As you know, only a profit-sharing plan, a stock bonus plan, a pre-ERISA money purchase pension plan, or a rural cooperative plan can include a 401(k) feature (CODA). Are any of you aware of any pre-ERISA money purchase pension plans that include such a feature?

Although not indicate in the IRC, Announcement 93-105 indicates that the plan had to include a CODA when ERISA was enacted. Do you know of any that have been amended to other types of plans to provide increased flexibility to the employer (and in some ways to the employee) and thus are dwindling in numbers?

Thanks!

I am looking around comparing HRA's (Health Reimbursement Arrangements). In the past I had looked at HSA's, but in this case there is difficulty in finding a qualified plan (State of Maine) and looking to minimize premiums / maximize benefits. I seem to be getting some conflicting information that I wondered if anyone here could clarify.

1)In a 1 person corporation can the HRA be established to cover premiums and a certain amount of out of pocket costs?

2)Does the amount covered have to be set at the beginning of the year or can it just cover all expenses?

3)I see that the account values can roll year to year and that employers may allow access after the employee leaves. Does that mean in an owner employee only arrangement that the account could be maintained for allowable health expense withdrawals until it was liquidated?

4) Does anyone know of any decent economical providers for a 1 person plan? or know of someone who offers a self admin setup?

Thank you!

Stephanie

I did find a thread on this, but after reading through it, I'm not sure it answers my particular question. I have a small amount of PS forfeitures ($2653). My Corbel doc says forfeitures are allocated with Employer contributions. Plan is cross tested with only 2 rate groups, one for owner & one for all others. Plan is large, has other HCEs (not owners) and has no trouble passing any of the 401(a) tests. The client has given me a dollar amount to allocate. If my staff group has an overall allocation rate of 3.67% which includes forfeitures, then I can give my owner up to 11.0% (3.67*3), correct? Now Relius allocated the forfeitures comp to comp, is that a problem? Or do I have to figure those forfeitures out with the cross testing and allocate by individual meaning hand keying all forfeiture transactions? If I don't then my %tages are ok and all tests pass. Thanks in advance

Sub-S corp has a 401k plan. The company will be paying bonuses but probably not until after the end of the year. Can the employer pay the bonus in 2005 and still have it count as 2004 income? If so, how late into 2005 can this take place? Furthermore, if this allowable, can 401(k) contributions be made out of this bonus and count as 2004 401(k) contributions?

Thanks

I am looking at a beneficiary designation form and it indicates for contigent beneficiary "Children per stirpes". Is this a latin word? Does anyone know what it means and how it affects their contigent beneficary designation?

Companies A and B are part of an Affiliated Service Group. A sponsors a plan and B is an adopting employer.

Effective 2005, the ASG status will end by virtue of change of ownership and business relationship. B will start its own plan, and assets for the employees of B will be spun off from A's plan to B's plan.

If B has non-owner employees who earned more than $90,000 in 2004, will they be HCEs in 2005?

(I think not but that's more of a guess than anything.)

We are directed trustee for a Safe Harbor plan that was recently audited. The employer admitted to the IRS that the Safe Harbor notice was not consistently given each year. Consequently, the plan is subject to testing for those years in which notice was not given, and its ADP test failures are pretty egregious.

The employer did consistently give the 3% nonelective contribution, even in those years for which notice was not given.

Apparently, the Service did not impart any information about possible corrective measures. Would it be possible for the employer to recharacterize the nonelective contribution as a QNEC?

Is there anywhere to look to see the amount of documentation that the DOL may request during an investigation? I ask because they are asking for the owners tax returns and other items that seem beyond Title I of ERISA (plan documents, SPDs, 5500s, etc.). Is there anywhere to start looking at this issue?

Husband participated in a qualified retirement plan. He was not a 5% owner and continue working until his death at 76. His spouse took a total distribution and rolled it into an IRA in 2004, which is also the year of death. An RMD was not withheld at the time of rollover.

The spouse is also over 70 1/2.

When does the spouse have to begin to receive distributions? If you are over 70 1/2 when you open the account, do you have to commence distributions right away, or the year following?

Thanks!

Facts:

Two companies participate in a single 401k plan. One is a corporation ("INC") and one is an LLC. Mr. A and Mr. B (unrelated people) own more than 90% of both INC and LLC. INC and LLC both have NHCE employees. The LLC is taxed as a partnership.

Question #1:

Based on my research, the compensation used for ADP testing (and other) purposes should generally be the gross INC W-2 compensation + the net earnings from self employment figure from form K-1 for the LLC owners. For any non-LLC owners, I'd simply add together W-2's, in a situation where an employee is paid by both INC and LLC. Am I correct?

Question #2:

Add another wrinkle - the LLC owners wish to have their net earnings from SE excluded from considered compensation. Assume that LLC owners are all HCE's. Assuming the plan document is properly drafted, can we specifically exclude net earnings from self employment, for LLC owners, from the plan's definition of compensation? The LLC owners, who also take W-2's from INC, are trying to eliminate the hassle of waiting for their K-1's in order to determine testing compensation. The HCE's derive "psychologically" all of their compensation from the INC. Were the other entity not an LLC, the HCE's would not have any compensation at all from the LLC (eg they would not take a W-2 out of the other entitity, were the LLC also and INC).

***

Thanks for any thoughts.

The only funding method change, under Rev Proc 2000-40, for the year of plan termination is per section 4.02.

A question about the sufficiency of assets (exclusive of receivable contributions) @ plan termination date - section 4.02(3)(a):

For a calendar year plan, @ 1/1/2004 plan assets are $200k Vs PVABs of $150k.

Assume the plan is terminated 11/30/2004 by which time the participants would have accrued an additional year benefits

Without the additional 2004 accruals, @ 11/30/04 assets are $210k Vs PVAB of $158k - nothing yet has been contributed for 2004. However, with the additional accruals in 2004, PVAB jumps to $225. The sponsor would be contributing $25k (min required) for 2004 after 11/30/04 and may be as late as 9/15/05 say. Is the $25k excluded from the assets for determining sufficiency of assets for section 4.02? It doesn't seem right if the additional accruals are to be taken into account but not the contributions payable!

Assuming one can ignore the 2004 accruals and contribution paybale for 2004 for sufficiency of assets ....

The plan is amended (at the same time as the plan termination) to increase the benefit accruals effective 1/1/2004. As a result of the amendment, PVAB @ 1/1/2004 jumps to $218k Vs assets of $200k (and jum)and . Does this violate the sufficiency of assets condition of section 4.02?

We have a client that is terminating his defined benefit plan and rolling the assets into a new profit sharing plan; there are 3 participants and are all family members.

I am looking for plan amendment language that basically freezes the defined benefit assets as of the date of termination; any subsequent increase in the market value of those assets is disregarded and treated as profit sharing trust earnings.

Any help??

Thanks,

ST

I'd appreciate thoughts on the application of the same desk rule -- such as it still exists -- to the following situation:

Union A meges into Union Z effective 1/1/04. Union A's employees on that date became employees of Union Z. However, all former Union A employees remain in Union A's benefit plans through 2004.

Union A's former employees continue to do the work of Union A and its members.

Beginning on 1/1/05, the non-union (former) employees of Union A will enter Union Z's benefit plans, including its 401(k).

The question is what must or may the former Union A employees do with their accounts in the "old" 401(k).

May those accounts be kept in that plan so long as the plan continues for the benefit of the unionized former Union A employees?

Must those accounts be kept until that plan terminates?

Is there now full portability between all 401(k)s and IRAs, i.e., can the account balances be rolled over to the new 401(k)? Is that a function solely of the terms of the new plan?

Thanks!

What do you do if an employee terminates and closes their Simple IRA prior to matching contribution. This particular case involves only a very small amount of money approx. $100 and the original company will not reopen the account for the deposit. It is my understanding that an account must be established, but we have found that no institution will open a simple for this one time small deposit. Any suggestions??

Can an owner, who employs only union employees, and is himself a union member, set up a separate profit sharing plan for just himself?

I had heard that if you define the pay by excluding collectively bargained benefits, that this is possible?

I know that many employers providing retiree health coverage are imposing caps on employer contributions in order to limit FAS 106 liability. Are there any special requirements for imposing such a cap or is it treated the same as any other amendment to a plan? Practical implementation suggestions are much appreciated.

I am a little new to this and had a question in regard to Testing...

We have a Plan that was Safe Harbor in 2003, but due to financial difficulties changed the plan not to be Safe Harbor for 2004. All of the proper notification to participants etc. took place. My question concerns when is someone in this situation considered to be an HCE.

Employee's A & B only worked a couple of months in 2003, but worked a full year in 2004 and will be over the Salary limit for HCE. Are they considered HCE's in 2004?

Employee C was over the HCE Salary limit in 2003, but NOT in 2004. Are they considered HCE in 2004.

We used prior year testing - accordingly all HCE's cannot contribution over a predetermined percentage - as not to fail the tests. But I am unsure if the above employees are considered HCE for purposes of the 2004 tests. Thank you for any help!

Ashlea

I have one issue I'm finding very confusing on this. If a participant doesn't make an election and you have mandatory cashouts, you have to do the mandatory rollover. So far so good. However, under the "miscellaneous" portion of the overview, it says that issues regarding missing participants are beyond the scope of this regulation.

So how do you know if a participant is merely "nonresponsive" - in which case you do a mandatory rollover, or if they are "missing" and therefore beyond the scope of the regulation?

And what do you do if they are determined to be "missing?"

This may be much simpler than I'm making it out to be.

I have a 401(k) plan with the 3% non-elective option. I want to allocate a discretionary match. I'm confused by Notice 98-52 sections VI.B.3 and VI.B.4.b.

HCE defers 6.34% of comp. Do I do a ratio limiting him to 6%, then allocate so that he gets no more than 4% of comp? Is it and OR or an AND?

I'm confused. I hope you aren't.

A recent article stated that "the summary plan description should have a clear statement that, if participants are concerned that they do not know how to invest properly,or if they simply do not want to take on that responsibility, the fiduciaries will manage their accounts. If participants communicate that they would rather have their accounts managed, in most cases the best choice would be to provide professionally managed accounts through an investment advisory firm. A number of advisory firms are offering those services. As a second choice, fiduciaries could use aged-based (or "target") lifestyle funds (for example, a 2010 fund, 2020 fund, a 2030 fund, and so on, where the date on the fund roughly corresponds to the participant's anticipated retirement age under the plan). The third choice might be a moderate risk-based lifestyle fund or a balanced fund."

We need to add this to a Volume Submitter SPD. Does anyone have some SPD language covering this?