I am working with a retireing teacher who has accumulated a significant amount of unused sick days. The state of CT will make a payment to him for these days, and he is being told his options are to roll it either into his 403(b) or into a 457 plan, both of which have variable annuity investment options with lock ups we are looking to avoid. Does anyone know if there is also the option of rolling something like this out to an IRA? Thx

401(k) plan document defines compensation to include bonuses. Many participants earn bonuses on a weekly or monthly basis. The employer has never applied participants deferral percentages to their bonuses. The employer now realizes its error and wants to start applying the deferral percentages to bonuses. Enrollment is coming up and participants will sign new forms in which they will elect to defer and elect a deferral percentage. They will be told that this percentage applies to all compensation including bonuses. My concern is that if the plan is ever audited, the auditor may discover that the plan was not operated in accordance with the plan document in the past. Does anyone have any idea how to fix this?

Can anyone confirm whether or not rollovers and/or direct transfers are allowed from a 457 tax exempt to a 401k or any other qualified plan? Or if a transfer to another 457 is only permitted?

Thank you

Taking over a plan which specified that Actuarial Equivalence for all purposes would equal 94GAR mortality and the "applicable interest rate" (ie, 30-year UST). The interest rate is based on the 3 month preceding with a 1 month stability period. Both participants in the plan attained NRA @ 1/1/2005 and benefit accruals were previously frozen, so late retirement increases on actuarial equivalence are the only factor.

My problem: how would you determine the Late Retirement adjustment factors, from NRA to NRA+1, given that the document states that the interest rate changes monthly? Any ideas as to a reasonable interpretation (and no, 415 limits don't come into play at this point).

I'm a bit confused about whether/how the new Proposed 415 Regulations may affect supplemental payments made to military reservists called up to active duty.

Up to this point, I was under the impression that there was a bit of leeway for employers to either terminate the employment relationship or continue the relationship when the employee was called to active duty. Either way, the employer could pay supplemental pay to the soldier. If the employer relationship was terminated, no FICA/FUTA was due. On the other hand, if it was continued, FICA/FUTA was due, but salary could be reduced to make 401(k) contributions. The IRS never confirmed this interpretation, but I believe it is a fairly reasonable one.

Under the new Regulations, Section 1.415©-2(e)(1) says:

"(e) Timing rules.

(1) In general.

(i) Payment during the limitation year. Except as otherwise provided in this paragraph (e), in order to be taken into account for a limitation year, compensation within the meaning of section 415©(3) must be actually paid or made available to an employee (or, if earlier, includible in the gross income of the employee) within the limitation year. For this purpose, compensation is treated as paid on a date if it is actually paid on that date or it would have been paid on that date but for an election under section 401(k), 403(b), 408(k), 408(p)(2)(A)(i), 457(b), 132(f), or 125.

(ii) Payment prior to severance from employment. In order to be taken into account for a limitation year, compensation within the meaning of section 415©(3) must be paid or treated as paid to the employee (in accordance with the rules of paragraph (e)(1)(i) of this section) prior to severance from employment (within the meaning of section 401(k)(2)(B)(i)(I)) with the employer maintaining the plan. "

Section 1.415©-2(e)(4) says:

"(4) Certain military service. The rule of paragraph (e)(1)(ii) of this section does not apply to payments to an individual who does not currently perform services for the employer by reason of qualified military service (as that term is used in section 414(u)(1)) to the extent those payments do not exceed the amounts the individual would have received if the individual had continued to perform services for the employer rather than entering qualified military service."

I am wondering what the impact of 1.415©-2(e)(4) is. Only employees can benefit under a plan, so the employer cannot make contributions or salary reduction contributions for the employee normally if such a relationship doesn't exist (other than in the same plan year). Does this only pertain to employer contributions (and possibly salary reduction contributions for the supplemental pay) for the plan year the employee enters active duty? Alternatively, is the IRS trying to permit all contributions after the person is no longer an employee?

Any help would be appreciated.

Client is putting in DB plan primarily for owners but with enough employee classifications to pass testing (401(a)(26), 410(b), 401(a)(4)). Now at the last minute the client wants benefit other classes of employees initially designed to be excluded, by giving them a token $500 contribution per year. These other employee classes are already in a generous MP plan but client seems to want them to feel like they are also benefiting under the new proposed DB plan.

Is there any way to write this into a DB formula (general tested of course) or do I have to use a cash-balance arrangement to get this type of result. I really don't want to have 10 different token formulas to get each participant of different ages $500 or thereabouts. Any easy way to accomplish this without going to cash-balance ?

Has anyone successfully exported data and plan specifications from Relius and imported the data to establish new plans in Omni? I have 85 plans to move into Omni and I am looking for the easiest and most efficient way to do it.

Tom Poje, have you ever attempted to move plans between Sungard systems?

Supposedly, you can export the data stored in cards and run a JOBUNIC in Omni to import the data in cards.

I would love to hear from anyone that has any input.

I have a contact that has a client that would like to maintain their DB Plan, but have Shareholders waive benefits to reduce current & future costs of the Plan.

1. Can this be done without terminating the Plan? My understanding is benefits are only waived upon terminating the Plan.

2. If it IS possible to waive benefits and continue the Plan, can you take into account the current waiver of benefits (6/6/2005) on the 12/31/2004 contribution calculation? The argument being that unlike amendments of future benefits, the benefits are actually being removed and don't actually exist for 12/31/2004.

It seems a tremendous stretch, but I promised I'd ask around.

Has anyone seen a version of the Special Tax Notice (402(f) Notice) that has been revised for the automatic rollover rules. I just checked the IRS website and couldn't find one there.

Are plans established by charitable aid societies considered church plans?

In Kentucky Association of Health Plans v. Miller, it states:

ERISA's savings clause does not require that a state law regulate "insurance companies" or even the "business of insurance" to be saved from preemption; it need only be a law which regulates "insurance", and self insured plans engage in the same sort of risk pooling arrangements as separate entities that provide insurance to an employee benefit plan.

Both of Kentucky's AWP laws apply to all HMOs, including HMOs that do not act as insurers but instead provide only administrative services to self insured plans. Petitioners maintain that the application to noninsuring HMOs forfeits the laws' status as laws which regulate insurance. We disagree. These noninsuring HMOs would be administering self insured plans, which we think suffices to bring them within the activity of insurance for purposes of Sec. 1144(b)(2)(A).

Rolling Vesting - At least one well-known benefit professional has written that rolling vesting will still be allowed for 457(f) arrangements because the "substantial risk of forfeiture" standard under 457 (b) will be different from the standard under ss 83(b) and 409A. [There is not an explanation of why it should be different.]

But then I saw an article from a national benefits consulting firm that seemed to say that not only will rolling vesting not be allowed for 457(b) arrangements under the new rules, but that the IRS was actively auditing old 457(f) arrangements and finding the rolling vesting to be per se bogus.

Anybody heard of IRS audits of this issue?

Any update from the IRS?

One of the arrangements I'm working on now has rolling vesting. I'm thinking of leaving it in there for now. It seems to me that there are so many rolling vesting provisions out there that the IRS will be forced to provide some transtional relief, even if it disapproves of the concept.

Three years ago, the employer made a discretionary PSP contribution for an employee who had never satisfied the eligibility requirement.

The requirement is one-year service & 1000 hours.

The employee worked only 8 months and then quit. However, the employer made a 15% contribution for the employee ($ 16,000 x 15% = $2,400).

Like I said, that was three years ago. The balance in this erroneous participant's investment account is now $ 3,200. He has moved out of state and the employer has no address for him.

The employer wants to terminate the plan, but has no idea what to do with the $3200. Is the former employee entitled to the $ 3,200 ? Since he was never a participant in the first place.... can the $3200 be refunded to the employer?

Was the $2400 erroneous contribution a "mistake of fact contribution (excess contribution" or some other type of operational failure ?

How can it be corrected now ?

I always thought it was a joke that someone would want to direct an investment into a tax exempt bond in an IRA. Now I have a customer who tells me their tax advisor says that this will make a distribution from a traditional IRA tax exempt. The contributions are pre, not after, tax. I thought all distributions from a traditional IRA made with pre-tax moneys were taxable as ordinary income. The customer's tax advisor is saying no that like a trust the character of the income is determined by the assets. Any thoughts?

An employer wants to amend their current graded vesting schedule and make all employer contributions full and immediately vested. The employer wants this change to apply to participants who have already terminated (generally I would see this as opposite of what employers would want to do).

My question is can they do this?

In the ERISA OUtline book it references a "One hour of service rule" to determine whether amended vesting schedule applies to a participant. I would think only current participants will get this benefit of full vesting, and the plan will have to distribute and forfeit terminated participants under the old vesting schedule, but as stated above, the employer wants to fullv vest everyone, including terminated participants (and already communicated this to the terminees).

I am trying to determine the benefit of having a TPA (separate from the insurance company) adminster the HRA. It seems that with most of the carriers offering an HRA + HDHP option as a package, it wouldn't be necessary to have a separate TPA administer the plan (for fully insured HDHPs).

Does anyone have any feedback on this? Thanks!

In my 24 years in this industry, I have never had this question arise. We have a money purchase pension plan and one of the participants is Muslim. She indicates that the company can make the pension contribution for her, but she will not accept the earnings as it's "against her religion"! Has anyone encountered this scenario? Wouldn't it be a breach of our fiduciary responsibility as Trustee to NOT give her earnings? HELP!

Is is possible for a 501©3 organization to have both a 457(b) and a 457(f), with the later limited exclusively to the CEO - so that the CEO could benefit from both plans simultaneously and the senior execs would benefit only from the 457(b)? We also currently have a Defined Contribution plan and supplemental 403b plan for all employees.

I read today that Roth 401(k) contributions are similar in concept to Roth IRA contributions, but they are not subject to the Roth IRA income-eligibility cap. Does this mean that there are no "discrimination" issues regarding the percentage of salary each participant contributes? I read through the IRS proposed regulations, and did not get any confirmation of this particular issue.

Don Levit

We have a former employee with a 401(k) balance. Unfortunately, he has terminal cancer. His beneficiary disgnation currently leaves 25% to each of three children and to his wife. His Wife has Alzheimer's disease and one of the children has a Power of Attorney over the mother. Can the power of attorney enable the child to change the beneficiary designations to 33% to each of the children? The mother currently doesn't always remember everyone in the family. If anyone has any thoughts, it would be very appreciated. Thanks.