I still don't understand HOW this could happen, but apparently it did. For all of 2005 the employer NEVER actually reduced anyone's compensation by the amount of their elective deferrals. The employer, did, however, made a deposit to the mutual fund company of an amount equal to the employee's deferral election as it applied to each pay period (for example 10% of comp). So, the employees get W2 at end of the year, with no reduction in taxable amount for the elective deferrals. The deposits were made to the mutual fund as employee deferrals and are being treated as such by the mutual fund company.

My question is how do we correct this? My first thought is that the amount that was deposited should be allocated as a discretionary profit sharing contribution. The document has a comp to comp allocation formula so this means that some accounts at the mutual fund company will be reduced while others will be increased. I'm worried about the ramifications of doing this.

My other concern is what about the error the employer made of NOT reducing compensation by deferral amounts? Is this a qualification issue that must be corrected somehow.

Any thoughts or suggestions?

Can I get some input as to the range of fees that are being charged by attorneys for drafting a basic QDRO after having already been supplied a sample? QDRO involves a relatively simple 50-50 split of contributions made between period A and period B. Obvious from supplied divorce decree that they divorced without counsel and are attempting to split the assets in the manner. I'd like to tell them that they would save money by retaining counsel rather than submitting it to me over and over until it's correct, but really have no clue as to the time and expense involved in a manner such as this.

If a church makes a 410(d) election for one of its plans, must it make the election for it's other plans as well?

I have a 3 partner LLC with all other employees leased through a PEO. The PEO has a 401(k) for which the LLC signs as Co-Employer. All leased employee comp is paid through the PEO. The PEO 401(k) plan is not what is defined as a "safe harbor" 10% pension.

It is my understanding that if the LLC starts a qualified retirement plan, the PEO employees will be included in coverage and compliance testing since they do not benefit from a 10% money purchase plan. Have I misinterpreted Derrin Watson's instructions? Could the LLC start a 401(k) and forget about the employees leased through the PEO?

This client is receiving various advice from vendors seeking their business, including "forget about the leased employees." I need to clarify.

One Hundred Years Ago 1906!!

I received this in an e-mail today.

Show this to your children and grandchildren

?? THE YEAR 1906??

This will boggle your mind, I know it did mine!

The year is 1906.

One hundred years ago.

What a difference a century makes!

Here are some of the U.S. statistics for the Year 1906 :

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

The average life expectancy in the U.S. was 47 years.

Only 14 percent of the homes in the U.S. had a bathtub.

Only 8 percent of the homes had a telephone.

A three-minute call from Denver to New York City

cost eleven dollars.

There were only 8,000 cars in the U.S., and only 144 miles

of paved roads.

The maximum speed limit in most cities was 10 mph.

Alabama, Mississippi, Iowa, and Tennessee were each more

heavily populated than California.

With a mere 1.4 million people, California was only the 21st

most populous state in the Union.

The tallest structure in the world was the Eiffel Tower!

The average wage in the U.S. was 22 cents per hour.

The average U.S. worker made between $200 and $400 per year .

A competent accountant could expect to earn $2000 per year,

a dentist $2,500 per year, a veterinarian between $1,500 and $4,000 per year, and a mechanical engineer about $5,000 per year.

More than 95 percent of all births in the U.S. took place at HOME .

Ninety percent of all U.S. doctors had NO COLLEGE EDUCATION!

Instead, they attended so-called medical schools, many of which

were condemned in the press AND the government as "substandard."

Sugar cost four cents a pound.

Eggs were fourteen cents a dozen.

Coffee was fifteen cents a pound.

Most women only washed their hair once a month, and used

borax or egg yolks for shampoo.

Canada passed a law that prohibited poor people from

entering into their country for any reason.

Five leading causes of death in the U.S. were:

1. Pneumonia and influenza

2. Tuberculosis

3. Diarrhea

4. Heart disease

5. Stroke

The American flag had 45 stars.

Arizona, Oklahoma, New Mexico, Hawaii, and

Alaska hadn't been admitted to the Union yet.

The population of Las Vegas, Nevada, was only 30!!!!

Crossword puzzles, canned beer, and ice tea

hadn't been invented yet.

There was no Mother's Day or Father's Day.

Two out of every 10 U.S. adults couldn't read or write.

Only 6 percent of all Americans had graduated from high school.

Eighteen percent of households in the U.S. had at least

one full-time servant or domestic help.

There were about 230 reported murders in the ENTIRE ! U.S.A. !

Now I forwarded this from someone else without typing

it myself, and sent it to you and others all over the United States,

possibly the world, in a matter of seconds!

Try to imagine what it may be like in another 100 years.

I'm the TPA for a 401(k) plan that is considering changing their investments. They have about 25 participants, all with individual brokerage accounts (it's not as bad as it sounds, but obviously there's room for improvement).

One of the things they're considering is using a fee-based advisor (hourly) to advise the participants and assist them with investments offered under a mutual fund platform.

I always thought that this arrangement would make the advisor a fiduciary and that no one in their right mind would want that. But I thought I'd throw it out there for discussion - is this common/uncommon, problematic or not? I guess the new pension bill, if it ever gets passed, may have some relief in it, but I'm sure that this particular advisor is not even aware of the issue.

Any comments welcome.

from the Western Benefits Conference:

in response to the question

What if a plan uses comp from date of entry, and only offers a SHNEC?

The IRS response was that the plan needs to make a top heavy contribution. I think Craig Hoffman's jaw hit the floor. He respectfully disagrees.

(This is the opposite of the response at the 2005 ASPPA Fall conference)

The IRS agent then agreed that clarification would be coming sometime in the future.

I'll have to look through my notes and see what else I've got to share, but after being gone a week I have one or two or three or...things sitting on my desk to do.

I would appreciate any comments that anyone might have regarding the following:

If an employer has or had at least 20 employees on each of 20 or more calendar weeks in the preceding or current calendar year (42 CFR 411.170(a)(2)(i)), the a group health plan of that employer must offer the same health coverage to active employees that are 65 or older and eligible for Medicare that is offered to other active employees. 42 CFR 411.102(b). Such an employer's group health plan must provide the "same benefits under the same conditions as it provides to employees and spouses under age 65."

42 CFR 411.172© provides that an employee or spouse that is age 65 or older "may refuse the health plan offered by the employer. If the employee or spouse refuses the plan (1) Medicare is primary payer for that individual; and (2) the plan may not offer that individual coverage complementary to Medicare."

Not only must such an employer not offer 'individual coverage complementary to Medicare', no one may offer "financial or other benefits as incentives" to a Medicare eligible individual to forego coverage in that employer's health plan. 42 CFR 411.103(a).

An HRA may be designed under IRC sec 105(h) to permit the employee to choose to have his or her HRA benefits applied either to pay health insurance premiums or reimburse out-of-pocket medical expenses. If the HRA permits benefits be applied to payment of supplemental health insurance premiums as well as major medical insurance premiums, would permitting employees such a choice be 'offering' individual coverage complementary to Medicare for those age 65 or older given such an employee could have his or her HRA benefits applied to premiums for Medicare supplement insurance rather than the employer's major medical coverage?

If an IRC sec 125 cafeteria plan gives the employee the option of payment of premiums for Medicare supplement insurance rather than taking employer-paid coverage in the group health plan, is that offering individual coverage complementary to Medicare?

Would the ability of the employee to not have his or her HRA benefits applied to the payment of premiums for major medical insurance (but applied to any other health insurance premium or to accumulate and be available for later reimbursement of out-of-pocket medical expenses) be a 'financial or other benefit' incenting an employee over age 65 to refuse coverage under the employer's major medical policy?

If an IRC sec 125 cafeteria plan gives the employee the option of cash rather than taking employer-paid coverage in the group health plan, is that a 'financial or other benefit' incenting an employee over age 65 to refuse coverage under the employer's major medical policy?

Restricting from such options just those who are age 65 or older would likely violate the Age Discrimination in Employment Act (ADEA).

It would seem that since the purpose of the Medicare coordination regs are to prevent employers from inducing those employees age 65 or older into refusing the employer-provided coverage and thus making Medicare primary coverage, rules that applied to all employees regardless of age and regardless of Medicare eligibility would be alright. Extra pay instead group health plan coverage under a cafeteria, or the ability to have HRA benefits applied to AFLAC insurance rather than major medical, ought be no problem for employees of all ages, even those age 65 or older.

However, since Medicare supplement insurance is only for those age 65 or older and those for whom Medicare is primary (i.e., those that don't have major medical through the employer's group health plan), it seems that allowing employees to pay the premiums for Medicare supplement insurance as a cafeteria or HRA option would be problematic.

Any info or thoughts on this would be greatly appreciated.

I met with a new 401(k) client and in wrapping up the meeting, the HR person asked if I thought they needed a separate ID number for their "OBRA trust", distinct from the EIN. Their accountant said yes, their OBRA trust expert said no. My initial response of "what exactly is an OBRA trust" did not hinder them from still asking my opinion.

It sounds like their employees contribute (after-tax) money into an account, and pretty much use it any way they want, similar to a savings account. Thats about all I got out of it. My initial thought is that if this account has money in it and is attached to an EIN, well if the employer goes bankrupt I would assume that any place with money and the Employer's ID is ripe pickings for creditors, so they would want a separate number.

Any help out there from someone who might know what to make of this?

My question is two-fold. First, does the Interal Revenue Code allow custodians to withhold between 0% and 10% on IRA distributions? If no, what is the authority?

The Form WP-4 allows a shareholder to elect 10%, 0%, or greater than 10%....is this the only authority? IRC Section 3405 does not address this issue.

Have any of you looked into the method of investing in personal real estate "outside" of the IRA? I can find lots of articles saying it is great but I can't find anything that downplays it.

Since 457f is nonqualified, once the employee vests, he is subject to income tax on the entire FMV, n'est-ce pas?

This may be a simple question, but can you tell me if separate dental and/or vision insurance plans are considered "medical" insurance, so as to be considered a welfare benefit plan under ERISA (thus possibly requiring the filing of an annual 5500)?

The new 401(a)(9) rules for DBs are in effect for 2006 and I see lots of unanswered questions. Some issues worthy of discussion:

1. What distribution method works best for most clients? I have come to think that term certain with a payment period equal to the "uniform lifetime method" may work best because (a) it produces a lower minimum than the normal annuity options, (2) it allows for a death benefit whereas it appears that the other annuity options only allow for whatever the option calls for (i.e., life annuity would have NO death benefit) (3) you could change payment options at any time rather than just at retirement or plan termination.

2) Is spousal waiver out of QJSA required for any payment option except QJSA? Must we give a full range of payment options or can the plan choose one method without employee selection?

3) Must the plan document, when amended to the new rules by the EGTRRA restatement date, specify the exact option?

Would welcome any feedback of this preliminary analysis

The case:

Wife died, and husband is sole beneficiary of her 403(b) annuity.

"The plan will treat the spouse bene as if they were the participant" ???

Details:

The husband is not and never has been employed by a 403(b) sponsor. The wife's plan was sponsored by a public school, funded via salary deferral only.

Question:

Can the 403(b) annuity be put into the husbands name? If so, can the husband take a loan?

We are new to the Relius Daily ASP system and I was wondering if anyone had any suggestions on some best practices to use when building the Data Valaidation Center (DVC) to allow Employers to upload their own payroll and census data. I am specifically concerned with Relius' use of the "Status" and "Status Date" fields to process Eligibilty. From my experience it can be diffiucult for an Employer to get their payroll provider to provide more than a Termination Date and/or a Rehire Date for their payrolls. But you would not want to upload either of these dates directly to those fields on Relius as the Eligibility Transaction would not process correctly. Rather I think you would need to set up some custom DVC rules to convert these dates to the appropriate Status and Status Date for them. But I am having trouble building the logic in the DVC Custom Rule Set Up. Does anyone have any suggestions?

Also, if anyone has any comments or experiences (recommendations and/or common pitfalls?) they can share about the DVC that willl help me prepare for rolling this out, would really appreciate it. THANKS!!!

A Trustee of a Multiemployer Pension Plan is also a member of the Local Union. The Trustee seeks to have the time his spends working on plan matters at the Local Union Office reimbursed by the Plan to the Local Union. Is this expense legitimate?

Employer wants to provide for early retirement subsidy in its own qualified pension to subsidize reduced benefits on account of early retirement under separate pension. Employer is considering this option to accomodate early retirement needs of employees while staying away from ADEA issues by stopping benefits at a certain age. Anyone considered whether you can have the subsidy set out in a qualified plan separate and distinct from the general pension? I cannot seem to find any discussion of this one way or the other. The employer is a governmental entity so I am not concerned about other issues which could normally arise in the private employer context--just the separate plan issue.

Governmental employer wants to provide for early retirement subsidy in its own qualified pension to subsidize reduced benefits on account of early retirement under state public retirement system. Governmental employer is considering this option to accomodate early retirement needs of employees while staying away from ADEA issues by stopping benefits at a certain age. Anyone considered whether you can have the subsidy set out in a qualified plan separate and distinct from the general pension? I cannot seem to find any discussion of this one way or the other.

For ADP Testing when disaggregating, can we exclude compensation earned prior to July 1st for Participants who would not have entered the Plan until July 1st had there been a year of service requirement?

Specifically, even though the Participant was deferring for the entire year, can you still exclude the compensation earned through June 30th?

As an example, say John was hired on July 1, 2005 and begins deferring in 2005. For the 2006 ADP Test, John "enters" the Plan July 1, 2006. For his Actual Deferral Ratio for 2006, can we use TOTAL 2006 deferrals and compensation for the period 7/1/2006 through 12/31/2006?