I understand the Service's position is that a cross-tested plan by a non-corporate employer cannot specify one self-employed person to be a cross-tested group. That would be a non-qualified CODA.

What about a categorization that given the data for a given year results in just one self-employed person qualifying for that categorization, but may in other years result in two or more self-employed persons being in that group?

I'm trying to determine some options I might have in a couple of plan design areas, and I've had a little trouble finding the answers in my attempts at searching through the IRC.

If I want to classify a few levels of employees, are there other ways to segregate groups of employees other than salaried employees vs hourly? And are there any possible effects/restrictions I can impose upon matching contribution %'s via these classifications? For example, is it possible for managers to receive a higher MC % relative to hourly employees MC %? (bear in mind, nobody involved with the 401k, not even the managers, would be considered a "HCE")

I was also trying to look into ways of crediting prior service (service recorded before the effective date). Are there a few ways to do this? Or do you simply have the ability to credit up to 5 years of prior service, period.

I don't want to take up too much of your time, so if you can even direct me to the right sections of the IRC that would be a great help. Thanks so much.

I had a rollover IRA account at a brokerage until March 1-2006. They then opened another kind of account where they were charging half the fees for a trade. When I talked to them, they assured me that I could move my rollover IRA into this account and it would still be an IRA account. Now, they are sending me a 1099 and are treating it as a withdrawal. I am in my thirties and this would be a huge tax burden for me. I never touched the money in the new account, never made any withdrawals from or deposits to it either. How do I fix this? I would like to go back to having my money in the rollover IRA as before. Thankyou for your help.

Ria

ok -here's the situation: Plan has 1 month eligibility & uses prior year testing. NHCEs ADP was 2.5% in 2005, HCEs ADP was 5.00% in 2006, so far so good.

NHCEs who were contributing termed in 2005. More NHCEs became eligible in 2006 (after 1 month) but are not contributing. The NHCE ADP as of 12/31/2006 is 0%.

Can I use the otherwise excludable rule to say that there are actually no NHCEs "eligible" in 2006 or do I let the HCEs know that they cannot contribute at all for 2007?

For some reason, I cannot keep this straight in my head; I think because I don't work on enough prior year testing plans...

Hello,

I am brand-new to benefits administration and am the administrator for employee benefits for a small company of under 30 employees. I have been trying to get clarity on the topic of Summary Plan Descriptions. I understand that it is required that the plan administrator provide these to employees for their retirement plan, welfare benefit plans and cafeteria plans within 90 of the employee's eligibility date for the plan. I have been told that an SPD and Plan Document are simply a different name for the same thing and are required when the company is self-funded. I have also been told that in a fully-insured situation that a Certificate of Coverage or a Master Group Policy is the only document required. Is this information correct? I ask because in gathering these documents I have been able to secure an SPD for our Cafeteria Plan, 401K and STD & LTD; whereas I am having a difficult time securing anything more than a Certificate of Coverage for our Health, Dental & Life. Our company is fully-insured. If I do need an SPD for the latter, is that the responsibility of the insurance carrier or is our company's responsibility to supply?

Thank you!

Company X maintains a nonqualified deferred compensation plan permitting certain employees to defer all or part of their compensation with a separate election permitting the deferral of the employee's bonus payment which is made in early March. Assume that Employee L is elitgible to participate in the nonqualified deferred compensation plan and that s/he elects to defer 0% on his/her regular compensation and 100% on his/her annual bonus, and that the election was made in compliance with Code Section 409A. Assuming that L has exceeded the Taxable Wage Base before the bonus is paid and that his/her gross bonus is equal to $100,000, $98,550 is contributed to the nonqualified deferred compensation plan and $1,450 is withheld as FICA tax. Can the amount withteld as FICA tax be considered a 401(k) contribution and require the employer to make a matching contribution (to the extent that the deemed 401(k) contributions does not exceed the plan's matching contribution formula)?

Have a client that is getting rid of their Simple in favor of a 401(k). Participants have already contributed some to the Simple for 2007. I'm wondering for the 2007 Plan Year, which contribution limits would apply - those for Simple or 401(k). I'm not so much worried about the participants going over as I am the owner and spouse who contribute the maximum each year.

Along these same lines, would the employer have to make the usual 3% to the Simple then on comp up until date the 401(k) is actually effective? The 401(k) will include a safe harbor nonelective of 3%. Could the employer just deposit that based on the entire year comp rather than doing a portion of the year to each to satisfy the Simple contribution and the SH nonelective? Of course, the doc would have to state that for the first year, partial comp applies, correct?

I manage a DB plan that does not have a lump sum cash out option for participants. My Company is thinking of adding one. Where can I get some plan design survey data that will give me information on things like number of plans with what kind of options they offer? I'd also appreciate any comments on adding this type of distribution option to a DB plan.

A participant has an IRS lien against her wages that states that she cannot make 401(k) deferrals from her paycheck (presumably until the lien is satisifed). However, she now wants to take a loan from her existing account balance. This is not mentioned in the lien specifically (I'm hoping to get a copy of the actual lien soon so I can verify its contents), but should the employer allow the loan? Any suggestions?

My first thought was that they should call the agent/office who issued the lien, but they don't seem eager to do that...

What are the employer's options as far as implementing auto enroll? Obviously, the employer can apply auto enroll to new hires. But, how can it be rolled to those who already met eligibility? What about those who previously elected out or elected a % less than the default...can we make them reenroll?

Hello,

A client is considering adding a PS source to their 401k plan and would like guidance on rules, regs, types of allocation formulas, etc. Anyone know of a good resource? Thanks

I know this is a DB Board, but since it is such an active board I thought I would make this unrelated inquiry here.

I was asked to prepare a proposal for a VEBA and one of the questions is "How much can it discriminate in favor of HCEs"?

For pensions I look to 401a4 and 410.

For welfare plans, the place to go is 419 (or at least one of the places)

So where does one go to educate oneself about VEBAs? And non discrimination? To my knowledge 501c9 presents VEBA information, but does that section and its regs address non discrimination?

Thanks much.

This question will show you that I am very new to the area.

A small non-profit organization is going to become affiliated with a much larger non-profit organization. Currently both sponsor 403(b) plans. After the small non-profit becomes affiliated with the larger organization all of its employees will become employees of the larger organization. What should the small non-profit do with its 403(b) plan? Can it be merged into the larger organzation's plan or should it be terminated prior to the closing?

Any ideas?

Thank you!!

Employer plan sponsor makes available full spectrum of investment options, including employer stock. Employer does not allow participants voting rights w/r/t the employer stock. Does this cause plan sponsor to loose all 404© protection, or can the plan be 404© compliant with respect to all of the investment options excluding the employer stock?

My understanding is that the IRS was considering issuing transition guidance back in 2006 regarding adding a roth 401(k) feature mid-year to a safe harbor 401(k) plan. I've looked around but can't find it. Did it ever come out? Also, what is everyone's take on whether I can enhance a match mid-year in a safe harbor plan where the enhancement was not laid out in the annual notice. Thanks!

Plan Sponsor (PS) of a large DB plan (Plan) is in the process of dissolving--not in bankruptcy (so no PBGC trustee)--it's just going out of business. Upon dissolution, all PS's remaining assets will be transferred to charitable foundations. PS has terminated Plan and annuitized all benefits that it knows of. It was extremely careful, but Plan is huge and participants could have been missed.

Per PBGC Reg. § 4041.23(b)(9) and a 1991 PBGC opinion letter, PBGC's position is that it's not on the hook for an overlooked participant's benefit, PS is. [On the other hand, I've appended a snippet from the letter, which does appear to contemplate ultimate PBGC liability for "uncorrected" errors.] So, who's on the hook after PS dissolves? Officer, directors, and DB Plan fiduciaries want to know their exposure, as well as any exposure of the charitable foundations. My initial thoughts on potential claims against these individuals:

- Individual § 409 / §502(a)(2) fiduciary claims seem dead in the water because plaintiffs in such cases must be acting on behalf of the plan as a whole. Also, given the well-documented, extreme care with which the termination was handled, proving imprudence would be a challenge.

- § 502(a)(3) claims seem out, given the absence of an equitable remedy.

- § 502(a)(1)(B) claims seem out--even if Plan is deemed never to have terminated (because it failed to satisfy its benefit obligations), who will be forced to fund the benefit?

- ERISA § 4070 claims (civil suits re termiation of single-employer plans) seem the most likely avenue, but only equitable remedies are available, and I don't see paying a fixed sum of money flying as an equitable remedy post-Knudson & Sereboff.

Am I missing something? Thanks.

******************************************

Here's the snip from the 1991 PBGC Opinion Letter:

If a participant did not receive his or her full plan benefit, or was simply missed in the distribution of plan assets, the plan, and therefore the plan sponsor, would continue to be liable. And in the event the error remained uncorrected, the PBGC would ultimately be responsible. See ERISA S 4041(b)(4).

- May 3, 1991, Letter from Carol Connor Flowe, 18 Pens. Rep. (BNA) 850.

I set up a DB Plan in 2006 for an LLC involving 2 principals only, with one minimally benefiting only to satisfy participation requirements. I had the 3 involved entities (the LLC and each principal's corporation) adopt the Plan.

I was just informed "their partnership was terminated in November".

The one principal wants to maintain the Plan while the other doesn't.

Am I stuck with keeping the minimally benefiting principal's benefit in the plan?

This request is being posted under Cafeteria Plans, Health Plans and Welfare Plans in hope of getting a response.

We have a client with a health flexible spending account that is considering establishing a tobacco cessation program – those that certify that they do not/will not use tobacco products will receive an employer contribution to the health fsa. Following research and discussion with the client, we have the following questions –

1. Does a program that rewards its participants based on the criteria that they do not/will not smoke have to be considered a wellness program? Could it be a stand alone employer- sponsored plan/program/benefit that provides for employer contributions into an employee’s FSA account if the employee certifies that s/he does not/will not smoke? Can the employer use non-smoking as its criteria for the reward without concern of a discrimination issue? Is there a way around the discrimination issue? Would there need to be a reasonable alternative to the certification in order for smokers to qualify for the reward? If the employer did not offer a reasonable alternative to the certification, but offered a smoke cessation program through its health plan, would this suffice?

2. If such a program does not have to be considered a wellness program, what would it be and pursuant to which regulations would it be established?

3. If such a program could not stand alone, would it have to be linked to the employer’s group health plan? Could it be linked to the FSA? If this program had to be considered a wellness program and HIPAA applied, and the program was linked to the FSA, what could we use as the cost of coverage to satisfy the requirement that the reward not exceed 20 percent of the cost of coverage?

4. If we wanted to offer the program to all employees, not just those participating in the health plan/FSA, and if we did not make the certification a condition of employment, how could we open the program up to all employees?

5. If the program sponsor were to make a determination that an employee who received the reward falsified the certification, can the employer cease additional contributions to such employee? Request and demand that such employee repay the prior contributions? Can the money be withheld from the employee’s pay? Can the employer cease the employee’s participation in the FSA plan? In the health plan?

6. What types of safeguards do wellness program sponsors have in place to determine/monitor that participants are being honest? Is there an appeals process when an employee’s honesty has been challenged?

7. How does the requirement to provide a terminated participant with a certificate of creditable coverage if s/he received employer contributions in excess of $500 negatively impact the program?

These are the remaining questions we have after reading the final HIPAA regulations. If you are aware of any research material or if you have any experience in this area, your assistance is greatly appreciated.

Thanks!

This request is being posted under Cafeteria Plans, Health Plans and Welfare Plans in hope of getting a response.

We have a client with a health flexible spending account that is considering establishing a tobacco cessation program – those that certify that they do not/will not use tobacco products will receive an employer contribution to the health fsa. Following research and discussion with the client, we have the following questions –

1. Does a program that rewards its participants based on the criteria that they do not/will not smoke have to be considered a wellness program? Could it be a stand alone employer- sponsored plan/program/benefit that provides for employer contributions into an employee’s FSA account if the employee certifies that s/he does not/will not smoke? Can the employer use non-smoking as its criteria for the reward without concern of a discrimination issue? Is there a way around the discrimination issue? Would there need to be a reasonable alternative to the certification in order for smokers to qualify for the reward? If the employer did not offer a reasonable alternative to the certification, but offered a smoke cessation program through its health plan, would this suffice?

2. If such a program does not have to be considered a wellness program, what would it be and pursuant to which regulations would it be established?

3. If such a program could not stand alone, would it have to be linked to the employer’s group health plan? Could it be linked to the FSA? If this program had to be considered a wellness program and HIPAA applied, and the program was linked to the FSA, what could we use as the cost of coverage to satisfy the requirement that the reward not exceed 20 percent of the cost of coverage?

4. If we wanted to offer the program to all employees, not just those participating in the health plan/FSA, and if we did not make the certification a condition of employment, how could we open the program up to all employees?

5. If the program sponsor were to make a determination that an employee who received the reward falsified the certification, can the employer cease additional contributions to such employee? Request and demand that such employee repay the prior contributions? Can the money be withheld from the employee’s pay? Can the employer cease the employee’s participation in the FSA plan? In the health plan?

6. What types of safeguards do wellness program sponsors have in place to determine/monitor that participants are being honest? Is there an appeals process when an employee’s honesty has been challenged?

7. How does the requirement to provide a terminated participant with a certificate of creditable coverage if s/he received employer contributions in excess of $500 negatively impact the program?

These are the remaining questions we have after reading the final HIPAA regulations. If you are aware of any research material or if you have any experience in this area, your assistance is greatly appreciated.

Thanks!

This request is being posted under Cafeteria Plans, Health Plans and Welfare Plans in hope of getting a response.

We have a client with a health flexible spending account that is considering establishing a tobacco cessation program – those that certify that they do not/will not use tobacco products will receive an employer contribution to the health fsa. Following research and discussion with the client, we have the following questions –

1. Does a program that rewards its participants based on the criteria that they do not/will not smoke have to be considered a wellness program? Could it be a stand alone employer- sponsored plan/program/benefit that provides for employer contributions into an employee’s FSA account if the employee certifies that s/he does not/will not smoke? Can the employer use non-smoking as its criteria for the reward without concern of a discrimination issue? Is there a way around the discrimination issue? Would there need to be a reasonable alternative to the certification in order for smokers to qualify for the reward? If the employer did not offer a reasonable alternative to the certification, but offered a smoke cessation program through its health plan, would this suffice?

2. If such a program does not have to be considered a wellness program, what would it be and pursuant to which regulations would it be established?

3. If such a program could not stand alone, would it have to be linked to the employer’s group health plan? Could it be linked to the FSA? If this program had to be considered a wellness program and HIPAA applied, and the program was linked to the FSA, what could we use as the cost of coverage to satisfy the requirement that the reward not exceed 20 percent of the cost of coverage?

4. If we wanted to offer the program to all employees, not just those participating in the health plan/FSA, and if we did not make the certification a condition of employment, how could we open the program up to all employees?

5. If the program sponsor were to make a determination that an employee who received the reward falsified the certification, can the employer cease additional contributions to such employee? Request and demand that such employee repay the prior contributions? Can the money be withheld from the employee’s pay? Can the employer cease the employee’s participation in the FSA plan? In the health plan?

6. What types of safeguards do wellness program sponsors have in place to determine/monitor that participants are being honest? Is there an appeals process when an employee’s honesty has been challenged?

7. How does the requirement to provide a terminated participant with a certificate of creditable coverage if s/he received employer contributions in excess of $500 negatively impact the program?

These are the remaining questions we have after reading the final HIPAA regulations. If you are aware of any research material or if you have any experience in this area, your assistance is greatly appreciated.

Thanks!