the scenerio is this...a participant in a 403(b)wants to continue to defer into the 403(b) but take distributions annually and roll them over to a 401(k) plan. he is over 59 1/2. my thinking is that he could do it but i dont know much about 403(b) plans.

A small closely-held company is implementing an ESOP and is in the process of appointing trustees. There will likely be three trustees - a non-management employee, an independent director from the Board, and an outside trustee.

Does anyone have thoughts on what would be considered "reasonable compensation" for an individual serving as an outside trustee? The trustee would not provide any services other than as trustee (e.g. no accounting, vote tabulation, etc.).

I appreciate any thoughts, as the "reasonableness" and "facts and circumstances" language of the §4975 prohibited transaction rules does not provide real-world guidance.

We are a TPA shop that provides administration to qualified plans that are with banks, insurance carriers, and direct to mutual fund companies. We have approximately 25 401(k) plans direct with Vanguard. These plans are in "pooled" accounts. In other words, the assets for each plan are pooled under one trust at Vanguard; each participant does not have a Vanguard account. We breakdown the accounts on our recordkeeping system. Participants logon to our website to view balances and make trades. Vanguard has no idea who the participants are, only the retirement plan trust as a whole. When a participant wishes to make a change on our website, we then logon to the Vanguard website, under the retirement plan trust, and initiate the trades, subsequently confirming them on our system. We do not use a trading platform.

Recently Vanguard instituted a "frequent-trading" policy for pooled retirement plans. Generally, if a plan makes an exchange by phone or online, the plan must wait 60 calendar days before exchanging back into the same fund. Reallocation and rebalancing transactions are also subject to this policy.

As an example: We have a plan with 50 participants using 10 Vanguard mutual funds. John Smith exchanges from the 500 Index to the Primecap on June 15th. The other 49 participants cannot exchange into the 500 Index Fund for 60 days.

Vanguard is putting us at a distinct disadvantage as a TPA. For example, a bank can offer Vanguard funds through their trust, and they are not subject to this policy. So we can administer two plans, one direct with Vanguard and one through a bank, offering Vanguard funds. The direct to Vanguard participants cannot trade, the bank plan participants can have unlimited trading in the exact same funds. Vanguard is actually forcing us to add a layer of cost, the bank trustee fee, in order to offer trading to plan participants.

I can understand that Vanguard is trying to keep trading costs down, but this policy seems ridiculous to me. How can any company follow (let alone write) a trading frequency policy in their retirement plan with these guidelines? We have tried explaining our concerns to Vanguard, but have hit stone wall after stone wall. Is anyone else dealing with this issue at Vanguard, or any other mutual fund company?

Thank you.

Hello,

I was hoping someone might shed some light on a situation that I am hoping to realize a prohibited transaction exemption under self-dealing rules. Here is the situation:

- Plan sponsor and insurance firm are owned by the same family (insurance firm is NOT owned by the sponsor however)

- separate boards of directors and officers for each company

- employees of both companies are covered by the same plan

- product is a group annuity type

- insurance agent receives commisions on the plan at a rate approx 75-80% below typical market rate

I was thinking that PTE 77-9 and/or PTE 84-24 might apply here since the commisions certainly pass the reasonable test and do not represent a significant portion of the insurance agent firm's total commision-based compensation. Thoughts?

We have a large DB client (about 600 participants) that is interested in terminating during 2007 and distributing during 2008. They have asked for an estimate of the distribution liability at a projected distribution date of May 2008. The plan's current assets are less than the plan's distribution values based on the current distribution assumptions, so they are concerned about the potential additional funding.

The calculation system we have is Datair. What assumptions would you suggest using to estimate the distribution values?

Thank you

I know there is a rule that if a cafeteria plan is maintained pusuant to a bona fide colletive bargaining agreement, it is not subject to the 125 discrimination rules. But what if there are non-unit employees of the employer that participate. Are they exempt as well? Or is there some concept of disaggregation (akin to the qualified plan discrimination rules) that would require the non-unit employees to be tested as though they participated in a separate plan?

Thanks.

A large 401k (over 5000 ees) plan is terminating. The trustee has put in a lot of time with both a DOL audit and in assisting with the accountants audit, as well as other admin. issues. Trustee wants to bill his time to the plan, which would result in around $20,000 invoice.

He can't do this, right? This would be a Prohibited Transaction. But, given the time spent on all of this, could the employer pay him for his time?

Thanks

How about a simple solution assuming the 45,000,000 Americans without health insurance have the ability to pass the hands-on and written tests for driving on our highways and by-ways? Simply require them to furnish evidence of being currently insured for healthcare coverage (at catastrophic levels or no fault levels if nothing else) as well as automobile coverage?

It would matter not whether the coverage is employer based, individual or government! No healthcare coverage equals no license.

Does the new NRA rules apply to Money Purchase Sources that were merged into Profit Sharing Plans? Would you need to amend your profit sharing plans that have money purchase sources to change the normal retirement age on that source of money.

Does anyone have any opinions, tips, experience, etc. regarding the pros and cons of funding severance payments through a VEBA. I know this is very open ended, just looking for general opinions.

If I am requesting FMLA or Medical Leave can the company I work for make me fill out a "HIPAA Autorization to Disclose form" that gives them (the Company), the Disability management company, it's affiliates, their disability consultants, health care professionals and staff permission to obtain the necessary information to adjudicate a claim for disability and/or leave of absense benefits. Before they process or grant either the FMLA or Medical Leave? This form wants us to sign and give the Company a date range that they can have the authorization then they want us to put a check next to each one of the following they are allowed to have: Complete Medical Records, Alcohol and or Substance Abuse, Psychiatric Evaluation and testing, hospitalization,confinement, AIDS/HIV Test information, other evaluations/assessments(specify).

If needed I can supply a copy of the form without the name of my employer.

Client has a 401k which has an ownership interest in the ESOP consists of shares of which 98.5% is company stock (Lockheed) and the other 1.5% is a bond fund.

So the question is, does the client actually own Lockheed stock (which would allow for NUA) inside the ESOP if he has ownership of "shares" in an ESOP that in turn are a blend of company stock and a bond mutual fund?

Client meets the usual NUA rules about retiring now, at age 65. Of course to get NUA one must withdraw entire balance of 401k, put the company stock directly into a taxable account (never into an IRA), and roll the rest directly into an IRA. They must pay tax on the basis part of the company stock and when they sell stock they pay LTCG.

I was wondering if a controlled group existed in this situation. I wanted toi understand this before I moved on to the ASG rules. The facts are set forth below:

Corporation A - 91% owned by ESOP (all shares allocated to Individual A, sole participant in ESOP) and 9% to Individual A.

Corporation B - 100% owned by Individual A, no employees except Individual A.

Corporation C - 100% owned by an irrevocable stock trust, no employees except Individual A

LLC - owned 51% by Corporation B and 49% by a truly unrelated 3rd party. Several employees work for LLC.

I guess I have two questions.

If 91% of stock in Company A is held in an ESOP, but allocated to A's account, is A treated as owning 9% of Company A or 100% of Campany A. I think the answer is 9%.

Are the employees of A required to be considered in determining if ESOP meets coverage and participation tests? I think the answer is no, as only 51% of the LLC is owned by A.

Thanks in advance for your comments.

Ed

There is an employee whose son got married May 24. The son wants to cover himself and his spouse on the insurance through COBRA.

Blue Cross says that since the COBRA starts June 1 and the marriage was prior to this date, she is not eligible to be covered.

If that is the case, no spouse of a marrying dependent would ever qualify.

Does anyone care to comment on this? I will send an appeal to be reviewed by legal, but I'm not sure what my grounds for appeal would be yet.

Employer maintains two nonaccount plans. One is an excess plan to make up for benefits limited by 415 and 401(a)(17) that provides for commencement of payments upon the later of separation from service or age 55, the earliest retirement age under the qualified plans. The form of payment is limited to equivalent annuity options. The other plan is a SERP for the very senior executives which provides for an immediate lump sum payment upon separation from service. The participants in the SERP also participate in the excess plan.

My reading of the plan aggregation rules under the final regualtions is that like kind plans are treated as one plan for all purposes except certain enumerated exceptions. Since timing and form of payment are not one of the exceptions, this would lead me to believe that the above design would not work and that there would need to be a single form and time of payment for each executive that participates in both plans.

I hope everyone disagrees.

Currently, our organization has a medical plan year that spans two calender years (07/01 - 06/30). We're in the process of considering to reverting back to a calender year plan year and have two questions....

1. Has anybody done this in the past and how did you implement it? A 18-month plan year? One six-month plan year?

2. Can an HDHP minimum deductible be pro-rated if we choose the half-year plan cycle?

Thanks!

Your thoughts would be appreciated regarding the following scenario:

A participant requested a hardship of $1,000. The plan allows hardships from the deferral source only, distribution fees are $50 (deducted from the participant's account) and the participant's eligible hardship amount is $1,000.

I have used round numbers to simplify (assume he lost money on his investments and has no residual earnings on his original deferral contributions).

Can you give the participant $1,000 as a hardship withdrawal and take the $50 distribution fee from another source or is the participant limited to $950 as a hardship assuming the $50 distribution needs to be paid out of the eligible hardship amount.

Calendar year 401k plan. The client last filed a 5500 for the 2003 plan year. The IRS sent a letter last week looking for the 2004 5500. Although the forms were prepared by the recordkeeper, they were sent to the client, who didn't realize they needed filed, so they were put in a drawer:

1) I plan on drafting a letter to the IRS, telling them the trust and asking for mercy. Are there any better ideas?

2) Is it too late to file the 2005 form through the IRS 5500 program, just paying the $750? Is that not an option since the 2004 form is on the IRS radar?

Thanks

Tomorrow the ABA's Joint Committee on Employee Benefits is going to have a 90-minute Webcast on these topics in light of the State Street decision and the more recent KSR v Teleflex decision of the Supreme Court.

Topics are:

Overview of the Patent Process

State Street Decision and Business Method Patents

Legislative Developments

Tax Shelter Issues

World of Patenting ERISA Strategies

Where do we go from here?

This looks to be of interest.

http://meetings.abanet.org/meeting/jceb/jceb061407/

Anyone who joins in might want to report here there impressions and what the implications might be for practitioners.

Individual covered under HDHP changes from family coverage to individual coverage halfway through 2007. I assume the contribution limit is calculated on monthly basis based on what coverage he has in place as of the first day of each month. Correct?