I'm setting up a 401(k) that initially will have no NHCEs. Down the road, some will be hired and eventually become eligible.

Plan effective calendar 2003. NHCE hired after 7/1/03. Year of service after 7/1/04 eligible 1/1/05.

How is it determined what the maximum deferrals are for the HCEs in 2005? Say the testing method is prior year.

Has any one else encountered the IRS taking the position that forfeitures of matching contributions cannot be reallocated as (fully vested) QNECs?

The IRS agent is saying that the contributions must be fully vested when they were initially contributed to the plan, citing 1.401(k)-1(g)(13)(iii), which states as follows:

Thus, the matching and nonelective contributions must

satisfy the vesting requirements of paragraph © of this section and be

subject to the distribution requirements of paragraph (d) of this

section when they are contributed to the plan.

I believe that the vesting requirement only need be satisfied at the first time the funds are treated as QNECs; not when they were originally contributed as matching contributions.

May an individual participant(s) be the owner(s) of the annuity contract(s) and still meet the requirements of 457(g)? I have a client that does not want to be the owner of the annuity contract(s).

When you do ADP refund calculations, do you do the earnings calculation and then recharacterize from the employee source to the Catch-up source after earnings, or do you recharacterize the actual excess amount before earnings? Specifically, I am working on a 5330 and am not certain whether to enter into the form the total excess contributions minus any catch-up recharacterization before the earnings calculation or after. Deducting Catch-up before the earnings Calc. results in a cheaper excise tax for the client.

I would love to talk to you directly about this via e-mail:

BJS@Burkegroup.com

Thanks :-)

We've just had a couple of "additional information" requests on this, and it's the first time this has ever happened.

One reviewer was from Cincinnati, OH and the other was from Portland, OR. In questions 17 j of the 5310, they ask if any participant received a distribution within the past 5 years. If we answered yes, we had to indicate the largest amount distributed.

In these two, both reviewers asked us to provide the name of the particpant who received the distribution, their allocations to their accounts for the prior 10 years, or if they had been in the plan for less than 10 all the amounts allocated to their accounts since their participation. In the one we are responding to today, the amount distributed was $15,000+. The other one was a similiar amount. On the first plan the participant had been in the plan since 1987, however, it was a takeover, and we had to go back to the Trustees to ask for information for the years where we do not have the information.

Has anyone else run into this? And if so, what in %$**& is the IRS asking this for? This is a lot of work for nothing - we haven't talked to the reviewers yet to ask them what kind of a game they are playing, but before we do, I wanted to see if anyone else is encountering similar problems, or knows why they are doing this? Thanks.

Retiree has coverage under HMO. The company offers several plans in addition to the HMO. If the retiree moves out of the HMO area, does the retiree have special enrollment rights or must he wait until the open enrollment period?

Does anyone have experience with denials of late 5558 forms? We typically mail by regular mail. Today, we received two denials the IRS claims are late. We can't prove because of regular mail, but they were mailed timely by 4/28/03 to extend to 7/15/03 for 9/30 year ends. Any advice?

Can anyone think of any reasons that company match paid by a plan sponsor to a qualified plan before 1990 would need to be held in a separate bucket than match paid after 1990? I am not seeing any reason for the distinction in the plan document and am not aware of any regulatory reasons. Please help!

Does anyone see a problem with restating an existing calendar year MP plan into a DB plan effective back to 1/1/2003? There is a last day requirement for the MP contribution. Effectively, the existing MP dollars would be treated as a separate account within the plan and would not affect funding.

I am trying to avoid terminating the MP and all the work involved to save the client costs. That's all.

In looking at the applicable COBRA Regs for business reorganizations (54.4980B-9), I cannot figure out how to handle the following situation:

Seller in an asset sale terminates health plan, and the majority of seller's employees will be terminated (a few will remain employed part time for "clean up" type operations). Buyer is not a successor employer, b/c there is a substantial change in the business operations after the sale. Thus, the buyer has no obligation make COBRA coverage available to the M&A qualified beneficiaries. Because the seller terminates its only plan, the seller also has no obligation to make COBRA coverage available.

So, we have M&A qualified beneficiaries and no entity with an obligation to cover them. Do these beneficiaries get a COBRA notice but no coverage? No notice of any kind?

Let's say an IRA beneficiary disclaims an interest in a decedent's IRA eleven months after the decedent passes away. In this instance, the disclaimer would not qualify for federal estate and gift tax purposes (Code Section 2518) since it was not executed within nine months of the decedent's death. However, would this beneficiary be precluded from disclaiming the IRA interest entirely since the disclaimer doesn't qualify under 2518?

I would think that, provided the disclaimer qualified under state law, the IRA custodian should honor the disclaimer, notwithstanding the fact that it doesn't qualify under 2518, and pay out the IRA to the alternate beneficiary under the IRA agreement.

Any insight anyone may have would be greatly appreciated.

I have a question that I was a little hesitant to post, but I would really like to hear your opinion. I have been an actuary for close to 20 years and during that time the issue of suspension notices and actuarial increases continues to bother me. Assume the Plan document is silent (I know it can't be silent, but somehow they get approval letters) or that it requires a Suspension Notice to be issued at NRA. I believe, as do most ERISA attorneys, that if you fail to provide the suspension notice at NRA, you must provide the greater of the age/service benefit or the actuarially increased value of the normal retirement benefit when the participant ultimately retires. (Proposed Reg. 1.411(b)). Now, this is where my question comes in. If you come across a client who has "never" given suspension notices and has "never" granted the actuarial increase, and has lots of actives and term vested older than NRA, what are the chances that this ever becomes a "problem" for them. In other words, is this something the IRS is checking on audit? Is this something the Plan or Company auditor should have caught? How do you inform the client that they potentially owe lots of people lots of money? This comment usually generates a blank stare that ends in "your insane if you think we are paying these people those benefits".

This can be a bigger problem in the multi-employer world where the plan may have hundreds of terminated vested participants that never came in to collect their benefit and the Trustees have no intention of trying to find them. We are in the position of telling them that they have to find them and not only that, they have to pay them 2 times their original benefit.

Has anyone ever had someone outside of the actuary raise this issue? Is this a "real" issue or is it something the IRS doesn't really care about? What would you advise your client?

The Cobra Model Notice issued by the DOL states it is for single employer plans.

Does anyone have or know where I can find something geared towards Multiemployer/Taft-Hartley plans? If not, does anyone know what differences there would be?

I would appreciate any guidance.

I see that the Model Notice issued by the DOL is for use by single employer plans. Does anyone know if any were issued for Taft-Hartley Plans? Does anyone know what differences there are for notices for these Plans?

I have a plan where the owner is the only participant with a balance. There are 3 others who are "eligible participants" because they meet the age and service requirements. However, the owner is never going to put any more contributions into the plan, so they will never have a balance. Is it allowable to file Form 5500-EZ and forego the bonding requirements? Or does he still need a bond?

An HCE and his spouse both participate in the same DB plan, which is underfunded. Plan does not pay lump sums. Both are restricted employees under 1.401(a)(4)-5(b).

Spouse recently died. Participant is entitled to the QPSA commencing at the deceased spouse's NRA. The participant will reach his NRA at about the same time. 1.401(a)(4)-5(b)(3) says "...the payment of benefits to or on behalf of a restricted employee...."

Because of the "on behalf of" phrase, I believe the participant can receive his full life annuity amount annually, as well as the survivor portion of his spouse's benefit. The combined amounts would exceed his unrestricted amount alone. But I think he can get his unrestricted amount plus an amount not to exceed his spouse's unrestricted amount (which the QPSA would obviously not exceed). Is this correct?

Thanks in advance for all responses.

When a company purchases a small company with terminated employees on state continuation (with a lesser maximum period of coverage than COBRA), should the buyer extend the state continuation to COBRA?

An plan stated a forfeiture did not occur until 5 consecutive breaks.

The Plan was amended to our Prototype effective 1-1-02 which states a forfeiture will occur at the earlier of distribution, or 5 consecutive breaks.

As of the date of our takeover (1-1-02) there are several terminated participants (prior to 1-1-02) that received a distribution but no forfeiture occurred because they didn't incur 5 consecutive breaks.

Is it reasonable to continue to treat those participants as not having incurred a forfeiture until they do have 5 consec. breaks, or because the plan has been amended effective 1-1-02 to state forfeitures NOW occur at the earlier of distribution or 5 consec. breaks, they must immediately treat those participants as having incurred a forfeiture?

A small ER (husband and wife only) did not realize that they needed to file 5500s. What address is used for the letter they are preparing to request an abatement of the penalties? I'm quite sure it's not the usual address for filing a 5500 form.

Has anyone reached an opinion on whether or not FAS Statement 150 applies to ESOPs? The statement itself appears to offer conflicting messages.