2003 is the first year of a new defined benefit plan. It credits a maximum of 5 years of service prior to 1/1/2003 to calculate accrued and projected benefits.

For the Average Benefit Percentage test of 410(b) for 2003 (using 2003 as the measurement period) what do I use as the increase in accrued benefit in the DB plan since everyone enters with an accrued benefit as of 1/1/2003 (as a result of counting pre-participation service)?

For example, suppose participant A enters with 5 years of past service and the accrued benefit is $10/month per year of service.

Accrued Benefit @ 1/1/2003 = $50

Accrued Benefit @ 12/31/2003 = $60

Do I test $60 or $10?

Is an audit still required where the final plan year is a 2-week short plan year from 1/1/03 to 1/15/2003? (the plan otherwise requires an audit).

Unfortunately, the plan was not able to be merged until 1/15/2003 and has an audit report for the 12/31/2002 plan year.

Thanks.

Client has 2 DB plans - one for hourly EEs and one for salaries EEs. The hourly formula is simple ($ x years of service). The salaried formula is more complicated (% x average annual comp x credited service), but is a richer benefit. Currently, when an employee transfers from an hourly position to a salaried position, hourly benefit freezes and participation in salaried begins. All service and compensation taken into account for the salaried plan for all purposes. The plans have language to offset benefits to the extent they are for the same period of employment and/or earnings.

The sponsor has asked whether they can stop counting service while in the hourly plan as service in the salaried plan for benefit accrual purposes only. I have already explained that it could only be for new transferring EEs (anti-cutback rule), but I keep feeling like this is a bad idea. Unfortunately, my research hasn't helped me to pinpoint why I am uncomfortable.

Any suggestions?

Is a change in worksite an event that permits a participants to change his or her election under a dependent care spending account? If so, under what authority?

Thank you,

It has been clarified that non-spouse beneficiaries have the same right to get minimum distributions over their lifetime from the account of a deceased participant in a qualified pension plan as they would as if the money was in an IRA. However:

This is all well and good if the participant was in a large plan expected to continue in the future. What about the non-spouse beneficiaries of a one-man plan? Obviously, for the benefits to be paid well into the future, the plan itself must continue. However, the plan sponsor (as well as the sole participant) is no longer with us. How to handle this?

A situation that has been posed to us is a self-employed Keogh PS plan where the 2 adult children are the named beneficiaries (no spouse involved). The 2 kids are both self-employed, therefore there is a basis for establishing a new qualified plan and/or taking over from the prior sponsor (namely their mother).

Any thoughts out there? The brokerage firm who handled the plan has been giving some obtuse advise (first response was to establish trusts under the plan's name for each kid - didn't think you could continue plans too long without a sponsor).

Hi:

Just found your forum and am hoping someone can assist. I have a retirement plan from a private university under the co. Tiaa-Cref. I left the university's employ in 1988. Although I was able to rollover my stock portion of this program to another vehicle, I have been trying to for years to get the annuity portion. TIAA-CREF will allow it but my previous employer's rules will not. I have even asked to close the account, realizing there would be penalties and was told I am not permitted to do that either! The only option I have is to roll 10 payments of equal amounts into a money market account once a year and then withdraw from that. I am spitting mad because these people are holding my money hostage!!! What are my rights under ERISA?

thanks, clgray

I am still struggling with whether a safe-harbor 401(k) plan that wants to allow participants to make catch-up contributions may or must provide matches on those contributions.

For purposes of this question, assume that the plan matches deferrals on with each payroll period (and does not make a year-end gross up) and that the plan matches 100% of the first 3% and 50% of the next 2%.

If the catch-up contributions are not matched, how contributions are categorized during the year becomes critical. The IRS requires that all NHCEs be able to obtain the match to retain the safe harbor and if contributions are not deemed to be catch-ups until after a limit has been reached (generally the 402(g) limit), by definition the NHCE would not be eligible to receive the full match.

If the catch up contributions are matched (to avoid the administrative issues alluded to above) and the catch-up contributions are disregarded for purposes of testing but the match is not, does that mean that an electing HCE has a higher rate of match than under 50 NHCEs (blowing the safe-harbor by violating 401(m)(11)(B)(iii)).

Thank you for clarification.

Participant in a participant-directed DC plan is doing some estate planning and has inquired as to whether the Plan would allow an individual designated under her durable POA to direct the investment of her Plan account in the event of her "incapacity".

Has anyone ever run into such a situation? What are the "considerations" relative to a qualified plan?

Any and all comments appreciated.

An ER recently discovered that a couple of pay periods worth of elective deferrals were not deposited to the plan for the 2001 Plan Year. Of course, he's willing to make the contributions and must calculate earnings (or losses) on those contributions. He'll need to come up with the earnings out-of-pocket.

Is it possible that this could be dealt with via self-correction, or is it definately a VCP issue?

Employer A hires a number of new employees from Employer X. All of the new employees are covered under Employer B’s COBRA continuation coverage. May the new employees elect medical FSA under the 125 of Employer A, and submit for reimbursement the cost of the COBRA premium paid to Employer X? Could Employer A deduct (pre-tax) the cost of the COBRA premium directly from each of the new employees’ paychecks, and pay the COBRA premium directly to Employer X on behalf of the new employees? Note that there are also other employees without any connection to Employer X or the COBRA continuation option. Does the answer change if Employer A already has a group health plan for which the new employees are not yet eligible?

What are the potential ramifications of including a noncompetition clause or non-disclosure clause in a NQDC document? Can benefits be subject to forfeiture even once the exec is receiving benefits and retired from the employer?

Small NONprofit has only one HCE, the CEO, who is 100% vested. Can they intentionally fail the ADP/ACP testing, knowing that he/she will be entitled to keep the excess matching contributions, which, had the test been passed, would have been foregone?

If the only HCE was the owner, their would simply be easier ways to get the money out of the company.

Due to plan mergers, we now have folks with a deferred vested DB benefit in a FAE title of the plan and a deferred vested DB benefit in a cash balance title of the plan (this follows a retirement choice election process). This is now one plan with one plan number. Reviewing Schedule SSA, it appears that it doesn't allow an individual to have say a DB plan benefit under an annuity and another DB plan benefit that generally is stated in an account balance/lump sum manner (the Cash Balance benefit). Are we to convert the Cash Balance amount to an annuity, add it to the annuity due from the FAE title of the plan and thus report such in that fashion? Any other guidance?

I am looking for a checklist for a plan termination. The plans are a MPP and a PS. The 5500s for both plans are filed as having a single participant that covers 100% owner of corporation. The "Company" covered by these plans are in the process of being dissolved but it has not been completed.

Does anyone know of a checklist out there?

Thanks in advance for your help!

It is allowable to use Universal Life products which have a minimum interest rate guarantee in a 412(i) arrangement?

http://benefitslink.com/IRS/revrul2003-83.shtml

Huh? What am I missing? Where is the accrued liability "used to determined plan costs"? Where does it pass condition (2) of Rev. Rul. 81-13?

We have a client that has not adopted any EGTRRA provisons. They intend on making the EGTRRA amendments along with the GUST restatement this year. A prior carrier calculated the 2002 top heavy test (12/31/01 Determination Date) using the changes to top heavy plans under EGTRRA. Namely, they only included distributions in 2002 and not the prior 4 years. The plan was determined to be top heavy in 2002 for the first time. However, in the past few years the plan has had numerous distributions to non-keys, enough such that the plan would not be top heavy if they used the old rules and included the prior four years distributions to non-keys. I am wondering if we can still use the old rules for top heavy distributions in 2002 because the client never adopted the EGTRRA amendments?

We have a client that has not adopted any EGTRRA provisons. They intend on making the EGTRRA amendments along with the GUST restatement this year. A prior carrier calculated the 2002 top heavy test (12/31/01 Determination Date) using the changes to top heavy plans under EGTRRA. Namely, they only included distributions in 2002 and not the prior 4 years. The plan was determined to be top heavy in 2002 for the first time. However, in the past few years the plan has had numerous distributions to non-keys, enough such that the plan would not be top heavy if they used the old rules and included the prior four years distributions to non-keys. I am wondering if we can still use the old rules for top heavy distributions in 2002 because the client never adopted the EGTRRA amendments?

Can an ESOP company ammend its plan summary regarding distributions? If so, what are the requirments?

Example: Current plan summary states an employee can receive distributions after terminating employment starting the year after the termination. Employee terminates employment Dec 22, 2002.(14yrs in the plan and 40 years old). According to the summary he can start receiving distributions over 5 years starting in June of 2003. The company changes its policy on distributions in June of 2003 stating the employee must wait for 5 years to start receiving distributions. When the employee quit the plan had not been ammended.

Is this legal? Is there a time frame a company must go by when ammending a plan summary?

The reason was that the company was strapped for money. or in financial trouble.

RCR

If a pension plan resolved an issue, that takes them 8 1/2 years to make a decision, all the while withholding thousands of dollar from ones pension, Can the pension plan be sued for gross negligence or some other tort, outside of ERISA. In this case, repeated request for a review fell on deaf ears, until the pensioner produced document edidence, which the committee did not think the pensioner had in his possession, although the evidence was in the hand of the pension committee.