I am aware that a limited scope audit can be performed if the investments are with a bank, insurance company or that is a 103-12 investment.

What I am not as clear on is if a bank, trust company or insurance company issues a certification statement on the investments of the plan that a limited scope audit can also be performed - is this regardless of the assets or do the assets have to be of the type stated in the first paragraph?

For example, a plan with 150 participants, assets are all invested in mutual funds. Plan has a directed Trustee listed in their plan document as "ABC Trust Co.". If ABC Trust Co. completed certification statements of the assets for the auditor, would the plan be able to have a limited scope audit?

I appreciate the assistance.

I have a pye of 9/30/05. Employer makes the required 3% SH non-elective contribuiton and is interested in making a P/S contribution. It is cross tested with him in Class A (shareholders0 and everyone else in Class B (staff). He deferred $16,500 (no one else deferred).

I guess my question is whcih limit is the annual additon for the 9/30/05 PYE? $41k, since teh plan year begins in 2004, or $42k, as the plan ends in 2005? I can't seem to find an answer - this is a takeover plan and the document seems incomplete. Any thoughts?

Legally, does an employer HAVE to offer annual open enrollment on their group medical plan each year?

Is it legal or are there any other issues if a 350 employee company, decides that the employees do not get an annual open enrollment for their group medical plan? The only way an employee can get on the plan is if he/she signs up when hired, or if there is a life changing event... other than that, they do not have the option to get on it.

Is this allowed? Is it legal? Does this open the door to DOL issues?

Recently the 5th Circuit made a case ruling to say the practice of limiting the time frame for a QB to enroll in COBRA to no more than 60 days is illegal. We have been allowing employees to elect coverage during a 60 day period, and if they decided to elect coverage at 90 days, we do not allow it, and neither does the insurer. I interpreted the case ruling to say that this practice is illegal?

If a COBRA QB does not elect the coverage until 13 months later and shows up with the back premium - are we to accept it?

Issue- how to apply 1.401(a)(4)-12 to dc plan that excludes pre-participation compensation and uses calendar year compensation.

Not an easy question-any help appreciated:

Facts:

Regulations 1.401(a)(4) - 12 Plan Year Compensation Section (5) states that in a situation whereby an "employees' plan year compensation for a plan year is determined based on a 12 month period ending within the plan year under paragraph (3) of this definition, then the plan year compensation of any employees whose date of hire was less than 12 months before the end of that 12 month period must be determined uniformly based on either the plan year or on the employees' periods of participation during the plan year, as provided in paragraphs (2) and (4), respectively, of this definition."

A plan is permitted to exclude compensation prior to participation.

A plan is permitted to use calendar year compensation to define eligible compensation for a plan year.

Assumptions:

9/30/2005 PYE

Eligibility is 1 YOS; Age 21 with entry 10/1/2004 and 4/1/2005

Compensation computation period is defined as calendar year ending in the plan year.

2 new entrants: ("A") hired 12/31/2003 and ("B") hired 1/02/2004; both enter on 4/01/2005

Under these facts, rules and assumptions, in order to rely on a design based safe harbor under Section 401(a)(4), New Entrant A's compensation is determined for the period 01/01/2004 through 12/31/2004 and is $0.00 after excluding pre participation compensation. New Entrant B's compensation is determined for the period 4/01/2005 through 9/30/2005 (due to his date of hire not being 12 months before the end of the 12 month period (12/31/2004)).

Questions: Is this analysis correct? What about year 2 when New Entrant A and New Entrant B's compensation is defined as 4/01/2005 - 12/31/2005? Isn't it true that in the absence of this rule, each would have $0.00 compensation for their first year of participation and compensation from 4/01/2005 - 12/31/2005 for their second year of participation?

In addition, is the $0.00 eligible compensation a potential hidden eligibility under 410(a) even if the Plan satisfies 410(b) ratio?

I have aplan with an ERISA FFL of $0, but there is an RPA floor. Do the existing bases get wiped out?? Thanks.

Facts: Company A is a brand new company. The company was formed on January 1, 2005. The same year they start a calendar year 401(k) plan - 1/1/05 through 12/31/05. The top heavy determination date will be 12/31/05 being the first plan year.

Q1) One of the key employee determination is an officer whose annual compensation exceeds $135,000 in 2005. However since this is the 1st year the determination date is 12/31/05. Does that mean that you use $135,000 compensation limit the first year as well as the second year while determining the key employee status?

OR

Q2) Basically it means that since there was no compensation in 2004 an officer cannot be a key employee in 2005. Am I correct?

How do you apply the key employee definition in case of an officer especially since the compensation limit is bumped up from $130,000 to $135,000.

Any IRC reference would be appreciated.

Thank you.

An Employer has 6 employees and wishes to cover 3 employees in a defined benefit plan and 3 employees in a profit sharing plan. They will commit to making a 25% of pay contribution to the PSP, so both plans will easily pass 401(a)(4). Also, both plans would be aggregated for 410(b).

The census should not change as all 6 are long term stable employees.

My understanding is that the 25% deduction limit would not apply as long as no employee participates in both plans.

Does anyone see problems with this arrangement?

Thanks much.

We currently have a self-funded Church Plan that we are contemplating terminating due to lack of sufficient participation (550 employees with only 150 currently enrolled). Lack of participation is mostly due to premium cost (most of the employees are service workers). We are exploring other avenues of medical coverage such as a classing out employees, implementing a carve out plan for management employees and a mini-med plan for the service employees.

Are there any legal ramifications that should be taken into consideration before making a decision to terminate the self-funded plan?

Are there any special notices that will need to be communicated to employees currently enrolled in the plan should the decision be made to terminate?

This plan IS NOT subject to COBRA.

I have found in several research sites the folloiwng fromthe 1999 ASPA IRS Q&As

2. Q. When can you terminate a SIMPLE IRA? Rumor has it that once you are passed the notification date, the employer must maintain the arrangement for the next entire calendar year.

A. It is either the notification date or the beginning of the next plan year. Though there is no official determination at this time, the conservative approach would be to use the notification date as the limit for termination.

My question - it was decided after 11/1 when the notice was required to be sent, to terminate the SIMPLE. If we do an amendment and send the participants another notice saying the SIMPLE has been terminated prior to the end of the plan year, is there a problem?

I could not find any recent quidance on this.

Thanks

Does the 6-month delay apply in the case of the death of a key employee of a publicly traded company?

Let's say a plan's normal form of benefit is a joint and 100% survivor annuity and that the plan offers a lump sum option actuarially equivalent to such. I have never seen document language the addresses the timing of when the spouse is determined other than at the annuity starting date, so it would seem possible for someone to manipulate the value of their lump sum benefit by marrying someone extremely young. Of course the flip side is their spouse could die, leaving them with a reduced benefit.

Has anyone had a plan that defined when the spouse is determined other than at the annuity starting date? Any thoughts? Anyone think this is a pointless observation?

if you like optical illusions try the following

http://gpsinformation.us/main/humor.htm

and then click on the first item: moving object illusions. and go to that link.

there are 60 of them, I particularly like the one that looks like a motorcycle driving down the road.

I would have posted that web site but there are other humorous things on this page. scrolling down to the dog and cat humor was the following picture entitled "why the dog left home":

good grief! Wonder what that thing eats!

Should diversification, 70 1/2 MRD, and an award to an Alternate Payee from the 401(K) account reduce hardship available dollars?

Participant takes a loan from her 401(k) Plan, but while that loan is outstanding the plan terminates...what happens to the loan?

I have a Safe Harbor 401k plan with basic match. The plan also has a discretionary match with no accrual requirements that matches catchup contributions only.

I believe that 410b would pass since all participants would be eligible for the Safe Harbor Match - since no accrual requirements.

Regarding ACP - since the discretionary match is limited to catchup contributions only - is this an example of HCEs receving a higher rate of match than the NHCEs; and therefore an ACP test would be required for the discretionary match?

A DB plan is in the process of being terminated (don't sound so shocked). Active and Vested Deferred Participants will be given the option to receive their benefit as a single sum distribution upon the approval of the IRS and PBGC. We typically provide the appropriate notice and election forms to the participants after the IRS does an intial inquiry, provided that the information requested is minimal. We typically do this to speed up the liquidation process, particularly if it is possible to liquidate the plan by year end.

The death benefit in the Plan is merely the QPSA.

If a participant dies while the plan is being reviewed (or prior to them making an election), it is my understanding that the QPSA would apply so that no benefit would be paid if the participant is single.

The question was raised on what benefit would be paid if the participant dies after making an election to receive a single sum distribution (QPSA or full accrued benefit without cutdown for QPSA)? Would it matter if the plan has received a fdl but was merely waiting to receive a bulk of the election forms?

This may be a reason to postpone the sending of notice and election forms until after the approval process is completed.

Please let me know if there is official guidance that I am not finding on these matters. Thank you very much!

I think I know the answer regarding this.... but I thought I would get thoughts of others.

I have a 401k plan that made their 401k deposits for the owners from a 12-31-04 bonus check in January 2005. This is the initial plan year, and none of the employees deferred; hence the owners are the only participants with account balances. Since this is the initial plan year, top heavy is determined from the balances at the end of the plan year. Are deposits in transit excludable since they were not in the plan 12-31-04?

Employer failed to make elective deferrals for exmployees for one payroll period in August '05 for a limited number of employees who had be laid off and were receiving unused vacation pay and severance payments in the same check. We have determined that we qualify for self-correction under the IRS correction procedures. We don't qualify for the self-correction exception because the employees will not have 9 months to "make up" the contributions (because we are so late in the year and the employees have been laid off). The employer would like to make the correction ASAP. My understanding of the correction procedures is that the employer makes a contribution on behalf of these employees based on the ADP for the group, either HCE or NHCE. My question is can the employer use the ADP for the non-highly compensated group from the last plan year instead of waiting until the ADP for this plan year is calculated sometime early next year?