Just met with accountant for plan sponsor who showed me past admin work for a possible takeover.

1040 Tax forms were wrong. Participant was advised to borrow back all the pension contributions, by way of the pension administrator who accomodated the transaction.

Big deductions for a db plan for two 35 yr olds. The TPA wrote to explain how all the prohibited transactions would be done.

I agreed the admin looked wrong. Then I checked the DOL who did not receive any of the prior 5500 forms. Thus, the copies of 5500 for db that were given to client and signed by client were never filed. The forms did not disclose the loans.

In addition, the forms did not show the actuary's cert. so I cannot ask if there was a valid enrolled actuary's work done.

My attorney says that the client can ignore the invalid past work at their own peril. Or, much better to go back and correct 4 past tax returns and 4 5500 filings, go into CAP, and sue the old TPA for damages for all the back penalties and underpaid taxes.

Any suggestions on handling this situation?

Does an ERISA - covered 403(b)(7) plan (custodial account) need to provide QPSA and QJSA benefits, or is is treated like an individual account plan that need only provide that the account is payable to the spouse unless waived?

I need a few questions answered:

A company currently sponsors a Simple IRA plan. The plan has been in place for over two years, but not all of the participants have been in the plan for at least two years. The comany would now like to close down the Simple IRA plan and become an adopting employer of a multiple employer (PEO) plan. My understanding is that the Simple IRA can only be closed at the end of the plan year, and then those employees who have been in the plan at least two years could roll their balance over to the new PEO 401k plan (if they wanted). However, those employees who have been participating in the plan less than two years cannot roll their money to the new PEO 401k plan. What options do the participants with less than 2 years participation have? Can the plan close down at this time? or does the company have to wait until everyone has been a participant for two years? Any help you can give is appreciated. Thank you.

The owner and sole participant/employee of a profit sharing plan that has been filing 5500-EZs every year recently got divorced and now his ex-wife is an alternate payee with a segregated account balance in the plan.

A colleague tells me that the plan can still file an EZ. I'm thinking that since the alternate payee is afforded the status of a beneficiary (e.g., getting copies of SPDs, SARs, a certificate showing her balance) a 5500 should be filed until the year after she is paid out. Who is correct?

DOL Advisory Opinion 2001-09A discusses computer generated asset allocation models as investment advice and the provision of such advice would constitute a PT if Sunamerica provided such computer models.

Does anyone know why the provision of computer generated asset allocation models constitutes advice and not education? As far as I could tell, participants didn't have to accept the results of the computer program.

All of you professional TPA's out there probably have a quck answer for this one.

Are you the payer, and do you use your own EIN, when you issue Form 1099-R/Form 1099-MISC?

I'm looking at TD 9010, 07/26/02. It seems that if a TPA exercises any sort of managerial or oversight duties -- for example, determining the amounts of distributions rather than merely writing checks at the direction of the plan sponsor -- it's required to use its own EIN on Form 1099. And, do the same rules apply to both retirement and welfare benefit plans?

Currently a school district is funding health care premiums for retirees for a period of time. The person at the school that handles the program is looking for a cleaner way to run this program, and was told a 403(b) plan, which they do not currently offer, would be the ticket. Her goal is to limit the uses for the funds to health care premiums or health care related expenses only. I have never heard of any retirement plan that could put a limit on how money from the plan could be spent. Has anyone else ever heard of this scenario? If not does anyone have a creative idea to meet her goals?

One of our vested terminated employees was recently murdered by her husband. I assume the husband will still be eligible to receive her vested benefit under the pre-retirement spouse's death benefit program, however, I'd like to make certain of this. It just doesn't seem right that he would be eligible to receive the benefits. Is there any case law out there?

Participant directed plan, where loans are treated as participant directed.

Participant is full-time, drops down to part-time, and now the loan repayments cannot be supported by his pay, so his payroll deductions must stop.

My only question is what is the fiduciary's responsibility to pursue collection of this amount? Should they sue the participant for collection? Force them into bankruptcy, etc.?

The Plan stipulates that discontnuing payroll deductions is an event of default.

401(k) Plan with Cross Tested Profit Sharing. My coverage ratios in the rate group testing ratios exceed 70%, so I shouldn't have to worry about the Average Benefit % Portion. However, when I run the Gen Nondisrim Test results say I fail, because once you include deferrals the Average Benefit % Portion would fail. Since I don't have to worry about that part is there anyway I can get Relius to show me a passing test?

What are people's thoughts on this situation... Let me know if and where I go wrong:

Plan makeup:

- LLC taxed as a partnership

- 401k non SH, No match, W/ER PS contribution

- 10/31 FYE & PYE

- Cross Tested: Group 1 Partners (3 partners), Group 2 all others

All partners make $200k+

Passes ADP

No problems W/Cross testing contribution

Here is the situation... One partner is retireing on 10/31/04. That partner has deferred $1,000/month for each month of the 10/04 plan year. 2003 402g not exceeded. Partner wants to defer an additional $3,000 in month 10/04 to get to the 2004 402g of $13,000 which would mean a $15,000 deferral to the plan for the 10/31/04 plan year (see my math... $1,000 each month of 10/04 PYE + $3,000 additional in 10/04 for $15K).... ok? Partner also wants to deffer the $3,000 catchup. (With me so far)

Questions:

1 - Can the partner have a $15,000 deferral for the 10/31/04 plan year? (+ $3,000 catchup?)

2 - Wont it limit the max non elective contribution to the other partners to $41,000 - $15,000 or $26,000? That will ultimately mean that the other partners will not max out.. they will get $26,000 + $12,000 or $38,000 (if they continue at their usual rate of $1,000/month).

CAN they (the other partners) also make that $15,000 deferral like the retireing partner as outlined? Basically use up their 2004 402g in the first 10 months of 2004, not make any deferrals in 11,12/04 and then as a business going forward their employer profit sharing contribution will just be more to get them up to the max for the 10/05 year end?

Is there a better way? Thanks!

Plan sponsor "relieves me of my duties", and hires firm X that happens to employ at least one Enrolled Actuary. Although annoying, it was not a surprise, and we move on.

The sponsor decides not to pay my modest fee for completing the Schedule B, and X says, "we'll do it". Note that X's EA did not say that, but the EA's non-actuary boss. It is beyond consideration (in this case) that X will recalculate the items to be placed on the Schedule B. Many are available in my report, but a few can only be approximated (the actuarial term for "guess"). Let's assume I know this EA will not do any such recalculation.

Do any of you EA's see a problem, within the Code of Conduct, or something that should be brought to the attention of the ABCD? Any action suggested? Get over it?

My clients are a husband and wife with two children. The wife and children have health insurance with a traditional individual health carrier and the husband is insured with the risk pool due to pre-existing health problems. The husband is currently unemployed due to a reoccurence of major health problems. They have long term care insurance.

I have talked to Mrs. Client about possibly going to a HDHP and opening an HSA. Both Mr. and Mrs. client have long term care insurance. My two questions are :

1, Is 100% of Mrs. Clients LTC premium qualified to be used from the HSA tax free?

2, Mr. Client is unemployed and the following is listed as a qualifying expense "health insurance for the unemployed". Can my clients use funds in the HSA to pay Mr. Clients risk pool premium since he is unemployed.

Any guidance would be appreciated.

Thanks,

Paul

I am working with some clients and discovered that certain investments that are in SIAs/PSA require the insurance company to mail all finacial reports required to neede to complete the 5500 120 days after the end of the plan year. However, I am not finding that this is true for Mutual Fund/Registered Investments. Any reason why they were made exempt?

A participant wants to receive a lump sum distribution at age 49. The plan has a retirement age of 55 and provides for maximum benefits as a life annuity. The participant only has 4 years of participation as of the date of termination.

The actuarial equivalent assumptions are 8% pre-retirement and 5% 1983 IAF setback 5 years post-retirement.

What is the maximum lump sum that the participant can receive???

It seems obvious that the 8% AE assumption will cause that calculation to be used for the benefit. This is because you use the smaller of the AE or 5%/GAR adjusted benefits to determine the lump sum.

The question is on the reductions. The benefit must be reduced from 62 to 49 and then an immediate annuity factor can be used to determine the lump sum.

160,000/12 * .4 = 5333.33

I thought the calculation would be:

5333.33 * (178.4792 / 207.0814) * (1/1.08)^13 = 1,690.19

The APRs and discount are both calculated using the AE assumptions.

However, a different calculation has produced a higher limit:

5333.33 * (178.4792 / 207.0814) * (1/1.05)^7 * (1/1.08)^6 = 2,058.63

Both of these numbers could be multiplied by the annuity factor using the applicable interest rate and mortality table.

I happen to like the second number better because my lump sum is 21% higher but question whether my 'explanation' would hold up.

The reason is the retirement age under the plan and the pre and post interest rates for actuarial equivalent being different.

Does anyone have a problem with the second calculation??

An sole proprietor had a profit sharing and money purchase plan put in place for herself years ago. She is the only participant and her combined assets exceeded $100,000 about 9 years ago. She has never filed the Form 5500-EZ. As I understand, the statute of limitations goes back 6 years but that would expose her to a potential penalty.

Another thought is to file the latest 5500-EZ and roll the dice. Does anyone have any experience with the consequences to a backfiling like this or ignoring the backfiling and just filing the most recent return?

I read in a recent post that there may be regs that do not allow for eligibility provisions on any Safe Harbor Match contributions, would that apply to Safe Harbor Non-Electives too? Can someone point me in the right direction to read more about it...

Thanks for any help.

I have an employee whose spouse's child has just come into this country. I don't believe that this situation applies to the Special Enrollment regs. Would the dependent be able to come onto the plan as a special enrollee or would they have to wait until open enrollment?

Participant takes out a new loan, and payments are via payroll deduction.

For whatever reason the participant now believes they cannot afford to repay the loan. In fact they send a letter to the Administrator saying "cease all loan repayment deductions from my paycheck."

Where I come from, if the participant says stop withholding something, you must stop withholding (with a few exceptions).

What do you do? Stop withholding? If so, aren't we creating a back door for early distributions?

If not, how can you deny a participant's request to cease withholding? What if they sincerely can't afford it? Medical bills, etc.?

Probably a stupid question, but can forfeitures that are normally re-allocated to plan participants be used towards the required top-heavy contribution?

Thanks for any help!