If it is decided to correct 3 years worth of failed ADP tests through Self-Correction and it has been determined that the approach will utilize the one-to-one correction method, for the amount that is distributed to the HCEs, is the client required to pay an excise tax (via Form 5330) due to the fact that the corrective distribution took place after 03/15 of the year following the plan year in question?

Thanks.

Do we need a new profit sharing plan document for the LLC that has replaced the proprietorship? We have a new EIN, of course, but am not sure if we need to terminate the old plan and "start" a new plan? Any help would be greatly appreciated. Thanks.

In 2002, our entity changed from a proprietorship to an LLC (with different EINs).

I'm confused on how to prepare the 5500. Do I finalize the "old" number and prepare an inital 5500 for the LLC? There were no distributions and the plan's investment guy at Painewebber just changed the entity name on the statements, account number remained the same. Any other issues I need to be made aware of? Thanks for your help.

Plan runs from 9/1 - 8/31, the same as teachers contract. If school opts not to renew a teacher's contract and teacher is paid through 8/31, are they considered active or terminated as of 8/31? Distributions paid out annually at the end of the year in which they terminate. Thanks....

Can a non-electing (non-ERISA) church plan pay a benefit to a former spouse while the participant is still employed and has not yet reached age 50? I think so.

I don't believe an ERISA plan could pay the benefit before the participant reaches age 50 or terminates (due to Code section 414(p)(4)(B)), but for a church plan, 414(p)(11) appears to treat a DRO as a QDRO without regard to 414(p)(4). And 414(p)(13) appears to shield the plan from any 401(a) violation in connection with an order treated as a QDRO. Based on that, distribution to the former spouse of a 35-year-old active participant should be OK.

Am I missing anything here?

A company would like to start a flex plan and say to the employees that they will let them spend $4,000 of employer money (i.e., not salary deferrals) on qualified benefits in the 125 plan. The employer does not want the employees to take the money as cash compensation, but instead, the dollars must be used for qualified benefits, or they are lost. Is it OK that the employees don't have a choice of taking the cash even though they can chose among both pre-tax and after-tax benefits. In a sense, the employer will say that we will increase your comp. by "up to $4,000" if you select benefits under the plan. Does this pass Section 125. I see in the proposed regs that employers clearly can put money into the plan for the employees, but I'm hung up on the language of the plan being a choice between cash and qualified benefits.

Lets say you have an LLC and the Member's K-1 is negative. Do you count him in the ADP test at all?

Employee terminates employment with Company A. Employee elects COBRA continuation for medical coverage. Employee pays Company A monthly premium. Employee starts his/her own Company B. Can employee:

1. Continue with medical coverage of Company A through COBRA, subject to the maximum coverage period?

2. Can he/she deduct this premium from self-employment compensation earned through Company B?

Appreciate your responses.

The DOL claims procedure regulations set forth time frames for processing claims. Specifically, there are certain times frames in which an initial decision on a claim must be made, the initial decision must be appealed and a decision on appeal completed and communicated. Do you think, with respect to a self-insured, self-administered, single-employer health plan, that the claims procedures include actual payment of a claim or may a plan comply with the regulations in making its determination as to whether a claim is covered under the plan and then take whatever time it wishes to actually pay the claim?

The DOL claims procedure regulations specify certain time frames for processing claims, appealing claims and making decisions on appeal. With respect to a self-insured, self-administered, single-employer health plan, do you think that actual payment of a claim is part of this process or may a plan comply with the regulations when deciding if a claim is covered under the plan and then take whatever time it wants to actually pay the claim?

Has anyone determined whether the deadline for adopting a corrective amendment under 1.401a4-11g (10/15/03) is extended until 11/18/03 due to Hurricane Isabel?

I have a possible 410b and 401a26 failure in a 2002 calendar year DB plan.

Rev Proc 2002-71, Sec 5 item 15 extends the deadline for 401a failures due to disqualifying provisions but I am not sure if this is on point or if there is something else that extends my deadline.

We are dealing with a client who has not been complying with his plan document regarding the definition of compensation. Probably not a big issue in terms of dollars but what exposure does this client have by not complying with the terms/definitions of the document?

Employer previously maintained two plans -- one MPPP and one PSP. Employer terminated MPPP as of June 30, 2003. 5310 was filed for the MPPP and still waiting on IRS to review. MPPP assets were paid out shortly after June 30, 2003. Employer wants to know if it can pay remaining termination expenses from the PSP. Employer's reasoning appears to be that since same participants are/were in both plans there should be no problem. Technically, I would think that the MPPP and the PSP are two separate animals and that payment of the remaining termination expenses should come from the employer directly and not by way of the PSP. Any comments or suggestions?

A quick question.. is code 3B(Self Employed) used for partnerships or just sole proprietors? Thanks for you input.

TAG

Several not-for-profit organizations are contemplating a merger. One of the entities sponsors a 403(b) plan that is subject to ERISA (includes employer match), while two other entities sponsor non-ERISA 403(b) arrangements.

The entities sponsoring the non-ERISA plans will cease existence as part of the merger. Will employees of these former entities be able to transfer custodianship/trusteeship of their 403(b) accounts over to the surviving organization's ERISA 403(b) arrangement?

I'd appreciate anyone's take on what the distinction is under the proposed "deemed IRA" regs regarding two points (1) your "deemed IRA" trust must be a a separate trust from the 401(a) plan's trust, yet, (2) it's OK to commingle the assets of the IRA trust and the 401(a) plan trust assets (proposed regs explicitly states this is ok).

Logistically and legally, just how does one keep these trusts separate (Deemed IRA vs. Qualified Plan) yet commingle these trusts investments (if so desired) ? I'm struggling just what the distinction is and how to walk that fine line. Anyone ?

As the third party administrator, have just been notified that a payout to a former spouse has occured in a profit sharing plan without a QDRO (participant had an amendment to the judgement of divorce prepared by her attorney and VanGuard paid out of her segregated account based on this amendment--the plan trustee was unaware of the situation).

Our recommendation to the plan trustee was for the participant to go back to her attorney and have him draft a DRO for qualification. Even though the money has already transferred, we feel that having a QDRO in place after the fact is better than not having one at all, at least from the trustees perspective.

Does anyone have any thoughts on this thought process? Any comments would be appreciated.

Thanks,

Diane

A client received advice that its plan should consider having the PBCG take over as plan sponsor..is this something that is actually done or does this refer to PBGC taking over as Trustee upon termination?

Let’s say I have a DB plan with 4 HCE's and one NHCE. The DB Plan uses the 1000 hour rule for benefit accruals.

The NHCE previously satisfied eligibility and has an accrued benefit. The NHCE goes to “part time” and is working less than 1000 hours per year.

Do I fail 410(b) because the NHCE is not "excludable" and therefore my coverage percentage is 0%? Does the Plan need to provide the NHCE with some benefit?

What if the denominator in my accrual fraction is the sum of 1) the numerator and 2) expected future years of service, so that technically, the NHCE's accrued benefit IS increasing each year because I am reducing my denominator by one.

Whatever that means, it works. Go Pedro.