Our firm recently received BISYS' Type II SAS 70 Report for the year ended December 31, 2002, which we were hoping to rely on to reduce participant testwork. Although the opinion was "clean", the report of independent accountants also stated that: "BISYS Retirement Services, L.P. was in the process of converting all recordkeeping to the WySTAR application and retiring the CASCADE System. Our examination did not extend to controls and related control objectives that were specific to the CASCADE recordkeeping application."

Because the CASCADE system was used for most of 2002, our firm believes that the SAS 70 report serves only to document controls at BISYS and cannot be used to reduce participant testwork. This would include testing the investment elections (which can be changed via the telephone and internet) and the allocation of investment gains/losses to participants.

Has anyone else received this report from BISYS and how did you deal with it??

A company where the bylaws restrict ownership of company stock to company employees and the ESOP, states in its benefit election forms that the ESOP will distribute the participant's interest entirely in the form of company stock, and that the participant will be required to sell to the company the shares that will be distributed to him, under the fair valuation formula for the year as determined by the ESOP's independent appraiser. (The form also contains a portion in which the participant can elect to make a "direct rollover" and contains spaces for the participant to set forth the name of the qualified plan or IRA trustee to receive such a "direct rollover.") Can a participant who receives a distribution per this form, in fact ever make a "direct rollover" under 401(a)(31) of the cash that he receives on this "automatic" sale? (If so, what is the authority for that position? Cites?) If not, can he rollover the proceeds from the sale of the stock to an IRA or another qualified plan that accepts rollovers, per 402©(6)? (It does not sound from the wording on the form, that the ESOP is going to actually be distributing any shares of stock. If it did, then maybe the participant could have his IRA trustee acquire the stock in a "direct rollover," thus avoiding any withholding, with the IRA trustee then simultaneously selling back the stock to the company.) I guess I'm a bit confused as to whether a "direct rollover" under 401(a)(31) is an option at all here, since it sounds like the employee is forced to "receive" the stock in a distribution taxable under 401 and 72, and then simultaneously "sell" the stock to the company.) Thanks for any help!

A cash balance has a higher interest credit for active employees than for former employees. In other words, it is partially backloaded. (The Contribution Credits are a percent of salary).

Both for purposes of measuring the ABO under FASB #87, and the current liability for ERISA purposes, in my opinion, it is appropriate to roll forward the balance at the lower rate (i.e the rate for inactives). Basically my reasoning is that the additional Interest Credit, like future Contribution Credits, has not yet been earned by the employee, who must perform future service for the employer before he is entitled to the additional Interest Credit. Therefore the additional Interest Credit should not be included in valuing the accrued benefit.

I have heard other actuaries express opinion on both sides of this question. I am curious about what interpretations other people are using, and whether the FASB or IRS has commented on the question.

I am the privacy officer for an employer that sponsors' a self-insured health plan. The current practice for budgeting for H&W is to provide estimated individual employee cost to the budgeting mangers to calculate their budgets for the coming year. My interpretion of HIPAA privacy rules (minimum necessary) has me questioning my company's current practice. However, I am getting a major push back from our accounting dept. and managers to "show me" where in HIPAA does it state we can not provide employee coverage levels (single, couple, family) cost to managers to perform their budgeting duties. Can you offer any guidance on this issue?

Note: The coverage level information comes from an ORACLE software based system that we use for benefits enrollment and payroll. The coming year cost are calculated by TPA vendor underwriters for the health plans.

I have a question regarding rights for a death caused by a negligent staff.

My sister-in-laws's father died recently. The staff did not respond when he was having a problem. He asphyxiated, had a stroke and died shortly thereafter. (Sorry so vague - I don't have all of the details.) Her mother is receiving hospital bills and the family doesn't believe she should have to pay - at least for the time he was in intensive care. They are in touch with an attorney and currently he is advising them not to pay.

My advice was to talk to the insurance company and have them investigate the surroundings of his death. Would this be correct?

Also, the mother really isn't interested in sueing & making money off of this. She just wants the hospital to have stricter guidelines/disciplines so that this doesn't happen to someone else. It seems to me money talks and that may be the only way to get them to take better care of their patients. Are there other ways to go about this?

Any other words of wisdom for these situations would be appreciated.

I posted this topic in the general retirement plans area and have received no replies. Thought I might get more readers here. . .

We have a client with a DB plan that will be frozen and a 401(k) plan with deferrals only-no match, no profit sharing. The plans cover the same employees, including 2 key employees. The 2 key employees are also the only 2 HCEs.

One of the key employees is receiving a life only annuity benefit from the DB plan, but continues to be employed. He has elected not to defer in the 401(k) plan, and, in fact, has no 401(k) plan balance. The other key employee is younger and is currently defering in the 401(k).

The plans are aggregated for top heavy determination and are top heavy. Since EGTRRA, we no longer have to count service while the DB plan is frozen for top heavy purposes. If the plans are written to provide the top heavy minimum in the 401(k), at the required lesser of 5% or the highest contribution rate for any key employee, and both key employees have elected to defer 0%, are we then required to provide a top heavy minimum in the DB, even though it is frozen, and would we then have to count years when the DB plan is frozen since otherwise, none of the nonkey would accrue additional benefits?

If so, since the goal is to avoid providing the top heavy minimum, can we amend the 401(k) plan to make key employees ineligible, thus avoiding having to combine the plans for testing, and then provide the top heavy minimum, if necessary, in both plans? There would be no minimum in the 401(k), and none in the DB since non-key employees have already accrued the required top heavy minimum.

Any comments would be appreciated.

I am looking for decisions (after 1995) awarding $100 or $110/day penalty for failure to provide records to a plan particpant in circumstances of concealment and gross breach of fiduciary duty by plan administrator.

Less than 3 years service, 20% vested. Accrued balance did not become nonforfeitable when plan terminated early. Why did ERISA Sec. 411 not apply? What would have happened to the 80% balance not paid out?

I am looking for resource on how different entities effect compensation for qualified plans/benefit purposes. The ERISA Book has some information- but I need a more comprehensive guide or resource.

Your suggestions are appreciated.

Can anyone refer me to a good source of information regarding the gateway/cross-testing rules for DB and DC plans. I am especially interested in scenarios in which the employer sponsors a PS and a cash-balance plan. Any on-line resources or books for purchase?

Searching for some perspectives. Plan A merges into Plan B on 6/30. Both have calendar PY. Both have a non-zero Credit Balance. Both have Reconciliation Account. The surviving plan has a full funding credit, without regard to the merger.

I do not have a change of method, but am using the techniques in section 4.07 of Rev. Proc. 2000-40 to develop my funding standard account. Anyone willing to share some experience?

Has it been determined how to calculate COBRA premiums for HRAs? Is an ex-spouse entitled

to COBRA on 100% of the balance in the employee's HRA at the time of the divorce?

A plan filing a Schedule H for 2002 moved their investments in 2002. The assets moved from a mutual fund company that charged the plan $8,000 in surrender fees. Are these fees to be reported on Sch C for 2002 and if so, how would the fees be coded.

Thanks.

What are the thoughts about Employer's who consistently make errors in their deposit of loan payments to the plan? It is usually an excess amount, then the employer will request the plan to refund the excess to them. Also, the same questions in regards to Employer contribution and Employee deferrals.

Posted same question on Distributions from Retirement Plans

Customer wants to use rate higher than IRS rate ( He says 2002-62 is only a guideline). If he insists, can we do his calculation using the higher rate? Is it our responsibility to tell him no or warn him ? We are the Bank Trustee of his IRA.

Thanks in advance for your help

Customer wants to use rate higher than IRS rate ( He says 2002-62 is only a guideline). If he insists, can we do his calculation using the higher rate? Is it our responsibility to tell him no or warn him ? We are the Bank Trustee of his IRA.

Thanks in advance for your help

I'm wondering if anyone out there is familiar with a medical group structure known as the "satellite group" setting. If not, perhaps the truly ambitious among you would be kind enough to wade through to offer suggestions as to the following.

We act as Plan Administrator for the 401(k) Profit Sharing Plan of a group of hospital-based physicians. Unlike the traditional medical group structure, wherein each of the physicians is an employee of a single corporation, physicians engaged by our client are actually employed by their own individual satellite service corporations ("satellite service corporations"), which, in turn, are engaged as independent contractors by our client (the "group service corporation") to provide physician services on behalf of the group service corporation. However, it bears noting that the group service corporation is solely owned by the physicians who are engaged by the group through the satellite service corporations. There are no outside or "third party" owners. Each physician is only issued shares (roughly 7% ownership) of the group service corporation at the time when they become eligible to participate in the Plan. Each of the physicians is also the sole owner of their respective satellite service corporation and each has no employees.

The group service corporation adopted a 401(k) Profit Sharing Plan (the "Plan"). The Plan definition of "employer" includes all Affiliated Employers, regardless of whether the Affiliated Employers adopt the Plan (hence, the issue of shares for the individual physicians to become eligible to participate). In addition, any Plan participant who is actively employed during the Plan year (calendar year) is eligible to share in the discretionary profit sharing contribution. The profit sharing contribution is paid out quarterly as the group service corporation reconciles the amounts it owes in compensation to the various satellite service corporations. To illustrate, if a particular satellite service corporation is owed $100,000 in compensation for a given quarter, the group service corporation would pay compensation of, say, $93,000 directly to the satellite service corporation. Then, the group service corporation would cut a check for the $7,000 profit sharing contribution directly to the participant's broker (directed investment accounts) and deduct the $28,000 ($7,000 x 4 quarters) profit sharing contribution on its income tax return at the end of the Plan year. The 401(k) elective deferral portion of the participant's contribution is paid directly from the satellite service corporation and thus reflected on the W-2 that the physician receives from his or satellite service corporation.

One of the physicians is leaving the group and terminated the contract between his satellite service corporation and the group service corporation as of March 1, 2003. My understanding is that the satellite service corporation and the group service corporation are no longer "Affiliated Employers" as of March 1. In terms of compensation, the individual physician will likely be paid W-2 compensation from his satellite service corporation of approximately $75,000 for the period from January 1, 2003-February 28, 2003. However, you should appreciate that there is a back-up of receivables due to the lag between services and collection, such that compensation from the satellite service corporation to the individual physician will easily be in excess of $200,000 at Plan year end. The question is whether we need to take all of it into account.

1. Is the individual physician required to make a profit sharing contribution to himself for Plan year 2003? I am fairly comfortable the answer here is yes.

2. Is the individual physician allowed a profit sharing contribution based only on pre-termination compensation? Appreciate that the individual physician does NOT want to make a contribution of any amount for 2003 and that all of the other participants (all $200,000+ W-2 comp.) are getting $28,000 profit sharing contributions.

3. What if the individual physician remains a shareholder of the group service corporation until the end of the year? Would this require us to take into account the post-March 1 compensation? Even if neither the individual physician or his satellite service corporation will provide services to the group service corporation after March 1?

Any advice on any or all of these questions is much appreciated!

Regarding testing a cash-balance plan using general test (on benefits basis). If your plan's actuarial equiv. interest rate is something close to 30-yr bond rate, is "normalizing" needed from plan actuarial equiv. to standard mortality and interest rates for NAR purposes ?

What if the cash-balance plan allowed for lump sums, under current interst rate environment would you likely have a MVAR greater than the NAR due to 417(e) subsidy ?

Plan has a last day requirement for match. Relius allocates the match correctly, but on the General Nondiscrimiantion analysis it will report terminated participants not receiving a match due to the last day requirement as benefitting under 401(m). Also it reports participants that have terminated in a prior year as eligible, but not benefitting for 401(k) & 401(m), but does correctly report those same participants as excludable for 401(a). Any thoughts on where my problem lies?

We have a 401(k) profit sharing plan that allocates a discretionary profit sharing contribution at the end of the employers fiscal year (ending 3/31/03) for the calendar plan year (ending 12/31/02).

It also has a last day of employers fiscal year employment requirement in order to share in the contribution allocation.

For deductibility purposes, when we look at eligible compensation for the fiscal year, do we look at everyone eligible to participate in the plan or only those participants eligible to share in the contribution allocation?