We are considering submitting an application on behalf of a client under the DOL Voluntary Fiduciary Correction Program for the purchase of an asset by a plan from a party in interest. As a result of this filing, we will be able to take advantage of PTE 2002-51 and avoid the payment of the excise tax under Code section 4975.

We have never taken advantage of VFCP before and are wondering about the experiences others have had with the program. If you have ever filed under VFCP and wouldn't mind sharing your experience (i.e., type of breach, correction, experience with DOL, etc.), please respond to this posting. Thank you!

Social Security Disability has been approved and the participant is getting benefits, plus is getting workman's comp. benefits. He took his money for his pension by installements each month on the status of Retired/Disabled. Recently he was just determined to committing insurance fraud and has had the workman's comp benefits and the SSI disability benefits revoked. Can the pension payment be stopped until he reached retirement age since he is not considered retired/disabled due to this issue.. because he needed to get a job? The DOL frowns upon taking a benefits away from participants, however under the circumstances... the employer feels that the participant took advantage of the system and wants this participant to wait until retirement age to collect the remaing pension balance.

What is the difference when a participant elects disability and get the SSI acceptance letter and then when the participant is up for review in 4-5 years, which is found that health has improved and the participant can go back to work... if this participant was taking installments and is not considered disabled.. can the pension payments cease since his status has changed. How do you go about doing this if it can be done and keep the Plan in compliance?

This is partly commentary and partly a question. A financial advisor brought us a brochure from a firm touting a type of traditional defined benefit plan that "almost" gets contributions similar to a 412i plans, but with a 50-50 mix of trust investments (stocks, bonds etc...) and life insurance. The contributions to the trust are typical maximum DB contributions, plus there is an exact matching level of deductible contributions to purchase life insurance (i.e., total contribution double the normal max DB contribution level when life insurance premiums are considered). As best I can tell from the brochure commentary, it appears this is a response to recent IRS promulgations on 412i plans and valuation of insurance in general. As you would expect with this arrangement, it appears to be a split-funded DB plan, but the life insurance premiums appear heavily front loaded (they are payable for 5-years) and more important the death benefit appears to be far, far, in excess of the incidental death benefits even using the 2/3rds method. They name an individual person as the beneficiaries (not the plan/trust) so It appears all death proceeds go directly to a named beneficiary without restriction. Given the insurance premium is an exact match of an un-rounded DB contribution figure, it seems too coincidental to be anything but an intentional matching figure. I think they may be taking the old revenue ruling on insurance limit that states that 50% of the contribution can be used to purchase whole life insurance, and trying to apply that directly to a DB plan without using normal 2/3rds derivative of this limit. My question is, is it clearly established that the insurance limit Revenue Ruling (50% method) only applies to DC plans and cannot be used directly (without 2/3rds derivative) to DB plans ? (I think so, but I don't want to kabosh someone else's design if I'm just missing something).

My question relates to annuities inside a Non-governmental 457(f) plan. I am trying to understand the mechanics of having a client annuitize their current 457(f) annuity. Should the tax statements and payment be sent to the client or the Plan on behalf of the client?

My understanding is that the annuity is taken out of the plan ownerhip and put into the client's ownerhip when the account is annuitized. The payment and applicable tax statement would be sent to the client (annuitant), not the plan.

Taking over a SH 401.... Just told by the financial advisor go-between that the client had an EE that was eligible to enter and defer on 1/1 but was not enrolled. The EE as a result ended up missing out on the ability to defer during the period from 1/1 to now.... and also missed out on the SH match.

Is EE entitled to make up the missed deferrals and receive the missed SH match? (I would think so)

Are there any other issues that I should be concerned with?

I appreciate the help!

I know that the maximum Safe Harbor match is 6% (enhanced match). And I know the plan can have an additional, discretionary, match as well. Is the maximum on that 4% before the ACP test has to be performed?

Two more questions:

Is it at 4% or more than 4% when the test has to be applied?

If and when the ACP test is done, which match gets tested? (say for example a 5% discr. match) Is it all 11%, or just the add'l 5%

I ask this becasue a client of mine currently has a match of 10% but the participation is very poor, and the ADP/ACP fails each year. I was thinking of suggesting a SH match of 6% and a discretionary of 4% to ease the plan's testing woes.

Will we have to do the ACP test? Does anyone see a problem with that scenario?

Any thoughts, as always, are appreciated.

A doctor has her own practice and gets a $40,000 contribution to her Profit Sharing Plan. This doctor also is employed at the VA Hospital and participates in their Thrift plan.

For 2003, is she limited to a total contribution of $40,000 between the two plans.

In August 2003, a participant borrowed $1,300 from their employee deferral source. Upon receipt of a new loan application, we discovered no payments were made on the August loan. Obviously, she defaulted on the August loan. How do we treat this? And is she eligible for a loan currently assuming all other issues such as 50% of the vested account balance .... are OK?

I have been hearing about SEC rule 482 and the effect on investment companies presentation of performance results. I am an internal retirement plan administrator. Our internal employee newsletter includes a chart of returns for the 401(k) investments. Should or must that chart be accompanied by disclosures and if so, which disclosures are required?

I imported the full census download from the ING website, I have run all necessary reports for 5500 and valuation purposes and they tie nicely. But..... when I run the ADP/ACP nondiscrimination tests, only the ADP test is performed. It is not running the ACP portion and there was a flat $200 matching contribution made to everyone who deferred during the 2003 plan year. Is there a way to disable/enable a portion of the testing? I would like to demonstrate the ACP portion of the testing since it is required. The former plan analyst kept running the test without the ACP portion and stamped pass on it each year b/c they did not know how to enable the ACP portion for this particular plan. I want to get it right this year.

Please help !!!!!

Multiemployer DB Plan is considering merging with another multiemployer DB Plan. DB Plan #1 has language that the optional forms of benefit are "one or more of the following" - basically, lump sum, installments and single life annuity. DB Plan #2 does not contain such language.

Is a combination of optional forms of benefit in and of itself an optional form of benefit? If so, because there are several permutations, might this be eliminated under the proposed regs?

My company has just notified the employees that they will be changing our 401(k) administrators in the next month. We currently have a completely self-directed plan that allows us to choose whatever investment we like, including stocks and bonds. The new plan will have a limited number of mutual funds to select from.

I know the current scenario poses a tremendous liability for the trustees and I completely understand the need to change. However, I am very concerned about the cost associated with this transaction.

They have instructed us to liquidate our current positions by a short deadline or they will be liquidated for us. !? Since we have been choosing our own investments until now, some of us are faced with realizing losses on long-term positions that happen to be currently underwater. Not to mention the $30 commission attached to each trade, which could amount to several hundreds of dollars for some of us.

What I'd like to know is:

Can they legally force us to sell our equities?

Can they require us to sell them at our own expense (fees)?

Does ERISA give us any power to resist the changes?

Do we have the right to retain our current investments via roll-over or "freezing?"

Unfortunately, our HR person is not here to answer these questions today and the trustee just left town for a business trip. Any insights would be appreciated.

Hi,

Does a non-ERISA 403(b) account that let's participants invest in custodial accounts need a plan document or does each employee just fill out a custodial agreement and that is it? Having a hard time finding the answer. Any help is greatly appreciated.

Thanks!

A financial institution is telling us that they do not need to register under California's vendor registration law since it is marketing non-proprietary 403(b) products. Anyone know if they would be considered a vendor or a broker that does not need to register or obtain a vendor number? Thanks.

March year end.... March quarter investment statement received and all activity accounted for. My question is .. do you take into consideration that an employee may have deferred during the last pay period in the year and the $$ has yet to hit the account? Or do you just go with what you see as of 3/31.

From Sal's ERISA Outline book, Chapter 14

PTE 80-26 permits interest free loans to the plan by a party in interest to be used for the payment of ordinary operating expenses, or for a purpose that is incidental to the operation of a plan. If it is for incidental expenses, it can not be for more than three business days. The DOL did cite an overdraft as being incidental.

QUESTIONS:

What happens if the trust is overdrafted for more than three days?

What about excess cash? Should it be treated the same way?

Is there any other cites/articles/anything that deals with this issue?

How does your company handle overdrafts?

I'm trying to determine who is Highly Compensated but I'm unclear what pay I'm supposed to use. It's a new plan that was effective in June of 2003. The company was sold in June and the new owners started this DB plan. The employees worked for the whole year in 2003 - but for part of the year they were working for the prior owners. Do I use their compensation for the whole year in determing if they are Highly Compensated for 2004? Or do I just use the pay they made under the new owners?

This is a cumulation of several discussions with some disagreement, so we're looking for a new view.

A participant contributes to plans for two unrelated employers during the year (2003). Assume that in the first plan, he reaches a plan limit at $8,000 and then has $2,000 in catch-up contributions.

He then changes employers. How much can the participant contribute to the plan of the new employer? Assume a second plan limit does not apply. Can we say the $2,000 catch-up has been used, and the participant can contribute another $4,000 to reach the 402(g) limit?

Is there any way that this participant might be limited to a total of $12,000 rather than $14,000? (We have one dissenting opinion for this.)

Further, the second plan does not match on catch-ups, but since the plan does not recognize a catch-up because no limits are met - and until notice that the participant actually did overcontribute in total, was unaware they would meet the 402(g) - this plan has matched on all contributions. Can the current plan recognize that catchup was made in the prior plan, and match all contributions to the new plan; or must the catch-up be recognized at the end of the year in the current plan (and we should then forfeit match on $2,000)?

Is there a limit as to how long a waiting period can be for a self-funded plan?

I have checked and can find nothing to prohibit a 6 month waiting period but thought I'd see if anyone can verify.

(We know it can't be counted as a break in coverage.)

What is everyone doing with tracking the value of an insurance policy on participant (or trust/plan) statements? Our company had always used the value of $1 and then we switched to using CSV but, now it looks like according to Rev Proc 2004-16 we should be using FMV. Of course FMV isn't provided by the insurance company so, now we have a dilemma on how to calculate. Just wondering how everyone else is handling.