A safe harbor 401(k) plan excludes bonuses from the definition of compensation. The compensation ratio test was performed and the inclusion percentage for the NHCEs is 5% less than the inclusion percentage for the HCEs. According to most this does not pass the "deminimus rule". I know that if the compensation ratio is not passed you can use the general test under 401(a)(4) to show that compensation is not discriminatory. Is this general test available for safe harbor 401(k) plans since safe harbor 401(k) plans must use a definition of compensation that satisfies 414(s)? In other words, if the plan satisfies the nondiscrimination test under 401(a)(4), does it also satisfy 414(s)?

Thank you.

Employer has an HRA in which participants' HRA Accounts are credited with $2000 on the first day of each plan year. Suppose a participant terminates employment and elects COBRA. On the first day of the next plan year, is the Employer obligated to credit the account with $2,000, as it does all other participants? Is there a legal basis to argue that the employer instead is only obligated to credit the account each month with the monthly COBRA premium paid by the employee for coverage under the HRA (i.e., $166, which equals 1/12th of $2,000)?

We have the following problem:

Discretionary 2003 profit sharing plan contributions were made in early 4Q 2003 and were allocated to all employees eligible to share in contributions as of that date. However, some of these employees left employment before the end of the year and the plan requires employees to be employed on 12/31 in order to share in contributions. Some of these employees took a distribution when they left which would have included their portion of the excess contributions.

Since these employees were not employed at the end of the year, they were not eligible for the quarterly contributions that had been credited to their accounts. Therefore, a negative contribution was entered in their statement. These negative contributions were supposed to reduce the employer's contribution to the other participants. However, the TPA's software could not accommodate these negative contributions, so they chose to enter $0s in place of the negative contributions. This had the effect of giving contributions to participants that were not eligible, and causing the employer to contribute more than was necessary for them to contribute. Many of these participants were not vested, so the amounts will go to forfeitures. Many were partially or fully vested, and will receive contributions for which they are not eligible. Since some of these employees have now left the company and taken a distribution and the employer does not think it can go back to the former employees and ask for the money back.

What problems are here vis-a-vis DOL and IRS? How are these excess contributions to be treated? All of these excess contributions were to non-highly rank and file and no HCE's benefited. The aggregate excess contributions were about $20,000.

Does the 10% excise tax apply to these excess contributions? Since there was no discrimination here (i.e. it benefited the rank and file) is there no real DOL problem?

Any help would be most appreciated.

I have a plan that will be considered a large plan this year. The CPA who will be performing the audit told me that he is using a "guide" which refers to comparative financials. He is asking if he has to prepare comparative financials this year since it's the first year that the plan is considered to be a large plan.

If you know where I can obtain an answer to his question, please let me know!

Have a plan that is sponsored by a member of a CG

Senorio:

Part A works for a subsidary of the the CG and is a 10% owner of this subisary.

Part A has no ownership in Employer that Sponsors plan (parent corp) Parent Corp owns 90% of sub that Part A works for

For MRD rules - would Part A be considered a > 5% owner, whereby requiring MRDs?

My gut says yes!

Is income from royalties deemed to be earned income and can said income be used to fund a retirement plan?

The maximum tax-deductible contibution for 2003 was $95,000. The client contributed and deducted $100,000 (return filed).

We told the client that $5,000 was not deductible and the matter should be discussed with his tax advisor.

Is there anything else we should do?

A church plan has Medicare as the primary payor for active employees age 65 and over. Apparentley, Medicare had a special rule allowing Medicare to be the primary payor for Diocese/Religeous organizations with active employees 65 or older.

My question is: Was there legislation last year or this year that changed this rule? If yes, could you please let me know which Act changed it. Also, were employees using Medicare as the primary payor gandfathered under the old rule?

I have tried to find information on this issue from various sources and have come up blank.

Thanks.

We're working on a subrogation case and the personal injury attorney who is representing the participant has asked for:

"certification from the US Secretary of Labor that our self-funded plan is

an approved ERISA plan".

I'm new to this process but can't find any reference in the ERISA regs that a certification is actually given by the DOL, just requirements for the plan to submit information and filings.

Can anyone shed light on this?

Thanks!

Are you required to file a schedule R for a profit sharing plan with no in-kind distributions?

Health plan currently provides opt out payment (under cafeteria plan) to employees who do not choose coverage under employer's plan (a common provision).

For 2005 plan year, employer wishes to offer high-deductible health plan with health savings account and employer contribution thereto as but one option under its health plan. Employees who have previously opted out of employer coverage have now expressed an interest in opting back in, and the employer portion of the HDHP premium plus the employer contribution to the HSA is greater than the opt-out payment. In short, the new HDHP/HSA option could result in the employer spending more for health coverage than before!

Anyone else faced this design hurdle and developed a suitable solution? All I can see is that the employer must establish an appropriate breakpoint - that is, a point at which neither the opt out nor the HDHP/HSA option is more attractive than the other. For instance, if the opt out payment is $50 per pay period while the total cost of the employer contribution to the HDHP/HSA is $40, the opt out still remain attractive. Alternatively, I suppose employer could just make health care coverage prohibitively expensive (e.g., no employer contribution to the premium or the HSA) such that coverage was selected only by the truly needy!

Any thoughts?

Situation:

C (LLC, taxed as a partnership) participates in a multiple employer plan. Plan sponsor (A), C, and one other employer (B) participate in the plan. One of C's partners owns 100% of A and 100% of B. A and B are a controlled group, but C is not in the A/B controlled group (confirmed by an ERISA attorney). When I'm setting up the plan document for C, is the document prepared as if the C plan is a new plan?

Also, if A's plan is amended to spin off C's assets, do they come into C's plan as rollovers, transfers, or what? Subject to vesting??

I have about 50 other questions and am hoping someone who has worked through a similar situation would be willing to converse via email or private message.

Thanks.

1.401(a)-20 Q&A 10© addresses annuity starting date for disability benefits:

1. Annuity starting date occurs when payment of disability benefit begins, unless disability benefit is an auxiliary benefit.

2. Disability benefit is auxiliary benefit if upon early or normal retirement age participant receives benefit that satisfies accrual and vesting rules of 411 without taking into account prior payment of disability benefit.

Reg gives two examples based on age 45 participant who is entiled to a vested accrued benefit of $100 per month commencing at age 65 in the form of a qjsa and receives a disability benefit before age 65:

1. If disability benefit does not reduce participant's $100 retirement benefit beginning at age 65, disability benefit benefit is auxiliary benefit, and annuity starting date occurs at age 65.

2. If participant's benefit at age 65 is reduced to $99 at age 65, disability benefit would not be an auxiliary benefit because the $99 benefit at age 65 would not satisfy 411 accrual and vesting rules without taking disability benefit payments before age 65. Thus, annuity starting date occurs when disability benefit is paid.

I recently took over a db plan that provides a disability benefit that is equal to the accrued benefit unreduced for payment before age 65. The plan provides a qjsa election at disability using disability actuarial factors (that results in a more severe reduction than the normal qjsa factors).

A question has been rasied whether this db plan is required to provide the J&S election at age 65 under the above reg. The plan prefers to give the qjsa election at disability.

I am not sure of the answer. You would think I could figure this out some 16 years after the issuance of the IRS regs.

As I see it, I could avoid the whole question by simply having the plan apply a small reduction for early payment upon disability. However, before doing so, I was wondering if anyone had any thoughts on whether:

1. if payment of an auxiliary disability benefit must be disregarded under the regs in determining the annuity starting date; and

2. if offering a qjsa election at disability and imposing a disability qjsa reduction by itself would take the disability benefit out of auxiliary disability benefit status.

A labor group is negotiating concessions with a company in bankruptcy. One proposal is to accept wage reductions and freezes in upcoming increases (the wage rates and scheduled increases are set out in the existing contract).

However, the hope is to maintain the existing accrual rate under the DB plan by using the present (unreduced) wage rate and scheduled increases for determining FAE in the benefit formula.

Can this be done? Can a plan define FAE as it wishes or must the earnings component accurately reflect reality and wages actually earned for any period?

Is this required under ERISA? Are there any bankruptcy concerns? PBGC limitations? Is preservation of benefit accrual an "improvement"?

Thanks for your thoughts.

We have an employee that is interested in banking the cord blood of their child? Do you think that this would qualify as reimbursable under the medical reimbursement plan? Any help would be appreciated.

I am working on a 5500 and am having trouble with the active participant rules for Lines 6 and 7 of the form.

At BOY, the company had 105 employees with account balances - I assume this is the number of participants at BOY.

At EOY, there were 76 employees listed as active with account balances, 28 listed as terminated and 1 retired. 13 of the terminateds/retirees had a zero balance at EOY.

Does this mean I am now down to 92 for EOY count on Line 7g? What about the other 16 terminateds who are to get their money? The instructions to the 5500 say not to include "any individual to whom an insurance company has made an irrevocable commitment to pay all the benefits to which the individual is entitled under the plan". Does that exclude the group of terminateds who will get their money but haven't done so yet?

As long as the total for the beginning of next year is under 100, that is the main goal here. Thanks for the help.

Can an individual roll her IRA money into her company's 401(k) plan? Does it matter how long the IRA has been around?

Thanks

Where can I find a list of assets that fall under the non-qualifying asset umbrella?

Not my bailiwick, so bear with me

Facts

- DB plan will be frozen to new participants. Freeze not applicable to current participants.

- Match in 403(b) plan will be increased for all participants; otherwise, no changes to 403(b) plan.

- New employees (no longer eligible for the DB plan) will receive a non-discretionary DC contribution. DB plan participants not eligible for this.

- Since the DB plan will eventually have a problem with coverage under 410(b), the plan is to aggregate it with the new 1% DC account.

Question

Can the DC account be aggregated for the ABPT if part of the 403(b) plan or will a 401(a) plan be required?

My analysis

401(a) plan will be required, per Reg. 1.410(b)-7(f).

However, that Reg. was last amended in 1994. Any IRC changes that would produce a different result? Any other relevant issues? What am I missing?

I received an email from a plan sponsor who wanted to update his/her plan for GUST.... missed the deadline and didnt do anything to date. This can be done through voluntary compliance.... Anyone want to share thier experience? A direct link to the proper procedure?