8 companies merged into one new company almost 9 months ago. Each of the former entities continued to operate their insurance plans while we rolled up the 8 companies. It was decided that the new organization would engage a PEO to hande our benefits and payroll administration since there was no infrastructure at the new corporate level at all (finances being managed by Excel and Quickbooks - $20m/year company - need I say more?) All insurance plans were to termiante 4/30 and all would go live with the PEO benefits on 5/1. Employee meetings were held 4/9-16 and at that time notices were sent to the insurance companies regarding plan termination. One insurance company required 60 days notice for termination therefore they could not terminate the plan until 5/31 and they were "working with us." There was one former employee enrolled in COBRA under this plan. The PEO sent COBRA paperwork reflecting a 5/1 start date that the person returned effectively enrolling them inthe new plan with the PEO. They had paid their premium for May to the former company and then requested a refund for their May premium so they could pay it to the PEO. THe former insurance company denied the request and they are now asking for the PEO to begin their COBRA coverage on 6/1 or for us (the employer) to pay their May premium.

I am at a loss. I think we may have mishandled the employee communication aspect but I don't know that we actually broke any law that would cause serious issue with the DOL.

I do fear that we had an obligation to officially notify this former employee of the termination of her original COBRA plan as soon as we became aware the plan would terminate. (I found out 4/7 that I would be implementing these new benefits and payroll relationship beginning 4/9 at the same time we were reducing headcount from 180 to 85.) I failed to do so. The COBRA coverage she had under the prior company was not sponsored by the merged company but was sponsored by the prior employer which effectively no longer existed (the asset purchase agreement bought all the assets of hte company) so it wasn't even on my radar at the time. The employee feels that the new company made a poor decision that affected her personally and that we must "make it right or face the consequences." I say it is bad timing and while we may be guilty of making poor decisions on bad timeframes, we did not break any law.

She has threatened to go to the DOL which is not on my top 10 hottest issues at the moment. Anything I should be prepared for or know? I want to make sure senior managemetn is fully aware of the potential exposure but am not sure I know myself!

Any advice, comments, thoughts, etc.?

Small C Corp is having financial problems, really cash flow problems and the CEO (sole shareholder) wants to help by not taking salary. He does not want to give away the benefit, he wants to delay being paid until cash flow improves in about 8 months when payments on job contracts start to come in. The company will accrue the salary liability on the books until paid.

Is this a deferred compensation arrangement/plan subject to 409A?

Is it subject to anything else?

When is FICA etc due ?

If you have seen anything like this and can point me to wording for such an agreement, I would greatly appreciate it.

I've been searching through old posts and not finding a clear answer. Forgive my ignorance, but tax law is a bit of a challenge for me.

Re: incidental death benefits:

I understand 100 x monthly benefit.

I understand 50% whole life, 25% term/ UL for a DC plan.

Can the 50% rule be used for 412(i) plan based on the actual contribution? It sounds like that's not valid, but I'm seeing some 412(i)'s with life insurance premium = annuity premium, indicating the originators thought that was an acceptable test.

In IRS Publication 6392 (Rev. 12-2006) III line f, it says "In applying Rev. Rul 74-307 to defined benefit plans the maximum premiums for ordinary life insurance may be no more than 66 (33 if term and/ or universal life) percent of the theoretical contribution." The theoretical contribution is based on the individual level premium method. The next paragraph says, "In addition to incidental death benefits under the above application of Rev. Rul. 74-307, preretirement death benefits under a defined benefit plan will also be considered incidental if: (1) the cost of the death benefit for any individual does not exceed 25 percent of the total cost of the individual's benefit..."

Does that last sentence mean I can take the Table 2001 rates multiplied by # 1000's net amount at risk and compare it to the normal cost? That makes is much easier to pass the incidental death benefit test, so I assume it's not acceptable, but where can I find clarification?

Most of the life insurance policies I'm seeing are intended (not guaranteed) to be 5-pay, so the premiums are much larger than a regular whole life premium, making it particularly challenging to meet the 66% test using premiums.

mwyatt referred to FSA 1999-633 and merlin referred to Jim Holland's letter regarding the 2/3 ILP calculation. May I get copies of those?

Thanks to anyone willing to get back into the 412(i) mess.

Can an employer require employees to make a specified percentage of deferrals to its 403(b) Plan as a condition of employment? Would this violate the CODA definition?

Same plan - the employer makes an employer contribution on behalf of all participants. If the above is acceptable (i.e., mandatory deferrals permitted as a condistion of employment), would the employer contribution be considered a Match because only received if deferrals are made or would it not be considered a Match because all participants receive the employer contribution, it's just you have to make deferrals to even be employed and a plan participant?

I have a family owned business 401(k) Plan.

Was husband and Spouse. Now hired 16 year old child to work and they have no age or service eligibility for the plan.

16 year old is going to defer and get Profit Sharing.

It is my understanding that once the 16 year old is hired (summers and Part time during School year), plan is now subject to ERISA, can no longer file 5500EZ.

I think a ERISA Bond would now be required, unless their is something I am missing about a minor child in this situation.

Am I missing anyting thing???

Thanks

Pat

Is it possible to set up allocations based on a taxonomy of a participant's classification? In place of a state allocation formula?

Can a business with non-union employees operate and contribute to both a Simple IRA and a profit sharing plan at the same time? Based on the Simple IRA section in IRS pub 560 I am under the impression that it is not permissible unless the profit sharing plan is part of a collective bargaining agreement. And even if there is a collective bargaining agreement contributions can still only be made for one plan or the other per each employee, correct? Am I missing anything here or would a business who operated both plans for more than one year be out of compliance?

Thanks

401(k) plan sponsor files Form 5500 for the first plan year without attaching independent auditor's report ("Accountant's Opinion"). Dept. of Labor's EFAST division spits out letter requesting completion of the return. Plan sponsor engages independent auditor and sends several letters to EFAST updating them on progress. No further communication from EFAST is received.

Is the plan "under examination" under EPCRS Sec. 5.03?

It was always my understanding that the "examination" part of "under examination" was limited to examination or investigation by IRS Employee Plans division and not other agencies. However the model Plan Sponsor's representations in Appendix F are a bit ambiguous:

"To the best of my knowledge (1) the subject Plan is not currently under examination of either an Employee Plans Form 5500 series return or other Employee Plans examination."

Comments appreciated.

Here's an interesting issue.

An employer self-insures its STD. It allows employees to "buy" coverage through their cafeteria plan, either with salary reduction or after-tax premiums. As is typical with cafeteria plans, there is no separate fund and this is OK due to the DOL non-enforcement position for employee contributions made through a cafeteria plan.

The question.

Will the STD payments be tax-free to the employees who contributed on an after-tax basis? Code Section 104(a)(3) provides that payments are tax free if made from insured plans, and "arrangements having the effect of ...insurance." If there is not a separate fund apart from the employer's assets, would this type of self-insured arrangement qualify the participants for the section 104 income exclusion?

I believe the answer is yes, but would love to hear any well-reasoned opposing view.

George

Can you exclude classes of NHCEs from the Safe Harbor contribution. Assuming you pass 410(b) and the plan is not TH they get no ER contrib and it is OK?

Or do you then somehow create two plans (like the early participation rules) 1 SH and 1 Non-SH?

Not 98-52: "a prescribed level of safe harbor matching or nonelective contributions are made on behalf of all eligible nonhighly compensated employees"

Not sure where to find the answer to this question.

Cross Tested Plan

The document (Lenorad Street) states full year compensation is to be used for allocation purposes and has 1/1 and 7/1 entry dates.

Can I use compensation while a participant for testing? Any thoughts would be greatly appreciated.

1. The instructions for Schedule A says that if a plan elects PPA-simplified reporting I only have to fill in A, B, C & D and jsut the commissions/fees info in Part I.

Is there some place on the forms that the plan elects this?

2. For 1(e), persons covered by the contract, who is considered "covered"? Is it the number of people who have a position in the contract? Or is it everyone with an account balance, since, if the plan is participant directed, they could, indeed, be in the contract but decide not to.

If a company made systematic errors (over the course of a few years) that led to it consistently making untimely contributions to a plan and wants to file for a VFCP exemption, will the DOL treat all of those late contributions as a single transaction (and therefore not subjecting the transactions to the three year rule limitation)?

I saw on the DOL's FAQ sheet re: VFCP that they said that they (unofficially) will treat some sets of multiple transactions as a single transaction. Does anybody know if there are specific rules they apply? Would this company's scenario fall into the DOL's view of a 'single transaction'?

thanks for your help.

I believe we've discussed that a new plan effective say 1/1/08 can be treated for funding purposes as if 1/10th of the 415 limit was available (allowed) on the first day of the plan year (1/1/08).

Is this a special rule just for the first plan year only ? or for the second year (2009) for funding purposes could you treat it as if you had 2/10ths of the dollar limit on 1/1/2009 ?

I have a client tha has two 401(k) Plans - One that we administer and another that we do not. A participant has taken a hardship withdrawal from the plan we administer and I was curious if the suspension extends to both plans or just our plan. I am thinking that it would not, but I am not sure and have not been able to readily find a site. If you know the answer or can provide a site, please advise. Thanx!

To the tune of Sgt. Pepper's Lonely Hearts Club Band

It was 20 years ago today

When Congress had to have a say

That they really don't like single pay

So they want to make it go away

They voted on TAMRA back then, so we're celebrating it today

It's seven-seven-zero-two-cap-A

It's seven-seven-zero-two-cap-A

Where MEC rules are all codified

Seven-seven-zero-two-cap-A

Who knew endowments could be modified?

Seven-seven-zero, Seven-seven-zero

Seven-seven-zero-two-cap-A

Watch out when taking income

The tax rules have been bent

Withdrawals can be taxable and loans plus ten percent

So when know all the facts

You can't avoid the excise tax

Unless you hold the policy

Death benefits are tax-free

Pay attention to the seven pay and don't change it in any way

It's seven-seven-zero-two-cap-A

It seems to me that I have seen somewhere that amounts forfeited under a defined contribution plan are supposed to be reutlilized (to defray expenses, reduce future contributions, etc.) within a certain time period, but I have not been able to find anything specific now. Is anyone aware of any IRS guidance on this subject?

Are contributions to a 457 plan required to be included in the average benefits testing of a 401a New Comparability plan of the same employer?? And along the same lines are there separate 415 limits or does the $46,000 limit apply to the combined plans??

I have a owner only plan where the owner has two sole proprietor business that have both adopted the plan. For 2007 his net Schedule C for business 1 is $150,000 and his net Schedule C for business 2 is ($200,000). Would the correct way to handle this be to use a combined net Schedule C of $150,000 ($150,000 for business 1 and $0 for business 2) and to instruct the owner that only business 1 can take a tax deduction for the contribution (in case that wasn't obvious)?

Suppose a participant is at the 415 dollar limit, terminates employment and wants a lump sum. In determining the lump sum benefit, the greater of 5.5%, the plan rate or a rate that produces a benefit of 105% of the benefit using minimum value lump sum interest must be used.

Must this same methodology be applied if a participant is not at the dollar limit but is at 100% of final average comp?