A tax client (employer) of mine has two separate plans. One is a money purchase pension plan and the other a SEP-IRA.

I recently read that a employer cannot sponsor a SEP, Simple 401k, or a SIMPLE IRA at the same time that it sponsors any other type of qualified plan.

Can this be true ?

I knew that a Simple plan could not be sponsored if another qualified plan was also being sponsored ...but I never knew that a SEP-IRA could not be sponsored with another plan.

Is this a new rule? How long has this rule been around?

What expenses for Plan Administration can be levied / charged back to

the Plan Assets?

Anyone have any thoughts on this?

http://www.actuarialstandardsboard.org/pdf...and2_repeal.pdf

I can't seem to find the answer to this anywhere. Does anybody know if the death benefit for single participants be eliminated without violating the Code or ERISA in a cash balance plan? Is notice required? I know we can't eliminate optional forms of benefit but I'm not sure this is one. Of course, it will not be eliminated for married participants.

We have a client who amended from a standardized profit-sharing plan to a Safe Harbor 401(k) with a SHNEC contribution for 2003. Now, the client has changed her mind and wants to change to a Traditional 401(k) without any required SHNEC contribution for 2003. Is there any way that she can do this? If not, can she terminate the Safe Habor 401(k) with SHNEC mid-year? If she is permitted to terminate the plan mid-year, does she have to give any notice, does she have to satisfy ADP/ACP tests, does she have to fund the non-elective through any particular date, and where is the authority for terminating mid-year, since you are generally not permitted to have a short plan year Safe Harbor?

When do "deferrals" have to be deposited for a SIMPLE IRA for a self employed individual who has no "salary"?

Is it April 15 like 401K's or January 31.

The fund companies do not want to say much on this topic.

{{That is because there is no official guidance on the issue. See discussion below -- by gsl}}

Participants in a PSP vest under a 5-year cliff vesting schedule. The plan sends notice to participants that benefit accruals will cease on 01/01/04. The plan does not terminate, nor does it intend to terminate (in other words ...plan assets will not be distributed by 01/01/04). Benefit accruals are simply frozen. So, I guess you could say that there is a "partial termination".

The plan started 10 years ago.

My Question:

Do participants with less than 5-years of employment (less than 100% vested) as of 01/01/04 ..... continue to vest?

Plan participant retires from Company but does not take any distribution from his 401K plan. Participant named his two sons as beneficiary following a divorce in 2000 (with former wife as contingent beneficiary). Participant remarried July 2002, and separated 3 weeks after marriage, and spouse filed for divorce Jan. 2003. Participant commits suicide before divorce is final. Had no will. Just found out that ERISA automatically assumes spouse as beneficiary on his 401k plan. Probate Court appointed sons co-administrators of estate as spouse refused to pay any funeral or burial expenses. Entire burden of estate is place on the sons (ages 23 and 19).

How can this be challenged? Can this be considered as "abondment"?

Decedent was a Kentucky resident, spouse an Indiana Resident and lived in Kentucky less than 3 weeks. This was spouses sixth marriage.

Many Thanks.

We merged an employers MP with PS as of 12/31/2002. Employer has never filed 5500's for plans because they have never reached the combined limit of $100,000. Question - since these plans have been merged to we need to file a 5500 for the MP and if so when?

Thanks,

Ronnie

We are restating a 401k of an employer who also maintains a DB plan. We are using a Corbel Volume Submitter checklist to do so but have a question on one of the selections. Question #69 states the following:

"If DC & DB plans are maintained (whether or not terminated), which plan provides top heavy minimum benefit?

a. n/a

b. DC, with 5% minimum

c. DC, with 7 1/2% minimum

d. DB, with 2% minimum accrual

e. DC, with 3% minimum accrual

f. Provide full top heavy minimums to each plan

We've never amended a DC with a DB and don't deal with DB plans. There is a 1% chance that either plan will ever be top heavy and we just need some advice as to which selection from above we should go with.

Thanks,

Ronnie Wasel, CPA

Is it possible to name both a corporate trustee such as a bank and also an individual from the company in a qualified plan?

I just want to make sure that I under a participant's right to convert his policy. A participant may only convert a policy into an individual policy after he separates if the policy itself permits such a conversion? Therefore, an employer is not required to offer convertible insurance products...

I have found a lot of information on the need to impose a penalty on an inservice withdrawal from a nonqualified plan, but no discussions on what happens to the haircut amounts.

When a plan imposes a haircut on an inservice withdrawal, where does the amount taken as the penalty go? Is it a forfeiture? Does it make any difference if there are employee deferrals in the plan? If these are forfeitures, are they reallocated, or used by the employer in some fashion?

Thanks for any help you can provide.

Hoping someone can help!!

If a 401(k) plan is over 120 participants because of record keepers errors is there a mechanism to avoid filing as a large plan and thus avoiding the expense of having the plan audited???

Situation: I'm the employer who sponsors a 401(k) plan. The plan year is the calendar year. The plan record keeping was initially done by "A". "A" got out of the business and 'sold' their responsibilty to "B". "B" was then acquired by "C". We then moved the plan to record keeper "D". Without the following 'errors' the plan has never exceeded 120 participants and thus would still qualify as a small plan and not be required to have an audit of the plan performed.

Record keeper "A" missed distributing a piece of Forfeiture dollars (~$2,200) from 1999. (Forfeitures are allocated to all active participants employed as the last day of the year.) The error was corrected but not distributed until December 28th, 2000. Fifteen (15) individuals who had previously received full distributions from the plan (after termination of employment) ended up with minimal balances ($200 or less) and thus ended up being included in year end head count for 2000, pushing the participant count to 127. (Participant count would have been 112 without the late Forfeiture distribution.) There were no additional entrants on January 1st, 2001 thus 112/127 was the head count at the start of 2001. In 2001 "A" got out of the business and sold their record keeping responsibilities to "B". In 2001 "B" was aquired by "C". The problem was discussed with "C" and "C" adjusted the beginning head count for 2001 on the Form 5500 filing for 2001 and filed as a small plan. Now, at the end of 2001, "C" was instructed via letter and fax to force out 22 participants who had balances less than $5000. "C" forgot to do the force outs and finally processed them in January of 2002 but once again left a head count issue at the close of 2001 - 130 versus the 108 it should have been. There were no additional entrants on January 1st, 2002 thus 108/130 was the head count at the start of 2002. In 2002 we moved record keeping responsibilties to "D" (you're not asking why after all of this, are you?? lol) "D" is now requesting an audit be performed based on the 130 head count at the start of 2002. (Head count at the conclusion of 2002, start of 2003 is 106.) The problem has been discussed with "D" and "D" has agreed to file as a small plan for 2002 with a letter from me, the plan sponsor stating that we will hold them harmless.

I don't mind sending the letter but I sure would feel better if I knew I had a 'leg to stand on' in case of an ERISA audit. Anybody have any case law or something that would support my position of filing as a small plan and not having the plan audited? My actual preference would be to address directly and include a letter of explanation with the 2002 Form 5500 filing but I have been advised that that would surely solve nothing and basically 'force' an ERISA audit. Anybody have thoughts or ideas here????

Suppose a participant has an accrued benefit of $100/mo as of 1/1/03 when lump sums are eliminated. When the participant terminates 5 years later (1/1/08), may the plan offer him the choice of receiving the lump sum value of the $100 protected benefit or his accrued benefit as of 1/1/08? Or must you offer the lump sum value of the $100 plus any accruals after 1/1/03 as an annuity?

If you have a non-electing church db plan, can you eliminate lump sum as an option without 411(d)(6) protection?

My question has to do with the treatment of the 415 dollar limit when a prior DB existed.

Supose a one participant DB was established with a NRA of 65. Also, the only participant was 55 when the plan started, always had more than $200k in salary and accrued the maximum benefit under the plan. He participated 5 years and then terminated the plan at age 60 and distributed benefits.

Suppose he then immediately adopted a new DB with a NRA of 65 and wanted to have the maximum benefits. Does he get penalized on the 415 dollar limit simply because he had a prior plan?

We are told that we must subtract the prior plan accrued benefit from the 415 dollar limit and then accrue the benefits over 10 years in the new plan without any consideration of participation in the prior plan. If this is the case, here are his maximum benefits under the new plan:

415 dollar limit: $13,333

Less prior plan benefit: -$6,666

Adjusted limit: $6,667

x 5/10

Max proj benefit $3,333

In this case he will have participated 10 years under two plans but will only be able to receive $10,000......a 25% penalty so to speak.

I've looked under 415(b) and the regs and cant seem to find anything on point.

Anyone have any experience with this?

Thanks much.

In the Forbes article on benefitslink e-mail today (8/7/03) titled "Pension Plans Wade in Murky Water", it stated the IRS had place a moratorium on approving new plans until it could be determined if they are discriminatory. Is this true ? Did they mean just new conversion ? or is this moratorium new since the IBM case and applicable to even start up cash balance plans ?

Scenario A:

On this board and at conferences I keep reading/hearing that if the 412(i) funding arrangement provided benefits are less than the top hvy minimum for the non-keys, then the balance of the top hvy benefits must be funded through a traditional DB plans & Sch B filed etc.

Question:

Since the amount of the insurance/annuity to be purchased under the 412(i) funding arrangement is a by product of the benefits to be provided under the DB plan, how could the 412(i) provided benefits be less than the top hvy min (unless the situation in Scenario B below occurs)? That is, one first determines the benefits under the plan (including top hvy) and then go and purchase the requisite amount of the insurance product - yes.no?

Scenario B:

Just found out that an insurance co. will not issue contracts for certain participants in a DB plan because the required annual premiums for them are below the insurance company's Minimum required for writing a policy!! Therefore, the benefits for these employees need to be funded outside the 412(i) arrangement.

Question:

Is this common inthe 412(i) arena? They will take the $150k or so annual prem for the owner and tell the others to take a hike! I know they are not legally required to do so but is this not a bad business practice [question for Matt, The 412(i) Man - Matt, not a bad slogan to use:)]?

I wish I was in such a position - pick and choose business from the "same" client!

Questions on both scenarios A & B.

1. How is this dual funding arrangement is accommodated for Sch B & PBGC Form 1 Sch A - what is the number of participants shown on Sch B - just those not receining enough benefits under isnario

2. Since there is only one plan, is there a benefits, rights and features violation issue here?

3. Are there any others issue to look out for?

Thanks in advance.

Ps - Comment for Dave Baker:

I use other non-employee benefit related message boards but none come even close to macthing the quality of this website - editing, searching, auto email notification and such. Thanks for the excellent website.

I have gone a little squirrelly looking for this....

I have a non-electing church plan that offers annuities with a life contingency only (no lump sums or certains). The plan does not have QJSA language. The plan has several terminated vested individuals. These participants did receive the term vested notice at termination letting each one know what benefit options they have at NRA.

Since the plan is not subject to ERISA or QJSA notice requirements, where in the Code or regs. does it say that the plan is responsible to contact each participant when they are approaching NRA to elect their benefit? The only thing I could find where it is inferred is the lost participant regs. under 1.401(a)-14(d).

Thanks!