A doctor uses only leased employees. The leasing organization has a 401(k) safe harbor plan for the leased employees. The doctor would like to put the same kind of plan in place for herself with the same contribution levels so that she is not discriminating.

A representative for the investment firm in which she is hoping to invest plan assets told her that she could not open a safe harbor plan since she was the only employee. She was told that she would need to use a one person 401(k) plan document (solo k) as opposed to a safe harbor adoption agreement.

Are leased employees considered employees for the recipient? If so, does that effect her eligibility for a solo k? Any thoughts or concerns?.

Thanks.

Question about VEBA contributions. Currently, an insurance company (tpa) is receiving veba contributions from a group into their main bank account and then directing the money to the veba trust. Is this a legitimate arrangement? Why aren't these funds put directly into the trust? Is this a violation of ERISA?

We are starting to receive calls from brokers eager to sell these things. I don't really see the appeal in automatically enrolling employees so that you can fund a free match for them, but I guess others do! Seems to me a regular safe harbor match plan would be the better alternative if you are willing to commit to employer contributions from the start.

The automatic increases are cumbersome, too, so unless the client is willing to do a lot of work on their end, they might as well enroll at 6% to start with. Hope they don't come looking to me to do this for them! I don't see how a TPA can help unless they go into the payroll business! Comments?

Vesting - seems everyone is much more excited than I am about 2 year cliff vesting. What am I missing here? If you design your plan to keep costs down, i.e. use maximum eligibility requirements of One Year, Age 21 with dual entry, by the time someone enters the plan they'll have 2 years of vesting.....unless you use the "elapsed time" method for calculating vesting years. We administer about 500 plans and only 2 of them use elapsed time.

Speaking of elapsed time.....seems we're not the only ones that use the 1,000 hours method. I believe it is by far the most common method used in the southeast region of the country...maybe other areas as well. But why is the 1,000 hour method so much more common? Seems elapsed time would be easier, take longer to vest and have a meaningful effect with the new Automatic Enrollment Safe Harbor plans. Comments?

While I'm on my soapbox......seems to me that automatic enrollment is a good thing (aside from the safe harbor rules) and it is important to increase the retirement savings rate of employees. But as long as you are permitted to "blow your wad" when you terminate employment, NOTHING will be accomplished in the long run. Money in, money out with no real results. Retirement savings rates may appear to go up but not retirement account balances. The same people that don't bother to fill out the enrollment forms are the same ones that will take a lump sum distribution at the first opportunity.

We had several clients this year that could/would not make their Safe Harbor contribution commitments by the extended due date of their tax return. Other than the obvious lost deduction, what are the consequences to the employer and the plan if the contribution is made by 12/31/07? What if the contribution is not made by 12/31/07?

I would think that as long as the contribution is made within 12 months after the plan year that all is well...deduction could be taken for 07...plan still qualified...no ADP testing required.

But if the contribution is not made by 12/31/07 the plan would be disqualified.

Assuming plan is not terminated, would ADP testing apply and if so, at what point?

I am taking over a DB plan on a nonstandardized prototype document and that document has, as part of the benefit provision choices, an election that "benefits are frozen as of blank date". There is nowhere to check a box that says "no new participants as of blank date". It seems silly that you would have new entrants with no ability to accrue a benefit, but in my mind freezing benefits and freezing new entrants are separate issues, yet I have seen more than a few instances upon takeover of all benefits being frozen but no amendment to freeze new participants. What am I missing here?

In this particular case benefits were frozen in 2006 and technically some new entrants have come in since then. Now I wonder, for this particular case, if I freeze new entrants, which I can't do within the prototype, would that take the plan out of prototype status?

Any input is appreciated.

I have an employer with a 401(k) plan that has a prevailing wage feature. The prevailing wage contribution is used (up to the extent allowed by the code) in the ADP testing.

The plan fails the APD testing and one of the HCE's who is required to get a refund has only prevailing wage money as a contribution. He is an HCE and is eligible for and contributes Prevailing Wage to the plan. He does not contribute 401(k) money but his entire Prevailing Wage is included in the test.

He is over age 50 - but I assume prevailing Wage is not eligible for "catch-up" provisions? Is that correct? If correct, am I required to refund prevaling wage contributions under the ADP testing?

I may be missing something here - I don't know - this has never come up in any prevailing wage plan I've worked with as I've never had an HCE even contribute prevailing wage money.

Any help is greatly appreciated.

I'm sure that Form 4010 will eventually be available on Free ERISA.com, but does anyone know of a source of public information that would be released sooner?

Thanks,

Joe

Help!

I have a plan that has to be cross tested.

The rate group test is not passing on a whole group basis. The prior vendor broke the plan into component plans:

Group A

HCEs 97

NHCEs 995

Group B

HCEs 11

NHCEs 15

The rate group testing passes in Group B on a contributions basis, because all of the employees in Group B have the highest allocation rate allowed by the plan. Group A passes on a benefits basis.

However, I thought that in order to be able to break a plan into component plans, 410(b) must be satisfied for each component as if they are a separate plan.

I interpreted this to mean that Group B would not satisfy 410(b) because the ratio % would be:

NHCEs = 15/1010

HCEs = 11/108

14.58%

I have never broken a plan into components for cross testing, so I questioned the prior recordkeeper on how Group B could possible satisfy 410(b). They responded that the coverage is 100% because the components are treated as completely separate plans.

Am I crazy? (there are probably several non pension related reasons I am crazy)...but from a pensions perspective, is it possible the coverage can be 100% for Group B?

Thanks!

We have several takeover clients for whom our firm has recently received various settlement checks as the result of class action suits against the investment firms. We do not have participant details sufficient enough to know how to allocate this money in the plans. Any recommendations on the best course of action for reallocation?

Prospective client informed us od an employee who was suspicious of a safe harbor 401(k) plan & signed a Waiver of Participation. I understand the issues with waivers (i.e. doucment must allow, irrevocable, etc;). My question relates to a safe harbor plan specifically. Assuming the Waiver of Participation is valid I don't see any reason the participant still can't use safe harbor 401(k) rules. I've looked & don't see anyhting in the safe harbor rules that would prevent such waivers. Am I missing anything?

Thanks in advance for any guidance.

Deceased participant was living in the state of Virginia at the time of his death. His first beneficiary designation named his long time (over 15 years) girlfriend 100% and this form was signed. His updated beneficiary designation named long time girlfriend 50% and his daughter 50%. The second form was never signed. I am figuring that his first beneficiary form is the valid one and his girlfriend should receive the money.

However, the plan sponsor tells me that at one time this guy was married and isn't sure there was ever a divorce.

Does the girlfriend get the money? I told the plan sponsor that an attorney may need to be involved. But I'm not sure who should seek legal counsel. Plan sponsor, daughter, girlfriend or all three??

A client sent us a Schedule C with a net loss. The gross receipt was positive, but there wre a lot of expenses. However, he contributed $26,000, of which $15,000 was 401(k). Are deferrals allowed on gross income, or should we look only at the net profit/loss?

Thanks

Hello,

I am a young investor that has been pretty active in the stock market. I initially started with $20,000 and have grown it substantially within the past year. Should I even consider a an IRA at this time? Im leaning towards a traditional IRA because I eventually I will be making more than 95K which would not allow me to hold a Roth IRA. If I should consider an IRA, I would like to just roll my stocks into the account without having to sell them first. Is this possible? I am mainly saving the money to invest in my first home. Can I buy my house through my IRA?

If your still with me, should I just go see an investment advisor?

Thanks for the help.

If health plan provides medical benefits for almost all participants on a self-insured basis, but also has a handful of participants who receive fully-insured coverage, can the SAR just be furnished to those with fully-insured benefits?

When a participant defaults on a plan loan, the balance due on the loan is "deemed distributed" such that the balance due constitutes a taxable distribution. Ordinarily, taxable distributions from a plan are subject to 20% backup withholding. However, since the deemed distribution is not an actual distribution of cash, no backup withholding is ordinarily possible with respect to same.

In cases where the deemed distribution is made concurrently with a taxable distribution directly to the participant, we believe the 20% withholding obligation relative to the total of the deemed distribution and cash distribution must be satisfied, to the extent possible, from the cash portion of the distribution. However, what is a plan sponsor's obligation where the deemed distribution occurs at the same time as a (normally) non-taxable rollover to another qualified plan? May/must the employer withhold up to 20% of the deemed distribution from the rollover amount?

Thanks for the help in advance!

I worked in California for a number of years, and moved back to Australia 10 years ago. I am now 51 and want to move my TSA and Plan B into my retirement plan here in Australia. What is the quickest, most effective way to do this? The employee is huge so should be well-versed with this, but I have constantly been surprised with international transactions, and sometimes feel that I have to re-invent the wheel everytime! I have tax advice here, and still choose to move it now. Thanks.

If I aggregate a DB and DC Plan for 401(a)(4) testing, must distribution options be the same for both plans. For example, the DB Plan provides for QJSA and lump sum. Must the DC Plan also provide QJSA form of distribution?

I need help understanding Reg. 1.401(a)(4)-4(d)(4) Permissive aggregation of certain benefits, rights or features. I think this reg says that if a BRF is "inherently equal" in value to another BRF, then the two BRFs may be treated as a single BRF. In the DB/DC Combo plans we work with, I think that the QJSA and the lump sum form of benefit are equal in value, e.g., there are no subsidies for the QJSA and there are no discounts for the lump sum; the plan benefit payable as an annuity is equal to the actuarial value of the lump sum.

I think I am missing something here because I think the general consensus is that the DC Plan has to have the QJSA option. But why? Thanks.

In California, are there any State or Federal laws which cover the use of company resources?

If a company has no stated policy regarding the use of company computers:

If an employee were to use company resources to sell items on an online bidding service, assuming it's during their breaks, lunch, or after work, could the company make a claim against that employee?

If an employee were to use company computers to design a product--again, assuming it is on their own time--and then later use those designs to produce and sell that product, could the company litigate a claim against that employee?

Could someone point me to the appropriate part of California or Federal law that covers these questions?

Thanks!

Edit: It occurs to me that I am asking non-benefit related employment questions. I'm sorry about that. If there is a more appropriate place for me to be asking these questions, could someone please direct me there? Thanks!

Can an employer pay a larger portion of health insurance premiums for some employees and a smaller percentage for other employees. For example, say the employer wishes to pay 100% of management's health insurnace premiums but only 50% of rank and file workers. The premiums are paid directly to the insurance provider. Would the management employees be subject to tax on the premiums paid to insurance company?