Hello, I was laid off from a company due to a merger for which I had worked for close to 5 years. I was 3 months short of vesting. The merger automatically vested my 401k dollars, but they say not the DB dollars. I have read on DOL website that plan termination mandates immediate and full vesting, but in a merger situation, if the new company assumed the old plan, does this count for vesting purposes? Any advice would be appreciated. Thank you!

A participant in a self directed plan invests in Corporation A. After the purchase, the participant's account will hold less than 10% of Corporation A's stock. The participant later becomes a director of Corporation A and Corporation A subsequently purchases property directly from the participant. This transaction seems fishy. In a rather indirect way, it seems like the plan is purchasing the participant's property. The only way I can see this being a PT would be if the Corporation was considered to be the Plan. Can anyone make that connection? Is there a point at which the Corporation would be considered to be the Plan? 100% ownership of Coporation A through the Plan? Am I missing something?

New Comp plan. I want to give the least amount of PS contribution. I have two non excludible NHCE participants, 1 of which does not meet the accrual rqtmts, significantly impacting my 401a4 test. If I give a very small contribution to this participant, making a corrective amendment, I can pass, but I won't meet gateway. Do corrective contributions need to meet gateway, when they do not meet the accrual requriements for a contribution?

Is 457 the ONLY choice for a state university to offer non-qualified deferred compensation? In other words, unless the requirements of 457 are met, does 457 render an employee unable to defer the taxation of income when he/she has no constructive receipt of the income?

Thanks,

Ken Davis

Client contacted his broker to establish a 401(k) plan. The broker gave him an IRA adoption agreement to complete. The broker says it is his mistake. The assets have been in the traditional IRA since 2003.

Now the client and the broker wants adjust all activity and assets from the IRA to the 401(k) plan.

Is this a correction process that is allowed? If is there not a deadline of the next year-end( the year end after the year that the mistake was made.?

Thanks for your help

I'm trying to determine how the deferral and contribution limits work in this situation. We have a person (Joe) self-employed for the first half of the year with a Solo 401k plan. During the second half of the year Joe goes to work for an employer offering a 403b plan.

We understand that the total deferrals for the year are limited to $14,000 total in both plans combined. We also understand that the limit on total contributions to the Solo 401k is $42,000 including any deferrals in that plan.

Assuming self-employment earnings (after subtracting 1/2 SE tax) were at least $210,000 could Joe forego making deferral contributions to the Solo 401k and instead make only a profit sharing contribution of $42,000 and then make deferrals with the new employer's 403b plan of $14,000?

I suppose he could acheive the same thing by using a SEP plan for the SE income, if the Solo 401k plan weren't already in place. right?

Has anyone looked at this or is anyone willing to hazard a guess?

We have a participant on a leave of absence who wants us to suspend his 401(k) loan repayments. He is receiving worker's comp payments from his employer, and the worker's comp payments are more than the loan installment payment. So far, his loan installment payments have been deducted from his worker's comp checks.

The regs say that you can suspend repayments where a leave of absence is either:

(1) without pay from the employer, or

(2) with pay, but only if the pay is less than the amount of the loan's installment payment.

Does a worker's comp payment from the employer (or from an insurance company on the employer's behalf, for that matter) count as "pay from the employer" that a loan payment has to be deducted from? How about a self-funded disability plan's income replacement payment (not the case here, just curious about what y'all's thoughts might be)? I've looked around a bit and haven't found any specific guidance on what exactly constitutes "pay from the employer", although it seems like this would be a common question.

Yes, that's right...the client just decided to write this terminee a check from the company's checking account rather than have the funds issued from the plan. Incidentally, the amount they paid the terminee was at no time her actual vested balance (go figure). This occurred back in 2001 and the plan is now terminating. Of course our records still show she has money in the plan, but the client is adamant that she not receive a distribution from the plan because they consider her already paid out. I don't even know where to begin. Does anyone have any thoughts?

are disability benefit provisions subject to 411(d)(6)?

Does anyone have a VFCP Class Exemption Notice to employees/beneficiaries you have created? While the 2002 fed reg gives a general outline of what the notice should include, we would like to see an actual notice. It can be emailed to: lmichals@pensionadm.com. Thank you.

Linda Michals

We took over a MP plan with standardized document in February; we prepared amendments to change it to a PS w/ Safe Harbor 401(k) Plan. Just found out employer neglected to adopt & a few a participants have accrued a benefit under the MP document.

I'm trying to find a solution to this problem. The MP plan requires a 25% contribution. Client prefers to amend rather than terminate. If plan retains QJSA provisions, is there any reason the plan couldn't be amended in 2005 to a profit sharing plan with a 22% employer contribution plus a 3% SHNEC? I don't see a problem right off, but I just found out & my head is still spinning.

Employer has an existing SIMPLE - due to cash flow problems they are looking to stop ER contributions for a period of 12 months. I don't believe they can do this without terminating the plan for ALL contributions. If this is correct what is the correct procedure to terminate the SIMPLE? I would think they could "re-adopt" the plan again at a later date?

I know that somewhere there was a notice or ruling to the effect that when determining the maximum lump sum at the 415 limit for principals, instead of using GATT interest, you can't use anything less than 5.5% interest or the plan's AE rates or something like that. I'm trying to look it up, but can't seem to find it. Can anyone provide a cite where I can dig up more info?

Thanks!

Dennis

Two books on HSAs will be released shortly, as follows:

Health Savings Account Answer Book (Aspen Publishers)

Advisors Guide to Health Savings Accounts (AICPA).

I expect that both books will be released within the next 60 days. Both books are similar in scope, but the "answer book" is written in Q&A format.

We have a multiemployer plan that is merging into another multiemployer plan. The other plan, which will be the surviving plan, has less generous accrual and benefit terms. Do we run into 411(d)(6) problems for the participants in the merging plan?

Good morning. I am currently working for a start up 8(a) company that is based out of Alaska. We are presently looking into putting together some type of benefits package to provide to our employees and I was wondering if anyone could provide me with some guidance in this area. Our staff consists of less than 50 employees.

This is my first experience of working with an 8(a) start up and we are trying to explore companies similar to ours to learn what may be in our area of doable. We certainly value the employees we have and want to be able to provide some type of benefit without bankrupting our efforts. We are looking for something mutually beneficial. I would also be interested in hearing some suggestions about how a couple of small companies run their HR departments and if anyone has used or is using the People Soft HR program.

Any information provided would be greatly appreciated. Thank you, Lucille.

I already know the answer to this question, but wanted to see how others felt. A two life 401k plan was adopted in 2004. Plan covers owner and the only other employee. We did the 5500 and SAR for the plan. The owner calls back and says that the asset section of the SAR is a little too specific, since with only her and 1 other employee, it is too easy for that other participant to figure out the owners account balance, contributions, etc. Could we revise the SAR to eliminate the specific asset data?

I can sympathize with the owner, but of course the answer is no for obvious reasons. But others in the office have suggested sending a revised SAR as requested, but stating plainly in the accompanying letter to the employer that the original SAR is required to be distributed as is and that is what we recommend doing. Still doesn't make it right, but does it help us (TPA) at all?

DOL reg 29CRF 2530.204-2(d) prohibits double proration of defined benefit plan benefit accruals. I recently became the actuary for a plan that I believe has double proration issues in two places as follows:

• Part-time employees for employees in the pension equity plan. When a participant works less than 2,000 hours, they get a prorated PEP accrual. For example, if they work 1,000 hours, and the PEP accrual % for their age + service would be 5% if they were full time employees, they will actually receive a 2.5% PEP accrual (5% x 1,000/2,000). The compensation that is counted towards their Final Average Pay is their part-time pay, (i.e. we are only counting pay actually received, and not pay as if they were a full-time employee). I believe this clearly is a double proration of benefit accruals.

• This plan also allows for seasonal employees for the participants whom did not elect the PEP plan. These participants are covered by a traditional FAP plan. The issue is less clear for these participants, but I think the double proration exists. The seasonal employees typically work 9 months of the year, thereby earning 9/12 of a year of service as they earn a month of service for every month in which they have an hour of service. The seasonal employees seem to work full-time hours while employed. Final Average Pay is defined as “the average of the Participant’s Compensation over the consecutive 36 month period...”. For seasonal employees, I read this as looking at a 36 month period, and taking the average, rather than piecing together 36 months when they were actually receiving pay and then taking the average. For an example I have put together this hypothetical seasonal participant:

Year Compensation Months worked

2004 $40,000 8

2003 $36,000 10

2002 $35,000 9

2001 $34,000 9

Method 1: Final Average Pay is the average of 2004, 2003 and 2002 pay, even though he only worked 27 months: (40,000 + 36,000 + 35,000)/36 = $3,083.33. This is the method I believe the current wording of the plan requires, and seems to be the method used in prior benefit estimations.

Method 2: Final Average Pay is the average over all four years, as the total months worked add up to 36 months: (40,000+36,000+35,000+34,000)/36 = $4,027.78.

I believe that Method 2 must be used to avoid double proration.

The reason for my post is that I am getting push back from the attorney who drafted the plan as they were not aware of this issue. I believe that double proration exists in the in the first instance, and probably in the second. Any opionions? Thanks!

We have a situation where we used to file separate welfare benefits plans for one employer. We have consoldated the plans into a "wrap plan." I know that it is permissible to file one 5500 for the wrap plan. How do I note on a 5500 that the plans used to be filed separately? May I just file the new plan? It doesn't seem correct to file final 5500s for each individual component, but I certianly don't want to red-flag anything with the Service. Does anyone have experience swtiching from filing individual plans to filing a wrap plan?

I have a takeover plan for 2005. In 2004 the company sold two of eight divisions which resulted in participant terminations. The former TPA is telling the client that since more than 20% of the participants have terminated the plan might have had a partial termination.

I have never heard of this. Can anyone please post your comments.

Thanks in advance!!