I have not been able to find any firm documentation anywhere to explain how to do this. Supposedly, a block of business is available which requires this to be done.

Let's take the simple case. Normally, a DB plan will test on the change in accrued benefits from year to year (at least that is one of the testing options). However, a 412i has an accrued benefit equal to the value of the contracts used to fund the participant. Do we just convert the value to a monthly benefit and compare from year to year this way??

It has come to my attention that if you bought a variable annuity sometime prior to 2000 inside of an IRA and your account balance is lower than your death benefit you can reap huge tax savings for your heirs...It doesn't help the account holder all that much but it really helps the kids later down the road.

It works like this... Many people bought variable annuities during the late 90s and in most variable annuities your premium payment becomes your death benefit. Some have annual ratchets and other bells and whistles that boost your death benefit on each anniversary date. Like most stocks, many of these annuities got crushed when the market went down but what most insurance companies didn't realize was that when you took some money out of your IRA or rolled part of it over to another IRA the death benefit didn't go down on a pro rata percentage basis, it was just reduced by the dollar amount that you withdrew. Bad deal for the insurance companies when Roth IRA's came into the picture... Finally after getting scathed, the insurance companies changed the wording in their contracts to reflect if you moved any money out, the death benefit drops by the same percentage. (IE.. You have 50K in account balance and you move 10K your death benefit drops by 20%)

Now that you are fully confused let me give you an example of real world example of what I did for a client.

The client invested 100K in an annuity(within an IRA) in 2000. The client mismanaged their investments and the account balance fell to 50K in 2 years...Bad deal for the client. However, after careful consideration we rolled over 45K to another IRA where we bought a mutual fund. We then reduced the death benefit of the IRA annuity to 55K with only 5K in account balance. We then converted the annuity IRA to a Roth IRA. My client now has 55K in death benefit that when he passes away will go to his heirs tax free in the Roth IRA and also has a 45K IRA for himself. Granted the client had to pay regular income taxes on the 5K he converted but he is essentialy giving his heirs 55K income tax free upon his death(provided he lives 5 Years). Their is obviously no monetary benefit for the client but he figured at least he could help his kids. There are thousand upon thousand of these cases out there and you won't hear one insurance company talk about them.

Now the insurance company hated this but had to do it based upon how the policy was written and I am sure when the IRS sees this, they won't be happy either because of all the tax revenue they will lose as a result of this, but it is completely legitimate until they change the law. The client is happy, I am happy, and well the government and insurance company...SO SORRY!

Hello,

Curious what people have to say about setting up profit sharing plan with 401k arrangement for one person. Rollover contribution comes into plan, loan provisions are put in place, loan is to be taken, contributions are not going to start being made in the non-elective and 401k/401m sources until a few years down the road...

Is this substantial and recurring?

Any thoughts are much appreciated.

Go Ducks!

The company I am working for has a policy where it reimburses exempt employees for their Cobra expenses. This covers the hire date until the employee is eligible for the company’s group plan. I was asked to submit an expense report with copies of my Cobra payments as proof. I received a check but it was grossed up. I ended up paying taxes on something I have already paid. Please let me know if this proper or if I should have them reverse the transaction and cut me an expense check.

Thanks

Satchi in CA

What software do you use for mid-size (200 - 1,000) plans? How well does it work for you? We currently use Datair and are looking to upgrade our software and would like to get some feedback from users of other products. Thanks.

Not sure if this should be on the ESOP or 401(k) board, but here goes:

Company A maintains a KSOP for itself and its subsidiary, Company B. Participants can direct the investment of their deferrals among several investment funds, including Company A stock. Company matching contributions are initially invested in Company A stock, but participants can redirect those contributions into any other fund.

The company is about to spinoff Company B, which will be an S Corp. After the spinoff, the account of every participant in the plan who is invested in Company A stock will hold shares of Company A and Company B stock. Because Company B stock will no longer be employer securities, and because Company B stock will subject the plan to UBIT, Company A plans to close Company B stock as an investment fund and prohibit plan participants from investing any future contributions in that stock and, over time, the plan will attempt to get rid of its Company B stock. However, it may take a while because of the limited market for Company B stock.

One idea that is being contemplated is for Company B to establish an ESOP, to which the accounts in Company A's plan of the Company B employees will be transferred. As a result of the transfer, both plans will hold stock of both companies. The two plans would then do a "stock swap" (i.e., Company A's plan exchanges Company B stock with Company B's plan for Company A stock of equal value). After the swap, the Company B plan would hold only Company B stock, while the Company A plan would still hold some shares of Company B stock, but fewer than it did before the swap.

A few questions:

1. Because participants have the right to direct their investments, can Company A unilaterally do the stock swap and replace shares of Company B stock in participants' accounts with Company A stock?

2. A similar question with respect to Company B stock remaining in Company A's plan after the stock swap (or all Company B stock if the swap does not occur). Does the participants' right to direct investments impact the ability of the plan to sell Company B stock over time?

I realize that an investment fund is not a protected benefit and a plan sponsor can eliminate a fund whenever it deems it necessary, but in most cases, the fund being replaced is a mutual fund, and the replacement can be done on a single day. Just curious as to how the gradual phase-out of Company B stock can/should be done.

Any thoughts?

Does anyone know if there are any reporting or notice requirements when a H&W plan terminates or, otherwise, merges with another H&W plan. Is there an "ERISA advance notice" that needs to be distributed? How about if the plan is a multiemployer plan? Does the PBGC need to receive notice?

Does anyone know if there are any reporting or notice requirements when a H&W plan terminates or, otherwise, merges with another H&W plan. Is there an "ERISA advance notice" that needs to be distributed? How about if the plan is a multiemployer plan? Does the PBGC need to receive notice?

I know EGTRRA allows a rollout provision as an optional Plan benefit. Has there been any legislation that makes <5000.00 rollouts a mandatory provision?

I have a client with a Money Purchase Plan who has just discovered that they did not fund 2002's contribution properly. They under-funded one of the Partners by $4,710.00 (confusion between individual's CPA and the Firm's accountant). We will be amending the 2002 return and will file a 5330. My question is, since I'm new to this area of admin, do we just have to file the 5330 for the amended 2002 return, pay the 10% excise and have them fund it or does anything carry forward for 2003? They will fully fund 2003's contribution plus the 2002 shortfall on or before 9/15/04.

Can a self-funded plan expressly and indefinitely ban a healthcare provider from its group of providers eligible for direct payment or reimbursement under the plan?

Is this accomplished by listing the banned provider in the SPD, by name?

Would this possibly subject the plan administrator to a defamation claim? Would ERISA preempt?

Provider in question was successfully sued for defrauding the plan and barred from list of approved providers. 10 years later, the plan receives a claim based on treatment by the same dentist.

We have several dc plans with fewer than 10 lower paid participants and one key/highly paid owner. The owners (mostly doctors) have rollovers within the plan with non-qualified assets requiring plan bonds and/or audits. Due to the type of non-qual assets (jewelery, artwork), we have found that the bonds are quite expensive. Here is my question- what would be the problem with having each owner simply "tranfer/roll out" their rollover account into a separate qualified plan? I assume they could easily transfer the rollover accounts to an IRA but what about another qualified plan whereby we could just do an EZ for them. The only issue I can think of at this point is that there would be no "recurring deposits" (if the rollover was tranferred to a new ps plan).

Any thoughts or ideas would be appreciated.

If a 401(k) participant earns 80k annually; deposits 10k into his company sponsored 401k plan, can he do a deductible IRA also? He is married and files a joint return with his spouse, who isn't working & earns no income. I know the IRA limit is 3,500 for '04 and phases out between 65k and 75k in joint income. The cruxt of the matter is what income is includable in this calculation? If he deducts mortgage interest and other personal deductible expenses, do they affect the IRA eligibility calculation. Thanks for any advice!!

Is an HMO only obligated to provide a certificate of coverage to participants or must it also provide a SPD to plan participants? If the HMO is only required to issue the certificate of coverage is the employer responsible for the SPD? The only item missing out of most certificates of coverage (for purposes of the SPD regulations) is the ERISA statement of claims? Would an employer be responsible for providing this separately?

Employer and employee enter into a split-dollar arrangement which provides that employer will pay full premiums on life insurance policy owned by employee for 14 years (through 2002). Collateral assignment provides that, if employee terminates or dies before end of 2002, employer will receive the lesser of premiums it has paid or, if less, the cash surrender value of the policy. SDA and collateral assignment provide that, after 2002, employer has no interest in cash value or policy or any right to return of premiums paid. Employee has not yet died or terminated employment. I am not aware of any formal action taken to terminate the SDA or collateral assignment.

By its terms, the SDA is no longer effective; as of 1/1/2003 the entire interest in the policy is held by the employee. Do you think that this situation qualifies as a "termination" of the split dollar arrangement prior to 1/1/2004, as provided in Section IV.4 of IR Notice 2002-8?

I have mulitple accounts with different brokerages and i was wondering how i would go about combining them all in to one. Do I have to pay any special fees for doing this. thanks

If I already have a Roth IRA account with a company, can I open a second account with another company? or do I have to close my first account and transfer all my assets from the first company over to the second company?

Thanks.

Employee currently covered by a health plan through mid-September will begin working for another employer on September 1 (i.e., she will be employed by two companies at the same time for a period of a few weeks). Can the new employer begins covering the employee as of September 1, even though this will mean that the individual is covered by both employers' health insurance at the same time? Does this involve coordination of benefits issues? Also, is it common for an employee's health insurance to terminate as of the date of termination of employment, rather than running through the last day of the month in which they terminate? I am thinking that if the employee's health insurance runs through the end of September with the employer they are leaving, they can start coverage under the new employer's plan as of 10/1? Any guidance would be greatly appreciated.

Participant would like to read an article or two or twenty (he's an engineer) on the concept of taking the entire distribution as an IRA rollover versus buying an annuity from an insurance company and immediately annuitizing it. Any ideas of an article or site that I could puruse to help him?? Thanks in advance.

A client's 401(k) plan has an excess match that was made to an HCE. The match is an excess match due to a miscalculation of the match amount. There are no excess salary deferrals.

It's my understanding that the match must be forefeited (with earnings) and placed in the suspense account. Is that still the current IRS thinking on this matter. Also, just FYI, no need to recalculate the nondiscrimination test since the test was run using the correct amount of match. Thanks for any ideas.