If an employer has a safe harbor matching contribution and allows for an additional discretionary match (based on deferrals not exceeding 4% of comp) subject to some vesting schedule, is this additional match subject to Top Heavy rules? My understanding is that this design would not be subject to ADP/ACP but not sure about whether the Top Heavy rules would apply to this discretionary piece.

Is it permissable to start a DB plan and fund the max. allowed in that year and then terminate it the following year? Reason for terminating is there is no more consulting wages going forward.

Much appreciated

S Corp, 4 employees, all over 50. For 2005, it appears that we can put away $46,000 each on salary of $112,000. We'll do this through 14,000 of deferrals, 4,000 catch-up, 4,480 match, and 23,520 from a 21% profit sharing plan contribution. Is there anything wrong with this? Is there a better DC plan option, that will keep these four equal? Thank you for your help and ideas.

Would modifying a participant loan policy be a "cut back" if the cure period for making up a missed payment is reduced? The 411(d)(6) regs state that the availablility of a loan is not a protected benefit. Any thoughts?

I have a client with a 401(k) plan which covers union and non-union employees. In the past, all employees received a pro-rata profit sharing contribution. The union has changed the contribution to 35 cents per hour worked up to 1920 hours. The employer would like to be able to offer their union and non union different rates of contribution. I contacted my document support about how to go about doing this and his recommendation was to keep the current plan for the non-union employees (it's a nonstandardized prototype) and to set up a volume submitter plan for the union employees. Has anybody else set up plans like this? Any information or suggestions would be helpful & appreciated.

This issue keeps popping up and we keep telling clients there is a significant tax issue. Retired executives get continued health coverage not given to other retirees. If this is under a self-insured plan, the benefits, not just the premium value, is included in income under 105(h). Under 105(h) regs, retirees are tested as a separate group and this program results in discrimination in favor of highly compensated.

Possible solutions -

1. buy individual health insurance coverage for the retiree executive to take it out from under the self-insured plan.

2. Give the retiree extra compensation during the COBRA period and let the retired executive elect COBRA under the self-insured plan. At end of COBRA buy the retired executive individual health insurance.

Obvious problem. What if individual is uninsurable? Many state laws provide for some mandatory pooling arrangement in some circumstances, but this is not always comparable coverage and may be very expensive.

Anyone else dealt with this and do you have any different take or solution?

A single shareholder owns 100% of a S Corp. The S Corp owns 100% of a C Corp.

The C Corp wants to establish an ESOP and the S Corp wants to sell its shares of the C Corp to the ESOP and elect 1042 treatment. Is the S Corp a qualifying seller under 1042? I realize that C Corp gain is not eleigible for 1042 deferral, so would the negative pregnant be true?

There is a question on the 5310 that asks if the distribution will be made in any other form beside cash. This question has been answered "no" (so only cash distribution) on a termination of the plan. We have received a determination letter based on the information on this 5310. A IRS reviewer has said that this question has no relevance and the plan should still follow the terms of the plan and allow in kind distribution if it is in the document. I would like to find out my colleague's opinion about that.

Company wants to do away with their defined benefit plan due to the expensive nature of maintaining/funding the plan. They will establish a 403(b) plan for their employees, as a new option.

Any advice on the best way to achieve this while keeping the employees happy is greatly appreciated. Also, any comments/concerns with the options that I have come up with is also greatly appreciated.

1. Terminate the DB plan and move everyone to the 403(b) plan - no choice. (not the best choice because ees will likely not be thrilled)

2. Give every ee a choice between remaining in the DB plan or switching to the 403(b) plan (not the best because it may not help company achieve its goals).

3. Provide all ees based on age participation in the DB plan (a sort of grandfathering) and move the rest (and new ees) to the 403(b) plan.

4. All vested ees (with certain age or service amount) could choose - the rest go to 403(b) plan. Must determine the vesting rules.

Of course, my main concern is that the latter two options create some discrimination issues, etc. Any other options that anyone has would be greatly appreciated.

Thanks!

I am trying to advise a friend of mine. Her husband was a middle manager (NHCE) in a large company. They are both 57 years old. Two years ago the company's pension plan was converted to a cash balance plan.

His position was eliminated, but he is due a $496,000 lump sum or a $3,300 J and 100% SS immediate annuity.

I searched the open annuity marketplace and could not find a better deal for him. There are two questions that I could think of, though. First, if he took the LSD, rolled it over and took the hit in an annuity purchase, would any of the LSD be subject to recapture by the PBGC if the plan terminated. How long is this exposure out there? Second, what is the maximum monthly J and 100% SS monthly pension that the PBGC would guarantee at age 57? He did receive significant salary increases in his final two years of employment. The question is how to minimize his exposure.

Any thoughts would be appreciated. Thanks in advance.

Is an ERISA 403(b) plan required to prepare a Summary Annual Report? Since the Summary Annual Report summarizes the Form 5500, and the Form 5500 for a 403(b) plan does not include any financial schedules, what exactly would a Summary Annual Report summarize for the participants?

Also, does an ERISA 403(b) require a named Trustee to the plan document?

We are considering consolidation of three companies with common ownership, but not a controlled group. Each of the three employers would participate in the Plan and could raise the plan's eligible employee number to 120+. If we exceed 120 on a plan basis, but no single employer has 100 eligible, must the Plan attach an audit and do we still file the Long Form? Under the old format (multiple 5500's with only Sch. T) that was clear. Anyone have any experience with this scenario yet? I realize we file one Form 5500 and a Schedule T for all participating employers, but how does the audit requirement change?

The beneficiary lives in England and doesn't have a US tax ID number. Cigna won't do anything without a tax id number and the beneficiary says she doesn't want to go through the trouble of getting one for the amount (which is $190). What do we do to close out this account?

Thanks

Can anyone tell me what a RMD formula might look like for a participant with a TEFRA 242(b) election? Could the participant choose whatever formulat they wanted at the time of the election?

For example, 2004 distribution amount is based on 1/2 of the balance as of 12/31/02. Could that be possible?

Notice 98-52, Section VIII.F seems to require continued current year ACP testing for any after tax contributions made to a safe harbor 401(k) Plan. Is this correct ?

The plan will use the basic matching contribution formula to pass the safe harbor. I have never dealt with a safe harbor 401(k) plan with A T $ and just found this requirement to be odd.

Any comments are appreciated.

Thanks.

Controlled group has 3 plans, each of which contains the following vesting schedules:

Plan A - 3 year cliff

Plan B - 3 year graded - Year 1 - 33% - Year 2 - 66% - Year 3 - 100%

Plan C - 3 year graded - Year 2 - 25% - Year 2 - 50% - Year 3 - 100%

Since all employees fully vest after 3 years of service, does anyone see any problems with keeping these schedules? If one of the plans had a 6 year graded schedule (e.g. -2/20), would this make a difference, and if so, would you be testing how many participants would have the right to fully vest after 6 years?

My thinking has always been to look at the maximum time period someone can become fully vested, in determining whether there would be a potential for discrimination.

Thanks for any reply.

An employer purchased a security for $100,000 with corporate money and now wants to transfer this security into their pension plan to meet the minimum funding requirement of $100,000.

My understanding is that cash must be used to meet the minimum funding and that the above is a prohibited transaction.

Does anyone have concrete evidence on the above issue?

Thanks.

GAry

What distributions are required to be made under a tax-qualified plan (DC) during the determination letter process for a terminated plan. How long can an employer wait to receive a letter from the Service before being required to distribute all of the terminated plan assets?

I have a technical question that I have received mixed information from other practitioners and lawyers. I would like to contact the IRS directly to ask for an interpretation.

Unfortunately, trying to get through the maze of automated operators and finding someone knowledgeable enough to assist is proving futile. Does anyone have a number for specific departments or divisions of the IRS to ask a fairly technical employee benefit plan related question (or any other suggestions)?

Is plan amendment bringing in the affected ee's under 2003-44 the only remedy?

Could you take the position, for example, that plan def. of comp is from date of participation and this ee does not have a DOP so does not have elig comp so he/she has a 415 excess and therefore the plan returns the deferrals? It is a corbel prototype doc and i didn't see this addressed.