Just entertained a question from a large church organization about the effects of the new California law AB2208 (insurers and HMOs must offer coverage to registered domestic partners on non-discriminatory terms if they offer any spousal coverage at all). The church is trying to determine whether AB2208 will require its self-funded health plan to offer benefits to domestic partners.

As a self-funded plan, you might intially think that ERISA's "deemer" clause (i.e., self-funded plans are not deemed to be insurance for purposes of state regulation) would preclude the application of AB2208. However, unless the plan at issue is an electing church plan, ERISA doesn't apply, so no deemer clause. This means that you get dumped back into the state insurance regulatory system. Further, the Church Plan Parity and Entanglement Prevention Act of 1999 indicates that state insurance laws are applied to church welfare plans as if they were insurers licensed by the state.

A literal application of these rules means that church plans, whether insured or self-funded, are now required to offer coverage to registered domestic partners if they offer spousal coverage.

Without debating the merits of the position, many churches have strong objections to this sort of thing. Then again, the California Supreme Court ruled last year that a non-profit entity affiliated with the Catholic Church had to provide contraceptive benefits through its health plan.

Anyone have any thoughts about this? Have you fought any battles on this topic yet?

Thanks!

Participant A's plan terminates in 12-04. Participant A fills out distributions forms indicating he wants to roll money into Company B's plan - provides address and account number and everything required to roll over money except Participant A does not sign the form. Participant A's distribution is processed by investment company and money is rolled into Company B's plan.

Participant A provides rollover ceertification form to company B indicating this is valid rollover. Company B accepts and deposits funds into it's plan. Participant A now decides he did not want to roll money over - he wants cash - however, Company B's plan only allows for inservice withdrawals for those reaching 59 1/2 and no available options exist in prototype document to allow immediate withdrawal of rollover funds.

Is the initial rollover done by prior investment company invalid becuase the participant did properly execute the form? Rollover amount is approx. $3000.

Could company B distribute the funds without violating the plan document under the assumption that it was an ineligible rollover as Employee A never signed the forms.

We have a 401(k) plan that is being sold 4/30/05. It is is stock purchase. The new owner is purchasing 100% of the stock. On April 20, 2005 the plan will be terminated. On April 30th, the two trustees will be fired. (One bank is buying another and terminating the President and CEO.)

Questions: 1.) There are about 5 participants who have been terminated for years but will not elect to take their distributions. Their balances are all well over $10,000. Any way to force them out without an election? 2.) I assume there has to be a sponsor until the plan zeros out. Would one of the current Trustees need to sign a corp resolution appointing the new bank as sponsor or can it be assumed the new bank will act??

I appreciate any help on this.

Pat

PS: The buying bank has a 401(k) plan and they will allow continuing employees to roll their balances in.

Several sole proprietors/service corporations-FSOs- (some of which have their own employees) own interests (greater than 10%) in single LLC which acts as a phone service for the FSOs. Appear to have affiliated service group between each FSO and the management company, but no cross ownership between the FSOs, so based on preamble to proposed regs "Two or more affiliated service groups will not be aggregated simply because an organization is an A Organization or a B Organization with respect to each affiliated service group." Each FSO has its own SEP and makes contributions. Management company has one employee who is a leased employee and participates in a 401k plan through the leasing organization (but plan doesn't appear to satisfy the requirements for employee not to be covered by lessee organization). Since apparently each FSO-group should technically cover the leased employee, how can this be done?

Amounts that are "deemed 125 compensation" are not included in the definition of compensation. What is "deemed" referring to?

Speaking / writing about 125 compensation, if a sponsor elects "W-2 Wages" to define compensation, are Section 125 contribution amounts included or excluded for determining employee deferral and employer matching allocations?

Is there an annual choice between testing by bargaining agreement or testing all agreements together? Or does one have to test the same way each year?

__

Typically when a plan deposits on a payroll basis (the document calls for it) we do not true up or even review the calculations/deposits as we do not have access to the "per payroll" info. I think the only exception is when deposits have been made in excess of what is allowed due to the Annual Compensation Limit. The match formula I'm looking at is 100% up to the first 3% plus 50% on the next 2%. For 2004, I've determined that the maximum match should be $8,200 (205000*.03 = 6150 + 205000*.02*.50=2050)

A couple of participants had in excess of $8200 deposited. There are some other differences when comparing the annual vs payroll calculations. I am only suggesting making the the adjustments for participants who had more than $8200 deposited.

Does this seem reasonable?

We are trying to install a SSL certificate on our Relius Web server with no success at all. Has anyone had any problems with this?

A sole proprietor and his wife own and operate a business that sponsors a profit sharing plan. In the past there have been employees who shared in contributions, but the business no longer has employees. All participants except the business owner and his wife have taken their distributions from the plan. The business owner isn't sure at this point if he will hire employees in the future, but wants to continue making contributions for himself and his wife. Since, at this point, a fidelity bond is in effect primarily protecting the owner from himself, is he required to continue purchasing the bond?

When a business changes from a sole proprietor to a corporation, exactly what needs to happen in terms of the profit sharing plan?

I have a client that has changed to a corporation effective 1/01/05. They have a new employer id number. Everything else is the same (profit sharing plan with no 401(k) provision).

Do we need to terminate and file the final 5500 for the sole proprietor plan, then establish a new plan under the corporation? Must we physically transfer funds to a new account registerred under the corporation? Are there any forms we must submit with the DOL or IRS?

Guidance on this matter would really be appreciated.

Thanks!

I have a DOL Audit correction that requires us to calculate a weighted average rate of return for Deferral deposits made on a weekly basis. Does anyone have a spreadsheet set up for this or know how I would create the formula in Excel?

A non-standard prototype provides for discretionary profit sharing contributions by the Plan Sponsor without providing any specific formula. The Plan Sponsor wishes to make a contribution based on a special formula just to be used for 2004, involving an end-of-year requrement.

Can this be done via board resolution? What is the take out there?

Can anyone suggest a simple "permitted" way to calculate the gain on excess contributions.

We have a client that sponsors a DB plan. The DB plan excluded service prior to the effective date of the plan.

It is my understanding that service prior to the effective date of the plan may be excluded as long as the sponsor does not have a predecessor plan. A qualified plan becomes a predecessor plan if it is "Terminated" within a 5 year period of the effective date of the new plan.

The client also sponsored a PS plan and a MP plan. The MP plan was merged into the PS plan. The PS plan has not been terminated.

Upon the merger of the MP plan into the PS plan, does the MP plan become a predecessor plan for vesting purposes?

Can anyone explain how to determine the income limit used in the income test for a qualifying relative? All the articles I have read refer to the 2005 limit being $3200 but I do not see where that dollar amount is determined. §151(d) is referenced but I am missing the connection. Is the exemption amount of $2000 in §151(d)(1) an indexed amount? Any assistance that can be provided would be much appreciated. Thanks!

Imagine a company that was newly formed in 2004 and began operation of a cafeteria plan in Nov., 2004. How does one determine the number of HCEs for (1) the short first year, and (2) the 2nd year?

Wouldn't all employees be NHCEs since the previous year's salary is either not applicable (no 2003 salary for look back) or less than the threshold amount (in 2004)?

It seems to me that the first nondiscrimination test that would produce a valid result will not be performed until after open enrollment for the 2006 plan year.

Document has three options: 1-Eligible Participants pro rata compensation. 2-Eligible Participants flat dollar amount. 3-under reverse allocation or similar method. it goes on describing the mechanism of bottom-up QNECs (max permissible contribution to lowest paid participant.

My question has to do with the "similar method", as this term is not defined in the document. Here is what I am trying to do:

401(k) is failing ADP and is Top Heavy. Employer does not want to contribute any more than he has to. There were no contributions other that the deferrals this year (and TH minimum obvioulsy.) 2 out of 5 HCEs are non-key EEs (doc excludes HCEs from QNEC allocation.)

If I provide a 3% QNEC to all NHCEs, then I have problems with my Top Heavy minimum as on HCEs get it.

Would it be acceptable under "similar method" to provide 3% QNEC to 3 lowest paid NHCEs and regular nonelective TH minimum to all other non-key EEs?

Does anyone have any thoughts on the following:

In August 2004, expecting again to be eligible to make Roth elections (two Roth accounts were established in 1998 with two separate brokerage firms, Firm A and Firm B), taxpayer went ahead and made Roth elections for two new rollover IRAs (funded from 401(k) distributions) held at different brokerage firms, Firm A, which also is custodian for one of the original good Roth IRAs, and Firm C).

In December, taxpayer established another Roth account with yet another brokerage firm (Firm D). Purpose of the Firm D Roth account was to hold stocks in Canadian listed companies whose shares ("F shares") also trade OTC in the U.S. To consolidate the "F" shares in the various Roth accounts in the Firm D Roth account, Taxpayer instructed Firm A to move the F shares in the 1998 and 2004 Firm A Roth accounts to the Firm D Roth account, instructed Firm B to move the F shares in the 1998 Firm B Roth account to the Firm D Roth account, and instructed Firm C to move the F shares in the 2004 Firm C Roth account to the Firm D Roth account. The transfers all took place as trustee to trustee transfers.

[Clarification: the instructions went to Firm D to initiate the transfers to it from Firms A, B and C. Sorry]

In the meantime, taxpayer discovered that his joint income with spouse would exceed the MAGI level and he therefore was not eligible to make the two Roth conversions. No trades occurred in the Firm D Roth account. One security distributed a royalty payment.

After briefly discussing with Firm A what to do, taxpayer determined that to fully undo the Roth election, it would be necessary to return the F share stocks from the Firm D Roth account to their respective 2004 Firm A and Firm C Roth accounts, and then to make an election to recharacterize the Roth conversion.

The F shares returned first to Firm C and taxpayer made a recharacterization election. Firm C indicated that because the F shares had gone out and come back in, it was necessary for it to perform an earnings calculation. That calculation resulted in less than all of the Roth coversion account being returned to the rollover IRA. About $1300 remains in the 2004 Firm C Roth account.

Once the 2004 Firm A Roth's F shares (including the royalty payment) returned to the 2004 Firm A Roth account, Firm A has taken a different approach, of treating the improper Roth conversion as an excess contribution, which will be withdrawn in time (it is to be hoped) to avoid excess contribution penalty.

Taxpayer is confused. Are both approaches correct? Can taxpayer withdraw the residual amount in the 2004 Firm C Roth IRA by having it returned to the Firm C rollover IRA as an excess contribution? If not, what does taxpayer do with the residual?

Many thanks for you time and patience.

Best regards,

I know this has been discussed before and I have read some past discussions on this.

Assuming the employer already has losses and does not want the deduction, when must the top heavy minimum contribution be funded?

Apparently there is no deadline other than 30 days following the extented corporate tax filing deadline if the contribution is to be allocated for the prior plan year.

Is anyone aware of any recent clarification on this issue?

Thanks much.

If you have a partnership and the partners exceed the plan imposed limit, are the deferrals which excee the plan limit left in for ADP testing like you would for HCE who exceed the 402(g) limits?

Any thoughts would be appreciated.