I have a cross tested partnership 3% safe harbor 401k plan. There are separate rate groups for each physician PC. The PC's are partners in the partnership.

For 2003 2 of the physicians terminated employment with the group. The TPA is saying that they still must make the safe harbor contribution for themselves just like any other employee. These 2 physicians do not want to make any contributions to the plan including this 3% safe harbor. What can we do ?

Assume a 401(k) plan has a five year cliff vesting schedule for employer contributions and credits vesting service on the elapsed time method. Employee A is hired on January 1, 2002, and leaves the Company on February 28, 2003 with 14 months of service.

If this employee is rehired on March 1, 2004, can the Plan provide that she has 1 year of service (so that she will complete her second year of vesting service on February 28, 2005), or must the Plan credit her with 14 months of service upon her rehire (so that she will complete a second year of service in December, 2004)?

In other words, under the elapsed time method, do you round down an employee's two periods of service before combining them?

Any cites would be helpful. Thanks.

For the 12/31/02 ADP/ACP test, we did not disaggregate the employee's who did not meet the statutory age/service requirements. The test was done using the total group.

For the 12/31/03 ADP/ACP test, we'd like to disaggregate. However we use the prior year testing method. What percents do I use for my prior year test percentage?

I don't think I have ever seen someone get sent to jail for embezzeling pension assets.

The Department of Labor announced that the former owner of a Mississippi home health care agency has been sentenced after pleading guilty to embezzlement of 401(k) plan assets.

Restitution and Prison Sentence Ordered After Owner’s Failure to Remit Contributions to 401(K) Plan, DOL/EBSA News Release No. 04-111-CHI, February 10, 2004.

News Release

U.S. Department of Labor

Office of Public Affairs

Atlanta, Ga

Release Number 04-111-ATL

For Immediate Release

Date: Feb. 10, 2004

Contact: Gloria Della

Phone: (202) 693-8664

Former Owner of Mississippi Home Health Care Agency Sentenced for Embezzling Pension Assets

ATLANTA-The former owner of Complete Health System, Inc. of Vicksburg, Miss., (formerly Haworth Home Health Agency, Inc.) was sentenced on Jan. 23, 2004 to four months in prison, four months of home confinement, probation and restitution to the company’s 401(k) plan.

Ida J. Haworth was sentenced in federal district court in Jackson, Miss. after pleading guilty to one count of embezzling assets belonging to the Haworth Home Health Agency 401(k) Plan.

“Theft of employee benefit assets jeopardizes the benefits of workers,” said Howard Marsh, regional director of the Employee Benefits Security Administration (EBSA) in Atlanta. “This case reaffirms our commitment to protect the benefit promises made to workers.”

Haworth was indicted on Aug. 20, 2003 for failing to remit approximately $53,000 in employee contributions to the 401(k) plan’s investment manager. She operated several home health care agencies in Louisiana and Mississippi for several years.

The Atlanta regional office of the U.S. Department of Labor’s Employee Benefits Security Administration investigated the case. The U.S. Attorney’s Office for the Southern District of Mississippi prosecuted the case.

(U.S. v. Haworth)

Criminal No. 3:03-CR-128B

DOLNews FiduciaryNews PlanAdminNews 401kNews PenaltiesNews

just received from TAG notice that IRS has issued the regs. Let the sweating begin...

Suppose an insurance agent establishes a SIMPLE IRA for his agency and enrolls himself & his employees. The agent elects to fund the IRA w/annuities from an insurance company he sells for. Some of the ees decide that they would like to estab a SIMPLE IRA annuity w/this same company as well.

If the plan is not a DFI plan, and the employees are aware they can go anywhere to establish SIMPLE IRA.

Suppose insurance company pays commission on these annuities. Has a prohibited transaction taken place?

2nd question: suppose agent sells a SIMPLE IRA plan (not a DFI) at his brother's unrelated business. Brother & employees of that business establish annuities w/agent. Upon payment of commission, has a prohibited transaction taken place?

MEWA sponsoring organization has insured health care benefit covering its own employees and those of many other employers but only receives and processes information regarding eligibility, what would be its HIPAA obligations?

Employer contracts with a payroll provider during 2003 to utilize their PEO 401(k) plan. He goes along with the employees and essentially everyone in the company becomes a leased employee.

A question arose that asks what would happen if the employer went back to work for the company and left his employees with the PEO. Could he have his own retirement program with the company (e.g a SEP or a Uni-K) that just covered him? I would be interested in opinions.

Thanks much.

So let's say I'm determining my HCE employees. I use the alternative definition of HCE, so the employee must:

-be a greater than 5% owner in the current plan year or preceeding 12-month period, or

-have earned more than the HCE dollar limit and have been paid in the top paid 20% of all employees in the preceeding 12 month period.

I'm doing my 12/31/03 plan year testing. So I need to look at the 2002 plan year. Let's say I have 100 employees.

Q1: Do I need to subtract the employees who are not eligible?

Q2: Let's say I determine I have 14 employee's who should be HCE. So I take sort my list of employee's by compensation - highest to lowest. 2 of those members termed in November of 2002, so they won't be included in the 2003 test.

Do I substitute the next two employee's who qualify to be HCE to replace the two who won't be on the test?

School District X sponsors a 403(b) to which salary reduction and employer contributions are made. Because school districts and 501©(3)s are not subject to income taxes (and therefore the tax deduction rules of Code Section 404(a) do not apply), what is the due date for remitting employer contributions for the plan year?

How do you correct a situation when the contributions W/H for one of the FSA accounts exceed the Annual Election Amount and W-2 have already been issued?

Before I go on a wild goose chase, does anyone

know if there is a plan that could accomplish

the following:

1. Create individual accounts using pretax

dollars;

2. Allow these dollars to be used to make

self payments to an industry health fund;

3. Allow the dollars to remain in the account

after retirement and be used to pay the

retiree's share of his health premium;

4. Allow a high ceiling on the maximum amount

permitted to accumulate in the plan.

Thanks.

What new requirement for content have been added to SPD's for health care plans since the final regs effective 1/1/2000?

Company B maintains a qualified 401(k) plan. Company A acquires Company B with the intention of continuing Company B's plan. Please confirm, citing any references, that the participants under the plan would not become fully vested as a result of the transaction.

I'm fairly certain that this is an event that would not accelerate vesting, but I would like a reference to see it in print.

Thanks.

I have an LLP with 4 partners. They have a regular 401k plan. Their deductions for their contributions flow on to the same line of their individual tax return regardless of whether they are classified as a deferral or a match. They send in contributions monthly and try to split the money between deferrals and match on the recordkeeping system ( knowing that this is purely an estimate since they don't really know their pension income ).

What is the administrator supposed to do with this data after year end ? Does he reclassify deferrrals and match for the partners somehow ? It would be better for ADP testing to show as little deferral as possible. Should his software make this computation after the partner net/net pension income is computed? Shoul they then go into the recordkeeper and reclassify these moneys between deferral and match ?

Thank you.

Can someone direct me to code sections on this.

A custodian receives a rollover distribution request and does not process the distribution for over 3 months.

1) Can the custodian be sued?

2) Can the plan sponsor?

3) What if the distribution instructions lacked a required letter of acceptnace by the new carrier, and delayed in notifying the participant of the incomplete forms, thereby delaying the processing of the distribution for over 3 months? Anyone liable? The letter of acceptance is an aknowledgement by the new carrier of the participant, what plan it is, and acceptance of the impending distribution.

Safe Harbor 401(k) plan using basic match formula (100% on 3% and 50% on next 2%). Match is calculated per pay. Payroll provider calculated match incorrectly for a NHCE that was deferring a flat dollar amount not a percentage. Only one participant was affected and it was not incorrect on all payrolls.

Would this cause it not to meet the safe habor and be subject to the ADP and ACP test? Or could a correction be done for the match for the one participant? Any ideas on correction method?

Thanks ahead of time !

Can someone help me out with Permissive Disaggregation rules?

I understand that if the plan's entry requirements are less restrictive than the statutory maximum, then you can run additional tests and rely on those results for coverage and ADP/ACP.

Here is where I'm confused.

-You run 1 test with the total group.

-You run 1 test with the otherwise excludable group (those who do not meet the statutory requirements)

-You run 1 test with only those that meet the requirements.

So as long as you pass one of the three tests, you can rely on those results?

Is it true that you in order to rely on Permissive Disaggregation results for ADP/ACP, you must pass Permissive Disaggregation for coverage? Does that mean you must pass both Permissive Disaggregation tests, or just one?

Thanks for any clarification anyone can give me!!

A takeover safe harbor 401(k) plan allows union employees to defer and receive matching contributions, but they are ineligible for any nonelective sources, including the safe harbor nonelective contribution.

I can't find anything that says this is permissible. Notice 98-52 and the ERISA Outline Book simply mention that all employees eligible to defer (except otherwise excludable employees) must receive the safe harbor nonelective.

Confirm or deny my findings please.

I have a new client who wants to establish a retirement plan for 2004. They are both partners in an S Corp. They are divorced husband and wife. A 60/40 split of ownership. They have drawn approx $20,000 in Salary for 2003 and $30,000 in dividend.

My 1st questions - can the dividend + the salary be used as basis for their contribution? I think it can because it flows through to their personal returns.

#2 - Because they are divorced, is a Single K an option for these clients?

Thanks for your response