A plan allows participants to refinance (replace) loans in order to take out a greater amount that is needed. I know that the sum of the replaced loan and the new loan cannot be greater than 50% of the vested balance as of the origination date of the new loan. My question is should the vested balance used to calculate the 50% include the value of the old loan?

I just discovered while doing the accounting for the 2002 plan year that the refunds of excess contribution for the 2001 plan year did not occur. I am reading Revenue Proc. 2001-17 and am a little confused about my options. Appendix A.03, OPERATIONAL FAILURES AND CORRECTIONS UNDER VCS says I can correct by allocating a QNEC to bring the ADP up to a passing level. I believe this option is not available to me because the QNEC would have had to have been made 12/31/2001 as the prior testing method was used for 2001. Am I correct?

Next option is the 1 to 1 correction method. The way I read this, I allocate an amount equal to the excess contributions adjusted for investment gains or losses to all nonhighly compensated employees who were eligible to defer during the plan year. (Is this the plan year tested, or the plan year in which the refunds should have occurred?). I also believe these contributions are subject to the vesting requirements.

Am I on the right track?

notice 98-52 VIII E

clearly states

"...a plan that uses the safe harbor methods to satisfy the ADP or ACP test for a plan year is treated as using the current year testing method for that year and, thus, is subject to the rules...relating to changes from current year to prior year testing...

so for you document experts, does that mean the document MUST say testing method is current? If the document says 'use prior year testing' does the notice simply override it?

We have a client who wants to set up a new safe harbor plan effective 7/1/03 (no other plan in place) and I have a couple questions.

1. Should the notice have gone out 30 days prior to 7/1.

2. There is an employee who was full time in the first 6 month of the year, but went part time as of 7/1, will be paid W-2 wages of $1,000 and commission as a independent contractor going forward. Does he have to be included in the new plan?

3. Should we ask the client to wait until 1/1/2004 to make the plan effective.

Has any one heard of Paradigm Solutions Group, LLC / The Healthier Plan

They promote having employee pay 100% of medical premium through a 125 plan. then reimburse medical expenses under a MERP/HRA (reimbursed amount is close to the after tax cost of the employee). The net effect to employee paycheck is zero, but employer saves money even after admin fees. Typical savings to employer claimed is 10 to 20%. Employee is supposed to keep receipts of qualified expenses and submitt at year end. Meanwhile the employee all year long is receiving reimbursements under the MERP. I asked what if the employee has no receipts or expenses and was told they could sign off stating they had them or make the MERP reimbursements taxable to the employee. Any thoughts or experiences with this program?

I have a client that has already received funding waivers in past years, and for which we submitted a waiver application for 2002. The client recently informed us that they may be able to find the funds to satisfy 2002's requirement.

Has anyone ever rescinded an application for a funding waiver?

Does rescinding the application have any effect on the three waivers in fifteen years rule?

Are there any other consequences to rescinding an application currently before the IRS and PBGC???

Thanks for your help!

We are currently using the Corbel cross-tested volume submitter plans. It is our understanding that as long as we do not significantly change the language in the plan, we do not have to submit the document to the IRS for a determination letter. Is this correct?

Our 401(k) plan has a Puerto Rican employee who passed away. He has a beneficiary designation on file with us naming his 2 brothers as beneficiaries. The employee was never married.

A son has suddenly appeared, claiming Puerto Rican law requires any benefit to be paid to the estate (and therefore him), overriding any written designation and is claiming if we had paid the benefit to the named beneficiaries we (plan sponsor) would be responsible and would need to pay twice - once to the named beneficiaries and once to the estate to correct the mistake.

Is anyone familiar with this law, and does it involve benefit plans, life insurance and personal property? Thank you!

It's my understanding prototype adoption agreements must be restated for every amendment. Separate amendments to a document section are not permitted. Is this true? Is there a rev proc that backs that up?

Thanks

TPA/Recordkeeper provided the company with the safeharbor notice in September 2002. The company had the employee meeting and distributed the notice. TPA/Recordkeeper did not forward the plan document and amendment to the client until Feb/March 2003. The client has been making deferrals and matching contribution as if a safe harbor was in effect. Upon receipt of the documentation in Feb/March 2003, it shows an effective date of January 1, 2004 rather than the January 1, 2003 as the client expected.

Can't the document be signed in March 2003 with an effective date of January 1, 2003 and still use the Safe-Harbor for 2003 since the notice was given?

I thought I had run across some provision in the Regs. before regarding a frozen plan being exempt from coverage testing. Can anyone point me in the right direction? Thanks.

Can an employee get reimbursements from his flexible spending account for after-tax premiums he paid for dependent coverage under his own employer's group health plan? I know that the IRS has taken the position that individual plan premiums cannot be paid from FSAs and that premiums for coverage through another employer cannot be paid using FSA funds. However, in looking at Prop. Reg. 1.125-2 Q&A 7(b)(4) it is not clear whether reimbursement of premiums for coverage with the employer sponsoring the FSA is also prohibited. (Assume for purposes of this inquiry that there are reasons that the employer does not allow premiums for dependent coverage to be paid on a pre-tax basis through a premium conversion component of a cafertia plan.) It seems that many have interpreted this reg to prevent reimbursement of premiums for unrelated coverage, but not for group coverage provided by the employer. Does anyone have any input or other guidance to which I should refer? Thanks.

I have a 401(k)/profit sharing plan that the 2 HCE's (one of which is the owner) waived out of the plan irrevocably (not sure why). They are now looking to shelter some money somehow, and we are starting to think of a way to do this. Would the waiver from the profit sharing plan prevent them from implementing a cash balance plan? If so, what would you suggest, other than terminating the plan and starting over due to them waiving out of the profit sharing plan they now have in place?

A valuation is performed as of 12/31/2002. The assets on that date are $1,000,000. These assets include contributions for the calendar year 2002 of $500,000. Additionally, the client makes the final contribution in March 2003 of $75,000.

Now, it is easy to determine that in funding the plan, the valuation assets are $500,000 (ignoring potential interest for 412 prepayments for the moment). This is because the prepaid contributions for the current year are ignored for funding.

However, for PBGC Schedule A, the instructions for Line 3 appear to say that because the Determination Date is 12/31/2002 then the actuarial value of assets is used in the determination of the variable premium for 2003.

Is a client permitted to use the $575,000 (the prepaids during 2002 and the payment during 2003) on

line 3©?? The $75,000 would have to be discounted to the determination date but it is made prior to the premium payment date (which I read as one of the requirements).

The inclusion of this additional money would enable the client to avoid the variable rate premium entirely because then the assets would exceed the vested benefits.

Thanks for any and all comments.

Is anyone willing to share what wording they put in their comparability plans to cover the following situation:

Plan has a 1000 hour, last day of the plan year requirement for the allocation. Plan is top-heavy. Some people only receive the TH minimum. The plan fails the gateway. Those people that are below the gateway are bumped up to make the plan pass the gateway.

My plan does not currently say that you can bump these people up to the gateway. It specifically says they will receive no more than what is required to satisfy the top-heavy minimum. Therefore, I will be doing a corrective amendment by Oct 15 to allow for this correction for the 2002 plan year. For 2003 and future I would like some failsafe language in the plan.

I have an article dated 1-23-2003 from Sungard Corbel that says they had submitted some wording to the Volume Submitter Coordinator for approval for the "topping-off the tank" wording. Anybody willing to share any wording that has been approved by the Volume Submitter Coordinator or has been approved via Determination Letter in an individually designed plan?

Thanks

Excuse me if this has been posted elsewhere, I searched and could not find anything.

I was referencing an old Top Heavy Training Manual and came across this situation:

Company A closes it's doors on July 15th, 2002. The plan was found to be top-heavy for the year of 2002. Under IRS regulations, it says that because the company has now closed it's doors, that the TH minimum is not required.

I don't believe that I have ever ran across information indicating that this is a true statement and I have always thought that because the plan is a seperate entity outside of Company A, the TH contrib. is still owed to the plan, regardless.

Thoughts?

I've seen this question posted before, but with no response. I'll give it another try.

Anyone know of a list of plan changes applicable to 403(b) plans arising out of the GUST legislation. It can't be very long.

Thanks.

A terminated participant is requesting two things:

1) he wants to roll money from a previous plan into the company he just terminated from. The document says "employees" are allowed to roll $$ into the plan, so the employer can tell him no on this one, but..............

2) he also wants to take a loan

The loan program states loan payments are to be repaid via payroll deduction. Is the plan obligated to allow for this loan? Can the employer technically "get out of" allowing for the loan based on this?

Many of my plan sponsors cringe when terminated participants want to even continue making their loan payments, they feel they should no longer have to administer their loans :angry: , so I usually take over for them to keep them happy! But this situation is different, he want to initiate the loan as a terminated participant.

As always, your comments are greatly appreciated!

Linda

In a 401k plan, do you include the basic PS contribution with the matching contribution when you do the testing? Or do you use match only?

Employee's spouse has DCA through her job, $5,000 for the year. However, she quits as of 6/1. She has submitted $2,000 and been reimbursed that amount BUT has submitted invoices for $3,000. Employee enters into DCA through his employer and wants to get that $1,000 covered. Now, the Employee can't do this because the invoice for services was before he was a participant in his plan.

The question is, can the qualifiying event that allowed the employee pick up the DCA be when he knew his wife was going to quit rather than her actual term date? If that was the case, then he could have covered at least part of the last invoice. Thoughts?