A client just informed me that their Fidelity rep. recommended against the automatic rollover, implying that Congress may change the rule? They recommend that the client reduce the maximum to $1,000 and not pay automatic rollover.

This seems to be counter to what I'm seeing with the other larger financial institutions. Most seem to be embracing the rollover concept and making it very easy for the plans.

Has anyone else encountered this from Fidelity? Any idea why they would say this?

Funding Method is EAN. Plan hits ERISA/Traditional Full-Funding limit. As a result, are prior OBRA FFC bases treated as fully-amortized along with prior bases due to experience gains/losses, amendments, ...? If not, does the situation change in a subsequent year if the UAL is zero?

I am aware that the security requirements for electronic PHI must apply by April 20, 2005 (for small plans, April 20, 2006). Some are suggesting that Business Associate agreements must be amended to include language regarding electronic PHI by those dates. This seems to me to be overkill and unnecessary, since electronic PHI is a subset of PHI; that is, if it is electronic PHI it is PHI, so the original language in the Business Associate agreement should suffice. Am I missing something here? Thanks for any input.

Can anyone help me find a ruling on whether or not you can rollover a Keogh plan into a 403(b)? Someone is annuitizing an old Keogh plan over a 7 year period (due to a much higher contract value than surrender value). She is trying to consolidate accounts and wants her annuity payments to go directly into her existing TSA/403(b). I've contacted numerous advisors and insurance companies, but no one seems to know the specifics. Her current custodian didn't know either...maybe we shouldn't have raised the question.

Any help would be GREATLY appreciated.

Can a SPD be amended to only include compensation such as salary and not include, commissions, bonuses, etc.

Are non-discrimination tests under IRS §129 applicable to political subdivisions?

Specifically, is a political subdivision of the state required to perform the 55% Average Benefits Test for a dependent care FSA. Remember ERISA is not applicable to political subdivisions.

If a plan fails the adp/acp test and you have match contributions that are forfeited are those forfeitures hit with the 10% excise tax?

I have a new challenge that I need help with. Have a safe Harbor Plan that is a March year end. It will be merging with another group of plans as a controlled group. This plan is a December year end and is not a safe harbor plan.

What do I need to worry about with the merger?

Thanks for your help

Pat

PS they are putting in the 3% to meet the Safe Harbor

Calendar year client has a 3% Safe Habor non-elective contribution Plan. He's asking if the plan can be terminated or amended prospectively to get rid of the contribution requirement. There's 1 HCE and 1 NHCE.

I assume they've accrued the 3% on compensation earned to-date. I've looked far and wide and see many opinions that the 3% is locked in on all compensation earned during the Plan Year.

I'm thinking of creating a short plan year to lock down compensation earned to date. I know it will not be "Safe Harbor", but HCE will not defer in 2005.

I'll end now and see if there are any opinions/options out there.

Is it possible to restate a 403b into a 401k? I have an employer who set up a 403b not knowing they had to be in custodial accounts and for Oppenheimer to be the custodian. Oppenheimer wants to charge them $750 a year to provide custodial services. The employer decided they wanted to have a 401(k) so they can have an inside trustee and not have to pay Oppenheimer for this service.

Do they have any options?

I cannot locate any information that says specifically that you are permitted to roll over installment payments made over a period of less than 10 years. But when I read between the lines of what cannot be rolled over, it seems that this qualifies as an eligible rollover distribution. Can someone verify? Thanks.

I want to resurrect a topic that was killed a while back. Not a bad idea for this time of year.

According to the just published article from the DOL, is the following question and answer on p. 20:

My group health plan excludes coverage for benefits for a certain health condition (without regard to whether it was preexisting in nature). Is my plan violating HIPAA's nondiscrimination provisions by imposing this exclusion?

Group health plans may exclude coverage for a specific disease, limit or exclude benefits for certain types of treatment or drugs, or limit or exclude benefits based on a determination of whether the benefits are experimental or medically necessary, if the benefit restriction is applied uniformly to all similarly situated individuals and is not directed at any individual participants or beneficiaries based on a health factor. (Plan amendments applicable to all individuals in a group of similarly situated individuals and made effective no earlier than the first day of the next plan year after the amendment is adopted are not considered to be directed at individual participants and beneficiaries).

Using this explanation for group health plans, I read that the plan sponsor can amend his plan in any way, except for a discriminatory fashion. How would mandated benefit laws that apply to plan issuers have any impact on the plan sponsor?

By the way, don't take my word for it. Go to: http://www.dol.gov/ebsa/pdf/hipaaemployer.pdf.

Don Levit

An ERISA covered 403(b) plan was invested in a group annuity of Company A for many years. The non-church 501© sponsor (the "Employer") exercised its fiduciay duty to select and monitor the investment options available under the plan for self-direction, and decided to move to a group annuity of Company B.

In reviewing the old group annuity contract issued by Company A, it was discovered that the Employer (as the Contract Holder) could discontinue the group annuity, BUT the contract said monies could be moved out of the group annuity to a new trust or annuity only with a Board resolution by the Employer and a written request for transfer by the participant.

Of course, a few participants have not responded or don't want to move.

To me, the contract provision of Company A really impedes the ability of the Employer to select and monitor the investment options of the plan. Any ideas how to force Company A to transfer the remaining funds to Company B?

Can a traditional 401(k) plan convert to safe harbor effective 1/1/2006, add a Roth contribution feature, and still be exempt from the ADP test? The plan will match pre-tax and after-tax at 100% up to 4%. It will still perform the ACP test on the traditional after-tax contributions. It will satsify the notice req by 12/1/05.

We offer pre-tax transportation benefits to our three offices (DC, San Francisco and Chicago). I was wondering if there is a third-party plan administrator we could use to administer the transportation program.

What plan administration services are available?

Thank you.

I couldn't decide whether to put my question in the cross-tested section or the defined benefit section, so I did both. Hope it's not a problem.

If I have a small plan DB/DC arrangement where all 10 employees are in both the cash balance plan and the profit sharing plan in 2004, can I avoid the 25% of compensation deduction limit for 2005 if the plans are structured so only 4 participants receive contribution credits in the cash balance plan and the other 6 receive contributions in the DC plan?

Does the fact that the participants have an existing accrued benefit in the cash balance plan leave me stuck with the 25% limit?

If I have a small plan DB/DC arrangement where all 10 employees are in both the cash balance plan and the profit sharing plan in 2004, can I avoid the 25% of compensation deduction limit for 2005 if the plans are structured so only 4 participants receive contribution credits in the cash balance plan and the other 6 receive contributions in the DC plan?

Does the fact that the participants have an existing accrued benefit in the cash balance plan leave me stuck with the 25% limit?

Funny how often this comes up. Let me start by saying that yes, I have read PLR 9144041, RR 91-4, 90-49, and Notice 89-52.

We've had a lively discussion on the following situation. Takeover plan, calendar year valuation, plan, and fiscal year. Defined benefit, with annuities as part of the funding, along with mutual funds, etc., etc..

Apparently what happened is this - and I don't even have firm #'s, so I'll use hypothetical. And I'm not concerned with the wisdom of their investment choices, only the situation at hand.

Required plan cost for 2003 was, say, $200,000. Due to their recently unfavorable investment experience in mutual funds, they decided to put the whole $200,000 into annuity policies.

The insurance company practice evidently is to send a bill each year, based upon the contribution to the annuities for the prior year. So they send a bill to the plan sponsor in December of 2004, saying there is $200,000 due for the annuities. (Now, of course, being flexible annuities, the sponsor is under no obligation to pay.) However, the receive the bill, so they pay it in early January of 2005.

Later in February of 2005, the actuarial valuation is performed. Required funding is some amount less than $200,000.

We're now looking at this on a takeover request. Can the excess be withdrawn as a mistake of fact? Certainly, the safest solution is to not do this, and leave excess in plan for 2005 contribution. However, sponsor doesn't want to do this.

This seems a little tricky. I lean toward conservatism, and thus am not comfortable with this being a mistake of fact. On the other hand, if the billing should have been $200,000, and the insurance company had a systems error and billed $300,000 instead, which the employer paid, then I'd think this would be a strong argument for a mistake of fact, so I'm not so sure how the first situation is really all that different. Anybody ever encountered something like this, and how did you handle? Or, how comfortable would you be with considering this a mistake of fact? Thanks.

Participant is a 5% owner and must take his first RMD by 4/1/05. About 2% of his AB consists of after-tax contributions and earnings thereon. How is the distribution treated? Can he take 100% of the after tax contributions first as part of his first distribution? Does he take a pro-rata share? I haven't researched this yet and will, but any thoughts will be appreciated. Thanks.

I have a C corporation ESOP that the majority shareholder owns >51% and the ESOP owns the rest. The shareholder is contemplating selling his shares to the ESOP but wants to maintain control. He is the sole trustee of the plan. The plan will be leveraged to purchase the shares.

I don't think that the shares are "registration-type" securities. Therefore, the plan states that the trustee will vote the shares held as collateral, and that the participants will be allowed to direct the trustee to vote the shares that are held in their company stock account with respect to corporate matters such as the approval or disapproval of a merger or consolidation, recapitalization, liquidation, dissolution or a sale of substantially all the assets of the corporation.

Since he is the trustee, I think he would basically maintain control in voting those shares, except in the corporate matters mentioned above, in which the pass-through voting rules would apply. Of course, as a fiduciary, he would have to make sure that he was acting in the best interests of the participants and meeting all the other fiduciary duties when voting those shares.

Corporate counsel would like to set up a voting trust to vote those shares or have a "buyback" provision or call option so that he can preserve the option to acquire those shares in the future if he wanted. Neither of these sound appropriate, and they would admit to not being ERISA attorneys. Can I tell them an emphatic "no"?