Has anyone had any experience dealing with the DOL's wage and hour division to qualify a self-funded health plan as a "bona fide fringe benefit" arrangement under the Davis Bacon Act or Service Contract Act? I have spoken to someone in that office about this issue generally and she said they were willing to work with plan sponsors to deal with this requirement, but I wondered if the reality is different from the PR.

At bottom, the DOL is concerned about the possibility that federal contractors will skim money from self-funded fringe benefit plans and therefore require plan sponsors to prove that these plans can't be used to divert federal money from the employees who are supposed to receive it.

In the absence of a VEBA or taxable trust with non-reversion provisions, my thought was you can satisfy this requirement by showing that the plan satisfies the usual requirements for a welfare plan under ERISA (i.e., that it's not some sort of fly-by-night sort of arrangement) and by including some language in the plan doc/SPD that obligates the plan sponsor to provide the minimum fringe benefit levels required by the DBA or SCA as long as those employees are performing work under a contract governed by these acts (thus creating an enforceable right under ERISA).

From past experience in other areas, I know that "reasonableness" is subjective where the DOL is concerned, and what I think will comply with the regs may not.

Anyone? Buehler?

It is my understanding that a Schedule C should be filed in situations where the plan pays more than $5,000 to a single service provider. Does that include investment expenses? Say, for example, that a plan pays $14,000 in investment expenses to its TPA. Should that be reported on Schedule C? Any insight would be greatly appreciated.

Let's use this as a place to suggest topics for inclusion in the 2005 Gray Book. Real topics please, and not something that has already been answered in a previous edition.

Here is my start. If others think it unworthy of suggestion, opinions are welcome.

Q&A20 from the 2004 Gray Book deals with a method change (to UC) when a plan is frozen. Included in the response is "The normal cost for the plan should be $0..."

Consider a frozen plan, using UC, but the actuarial assumptions include an item for expenses, which is added to the normal cost. Does the 2004 response mean mean the IRS considers a non-zero normal cost to be unreasonable in that situation?

As an employer one of our plants has a union group that currently numbers around 40 employees. Their contract states that if enough employees express an interest in a 401K plan, that we will establish a 401K plan for them. As of yet, no one has expressed any interest in a 401K plan.

However, we would like to know if it's feasible to open up our current 401K plan to these employees. None of these employees have ever been included in the testing of this plan, and I really don't expect much participation by them, if any.

I'm interested to know how opening this up would affect our testing, costs, etc. Since no one has come forward yet, should we just leave it alone until someone does? If they do, then what? We are trying to simplify/standardize as much as we can; and rather than have 2 401K plans, we were seeing if it's feasible to have only the one.

thanks

WHY

A plan participant announced he was terminating employment as of 8/30/04. He did not give a written notice to this effect. The plan has a 8/31/04 plan year end and requires participants to be employed on the last day to receive an allocation of employer contributions. The participant is stating that he should get an allocation because he had unused vacation days. Any thoughts?

Employer is converting retirement plan assets from a variable annuity/GIC arrangement, to mutual funds. Approximately 30% of participants are invested in the GIC. Employer can avoid paying a large surrender charge under the GIC only by moving GIC funds to a money market two months prior to the conversion date. Employer has calculated that each of the 500 or so employees invested in the GIC will lose approximately $10 in earnings during the 2 month holding period, and would like to make a $5,000 restorative payment to the plan to make them whole. Employer would not treat restorative payment as a deductible plan contribution, just as added earnings under the plan. Employer will comply with blackout disclosure rules.

Is a restorative payment of this type permissible? Can it be reported on Form 5500 in a way that does not invite an audit?

At retirement, a plan provides a benefit composed of a "regular payment" and a "special payment". The "special payment" is based on vacation pay and the "regular payment" is based on a standard benefit formula. At commencement, the "special payment" is made in lieu of the first 3 months of "regular payment" (this plan has many of the same characteristics you would find in a steelworkers plan).

My question - would this benefit form (it is not an option) be subject to review for early application (October 1, 2004) of the Relative Value Regulations?

Thanks

Should a Plan Sponsor (Employer) complete a W-8 or a W-9 if it is a foreign corporation with subsidiaries in the US? Which would be appropriate, or is there another more appropriate form?

There must be a similarly situated company out there that has been through this before.

Thanks for any help.

An individual is entitled to receive stock worth $100,000 from an ESOP. The stock is put back to the Company. Assume the trust's basis in the stock is $20,000. I was told that the trustee would issue a 1099-R showing a non-taxable distribution and the Company would issue a 1099-B showing sale of proceeds of $100,000. This doesn't sound correct. Thanks in advance for your help. Ed

I understand that an insured welfare plan that provides benefits for a select group of management is exempt from ERISA's reporting and disclosure requirements (Sec. 2520.104-24), but does there have to be a written plan document as described in ERISA Sec. 402(a)(1)? Thanks in advance for any comments.

Is it possible to transfer money from my 401k account to an IRA account while I am still employed at the 401k plan provider? I am not very happy with the investment options available in my 401k.

Is a catch up match excluded from ACP testing? Any help would be great! Thanks, Amanda

I recently heard a local rumor that anyone can freely download a copy of any plan's 5500 off some website.

For example: It's possible for ANYONE to go to some website and download the 2002 Form 5500 of the Mayo Clinic- 401(k) Plan, Bob's Hardware Store-PSP, etc.

I never thought that was possible or legal.

I knew that Form 990 of charitable organizations were pubic information and open to public inspection because of their nonprofit status. There are a few websites from which anyone can download a copy of any annual 990 return of any organization.

But I never thought that a copy of a plan's 5500 was available on line to the general public.

Please tell me this is nonsense!

In 2000 a client made a late contribution of deferrals into their 401(k) plan on one occasion (30 days beyond the date the DOL said they could have been made).

Although the contributions were made in 2000, and thus the company ceased using the principal in a prohibited manner in 2000, the earnings on the late contributions were not deposited until 2004 (when the late deposit was discovered by the DOL).

Question: is there only one prohibited transaction (in 2000) for the late deferral, or are there additional prohibited transactions for each succeeding year because the company had the benefit of the use of the earnings on the late deposits through 2004? If so, I imagine the tax would be 15% of the value of the use of the earnings (which is all the employer still had the benefit of in the later years).

I saw this same question raised in a thread from 2001 that I cannot locate now, but there was no answer posted.

Thanks for any thoughts and comments.

If a 78-year-old non-5% owner is still employed & participating in a SIMPLE-IRA plan, can they elect to defer their RMD until after they terminate service with the employer?

The accountant who is performing an independent audit (for 5500 purposes) on a large plan is informing me that we, as third party administrator, must have a SAS 70 report. Does anyone know where I can find more information regarding the Service Auditor's Report?

There has sometimes been speculation that no plan meets all the requirements of ERISA 404© and a fiduciary may be better protected from liability by performing due diligence and helping improve participants understanding of investments.

Does anyone think that the same is true of the automatic rollover rules? In other words, is it likely that there will be some question of whether a plan has complied with the safe harbor based on lack of definition in the rules (or will the new requirement for an agreement eliminate that risk)? Would it be just as good to comply with the one-year non-safe harbor rule instead.

We offer a retiree plan (self-funded) to our employees who meet certain criteria and retire. If the retiree is eligible for Medicare, we would like to make Medicare the primary payor, and let the retiree plan pay as a med-supp plan.

Our active employee group plan does have over 100 lives.

I am familiar with the COB rules as they relate to disabled employees under age 65 and Medicare, but is it permissible to have Medicare as primary if it is a retiree plan and the retiree is disabled? We would of course amend the plan document to clearly state that the retiree plan is secondary to Medicare, if available.

Thanks for your input.

I have a brand new VEBA that is setup for a company's retired employees. No current employees are eligible. Since all participants are retired, should I enter the number of participants under line 7a or 7b?

IBM has announced a partial settlement in its class action brought by workers who sued for age discrimination. IBM has agreed to pay 320M to workers who were affected by the adoption of a pension equity benefit formua in 1995. If the court decision that IBM's cash balance pension formula discriminated against participants on account of age is upheld on appeal, IBM would pay up to an additional 1.4B. The agreements are subject to ct approval.