I have a client who just purchased fidelity bond insurance through CNA/Western. All of my other clients have fidelity bonds which are 3 year bonds for 10% of the plan assets. The premium is around $150-200 for the 3 years.

The clients insurance company was told by CNA/Western that they only sell one year bonds, and that they set it up so that the coverage of the bond is 10% of plan assets, but that they split the coverage among however many trustees there are. I never heard this before?? The premium is $500 PER YEAR! I thought at first that it was fiduciary liability insurance they were selling, but it is not...it is a fidelity bond. The plan is the named insured.

The agent told me that CNA/Western is the leading seller of ERISA bonds and that they know what they are doing. I felt kind of dumb and am wondering...is this normal? The agent called back CNA and told them what I said, that my clients have 3 year bonds on the PLAN, and that the coverage is not split amongst the fiduciaries. They told him "there was a right and wrong way to do things".

How are your clients plans bonded? Does $500 a year seem outrageous? This is a tiny little company so that is a LOT. I could get them a bond for $200 for 3 years, he is selling them a bond that will cost $1500 for 3 years.

Can any of you share your procedures pertaining to beneficiaries? I realize it should all be covered in the plan document, but I am wondering what the majority of plans allow.

Do you leave the funds under the participant's SS# or do you move the funds to a new account under the beneficiary's SS#?

Do you allow beneficiaries to direct investments? If so, do you require direction from the plan sponsor to allow this?

Any thoughts are appreciated.

Our financial advisor wants us to terminate our profit sharing plan (it's two years old) and put a simple plan in place. I thought there were some issues centering on "permanency" when you terminate a plan (e.g., you are supposed to establish a plan for it to continue and if you terminate a plan and then establish another plan without some time in-between, the second plan is deemed to be a continuation of the first plan, etc.). Does this apply in a situation where you are going from a profit sharing plan to a simple plan? Is there a specific way you are supposed to handle this? I found guidance on going from a money purchase plan to a profit sharing plan - but nothing involving simple plans.

I just discovered that I contributed $5000 to a Vanguard Roth IRA for the year 2002. The IRA was in two different accounts (Index 500 - July, 2002 and money market - March, 2003). I do not know where to begin to straighten this out.

My daughter is 13.5 y.o, and during financial year 2003 made ~ 500.00 baby-sitting.

I figured that starting to contibute to a ROTH, whilst she is paying virtually no tax, would be a great way to start.

Is she allowed to open a ROTH?

Thanks

Deryk

Please help us resolve a little discussion in our office. Here's the situation:

New Plan that used to have a simple plan. Effective date of the plan is 1/01/04. The first payroll (paydate) for 2004 plan year is 1/04/04 (for payroll end 12/31/03). Some enrollment forms completed and dated as early as 11/19/03, while most completed and dated 1/08/04.

While checking the enrollment forms against the payroll information, I found that pretty much everyone's deferral amounts were different than what they specified on their enrollment forms. There were only three that were actually equal to what the enrollment form speciefied.

I found out that the payroll service had not gotten any of the enrollment form information for the 401(k) plan by the time the 1/04/04 payroll was to be paid. They were still using the old simple plan's elections. The service is reporting the correct type of plan under the deferrals (401k), just the amount did not match what the enrollment forms specified.

What about the dates on the enrollment forms? Should the individuals, who do not have a timely enrollment form on file, be able to defer for paydate 1/04/04?

Is this a "big deal". Some people here think it is while others think it is not.

Any thoughts on this?

I am reviewing a proposed contract with a claims fiduciary for a self-insured health plan. The contract limits the number of claims that can be audited, requires a random sample of claims for an audit, and prohibits the calculation of overpayments based upon an extrapolation from the audit sample. The proposed contract also is very restrictive in terms of remedies against the claims fiduciary. My questions are:

1. Have any of you had success in negotiating revisions to similar contract terms?

2. Is an audit of 250 claims sufficient for a plan with over 4,000 covered employees?

3. Is this similar to your experience?

While I have my own notions about these questions, I am interested in hearing from those of you who have dealt with this issue.

We have a 401(k) plan with a participant who retired and deferred payment of her distributions. She is age 62 and will probably take a distribution soon. She is getting divorced now and wants to change her beneficiary to her children. If the QDRO does not name her soon-to-be-former husband as the surviving spouse, can she change it to her children? Or do you like at the date she retired and if he was the spouse on that date then she has to get his consent, QDRO or not?

Has anyone found any guidance with regards to Sub-s shareholders being prohibited from participating in a Health Savings Account if the account is offered as part of a Sec 125 plan? I haven't seen any prohibition of Sub-s shareholders establishing HSA outside of a Sec 125 plan.

Can an IRA owner loan funds out of his IRA to an unrelated and independent corporation and at the same time enter into a consulting agreement to perform services to that corporation without incurring a prohibited transaction? Thanks for your help.

Scenario:

Corbel cross tested VS

3 employees 2 hce

401(k) and match

two rate groups owner and non-owners

Company wishes to provide maximum contribution to nhce and 1 hce (owner takes 0)

Problem: Allocation percent for nhce is 41% to reach 40,000 (including k and match) Allocation perecent is 15% for hce to max out at 40,000 (inc k and match)

Document stipulates that allcoations to employees stop when they have reached 415 limit.

Isn't the hce being hurt by deferring. How can we give diefferent er %s to individuals in the same rate group just because of 415.

Any input would be appreciated

Thanks

PADMIN

We have someone asserting that for self-employed, the 5500 MUST be prepared using the modified accrual method. But no one can find any guidance or instruction that says this. Has anyone ever heard this, or have a reason why someone would think this? I've checked 5500 instructions going back years and years, and can find no such requirement. Thanks.

Plan is determined to be top heavy for 2003 plan year. When must an employer make the top heavy contribution (please include authority)?

Can one use the 401(k) deferral data from W-2 forms to do ADP testing?

A calendar year top heavy 401(k) plan has 3 month eligibility for the 401(k) portion and 1 year for the nonelective portion. The cross-testing is done using compensation from date of plan entry as an acceptable definition under 414(s). Say a participant enters 10/1/02 for the 401(k) and 7/1/03 for the PS. For 2003 testing would you agree that for the determination of the nonelective EBAR, I could use compensation from 7/1/03 - 12/31/03, but for the 401(k) EBAR for average benefits, I would use full 2003 compensation?

If you agree to that, move to this next question. For those participants that just enter the 401(k), but have not met the nonelective eligibility and are thus just receiving a TH minimum, what compensation is acceptable to use? I have no entry date to the nonelective portion.

Thanks for your time and thanks for the vine. (If you know what this means, then I salute you.)

I have two situations of clients turning in claims for the tea tree oil shampoo (to treat psoriasis on the scalp) and also for the Proactive system for acne treatment. My supervisor says on the shampoo that we should deny the claim and ask for proof of what they use normally and subtract that from the cost of the shampoo. Aren't we opening a can of worms here?

I have another person that has been using the Proactive system for a few years now and it has kept her acne at bay as long as she uses it faithfully. Would you accept it?

I am finding the OTC's are going to take up a lot of my time and am fearful of that as I have other duties to get done too. I wish someone would come up with a good list that we could follow. I did get the one from www.125plan.com, but it leaves a lot open for interpretation.

I appreciate any input on these. Thanks!

Jane

Can anyone comment on the following excerpt from Sal's ERISA Outline book?

Chapter 7: Taxation Rules - Section XIV (Death benefits): Part D (Rollover by surviving spouse)

9. Elective transfer of a beneficiary™s inherited benefit. IRC §411(d)(6)(D), as added by EGTRRA §645, allows an elective transfer from one defined contribution plan to another, where the transferee plan need not protect the forms of payment options that were available under the transferor plan. This rule is effective for transfers made on or after January 1, 2002. See Section III (Part D.3.) of Chapter 6 for more details. The statutory language refers to a participant or beneficiary consenting to such an elective transfer. Thus, after 2001, a nonspouse beneficiary is able to have inherited benefits under a qualified plan electively transferred to another qualified plan, even though a rollover option would not be available.

If I am reading this correctly, a non-spousal beneficiary could potentially (if allowed in plan documents, and all other requirements are met) transfer their inherited benefit to their own qualified plan and avoid tax consequences.

It doesn't seem right to me. I attended NUMEROUS EGTRRA recap sessions, and I don't remember this coming up once. I would think it would have been big news. I obviously need some help understanding this one!

Question:

We are contemplating beginning delivering Prototype Adoption Agreements, Plan and Trust Documents, and related SPD's to Plan Sponsors via CD Rom, as opposed to hard copy. Please provide input on any pitfalls I should be considering. Thanks.

Can one name a Non-profit Corp as a secondary beneficary?

Thanks in advance.

The assets are at fidelity and they issue check payable to the trustees on 12/29. The trustees deposit into corporate account and write the check to partipant in 2004. What year is he/she 1099'd?