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?

We have a client that provides a 100% vested match. Both ADP and ACP are run current year. Preliminary ADP testing failing but ACP passes. We would like to consider part of the match a QMAC and include in ADP test. Can this be done retro to 01/01/04 if no hardhsips or in-service payments have been made from the match account even though the document(which can be ammended) stipluates that the matching contributions are not qualified.

Plan maintained old requirement for actives > 70 1/2. Distribution of the accrued benefit (AB) began on 4/1 following 70 1/2. This benefit was payable as a life annuity. Each 1/1 update AB. While active the participant has pre-retirement survivor coverage. Once participant actually retires, plan provides makes elections on late retirement date (LRD).

Did the old regulation require or was it an option that the benefit calculated at LRD be offset by the actuarial value of any payments previously made to the participant as a required minimum distribution?

Participant retired 7/1/04. He is still receiving his AB (updated to 1/1/04) as of now.

Plan does not provide for retroactive annuity starting date.

Retiree needs to make election on form of benefit payment.

Propose: Recalculate benefit at LRD and determine value of optional forms of this benefit on 1/1/05. For lump sum option, use interest rates applicable on 1/1/05. Make payments for 6 months (7/04 through 12/04) for additional AB accrued from 1/1/04 to 7/1/04. Begin payments on 1/1/05 in accordance with option elected or pay lump sum.

Is this proposal acceptable?

I am not sure whether to select stocks or mutual funds for my roth IRA. I read some previous threads regarding stocks that over time, the Ups would be greater than the downs for the stocks. In that case, should I invest a larger portion of my money into stocks ? Mutual funds seems to be more stable and less risky while the returns are not as high. I am currently 24 so will it be better to invest in the stocks because I can take the risk now ?

-hustler98

401(k) Plan requires only 3 months of service for entry. Plan has one HCE & several NHCEs not meeting statutory age & service minimums. We want to exlude the otherwise excludible NHCEs. How do I get Relius to do that? When I test the "otherwise excludibles" seperately Relius puts the one HCE in the "otherwise exlcludible" test. Obviously, when I include the "otherwise excludibles", I get not only the HCE, but all the NHCEs as well.

Thanks in advance for any guidance.

DOL regulations make it clear that, if a MEWA is created for a temporary period due to a change in control of a business, Form M-1 is not required. The temporary period is limited to the plan year of the change in control and the immediately following plan year. What I infer (correctly or not) from this provision is that the DOL is not concerned with the situation where a MEWA is created for a short time due to a corporate transaction, provided the MEWA "goes away" within the period stated in the regulation. 29 CFR 2520.101-2©(2)(ii)(B).

Does anyone have any experience with DOL on this "temporary MEWA" issue? Also, does anyone have any experience with any state regulators on this type of situation?

I am taking a Business Law class that is studying the First Central Bank Case, which is one of the Harvard Business Cases.

This is about unions and the rights of the employees to pursue and what employers can and cannot do...

Any good tips on websites to check out about this topic? Labor Law essentially, but I am looking for more than just the law itself, but some good sites that will be more "user-friendly"...

Thank you

The IRS has issued 3 PLRs allowing Non-Qualified Annuity Stretch-Outs. None of these involve trusts. Is it too much of a leap to apply the IRA Trust Separate Share rules to NQ Annuities, as well. In other words, annuity in a Revocable trust; annuitant dies; trust becomes irrevocable. It would seem we could do a stretch over oldest bene's life expectancy. Any thoughts? I try my best to discourage clients from putting their Annuities in a trust, or making a trust the bene, however sometimes it does seem to fit. Other times they don't listen. Al

Hello,

My company (a private university) has a 3-year cliff vesting, or as I was told 2 years and 1000 hours of service to be exact. I plan to terminate my employment after only 2 years and 2 months of service, and thus my 403(b) will be annulled and I will lose the money the university invested so far into my account. I'm looking to options to avoid this and was wondering if you could give me some advice on negotiation with the university. Do you think I have a chance to keep the account? If I'll be working part-time after I leave, would this keep my work history rolling and can I reach 2-year-1000-hours requirement then? Anything else I can do/tell to convince them to vest my account only after 2years and 2 months?

Overall, I'm leaving this job on very good terms and in fact has just been promoted. Do you think my manager can play a role in the discussions with HR?

thanks all in advance

I am looking for good articles on the trend of larger employers freezing or terminating defined benefit plans and replacing with across the board employer contribution to an existing 401(k) plan. Thanks for your help

An employer wants to go to a higher deductible health plan and make non-elective employer contributions on behalf of each FSA participant to offset the higher deductible for the employee. Contributions will all be the same for each employee, a specific dollar amount. Are there any regulations that prohibit this or any pitfalls to watch for?

Wisln