The plan sponsor of a DB plan was rountinely writing a check from the pension trust to a non-interest bearing corporate account in order to write checks for the monthly benefit payments to retirees. According to the auditor, the exact amount of assets that came out of the trust were used to pay benefits each time. This practice was discontinued towards then end of 2002 when the sponsor (finally) opened up a checking account in the name of the pension trust.

Is there any way that this is not considered a prohibited transaction?

Otherwise, box 4(d) on the Sch. H is checked yes, a Schedule G is attached, and the plan probably ends up getting audited, and the sponsor pays a 15% excise tax. Does that about sum it up?

We have an Indian Tribal Plan in New Mexico we do the admin for. We consider it a governmental plan exempt form 5500 reporting. We are putting together an SAR for general information purposes only. My question now is the bonding issue. Do they need to obtain a bond? I review other threads and it said check with the state and an address was given via the computer; however, all I found out there were the asset size of the State's retirement plan. I think I missed something(?).

Anyone deal with tribal accounts and know. Even if it is not required, any thoughts about recommending one?

Thanks for your thoughts.

If a standardized plan does not amend their document for GUST until after 9/30, does it still have to file for determination letter along with the $250 user fee under RP 2003-72?

Hi,

I've read the PGGC Form 1 instructions as well as ERISA 4021 and can't find an exemption from PBGC coverage for professional associations with less than 25 employees. However, someone is telling me these plans are exempt. Does anyone have a cite or can confirm this is true??

I'm just getting back into the DB world.

Thanks!

Signed

Girl Missing the DC World

In 2002, board of directors decided to terminate money purchase pension plan effective 1/1/03. Other than reflecting this in the minutes of the meeting, no further action was taken. Can the employer act now to terminate the plan effective 1/1/03? If so, want action do they need to take?

Employer wants to amend 401k plan now to provide for 3% safe harbor contribution. Amendment to be effective 1/1/03. Can this be done, or is it too late to provide for a 3% safe harbor contribution for 2003?

I can find good authority for an exception to the in-service distribution restrictions on money purchase pension plans for distributions to satisfy diversification rights.

I can find good authority for an exception to the in-service distribution restrictions under section 401(k) for dividend distributions.

Is there good authority for in-service distribution of dividends from a stock bonus/money purchase plan ESOP besides an inference from section 404(k) of the tax code?

http://home.nc.rr.com/tuco/looney/acme/acme.html

"ACME is a worldwide leader of many manufactured goods. From its humble beginnings providing corks and flypaper to bug collectors ("Buddy's Bug Hunt/1935") to its heyday in the American Southwest supplying a certain coyote, from Ultimatum Dispatchers to Batman outfits, ACME has set the standard for excellence.

"For the first time ever, information and pictures of all ACME products, specialty divisions, and services featured in Warner Bros. cartoons (made by the original studio from 1935 to 1964) are gathered here, in one convenient catalog."

Company maintains a self-funded national plan for which a TPA has developed fully-insured equivalent premium rates. There are 27 locations and each location has a different fully-insured equivalent rate. How does the employer calculate the COBRA rate? Does it look at the Plan as a whole and come up with a national COBRA rate or does it base the COBRA rates off the fully insured equivalent at each location?

Since the COBRA statute refers to coverage costs for "similarly situated" active employees, and since regional differences in health costs is a factor that goes toward determining whether or not one is "similarly situated," I am presuming that different COBRA rates for different regions is appropriate, assuming different regional coverage costs. Any comments appreciated.

I've got a top heavy plan. Basic 4 step integration formula. Plan has a last day/1000 hour requirement. I've got 14 NHCEs & 3 HCEs. 3 NHCEs are nonbenefitting, nonexcludable. 2 NHCEs receive top heavy only. I know that the 2 NHCEs are benefitting for coverage. In the basic integrated plan I get the pass on 401(a)(4), but since this is top heavy is this a multiple formula situation? If so I've got to pass 410(b) assuming the 2 don't benefit or I don't get the free pass on 401(a)(4); correct?

Would a 401k for a nonprofit private school make sense rather than a 403b plan? Most participants are not teachers, and most teachers seem to move in and out of teaching. Thoughts and comments are appreciated.

Dave,

In your latest update, special characters are being created by code sections again. The one I've noticed a couple of times is ( c ) becoming ©.

I had a client find this and was wanting to know more about it. Does anyone have any comments on this?

http://www.pottsfinancial.com/ira_articles.htm

An employer has an insured health plan. Employees pay their portion of the premiums through a Section 125 arrangement. The employer wants to charge employees different percentages of the premiums for different coverage options. For example, assume that the total premiums are:

Employee only: $300 per month

Employee and spouse: $400 per month

Employee and dependent child: $400 per month

Employee and family: $500 per month

The employer wants to charge employees the following:

Employee only: $200 (67% of total premium)

Employee and spouse: $300 (75%)

Employee and dependent child: $200 (50%)

Employee and family: $350 (70%)

Is there any reason why this can't be done?

An overfunded plan using the unit credit funding method has a credit balance. I am curious how those out there would handle establishing new bases each year. Would you:

a) establish a new base each year to force the balance equation to work, knowing that the base will only be wiped out next year because the plan hits the FFL?

b) not establish any bases because the UAL is not greater than zero?

c) do something different?

I have a client who has a participant who embezzled over $20,000 from the Corporation. The client is not planning to take the participant to court, as the participant is a cousin, and has no resources for a court battle (and no resources to repay the embezzled funds).

The client is stating that the participant has not been terminated by the Corporation, nor has the participant "quit". The participant is still on the Corporation's "payroll", although he does not receive a paycheck and does not provide services to the Corporation. However, the Corporation is still paying for his regular health insurance, and he is not disputing the receipt of this benefit.

Does the client have any recourse against the participant's balance in the Plan, since there will be no court judgement?

Any insight is much appreciated!

I am reviewing a cross tested profit sharing plan allocation for a plan year ending 10/31/02. There are three HCEs and 41 NonHCEs. The owner's alloc rate is 21.88%, his wife's alloc rate is 17.5% and the other HCE's alloc rate is 3% as is all the NonHCEs. Testing on an accrual basis, each rate group's ratio is greater than 70%. Shouldn't this plan still have to meet the 5% minimum gateway?? When wouldn't the plan have to meet the 5% (or 1/3) minimum gateway?? Thanks.

Profit sharing plan maintains a separate brokerage account for each plan participant. The plan has over 100 participants.

The plan mistakenly contributed too much to a participant's account. The mistake was a "mistake of fact".

This is not a multiemployer plan.

The plan refunds the contribution to the employer .... but according to IRS regulations and the plan document, the plan CANNOT pay/refund to the employer , the interest earned on the contribution (while the contribution was in brokerage account).

MY QUESTION:

What is the plan supposed to do with the interest ? The participant has recently quit. She was only 40% vested. The plan disbursed her 40%. The brokerage account still holds the 60% forfeiture plus all of the interst earned on the mistaken contribution. The 60% forfeiture will be used to reduce next year's plan contribution. But waht about the interest ?

We have been asked to assist with a situation where, through misunderstanding or oversight, a plan administrator filed two 5500s for a number of years for one plan. The facts are as follows. Prior to 1997, the employer sponsored a profit sharing plan and a money purchase pension plan. The employee accounts under both of these plans were with Investment Broker A. In 1997, the employer terminated the money purchase pension plan and restated the profit sharing plan as a 401(k) profit sharing plan. At this time, new accounts were opened with Investment Broker B. Accounts also remained with Investment Broker A. The upshot of this was that each employee employed at that time had two investment accounts but was a participant in only one plan. This in and of itself is obviously fine. However, the plan administrator filed two 5500s for 1997-present. Although the 5500s reflected the same plan name, the three digit plan number was different. Otherwise, the underlying information was identical.

We need to correct this mistake and are looking for guidance on how to do so. Obviously, filing one 5500 is a start but we are concerned about what the reaction of the Service will be. I'm going to start by putting an anonymous call into them.

Plan withholds from payroll at several service centers. Data is accumulated centrally in a large spreadsheet (as required by custodian) and submitted to custodian, who withdraws funds based on the sheet.

For February 2003, one division accidentally re-reports January 2003 activity. As a result, custodian withdraws funds for February (timely) based on January information. Some participants receive too much in February, others too little. Net impact is small underpayment.

In this situation, is there any basis that a prohibited transaction has not occurred? Is there an exception for mistakes of fact or plain clerical errors?