Is it necessary to determine the "allowable deferral amount" in the 401(k) prior to January 31st of the following year? This is implied by the earlier PLRs regarding 401(k) wraparounds, but is not indicated in the most recent (PLR 200116046).

My basic question is whether you have to report the deferrals to the 401(k) that were recast from the deferred comp plan on the W-2 for the plan year being tested or whether its reported on the following year's W-2??

Does anyone know if all employees of a controlled group are required to be eligible to participate in a Section 125 plan which includes a flexible spending account that is adopted by only one of the entities of the group? I know they are required to be aggregated for nondiscrimination purposes, but can we limit participation in the plan to only the employees of the one entity? I believe that if at some time one of the other entities wanted to participate in the Sec 125 plan they would be required to formally adopt the plan as a participating employer and that the employees are not automatically considered eligible to participate because they belong to a contolled group.

As some of you may know, FASB has proposed new disclosure requirements for defined benefit plans effective with fiscal years ending after 12/15/03. The changes are heavily weighted towards financial type disclosures. Question: the disclosure requires long term expected rates of return by asset category. How are people determining these rates? Are you looking to the investment advisor? Are you getting rates from trust statements? Are you taking a best guess?

This statement may become effective very shortly so any input would be appreciated. Thanks

Good morning,

I have a PEO issue I would appreciate some commentary on. I have a client who just purchased a block of plans from a defunct entity. Included in this block of plans were a couple of plans involving PEOs which were not addressed by the TPA, PEO or other employers.

Obviously, per Rev. Proc. 2002-21, the PEO decision date was missed. My question is whether you still think we can avail ourselves to the process delineated under this Rev. Proc.

On one hand, I think we are okay because we still haven't passed the compliance deadline of 12/31/03 for terminating plans.

On the other hand, the initial deadline was missed. I did read the various commentaries by Derrin Watson and I denote Dick Wickersham's quote on being in "subtantial compliance" with the Rev. Proc. Granted, Dick is now retired so it is anybody's guess as to what is "subtantial compliance" and whether the "substantial compliance" theory still holds water with the IRS.

If you we can't use 2002-21, are we left with EPCRS?

Thanx in advance for your comments.

IRC Section 409(e) requires limited pass through voting rights for stock held by a ESOP that is not registration-type. For such stock, there need be a pass through of voting rights to the ESOP participants only if there is a "corporate matter" which includes (among other things) a "reclassification".

Does anyone have a reasonable opinion about whether a conversion from a C corp to an S corp constitutes a "reclassification" for this purpose? In other words, do the participants of an ESOP have pass-through voting rights if the sponsoring company is contemplating a switch from C to S corp?

We have requested high claimant information from one of our fully insured HMOs, for stop loss underwriting purposes for another plan.

The HMO has indicated that they cannot share this information with us, as it is a violation of HIPAA.

Is this the case? We do not have a Business Associate Agreement with them, as they a fully insured plan.

For a floor/offset arrangement, deductibility is governed by IRC 404:

"the total amount deductible in a taxable year under such plans shall not exceed the greater of--

(i) 25 percent of the compensation. . .or

(ii) the amount of contributions made. . .to satisfy the minimum funding standard provided by section 412. . ."

I am not sure how to read this. For example:

floor/offset arrangement: 1HC $125,000 contribution under the DB plan (HC's excluded from PS plan), 2 NCs require a combined PS contribution projected at $15,000 (less than 25% of compensation for both NCs) to fully offset their benefit from the DB plan.

For the plan year, is the total deduction for this FOA $125,000?

If so, what happens to the combined PS contribution--is it ever deductible?

I appreciate any help with this matter.

These are the facts. The trustee of a profit sharing plan invested all of the plan's $ in internet stocks. The plan assets went down 75%. Now, I would like to recover some of the losses due to the fact that the trustee acted imprudently and failed to diversify the plan's assets.

Can the Trustee make me whole by putting $ back into the plan or does he have to pay me "outside" of the plan, which I assume would be taxable. Of course, my preference is that the $ be returned to the plan. Also, does the Trustee need to make all other participant's whole, or can he just make me whole?

A business owner has a factory shop with 10 employees, including himself, about 8 union ee's, and 1 front office/non-union employee. I believe he makes contributions on behalf of the union ee's to their union retirement plan. His business currently has no retirement plan. He is interested in starting up a PS plan for 2003 and would like to exclude those 8 union ee's. No problem so far, but as it turns out, he also is a member of the same union and apparantly contributes amounts to the same union retirement plan for himself, as well as for the other union ee's.

Is there a problem if he starts up a plan, excludes everyone except front office person and himself? When defining "eligible class of ee's" in the document, can he say "members of the XYZ union, with exception of Mr. Owner, are excludable"? If so, would this take the document out of prototype status, as all other provisions are s/h?

Thanks for any responses.

Ok, We have a 401k plan w/ ER Securities and mutual funds wanting to convert to an ESOP or at least the employer securities portion would convert. How do you go about breaking down the compensation for testing between the 401k plan and the ESOP for purposes of doing the ADP/ACP tests that would be done separately?

For instance if you have $8000 in deferrals going into the 401k mutual funds and you have $4000 in deferrals going into the employer stock with a total of $100,000 in compensation, What do you use for compensation in each test?

Thanks in advance!

Please be gentle, non-benefits attorney dabbling at the company's insistence.

We have a self insured self administered health plan and a third party insured optional dental and vision plan. Three tiers are offered, employee, employee+1, and family.

Existing company policy is that if you have family medical, you MUST take family dental or family vision when electing them -- you cannot have family medical and single or employee+1 dental or vision coverage.

Regime change we're considering changing this rule. Any legal requirement that these coverages be mirrored completely?

Thanks in advance!

Kylaw

401(k) Profit Sharing Plan - PYE 12/31 - has been satisfying the ADP safe harbor (match) since 1999. The plan sponsor decides that they want to have a short plan year (let's say 1/1/03-6/30/03), so that the plan year and fiscal year coincide.

On 6/30/03 the plan sponsor signs the GUST resatement which also includes the short plan year 1/1/03 to 6/30/03.

NOTE: the plan does not permit match other than the SH match

What should the TPA firm do at this point to "unravel" what's happened?

Clearly, notices 98-52 and 2000-3 do not permit this plan to be safe harbor during the short plan year. The ADP test fals miserably.

Any comments are appreciated.

Treas. Reg. § 1.403(b)-3 Q&A 4 provides that for purposes of calculating a participant's required minimum distribution (RMD) from more than one 403(b) plan, a participant can total the minimum amount from each 403(b) and take the total minimum distribution from any one of the 403(b) plans (rather than taking a minimum distribution from each plan). Does anyone know whether a plan must specifically permit that a person's total RMD for the year may be taken from its plan? What if a plan is silent on this point? Does that mean that a person can only take the RMD attributable to that plan only? Is there any authority one way or the other? Thank you for your comments. I truly appreciate it.

I have been talking to a school run by a church. They have a 403(b) which, allows for employee deferrals and according to them matches dollar for dollar up to $1500. They have no plan document and have never filed a 5500. They have some sort of summary of the 403(b) which is given to the employees. I have looked at the other posts and I believe that since they have matching contributions, they would be required to file a 5500. Is this correct and since they never filed, is this a matter that is resolved with the DFVC?

Secondly to make matters worse, the $1500 match was not given to everyone. The employees had a choice. The school would contribute the match to the medical plan, Oxford, or they would put the 1500 into the 403(b). For example, an employee who used up the $1500 match in the 403(b) had to pay the Oxford premium out of their own pocket. Hence, an employee who used the $1500 to pay for Oxford did not get a 403(b) match.

Any help would be greatly appreciated.

Treas. Reg. § 1.403(b)-3 Q&A 4 provides that for purposes of calculating a participant's required minimum distribution (RMD) from more than one 403(b) plan, a participant can total the minimum amount from each 403(b) and take the total minimum distribution from any one of the 403(b) plans (rather than taking a minimum distribution from each plan). Does anyone know whether a plan must specifically permit that a person's total RMD for the year may be taken from its plan? What if a plan is silent on this point? Does that mean that a person can only take the RMD attributable to that plan only? Is there any authority one way or the other? Thank you for your comments. I truly appreciate it.

In need of suggestions. I have a sick plan that needs attention. The plan is currently a dual plan, money purchase-profit sharing combo. The intention was to merge the money purchase into the profit sharing plan during 2002 and file a final 5500 for 2002. The amendment and notice was provided in a timely manner. The problem is that the money purchase plan has a funding deficiency of about $7000. The company is a C-corp with the owner employed under a sole prop. When it came time to deposit the 2001 contribution, the CPA informed us that the sole prop did not have the money to fund it’s part of the contribution. In addition to the plan being sick, the owner is currently undergoing Chemo and I’m not sure of the prognosis. The client did not submit a census for 2002 or the value of one of the CD’s in the plan. So, the 5500 that was filed for 2002 was inaccurate. The 5330 was prepared for 2001 but I’m not sure if the client filed the form and paid the penalty. I also prepared a 5330 for 2002 with the outstanding funding deficiency. I was thinking of filing a 5310-A and transferring the liability to the Profit Sharing plan. Does anyone have a better suggestion?

You can’t see me, but, I’m wearing a brown paper bag over my head with eye holes cut out.

401(k) plan. Plan sponsor terminated 10/31/03, and 401(k)/employment ceased on that date.

What are the document requirements if we don't submit? I don't think there are any.

But is there a sample notice somewhere that I can give to participants?

Thank you

I have a client who is curious if this can be done?

Can you pay for life insurance out of your pension plan?

Also, what are the restrictions, advantages and disadvantages?

Does anyone know where I would begin to make this change?

Would a new document have to be drafted?

Can someone please give me their feedback on this if you are knowledgable about it or have experienced it yourself?

Would you recommend it? I know nothing about this issue.

HELP!!

Thanks.

just loaded 8.3 and the adp test is applying CUD's to nhce's adp % when the adp test fails(deferred $2800 and is only using $800 in the test). there is no other limit the nhce is exceeding(402g, 415 or plan limit). The effective date for CUD's is in census but i don't understand why it affects the nhce?

I have a DC plan with various contributions (e.g. EE deferral, match, profit sharing). The plan recently added a provision (called a retiree health account). The company contributes a flat amount per year into this part of the plan. At retirement, I can either take the money (rollover to my IRA) or use it to purchase employer health insurance (and pay taxes on the withdrawal).

The plan does not put in the same amount for all employees. The amounts vary based upon age (under age 50 and over age 50), service (in 5 year bands), and marital status (single or married).

My question is: Can an employer make different contributions to a retirement plan based upon marital status?

Any help is appreciated.