Can someone please clarify this issue for me:

DB plan year end 12/31

If you are using EGTRRA provisions for the 2002 plan year end - did the employer have to adopt a model amendment prior to the end of the 12/31/02 plan year or can they adopt the EGTRRA amendment prior to 09/30/03?

Thank you.

I am trying to figure out which participants I need to report on the SSA form. The instructions say to report a participant if they separate from service covered by the plan in a plan year, and the participant is entitled to a deferred vested benefit under the plan.

Do I report even the ones that only have $50.00 in vested benefits, or does "entitled to a deferred vested benefit" mean only those who have a vested benefit over $5,000 and have the right to defer until a later date.

It says that a separated participant must be reported no later than on the Schedule SSA filed for the plan year following the plan year in which separation occurred (or earlier). So does this mean that on the 12/31 2002 5500 (calendar plan), I need to report all participants who terminated in 2001 that have not been paid out as of the date the 2002 5500 is due?

Any guidance would be appreciatd.

Thanks

Hi,

I am trying to remember the rules on which employees a SEP IRA must cover and I don't have my ERISA outline book to refer to (ouch).

Can someone refresh my memory? Must the SEP be offered to all employees? I seem to recall it must cover all employees who have worked 2 out of the last five years, or something to that affect?

Please let me know.

Many thanks!

I'm running the ABPT using the "annual method" and have 2 plans in the testing group - an active DB with 2 HCE's and 10 NHCE's and a "frozen" DB with 4 HCEs and 20 NHCE's ( also, the "frozen" plan was frozen before the testing year ) .

Question : In determining my actual benefit percentage per 1.410(b)-5© do I divide by 6 for the HCE's & 30 for the NHCE's or different numbers like 2 & 10 ?

Also, assume the number of HCE's and NHCE's given above are the appropriate numbers.

I have a fiscal year plan ended 6/30/03 which fails ADP. The plan has a "Ketchup" provision and the failing HCE is catch-up eligible. Additionally, he had not used any of the available $2000.00 as of 6/30/03. Subsequently, the employee has surpassed the 2003 402(g) limit and used $81.00 worth of catch-up in the 6/30/04 plan year. My problem is that the 6/30/03 ADP test is not recognizing that he has already used $81.00 when it calculates the catch-up and refund. Has anyone else encountered this? Any solutions?

I have posted an incident with Relius.

A mechanic who worked out of his home had a dog

named Mace. Mace had a bad habit of eating all the grass in the mechanic's

lawn, so the mechanic had to keep Mace inside. The grass eventually became

overgrown.

One day the mechanic was working on a car in his backyard and dropped his

wrench losing it in the tall grass. He couldn't find it for the life of him,

so he decided to call it a day.

That night, Mace escaped from the house and ate all the grass in the

backyard. The next morning the mechanic went outside and saw his wrench

glinting in the sunlight. Realizing what had happened he looked up to the

heavens and proclaimed...

"A grazing Mace, how sweet the hound, that saved a

wrench for me!"

Small DB plan covering doctor and 4 staff. Doctor's PVAB in the plan comprises about 80% of total PVABs. Doctor wants to purchase undeveloped land with plan assets. Recognizing the fact that there are a whole host of other issues related to having real estate in the plan, what % of plan assets could he use for this purpose and still meet the diversification obligations?

When reporting a distribution to an alternate payee under a nongovernmental 457(b) plan, do you use Form 1099-R or W-2? The instructions to Form 1099-R discuss the reporting for distributions to participants (W-2) and beneficiaries (1099-R), but are silent as to alternate payees. Any help would be appreciated.

Could you help me out with the following?

A company offers a cafeteria plan that allows for the payment of premiums to the company's group health plan, a medical FSA and a dependent care FSA. The group medical has an age out policy for dependent children up to age 25 if still in college. An employee has a child that is age 23, not in school and is still a dependent of the employee. The plan allows for COBRA for dependents that age-out of the group medical plan. I understand that the coverage to the dependent can be extended for 36 months and the employee can pay the cost of this premium on a pre-tax basis through the cafeteria plan - all on the condition that the child is a dependent of the employee.

After 36 months of coverage, the plan would offer to convert the child to an individual policy of the medical plan provider. At this point, could the employee continue to pay for this coverage with pre-tax dollars? Again, assuming that the child is still a dependent?

I appreciate any comments on this. Thanks.

Ok Relius users...I have a 401(k) plan with 1 month of service for eligibility (deferrals only). Participant enters on the first of the month following completion of 1 month. There is an employee who was hired on 01/21/2002. 1 month of service completed 02/21/2002, plan entry on 03/01/2002. No problem there. When I run the preliminary discrimination test for 2003 and use the statutory exclusions, this employee is excluded. I was under the impression that when you use statutory exclusions, you still use the normal plan entry date definition. In this case, 1 year of service for this employee is 01/21/2003, and I would say plan entry was 02/01/2003 (just for ADP purposes). The employee terminated on 02/05/2003. Relius ADP test with statutory exclusions lists this employee as excludable. I'm thinking that Relius might be saying that the ADP entry date would be 03/01/2003 (1 year from original DOP???) and since he terminated 02/05 he's excludable. Any thoughts? Thanks in advance.

I have generally assumed that the effective date for a spun-off plan should reflect the date that plan assets were spun-off and transferred from the existing plan to the spun-off plan. Could (or should) a spun-off plan ever use the existing plan's original effective date as its own effective date? Seems that could raise potential concerns about why no Form 5500s were ever filed by the spun-off plan in earlier years and other reporting and tax issues; however, for various reasons the plan sponsor here prefers to have the spun-off plan's effective date reflect the original effective date of the existing plan if at all possible. Thanks.

Can a DB plan be amended to provide for the purchase of past service credit for new employees coming into the plan by virtue of a merger of companies if the surving company did not otherwise give past service credit?

We have the ABC profit sharing plan. ABC plan adopted 12/24/01, effective 01/01/01

ABC is a law firm. ABC just informed us, that unbeknowst to us, they formed another law firm with Lawyer D. The DABC firm was formed 01/09/01. D & ABC each own 50% of DABC, no other relation between D & ABC

I just got the good news a few minutes ago so I'm just digging into it. It seems to me that this an affiliated service group situation. (I hate affiliated service group rules).

A couple of preliminary questions:

1. The ABC plan requires a year of service. I should be O.K. for 2001 because DABC wasn't formed until 2001, those employees wouldn't meet the YOS requirement. Does that seem to correct?

2. I don't know much about D yet. If D has employees I assume that this is 1 affiliated service group & I need to consider D's employees also. Seem correct?

3. If D has affiliated service group/controlled group issues apart from DABC. I don't see that I need to consider those issues because they wouldn't be related to ABC? Seem correct.

Thanks in advance for any guidance.

We have a potential client who received some bad tax advice, in my opinion, and is in a bit of a fix. I wanted to bounce an idea off some of you gurus.

In 2002, client contributed 40,000 to a Money Purchase plan. Client also installed a 412(i) plan in 2002. The contribution to the 412(i) plan is far in excess of the 25% of comp. limitation, so the MP plan has a portion that is nondeductible, (the amount in excess of 6% of comp as per IRC 4972©(6)(B)) and will be nondeductible for many years, as the annual 412(i) cost will exceed the 25% limitation for the forseeable future.

First, the client was told that this excise tax is "one time only." I disagree. I don't reach the same conclusion from the statute. Furthermore, the form 5330 is pretty clear in the instructions that this excise tax is payable EACH YEAR that the MP contribution remains nondeductible.

Here's my bizarre idea. If you look at IRC 4972©(7), as added by EGTRRA 653(a), it appears that you might be able to take an aggressive interpretation to say that this allows you, for purposes of calculating excise tax only, to pay no excise tax whatsoever. I read the EGTRRA conference committee report, which doesn't say anything additional to support this interpretation in the situation I've outlined. I've told the client to seek ERISA counsel with regard to this idea. But in the meantime, I wondered if any of you have considered this issue, and what conclusion(s) you reached?

I have a client who wants to have the forfeitures reduce administrative expenses and allow the client to either supplement employer contributions and / or matching contributions or reduce employer and / or matching contributions. Has anyone seen this kind of flexibility built into a document

An employee has recently married. I know this is a status change to add the spouse to the health insurance, but does this mean only to the plan the employee is currently enrolled in? The employee wants to change health plans (the employer has two different plans to choose from) at the time the spouse is added.

Plan sponsor inadvertently made residential participant loan (permitted under plan) with a 30 year term instead of 15 year specified in plan doc. The single loan is insignificant both in terms of asset size of the plan and the number of "proper" loans outstanding.

Plan sponsor wants to retroactively amend plan to allow 30 year loans as a self-correction. Under EPCRS, retroactive plan amendment is not available for plan loans under SCP. Amendment is available under VCP, but client wants to stay under IRS radar and avoid time and expense of VCR filing.

Loan reamortization is not available under plan, and affected participant cannot afford repayment and accelerated repayment schedule under a 15 yr. loan.

How risky is doing a retroactive amendment under SCP, even though it isn't "technically" permitted under Rev. Proc. 2003-44 (EPCRS)? Are there any other options available to the plan sponsor?

I know that the instructions for the Model SEP say that you cannot use the 5305 SEP if you maintain any other qualified plan. But if you are terminating a qualified plan and then establish the SEP, is there a problem using the model, or must the client go to a prototype instead?

Other than a conversion to a cash balance plan, are there any other practical means for converting a unit benefit DB plan to a DC plan?

If a DB plan participant enters into a same-sex marriage in Canada, is the same-sex partner considered to be a "spouse" under the terms of the plan? Does the answer depend on whether the participant's state of residence prohibits same-sex marriages? The plan document does not define the terms spouse or marriage.