Where can I obtain reliable statistics regarding the number of lawsuits filed during the past few years regarding fiduciary breaches? Is there reliable information regarding the number of class action lawsuits filed by ERISA plan participants? Is there information tracking the results of these lawsuits?

Our employee has been covered under her husband's PPO through Medical Mutual. His union has advised that, on 4/1/07, the plan will become a POS plan through Kaiser. The union covers all permiums but, for example, using non-Kaiser providers will cause the participant to incur costs not previously anticipated. In addition, their deductible will increase from $300/person//$600/family to $1,000/person//$2,000/family. Given these unanticipated changes, would our employee be permitted to increase her Medical FSA contributions as of 4/1/07 or must she wait until next plan year (2008) ?

Company makes cash contribution to ESOP. Owner is a participant under the ESOP and receives an allocation of the cash contribution. The ESOP purchases shares from the Owner -- non-leveraged transaction -- and Owner makes 1042 election with respect to those shares. The Owner's account under the ESOP does not share in the purchase of the shares, because under Code Section 409(n) (and terms of Plan) no portion of the 1042 shares may be allocated to his ESOP account. Rather, the Owner's account remains invested in cash. Next year, the Company again makes a cash contribution to the ESOP and again a portion of the cash contribution is allocated to the Owner in accordance with the terms of the ESOP. The ESOP again uses a portion of the cash contribution to purchase a block of shares from the Owner. Again, no portion of the cash which has been allocated to the Owner is used to purchase the 1042 shares. Rather, the Owner's account stays invested in cash.

Have we somehow violated the prohibited allocation rule under Section 409(n)? Certainly, no 1042 shares of stock have been allocated to the Owner's account under the ESOP. But, should 409(n) be read so broadly as to mean that once the Owner elects 1042 treatment, he is in effect out of the ESOP as an ongoing participant -- can't share in the non-leveraged cash contributions -- for the 10 year nonallocation period.

This seems like an overly broad reading of 409(n) to me, but am interested in others' view.

Thanks.

Just in case you haven't read the news items on Benefits Link here is the IRS Newsletter re: Clarifying Notice 2007-7

HERE

My accounting client has a Prevailing Wage plan with another TPA firm. They are a calendar year plan and on 1/1/06 they had 106 participants and at 1/1/07 they had 124 participants...do prevailing wage plans need to be audited? Can someone give me some information on the rules governing the prevailing wage plans, and if they need to be audited over a certain participant count? Aren't they non-qualified plans? If so, do those not get audited? Is there anything that needs to be done in this case?

Thanks for your help!

I'm looking for thoughts on the pros and cons of choosing between (1) terminating the plan and distributing all assets before the determination letter is received in order to avoid filing the 5500 in the following year or (2) terminating the plan and obtaining the determination letter before distributing.

Has anyone ever encountered this situation before:

Owner has paid his children age 4 & 7 compensation. They enter the plan due to the employer opting any employee employed on the effective date does not have to meet the standard eligibility requirements - i.e. age 21, 1000 hours....

Is this possible to have these children earning wages - receiving a W2?

Thank you for any feedback.

Can a multiple employer 401k plan permit each employer to provide (or not) a 401k safe harbor notice for a plan year for just that employer's employees? or must it be plan-wide or nothing?

Since 401k testing in a multiple employer plan is an employer by employer issue, it would seem that whether to safe harbor against that testing would also be permitted on an employer by employe basis, provided the 401k safe harbor notice specified it applied only as to the employees of the participating employer providing that notice.

Does anyone know if there's IRS ruling to the contrary?

A plan with two employees terminated in March 2006 and distributed benefits in July 2006. That is, a standard termination.

The plan is covered by PBGC and did not terminate with PBGC process.

What are consequences of not filing with PBGC FOrm 500, notices, etc.?

And if they were to do so now, what would happen? That is, would PBGC disqualify plan, change termination date, some other approach?

According to the online SS-4 instructions, it says third parties (like us) may request EINs via the internet on

behalf of their clients. And it says that a copy of the Form SS-4, signed by the customer, must be maintained in our business files along with a signed statement authorizing us to file the online application.

The online SS-4 prints "not required" under the signature line, making it (sometimes) difficult to convince a client to sign the form.

1) If you are a TPA and filing for online trust ID#s for your new clients' plans, are you having success in obtaining the signed SS-4 for your own files?

2) What kind of a signed statement are you getting to authorize your firm to complete the online SS-4 for your clients' plans? Do you just add wording to your engagement agreement? Or are using a Form 2848?

Any comments?

My new employer switched their 401(k) plan to a Safe Harbor plan effective January 1, 2007. They are matching 100% of the first 3% of salary and 50% of the second 2% of salary, which meets the Safe Harbor requirement.

Interestingly, they've elected to go with an annual match, which will be calculated and funded in early 2008. I have a couple of questions with regard to this:

1. How do we provide a match for those employees who leave us mid-year and take their money with them? No problem funding their account if it is kept with us, but what happens if they walk and take their money? Do we will have an obligation to fund the match?

2. Disregarding the first question, do we even have an obligation to fund the match for a terminated employee under Safe Harbor? Or can we say "you must be employed on December 31, 2007 to receive an employer match"?

Thanks much!

We are looking for a 401k TPA to purchase to grow our current company. We are also a Registered Investment Advisory firm that specializes in individual participant account management. Prefer a NJ, NY, or FL location.

Please contact: Tom McNeill, tkm@thebest401k.com, 800-430-8054 ext 301

In a recent 401(k) plan review, a securities broker (who was receiving a commission for delivering an annuity contract to a 401(k) client) stated he was not acting as an advisor or as a fiduciary to the plan sponsor and the plan participants for the reasons below. I was under the impression that the DOL intended general information and computer generated models to not qualify as advice and that this exemption did not apply to anyone other than participants (not the plan sponsor for the purpose of choosing plan funds and writing policy statements. Comments please!! The broker's comments are shown below

"We provide Investment Management Consulting Services to THE CLIENT. As such, we provide a customized Investment Policy Statement to the client. This document is presented to the client for comment and review, and is adopted by the client after making any changes relevant to their plan. It is a collaborative effort, and the document belongs to the client. As part of our ongoing monitoring services, we also provide fund specific advice to the Trustees, Investment Committee, and ultimately to Plan Participants However, I want to be clear that under this is not considered Investment Advice as defined in ERISA section 3(21)A(ii) or regulation 29 CFR 2510.3-21© and clarified in FINAL-REG, ERISA-REG [¶14,746C], §2509.96-1 Interpretive Bulletin relating to participant investment education §2509.96-1"

I am unable to find the answer to the following question and would like to hear your thoughts/suggestions:

Two plans (Plan A and Plan B) have become first-tier subsidiaries of a parent corporation, as follows:

Plan A has a plan year ending January 31 and was acquired by the parent on January 3, 2005.

Plan B has a plan year ending June 30 and was acquired by the parent on August 9, 2005.

We know that Plans A and B have to be tested as a controlled employer at some point, but the question is

WHO IS IN PLAN A'S TESTING GROUP as of February 1, 2006 (which is "the last day of the first plan year following the date of the acquisition...")??? When we do the testing for PLAN A, do we also include Plan B in the tests, even though Plan B's transition period is not yet expired??

I have looked at 410(b)(6), I have looked at the regs, I have looked at secondary materials all to no avail. Where is the answer????

Help!

FYI, The IRS appears to be sending compliance questionnaires to public school districts in Washington, Missouri, and New Jersey, according to the National Tax Sheltered Accounts Association (NTSAA). The association's website contains what appears to be copies of the mailing. Here's a link: http://www.ntsaa.org/news.php

A second letter is mailed to school districts whose responses suggest that their plans might be discriminatory. This letter offers forgiveness in exchange for the school's making contributions to the 403(b) accounts of employees who missed out.

According to a bulletin published by Lincoln Investment Planning, Inc., the IRS discovered that certain groups of employees, such as substitute teachers have few participants in the 403(b) at some schools. See the bulletin at http://www.lincolninvestment.com/emp/pdfs/IRS403bSummary.pdf

my brother-in-law says we can take $4000 out of my husbands roth ira to fund a hsa ?? i say he is wrong... what do you say??

We have a client that generally uses te GATT rates, however, if a participant works until normal retirement age and then retires, the lump sum is determined on the basis of the greater of the GATT rate or the PBGC rate with a 4 year setback. Currently, the PBGC rate provides a better benefit.

The question is, could the PBGC rate be eliminated for anyone who has not yet reached NRD without having to guarantee that the benefit earned to date would be subject to that provision?

Any guidance/regulations is appreciated - thanks.

Is a MEP with one trust to hold benefits of the employees of the different, unrelated employers subject to securities laws registration if no trust assets are invested in securities of any of the participating employers? Or is there a securities law exemption where no employer securities are involved?

Plan sponsor adopted 401(k) in 2000. Changed TPAs and prototype plan sponsor in early 2006.

Didn't understand the process and thought it was "adopting new plan" and wanted safe harbor. Found out

that it could do that because of the notice provision until 2007. Owner of plan sponsor was informed by TPA that he could also adopt Simple 401(k) year for 2006 thereby allowing himself the opportunity to defer the most. The TPA told them that instead of deferring to the 401(k) for the year the employees would simply contribute to the Simple 401(k). So, no elective deferral contributions were made for 2006 to 401k.

Now, the TPA has sent a letter to the plan sponsor stating that it believes that there was a plan compliance problem because no contributions where made to the 401(k). The employees never revoked their elections to the 401(k) when they decided to defer to the Simple 401(k). I agree that there was a failure to follow the plan document but what is the remedy? The employees still deferred to another plan sponsored by the employer.

We want to use 6% as our 12/31/06 discount rate for our pension plan. I keep hearing that 5.75% is the rate likely to raise the fewest eyebrows, if any. Anybody using 6% with no push back from auditors?