I am doing some research into the gray area of the use (or non-use) of control premiums in valuing ESOPs that hold a majority of the stock in the company.

The argument for not using a control premium seems to come down to the fact that the ESOP is made up of individual participants and each participant holds a minority interest in the company, therefore the stock is valued on a minority interest. But, on the other hand, if an ESOP owns a controlling interest in a company, especially cases of 90% or 100% ownership, then the ESOP has control and it makes sense that the stock should be valued on a control basis.

I’m looking to see how other professionals deal with this situation. If an ESOP owns 100% do you require that it be valued on a control basis? I know there are a variety of case specific facts that play into the outcome. But, generally, what is your view of this situation?

TIA

We have a deferred compensation plan in our church that was set up by the ruling body of the church. We receive $2000 each year directly placed in our 403B. But, until we are vested, the contributions are pro-rated...i.e., $750 in the 403B the first year, $1,250 in the church's escrow account until 8 years of service had been completed, the following year it was raised to $1,000 in our 403B, $1,000 in the church escrow, and last year $1,250 to the 403B and $750 to escrow. In 2 years, we will have 8 years of service. But, the clincher, the church has decided that they can't afford a pastor, so we have been terminated, effective the end of the summer. The deferred compensation is paid in July. They don't want to pay this years, because we will be terminated the next month. We also "lose" the escrow amount because we won't make the 8 years of service. Can they do this? Any insight would be appreciated. Thanks.

Can there be a Last Day rule for Safe Harbor match or non-elective contribution?

I am evaluating the possibility of adding an after tax savings plan to our existing 401k for our hourly employees. Would appreciate hearing from anyone who can share his/her experience. Thanks.

Is there a minimum requirement on the amount that is to be refunded to a participant who has terminated? e.g. A participant has overpaid by $1.32 on their premium for the month of May. Typically that amount would be applied to June's premium, but instead the participant decided to cancel the coverage as of May 31. Is there a minimum amount that we are required to return to the participant (e.g. anything under $25 doesn't have to be returned) or are all overpayments required to be refunded?

FACTS:

Plan set up by Company X (Company X being the plan sponsor) in the early '90's (PS/401k). In 1999 new TPA inherits the Company X as a client. At that same time a new investment provider/recordkeeper also enters the scene. TPA is independent and not related to the recordkeeper.

Early '90's two gentlemen both by the name of John Doe work for X. Doe #1 hires/fires prior to ever becoming eligible. Doe #2 works for about 5 years and ends up w/ about 30K in PS and 401k money by the time he separates. Both Doe's leave X in 1995.

2001, Doe #1 requests a distribution (via his daughter) from the plan (recall he had no money). Doe #1 has had a massive stroke and is completely incapacitated physically and mentally. Daughter legally has durable POA and signs the recordkeeper's required distribution paperwork, providing a copy of the POA document.

X inadvertently, in 1999, gave Doe #1's address to recordkeeper for statement mailing. So Doe #2's account statements have always gone to Doe #1's house since the change in recordkeeper's in 1999. Thus leading daughter to believe that Doe #1 has 30K in this plan (noone ever thinks to check the soc #'s on the a/c statements). Doe #2 never questions the complete lack of account statements.

Sole role of TPA in assisting with distributions is to verify vesting and make sure J&S is complied w/ if necessary etc etc. Client is not sophisticated enough to know of these legal compliance issues and recordkeeper specifically does not provide these functions.

2001, daughter forwards distribution paperwork to trustee, trustee signs the paperwork and forwards to TPA, who calculates vesting and makes sure legal ducks are in a row. Neither trustee nor TPA is aware that the wrong Doe has requested the funds. Bear in mind both Doe's terminated four years prior to TPA ever becoming involved w/ the plan.

TPA forwards paperwork to recordkeeper to cut the check. On that same date, recordkeeper does the following:

-Changes the social security number on the account. The distribution paperwork reflects the soc # of Doe #1. The recordkeeper's records reflect the soc # of Doe #2, to whom the money really belongs. Recordkeeper happens to be one of the best in the business and is extremely diligent about never making changes, like soc # changes, w/o a trustee/plan sponsor signature. Unfortunately in this situation recordkeeper believes procedures were not followed and cannot pinpoint why they (recordkeeper) changed the soc # on the account, the day of the distribution, from Doe #2's soc # to Doe #1's soc #. Had the soc # differential been questioned, the payout probably would have never happened.

-Cuts the check (participant was taking cash, not rolling) to Doe #1.

Fast forward to 2003. Doe #2 appears out of the woodwork and requests his funds, which of course he is legally entitled to. He is initially informed that he was distributed early 2001. Doe #2 claims he never got a check (also wants the cash, not rolling). After investigation, all of the above facts are uncovered.

QUESTION:

This unfortunate set of circumstances is a true story. Who is liable to the participant and what insurance policies may cover the loss? I realize this is an issue for attorneys to potentially sort out but am curious as to any opinions. Thanks in advance for any help.

I have a client who recently merged his money purchase pension plan into his 401(k) profit sharing plan. The effective date of the merger was 12/31/01. The problem is that the funds technically didn't move out of the related trust until January 2002. The question being does the money purchase plan need to meet minimum funding requirements for the year 2002? How will this affect the 2002 5500 reporting?

When ERISA was passed into law in 1974, my company indicated in a letter that I was given three year credit for service prior to age 30 ( plan required you to be 30 years old to join), I also was given $1 monthly annuity credit for each year of prior service. I was also told that I was fully vested at age 37, and did not have to wait until age 40 and if I terminated service at age 37, I would be entitled to 50% of my annuity accumulation at age 55. The company's payout start at 50% for less than twenty years service and goes up in increments until 25 years of service is obtain with a payout of 63%

Question: Does the three years prior service credit (age 27,28,29) count toward total years of participating service, although years actually under the plan is 21 years. Am I entitled to benefit based upon 21 years or 24 years?

Nice utility from Microsoft that speeds up the Windows XP boot-up process:

http://www.microsoft.com/whdc/hwdev/platfo...ot/BootVis.mspx

Start it up, then use the Trace -> Optimize System command. Worked well for me!

Does the Privacy Rule (or some other law) permit a health plan to send correspondence (e.g. EOBs) directly to the primary insured, even if such correspondence concerns a dependent? It is my understanding that many plans are continuing to send EOBs to the primary insured even if the document concerns a dependent. I gather that if a dependent wanted to receive communications from the health plan directly to them, they could request the plan to do so (request for confidential communications). Since I could not find a specific HIPAA regulation approving or disapproving of the action, I figured I would pose the question to the experts!

Thanks.

I am trying to fill out a Form 5500, and I cannot discern what the following information, contained within the insurance company's Schedule A information, means:

Average Enrollment =

100 Subscibers

200 Members

For purposes of filling out the 5500, are both subscribers and members "participants" for purposes of 5500, line 7?

Thanks!

Have client who withheld SIMPLE IRA deferrals from ees pay since 2001 but never remitted ee deferrals (or er match) until yesterday.

As I review the DOL's timing rule on remitting ee contributions to SIMPLE IRAs (29 CFR 2510.3-102), it is unclear to me on whether the er owes lost interest or earnings on the funds.

The paragraphs referring to the employer's obligation to make up lost earnings or interest seem to apply to pension plans only - not to SIMPLE IRAs. Has anyone come across a different interpretation? Does this er owe interest?

I noticed that the EPCRS program now includes SIMPLE IRAs - does anyone know if the IRS recommended method of correcting this type of violation includes procedures for making up lost earnings/interest on the funds?

jlg

A new plan is set up for an employer who has several participants who are 5% owners and who are over age 70 and 1/2. Some are well into their 80s and are close to 90 -really!!. (We should all be so healthy!!!) I am assuming that a contribution can be made on behalf of these senior-senior citizens, but how does MRDs work for them. Are they given the grace period to the following 4/1 for purposes of receiving their first MRD and then double up in such year or must they take their first MRD by 12/31/03, the second by 12/31/04, etc....

Merger of two corporations (stock for stock), with possible cash earnout payments over the next few years. Some of the earnout, if earned, will be paid to shareholders' 401(k) accounts (or possibly conduit IRAs if 401(k) accounts are rolled to IRAs) based on company stock held within their accounts. Is the earnout paid to the 401(k)/IRA accounts simply considered earnings and, thus, creates no immediate tax consequence within the 401(k)/IRA? Is the answer the same if the participants sold their stock held within the 401(k)/IRA prior to the time the earnout is paid? Any thoughts are appreciated.

Does anyone know of any pension funds suing their investment manager because they invested in Worldcom stock? (Not suing Worldcom or its investment managers.) In general, does anyone know of any suits filed by pension funds because of bad investments by their investment managers?

I have several questions regarding QSLOBs, but I need to start somewhere. We have a controlled group that includes several companies. The owner of these businesses is a European company. I believe that most of the US companies can be treated as QSLOBs. Each of the companies has its own 401(k), and one also has a DB plan.

A couple of the companies have just a handful of employees. They don't seem to overlap with each other or the any of the other companies. They don't meet the 50 employee rule for QSLOBs. What do I do with them? If they are covering all eligible employees in their plans, can they continue to maintain their own plans?

A couple of the companies do similar businesses, and share a few employees. If each company can pass coverage and minimum participation on its own, and I allocate those few employees to one company or the other, can they still be QSLOBs -- or must each line of business be totally unrelated to each other?

Some of the reading I've done implies that it's not worth it to go through the hassel of trying to meet the QSLOB rules. It seems that it's just as easy to test all the businesses together. Can anyone comment?

For FMLA purposes a child means biological, adopted, or foster child, a stepchild, a legal ward, or a child of a person standing in loco parentis, who is either under age 18, or age 18 or older and "incapable of self-care because of a mental or physical disability."

Does that mean that a child that is over 18, must meet the definition of having a disability on the day before the FMLA event? Or can it mean an adult child who, as a result of the FMLA event is, for instance hospitalized and needs assistance.

I need to know if the child had to have already been considered disabled by the above definition prior to the FMLA or is the FMLA event enough to cause the child to meet the definition?

I am the agent of record for a plan that has recently sold off greater than 50% of the business. Plan assets dropped from 1.5 mil to less than 500K and participant count is down to less than 40. For this size of plan what is the average asset charge, or where can I find this type of statistic?

I have an issue where the IRA holder named a trust as the beneficiary of the IRA. Form my understanding of the final RMD regs, specifically treas 1.408-8 Q&A 5, this designation cannot be passed on to the underlying beneficiaries of the trust. This means that all post death distributions must be reported under the name and tax ID number of the trust beneficiary. The trustee may then pay the funds to the underlying beneficiaries of the trust.

However, I am being challenged. I am being told by the trustee of the trust that the effect that the underlying beneficiaries of the trust can be treated as the direct beneficiary of the IRA, and not just for purposes of calculating RMDs as provided in the regs, but that we should ignore the trust altogether and treat the underlying beneficiaries of the trust as if they were the direct designated beneficiaries ( i.e. , instead of naming the trust, the IRA Holder named the individuals as the beneficiaries)

What is the right approach or permissible allowances.

Thanks for your help.