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!!

A POP cafeteria plan fails the key employee 25% concentration test. Would the acceptable correction method be to make all benefits taxable in the calendar year they are attributable to?

I've been researching Deemed Roth IRAs under employer retirement plans and need to verify two points, one of which just doesn't smell right. I have also posted this query under IRAs, but have not yet received a response.

1. The internet tax research network we use states ... However, the deemed IRA accounts are not subject to the ERISA reporting and disclosure, participation, vesting, funding and enforcement requirements applicable to the eligible retirement plan.

This would seem to imply that an employer can create deemed Roth IRAs for only a select group of individuals - i.e. only the HCEs or owners or officers. This does not pass my smell test. Does anyone have any insights on this?

2. Regular Roth IRAs have an AGI phase out. The research I've read seems somewhat vague regarding Deemed Roth IRAs. It states ... For 2005, the dollar limitation will generally be $4,000, plus an additional $500 for participants over 50. The maximum contribution cannot exceed the employee's includible compensation for the year. - It never specifically references and AGI phase out, however it previously states that the deemed Roth IRA must meet the requirements of 408A (which is where the AGI phase out is found) and also states Deemed Roth IRAs are subject the same contribution limits as regular Roth IRAs.

Any thoughts on whether the phase-outs apply to Deemed Roth IRAs?

In years past TPA has been filing schedule A for a self-insured medical plan for which the employer has a stop-loss policy. This year, the schedule A reports 17,000 in commissions to the TPA (which I assume are not paid from the plan) and 170,000 in premiums.

I didn't think a Schedule A was needed for a self-insured plan because the insurance contract is whith the employer, not the plan.

Agree/disagree?

We have a client with a 401(k) that includes employer stock. The employer has an administrative wherein when volume is extremely high (determined pursuant to pre-defined volume), trading is suspending until such time as the the employer can dispose of all the stock to purchase the new investment. Individuals who immediately prior to the trigger get the average price for the stock when disposed of. The employer does not exercise discretion in suspending trading, it is an automatic trigger once the criteria is met. Does the above create a problem and/or is it impermissible? I have looked for DOL guidance, but thus far have not been able to find any.

Hi,

The owner of our Company owns us and several other businesses all under the umbrella of a holding company. The holding co. was just formed recently. Regarding our 401k plan,

1. Does common ownership require a consolidated form 5500, rather than separate 5500's for each company?

2. Does common ownership require that all of the commonly owned companies have identical 401(k)'s (matching fund percentages, contribution limits, etc.) to aviod discrimination?

We are getting conflicting answers from the 401k plan and the accounting firm...

Thanks very much for your assistance!

JM-B in HOT SoCal.

Is anybody aware of a law in either Illinois or California which in effect penalizes individuals who elect COBRA coverage? An individual mentioned that they thought they had heard that individuals who elect COBRA in Illinois and California are not entitled to state-provided benefits at the expiration of the COBRA coverage. I have not heard of such a law - I would like to know everybody else's thoughts. If there are such laws, please let me know where I might find them.

Thanks

Two controlled corporations sponsor a standardized DC plan which has a calender year. Stock transaction in early 2006 will eliminate controlled group status, so a spin off plan will be established.

Any feelings on doing the spinoff in the second half of 2005 to save the audit report attachment for the 2006 5500 return? If separarated before year end, both plans [identical otherwise] will have under 100 participants on 1/1/06.

My feeling is no, cart before the horse. Initially I thought there might be a 411(d)(6) problem for the period of time up to the stock transaction, but everything in the spin off plan will be identical. I don't anticipate any testing issues....