Can I have 2 457 plans...a 457(b) and a 457(f) tophat plan? The participants in the 457(f) would not participate in the 457(b). Where can I find this in the regulations?

I've recently learned from a reliable source that the Service is backtracking somewhat on previous liberal rulings on employee elections to participate in pick-up arrangements.

The Service is now taking the position that a mandatory employee contribution that is picked up by the employer will not be valid under section 414(h)(2) if employees have a continuing right to elect participation in the plan receiving the pick-ups. Previous PLRs had approved pick-ups under plans that offered employees an election to participate as long as the election to participate was irrevocable. However, these rulings permitted employees who didn't at first elect to participate to make that election in future years.

Now it appears that failure to elect participation will be treated as an irrevocable election not to participate, although an employer may give employees 24 months to make a decision.

Perhaps this isn't news to others, but I was taken aback. Anyone else have experience with this issue?

I have a safe harbor plan that makes an additional profit sharing contribution. They are also top heavy. Can I have a 5 year cliff vesting schedule for the profit sharing piece, or do I need to have the graded vesting schedule?

Thanks

Company A has a 401(k) plan. Roughly 1/2 of the participants are being spun-off to form a new Company B, that also wants to establish a 401(k) plan.

Since these participants have separated from service of Company A, is Company A's plan "required" to permit them to take a distribution? Or can the trustees of each plan affect a plan to plan transfer, without giving these participants the option of receiving a distribution?

And with the significant drop in the number of participants in Company A's plan, could it be considered a partial plan termination, even though the "separation" may be voluntary and Company B is establishing its own plan that would accept the transfer of account balances?

After a participant retires with, say, a JS50% pension and had a marriage breakdown years later, do QDROs have any applicability? In other words, is this no longer the plan's problem if divorce occurs after pension commencement and the concept of QDRO doesn't come into play? I presume the JS50% option applies to the spouse at time of retirement so that upon the participant's death the now former spouse will be entitled to the usual benefits under the JS50% option.

Please see IRA topics for details

Problem with IRA custodian rolling over funds to a 401(k) Plan.

I am from a TPA. We have an Employer/client that is the Sponsor & Trustee of a 401(k) Plan. The asset are invested in Pooled Separate Account with an Insurance Company. A Participant wants to rollover her funds from a conduit IRA into the 401(k) Plan. The IRA Institution does not know how to accomplish this.

The IRA institution can "transfer" to another IRA custodian but the Pooled Separate Account would't accept fiduciary liability for the IRA therefore the IRA institution won't distribute.

The IRA institution can payout without withholding taxes, but the Participant is under 59 1/2 & the IRA institution would issue 1099 coded that 10% penalty apply. The IRA institution suggsted the Pooled Separate Account issue a 5498 showing the money was actually contributed thus negating the 10% penalty, but because the Pooled Separate Account ia a 401(k) Plan NOT an IRA they do not issue 5498.

Anyone have any suggestions? Both the IRA institution & the Pooled Separate Acct are big name companies & I'm astounded that neither's legal department has a solution especially now that most IRAs, not just conduits, may be rolled into qualified Plan. So I figure either the legal departments are out to lunch or I am not phrasing things properly. Any guidance?

Hi, I have a plan and the owner of the main corp that maintains the 401(k) also is the owner of 7 different car dealerships. Each of the 7 divisions participate in the 401(k) as one plan (approx 450 EE's). However as of 10/31/03 one of the divisions will be sold to one of the participants of the plan (approx 30 EE's). As the new owner he would like to set up a 401(k) with the exact same features and include all prior yrs of service with original employer. I am not sure in this case what I need to file and with whom. We want to notify employees of the sale of that store and the transfer of plan assets (for that division) to new plan. I am just not sure of all the requirements to get this completed correctly. Any help would be appreciated.

Thanks

I know generally disability benefits paid from a qualified retirement plan are taxable, but I believe in some circumstances certain extreme disabilities may be exempt from taxation (e.g., loss of eyesight, limbs). If this is correct, does anyone know the code or reg cite that discusses non-taxation eligibility ?

Also, does the plan need to specifically include special language to support a potential non-taxable disability benefit or is the normal disability langauge found in most plans sufficient ?

Anybody know of a good reference for learning more about plans for PEO's?

Can a traditional defined benefit plan be converted to a 412(i)? This assumes the money from the traditional DB would be placed in qualifying insurance annuities.

I am reviewing a 401(k) plan document and noticed that the IRS issued a favorable letter of determination dated 08/06/03. Upon further review, the letter says that this letter cannot be relied on with respect to EGTRRA legislation changes. The plan document that was submitted contained an amendment adopting provisions related to EGTRRA.

Here comes the dumb question. Is the IRS only issuing letters of determination up to EGTRRA, or did something get overlooked during the submission process?

Thanks for any responses.

I am really struggling with ERISA Reg. sec. 2530.203-3(a). Our plan allows suspension of benefits and we have a defined benefit plan with no voluntary employee contributions. NRA under our plan is 65 and we send suspension of benefit notices if anybody works past NRA. We suspend the whole benefit. According to our company "expert" we don't have to provide an actuarial increase once the reemployed retiree stops working and commences benefits again.

I am reading the ERISA reg. and I am just not sure not sure what it is saying: "... A plan may provide for the suspension of pension benefits which commence prior to the attainment of normal retirement age, or for the suspension of that portion of pension benefits which exceeds the normal retirement benefit, or both, for any reemployment and without regard to the provision of sec. 203(a)(3)(B) and this regulation to the extent (but only to the extent) that suspension of such benefits does not affect a retiree's entitlement to normal retirement benefits payabe after attainment of normal retirement age, or the actuarial equivalent thereof."

We'd really like to comply with the law if we can figure out what it really says. Is there a portion of the benefit that cannot be suspended? I gather from previous posts that there is a divergence of thought re the actuarial increase issue. Thanks!

Does anyone know if the Cash Value of individual life insurance policies in a 401(k) Plan needs to be reported as an asset on the 5500? If it does, how is it reported - what lines on the Schedule H?

A new (calendar tax year) business is established 7/1/2003 say.

Q1. Can a plan, adopted during 2003, be made effective 1/1/2003 to make the first plan year a full 12-month year?

Q2. Does the answer differ if the new business is a Corp or a Sole Prop?

Q3. If a 12-month initial plan year is ok, Is the deduction limited to 50% of the annual(ized) 404 cost because the initial tax year is a short yr?

Any and all cites would be appreciated.

Help! My study partner has gone on vacation and took the C-2 DB Guide with her. I will be without study materials for the next ten days. boo hoo. Is it legal to fax me photocopies of Chapters 6 & 7? I hate to lose momentum!

Thanks (I hope)!

Laura Hartnett

fax (518) 785-0134

Q: Employer has a DB and DC plan and we would like to test the plans using the ABT for 410(b) and utilize the special rule to separately test plans of the "same type" for the ABR purposes [1.410(b)-5(e)(3)].

I just want to make sure if I do this I'm not precluded from using cross-testing under the DC plan for 401(a)(4) purposes (DB is safe-harbor), since I read under above reg you can't use cross-testing with this special rule. I'm hoping that means just not for calc'ing the 410(b) ABP, and not that we're precluded from using cross-testing for 401(a)(4) purposes. FWIW, I can pass 401(a)(4) cross-testing for each rate group on a ratio/percent basis (without needing to utilize the ABT), though this may not be relevant.

Do anyone think the 410(b) "special rule" precludes me from using cross-testing for 401(a)(4) ? Also I assume I don't have DB/DC combo plan subject to higher gateway threshold since I'm not aggregating for testing, right ?

A friend of mine lives in Florida and her brother who just retired at age 53 from his practice, was in an accident that was his fault and is now paralyzed. He has a small group plan for 1 (permitted there). Florida has min-COBRA for small groups not covered by Federal COBRA. My friend said that his broker said that he was not eligible because he was part of P.A.

I am assuming that means physicians association. It is through United Health Care PPO plan. Does anyone know what this means as far as COBRA is concerned. Someone said maybe it is an individual plan sold by out of state brokers that are ineligible under Florida mini-COBRA since association plans are not excluded from COBRA. I try to get info from the carriers but everything is confidential even more so now and it is also a convenient way to side step any issue and not do anything. If anyone can shed light on the term P.A. (it is on his ID card as well). The id card states small group PPO plan and the group name is his name. The costs are astronomical and he will be completely broke, besides everything else.

Thanks!

Our general practice is to discontinue all services for a client once they are more than 90 days behind on paying their bill to us. If we turn off the Web and VRU access should a blackout notice be issued to the participants?

One person company maintains a SEP and a MPPP. Combined assets are over $100,000. SEP alone does not require 5500, and MPPP with assets under $100,000 does not require 5500 but are SEP assets combined with MPPP assets to require a 5500-EZ filing for the MPPP?