An employer wants to add a new comparability allocation and a safe harbor match to his 401(k) Plan. The match is 100% up to 4%. For the cross-tested formula he wants to contribute 2% to the rank and file and 6% to executives. If testing fails HCEs will be reduced. From a previous post I got the impression that the 1/3-2/3 could not be used for the gateway on a safe harbor plan but I cannot find anything to support this. Is this true? Does anyone see other problems with this formula? Of course, I could leave the definate formula out, but I want the employer to know what to expect.

Thanks!

According to our document provider, each time a client adds a new benefit such as life, prescription, dental, vision, ltd or voluntary benefits - an amendment in plan document language for cafeteria plan must take place. The charge is $250 in addition to annual administration. I am arguing that the term "group insurance" or "group health insurance" should be used to cover all these since the IRS already states that group health means medical, dental, vision or other employer provided insurance. The document must be modified even if the employer offers LTD as an employer paid benefit and then another if they offer voluntary buy-up the following year etc. If an employer offers life either employer paid or employee paid, it must be amended as well.

The only reason the TPA knows this is because apparently a well known voluntary benefit carrier is telling clients that when they add voluntary benefits, they need an add on document which this carrier will provide for free. Then they will also replace current TPA but do not explain that if the membership falls in the voluntary program, this free service will be withdrawn. The document provider does not provide for simple language like group insurance or group health. Why would the plan document have to include employer paid benefits as well? This is a well know firm that advertises here as well that provides Plan documents. What will result is that the TPA will lose entire cafeteria to AFLAC or if group insurance is handled, each time a client adds or modifies a benefit, they will have to be alerted that it will cost them to modify Plan Document. This goes against all logic seems ridiculous in light of IRS language in recent times and general market conditions. Does anyone have any thoughts or experience with this? It seems excessive to me. I can understand why restatement is necessary for HIPAA and COBRA for FSAs but amending a plan document and spds each time an employer modifies or changes does not ring true. Is this just a marketing ploy to push unnecessary plan language changes by the document vendor, TPA and the voluntary benefits company is piggybacking on this to their advantage to capture sales?

Does anyone know if workers in a Puerto Rican division of a US based company can participate in a Section 125 Plan? I didn't think they paid FICA or Medicare, so don't know what advantage there would be to the employer. How about federal income tax? Thanks.

Being exempt from Code Section 411, a church plan can cash out benefits without regard to the 411(a)(11) limit, and it can eliminate optional forms of benefit. Is there any restriction on amending the plan to increase the cashout limit as applied to vested participants who have already terminated before the amendment?

What, if any, type of withholding should be taken on a corrective distribution from a 401(k) plan due to ADP failure? Does it matter if the correction is after the 2 1/2 months following the plan year end?

Does anyone know the proper date of withdrawal to use for a building and construction industry employer contributing to a multemployer plan? Would it be the day after the obligation to contributed under the CBA expires, where the employer continues the same kind of work in the same area. Or would it just be the day on which the obligation to contribute, (the CBA) expires?

Can someone tell me if there exists an IRS ruling for Simple 401K Plans that states no distribution can be made for 2 years

Are the requirements for the Small Plan Audit for plans with greater than 5% of assets considered non-qualified the same as the Audit for plans with over 100 participants?? Is it stated anywhere that the Small Plan Audit must be done on a cash or accrual or a hybrid method?? And must the audit match the Form 5500?? Any other info would be appreciated. Thanks.

I am having one of those days where I can't remember or find the documentation that I am looking for. Quick, basic question: Can an alternate Payee of a QDRO roll her monies into a IRA without any adverse tax penalties?

I got volunteered to speak at a seminar on 5500's. I prepare 5500's, but by no means am I an expert. I need to beacome an expert over the next couple of months. Can anybody recommend a good Prepaper's Manual I could study? Several years ago I saw a Manual by Joan Guaciardi (I think, but maybe not) that was excellent, but I can't remmeber the name of it and don't even know if it is still published.

Does anyone have any experience with the following scenario:

Company files for bankruptcy March 2002 but has not contributed 401(k) deferrals and matching contributions for November December 2001 as well as January 2002. This situation only comes to light May 2003.

I am new to the 403(b) arena and have the opportunity to takeover a state economic development agency 403(b) plan. Looks pretty simple to me, no HCE's, complete a few items on the 5500 and you are done. They have a model plan document with custodial accounts and annuity contract provisions. The document is not investment provider specific.

I do have some questions on the funding arrangements. I know they are limited to annuities and mutual funds for limited reporting, but it is our desire to offer a couple options to participants for investing:

Option 1 would be a mutual fund platform with a single fund family. Is this required to be a 403(b) specific platform, or can we just utililize their 401(k) platform knowing that the plan is still a 403(b)?

Option 2 would be individual brokerage accounts limited to mutual fund universe and annuities. Again, does this have to be 403(b) specific? Also, can we restrict this option to participants that have over 5k and are 100% vested?

Thanks for some prompt input!!

In calculating the 80%/120% corridor on actuarial value of assets, is the calculation:

1. (MKT + CONTR RECIEVABLE) * 1.20, or

2. (MKT * 1.20) + CONTR RECIEVABLE

With the newest legislation, it is now possible for participants to transfer their IRA's (SIMPLE, SEP, traditional, etc) into a 401k plan. I see many providers already have a transfer form out on this.

What reporting requirements are necessary for this? Presuming a plan sponsor pools all assets into a retail investment account and act as trustee (and no custodian). Do these assets continue to be tracked as IRA assets? or simply as transferred in assets that are fully vested? What, if any, reporting is required by the sponsor (again, remember there is no custodian).

please advise...

I have a client who has come to me with a question that has me confused. They are a group of 5 clinics that are owned by at least 10 different doctors per site. The clinics are run by a management group that owns 5% of each clinic. The clinics do common billing and purchasing, but do not share any revenues. The management firm charges a "fee" to each clinic for their services. While each clinic does its own hiring and firing of personnel all the paperwork and candidate screening goes through the management group.

In definition they aren't part of a controlled group nor affiliated services group, but there seems to be a common bond running through the five clinics and the management group. I have read some about common management groups, but don't know enough about whether this is one or not and whether these groups should be in one common plan or part of a MEP.

Any thoughts or direction would be greatly appreciated.

A Calendar yr plan is terminating effective 8/31/2003.

The valuation date is BOY (i.e. 1/1/2003) and the annual normal cost under the Ind Agg method is $100,000.

Per Rev Rul 79-237, for Section 412, Charges and Credits are pro-rated from BOY to the termination date.

So for the above, the minmum required would be $66,667 plus interest to EOY & late quarterly charge, if any.

Is there any such pro-rating requirement for determining the deductible amount S404(a)(a)(iii) i.e. deductible = Normal Cost + 10 yr bases' charges and credits = $100k +0 = 100k.

Your thoughts please.

We have a self insured health plan. I have been told that if we include in our HIPPA policy that assisting employees with health insurance claims is a routine and recurring task, that we are not required to have an employee sign an authorization form before we can assist them. Can anyone verify that this is correct for me? Thank you.

Are there any articles regarding how to structure a match in a 403(b) church plan? I.e., whether it is best for the match to go into the 403(b) plan or into a separate 401(a) plan? I am just looking for some guidance on the best way to structure the arrangement.

Thank you.

May an employer, who is experiencing financial difficulty, stop making contributions to a simple 401(k) plan mid year? Must they terminate the plan in order to accomplish this?

We have submitted a plan under the VCO program due to profit sharing contributions made for 2 employees who are in an ineligible class of employees. We will be transferring the contributions to an unallocated account and the ER will allocate the dollars to the remaining participants next year.

The agent would like us to address how earnings will be calculated. These individuals were eligible employees for several years, then entered an ineligible class a few years ago. Is there a generally accepted method for calculating earnings for the years the employees were not eligible. It seems impossible since the employees were diversified amoung several funds offered under the plan and had the ability to change investments periodically.