davis

DB Plan has a cola formula for participants in pay status baked into the plan. Where can I find the IRS' position on (a) whether the the cola needs to be included in determining actuarial equivalent lump sum, and (b) how (the heck) you assign a value to the prospective cola. I know there has been private party litigation concerning (a), but where in regulations or other guidance can one find the IRS' position?

Company had over 100 employees from day 1 in 1996. we managed to obtain schedule A info back to 1998 for all carriers [whew], but only 1 carrier for 1996 and 1997 [darn]. That carrier shows under 100 employees. Company does not have records of employee counts in those 1st 2 yrs. Question:

Do we just file dfvc back to 1998?

Do we file back to 1996 with incomplete info for 1996-1997 showing < 100 employees?

Earlier this month, I prepared an SB for 2012 using the same plan provisions that were used for the past few years. Two of those provisions are:1) NRA of 62 and 5 years of service and 2) eligibility based upon 1000 hours. Subsequently, I realized that the GUST and EGTRRA adoption agreements actually had NRA as 61 and 5 and that the EGTRRA adoption agreement (but not the GUST adoption agreement had eligibility based upon elapsed time. The person in our office who prepared the EGTRRA adoption agreements erroneously made this "elapsed time" change for many plans and I'm confident that the plan sponsor did not intend to amend the eligibility to elapsed time. Moreover, I am fairly certain that NRA in both adoption agreements is a mistake. Can these two corrections be made now and enable me to file the SB with the provisions always used? Any help would be appreciated!

But not yet approved by the IRS, although it is more or less "guaranteed" it will be approved. Can they start a 403b before the application is approved? [They receive state grants to provide services to the mentally disabled.]

Any citations appreciated. I have it on good authority that this is doable, but that individual (an ERISA attorney) couldn't recall where he had obtained this response.

Was having a discusison today about commercial locator service versus the SSA letter forwarding program. What types of information do private locator services have access to that the general public doesn't? How are they linking the SSN with the correct Joe Smith?

Thanks for any guidance.

I'm sure that this topic has come up before and I am just not finidng it.

Plan has been in existence for 20 years and never filed a form 5500. Plan sponsor probably has sufficient data to file for the last 10 years, but no chance they have data 20 years back. I'd like to help them, but I'm not sure how to proceed. Has anyone had this circumstance? I'm wondering if plan sponsor can file as far back as records permit and then hope for mercy if the DOL asks for earlier filings?

Any guidance is appreciated.

If a plan sponsor initiates (either with PBGC or with both IRS and PBGC) the termination of a DB plan, can it purchase annuities or pay lump sums (at least to non-active participants) at any time? Or must it wait until the 60 day window has closed (in the case of PBGC only)or it receives a determination letter? Thanks.

New client has 2001 GUST IDP with DL but nothing after that.

Can we use our VS document for their EGTRRA restatement and late amender VCP filing?

If so, can we consider the post-EGTRRA interim amendments that we've done as VS plan sponsor as already "attached" to our VS Adoption Agreement or does the client have to separately execute the interims?

Thanks

I think I am probably overthinking this but it never hurts to get a second (and third and fourth) opinion.

I am designing a NQDC which has fairly simple terms.

All contributions are by employer (i.e., no employee deferrals).

There is a 10 year vesting schedule wiht immediate vesting for death and disability.

Payment events will be separation from service, death and disability.

In addition, all amounts will be forfeited if a participant is terminated for cause (as defined in the participant's employment agreement).

Does anyone see any inconsistency between separation from service (which includes termination for cause) as a payment event and termination for cause as a forfeiture event?

2012 Takeover problem. Plan A amended their Adoption Agreement to have Plan B merge into Plan A in 2009. The Adoption Agreement is executed. However, the Employer also signed as the Plan Trustee - the actual Trustee was Fidelity. Nothing else was done to effecutate the merger. Plan A's 2009 and 2010 5500, Schedule H does not recognize the merger of assets, nor does the 2009 or 2010 Audited Financial Statements. Plan B has not filed a 5500 since 2008.

I think this is an invalid merger - as if it did not occur.

Any thoughts or comments would be appreciated.

after a qualified plan distributed annuity is paid out to the participant if the participant wants to surrender the annuity and roll over the proceeds to a personal IRA can he do so without regard to GATT and 415? i would say yes but i need verification.

Plan invested part of plan assets in what turned out to be a ponzi scheme. Plan Trustees recently recovered money from bankruptcy Trustee. What should plan trustee do vis a vis informing participants of recovered amount? what about particicipants who are no longer employees?

Our 401(k) Plan is covered by a Fidelity Bond purchased by the Plan's Trustee, State Street Bank & Trust. Does this bond also cover the Plan's assets in event of dishonest acts by our company's employees -- or does it only cover the Plan in the event of dishonest acts by the Trustee's employees?

New Client wants to to know if he can have a second Trustee for his plan, which of course he can. However, the client tells us that the person he wants to name has no relationship to the company and is not American.

Your thoughts?

I have a case in which two individuals are trying to broker a merger of their companies. The new company will be an LLC (taxed as a partnership). Member A owns 75% of the company and Member B owns the remaining 25%. A has proposed a NQDC plan exclusively for B. B must remain with the company for 10 years to received the deferred comp.

I understand that the pass-through nature of the entity and the non-deductibility of the deferred comp mean that A and B will report higher net operating income on their individual returns as a result of this NQDC plan. My question is: So what?

From A's perspective: he's going to report 75% of the NOI on his return, but he's also going to take the deduction on the back end if the deferred comp is eventually paid out. If B fails to meet his contractual obligation, the entire deferred comp balance will return to A's coffers. Alternatively, he could have paid B normal compensation (i.e. guaranteed payments), for which he would have received a deduction, but he would also find himself out a pile of cash if B decided to walk away prematurely.

From B's perspective: he's going to report 25% of the increased NOI on his return, but like A, he's going to take a pro rata deduction on the back end. If he fails to meet his obligation, he's out the deferred comp, but since he failed to perform the required service, the money wasn't really his to "lose" in the first place. And regardless, it can be presumed that B was aware of the consequences of his actions when he quit, and subsequently factored that into his decision making.

And because A and B are trying to broker a merger of their businesses, it seems like both parties can negotiate the amount of the deferred comp to a point where both sides are amicable to the risks and trade-offs they are accepting.

In short, every argument I've seen against pass-through NQDC plans revolves around the pro rata reporting of the pass-through NOI. Since this is recaptured on the back end by at least one of the two parties, I fail to see the problem? Given that there are many smarter than I that seem to be on the other side of the argument, I suspect that I am overlooking some crucial detail. Please... enlighten me!

thanks,

Suppose a top-heavy plan's test percentage fell below 60% but no action was taken to shut off accrual of the top-heavy minimum benefit. Would some sort of corrective action be needed or could the top-heavy minimum just be frozen as of the end of the current plan year? If correction was necessary, what would be an appropriate action?

Have discovered a plan that has employer securities has been filing using the 5500sf. Our firm had not prepared the prior year filings. Should we recommend amended filings going back to 2009 when the SF began, or start using the 5500 going forward. Thoughts?

My wife's employer is currently in the process of terminating their money purchase plan. They have schedule "meetings" for all plan participants to attend with the investment vendor. My wife's work schedule is part time and as such all of these "meetings" they have scheduled are on the days she does not work.

So being a person who works in the pension industry I advised her to simply request the distribution election forms so we could fill them out and get her money rolled over to an IRA as I suspect these meetings were set up as an opportunity for the vendor to sit down with the plan participants and potentially retain the assets via the participant rollovers to the 403b plan that will remain in existence.

Recently she recieved notice from her HR director stating that if she did not attend one of these meetings with the vendor, that they would suspend her and withhold her pay. Immediately I said, that is right.

I am looking for some help in identifying the specific section of ERISA or DOL regulations that would constitute this action as a violation.

Here's today's problem on which I ask for your help.

An employer has a 401(k) plan that the employer established without help from anyone beyond the salesman who sold the recordkeeper's packaged service.

The recordkeeper's service is unsuitable for this employer because everything depends on the employer knowing that it needs to do something. For example, the employer never filed any Form 5500 report. The recordkeeper's letter said all the right things, but the business owner never read that letter (or any of the few dozen other things that the recordkeeper mailed).

The employer has only three people: The owner is the designer of the business' products, the sole salesman, and the corporation's president, secretary, treasurer, safety officer, and everything else that's supposed to be done. A craftsman and a laborer do all the manufacturing.

While I don't condone the employer's conduct, I'd like to pursue practical suggestions.

Although I'm aware that it's almost impossible to get a service business to act as a retirement plan's named administrator, is it possible to find a service provider that would have a service rep (someone who's smarter than just reading from canned scripts) make telephone calls affirmatively to tell the business owner what he needs to do and why it's important? (It's okay if such a service is more expensive; the business has money to spend.) I understand that this would be a reminder service or an I'm-too-busy-to-read service; but is it possible to buy something like this? If so, what does a micro business pay for this?