I have a 1-participant DB plan takeover case where the contribution figures are quite high. The actuarial assumptions appear to not be fully disclosed in the Sch B attachment as required, since I cannot even get close to the numbers using the disclosed assumptions (the Sch B attachment is a word processor type version, not output from any valuation software). The only way I can duplicate the prior year's numbers is to use a post-retirement COLA in the benefit - with this I can come very close. The problem is that the COLA increases go beyond the current year 415 $ limit. Revenue Ruling 81-195 and IRC 404(j) prohibit this.

The valuation software I use appears to compute the reserve at NRA by using a new interest rate (1+i)/(1+j) to model the COLA. However, there is no 415 $ limit cap to the post-retirement COLA increases coded into the software either. Assuming I'm correct in my conclusions, I don't feel this is necessarily a mistake on the part of the valuation software, just a software parameter that should be used with caution. Another actuary and I have contacted the software company, but haven't yet received a full reply - I expect to hear from them this week.

The client does not want me to contact the prior actuary, probably to limit any problems for them if another professional catches a mistake (although I find major errors in takeover cases all the time, and E&O coverage seems to prevent anyone from ever admitting a mistake has been made). I always proceed with caution before concluding a prior admin firm did something incorrect, so I'm wondering if anyone has a different opinion or insight, or can confirm.

This issue will probably prevent me from taking over the case, as I'm sure the client probably won't want me to revise all prior year's valuations - I don't see how I can avoid this. Anyone have a different approach?

With regard to a multiemployer health and welfare fund are the Board of Trustees the "plan sponsor" or is the fund itself the "plan sponsor" for purposes of HIPAA?

Under Treas Reg 1.401-1(b)(2) it states that merely making a single or occasional contribution from employer profits does not establish a plan of profit sharing. To be a profit sharing plan, there must be recurring and substantial contributions out of profits for the employees. In the event the plan is abandoned, the employer should promptly notify the distric director, stating the circumstances which led to discontinuance of the plan.

My question is this: we are trustees for a profit sharing plan that has not made a contribution since we took it over in 1997. At what point is the plan considered abandoned? Should it be terminated? What if they decide to make a contribution for 2003? Does anybody know if there is a clear guideline that is used to make this determination? The employer is working on restating the document for GUST/EGTRRA.

Thanks for your help!

Form 5500 EZ filers are not eligible for the Department of Labor's Delinquent Filer Voluntary Compliance (DFVC) Program. The only penalties that are assessed for the From 5500 EZ are IRS penalties. Does the IRS have a similar program or procedure for late filed Form 5500EZ that may reduce or offset late filing penalties?

how is a multiple employer plan audited for ERISA purposes? Is it audited by participating employer over 100 or is it audite based on the total number of participants regardless of employer?

Does HIPAA require an authorization form to release information to a spouse or other family member?

If a plan sponsor wants to restate their SEP to a 401(k) safe harbor, can the safe harbor feature be added in the middle of a year? Does the SEP follow the same rules as a 401(k) in adding the safe harbor match or nonelective?

How does "effectively connected income" affect 401(k) plans?

When is “effectively connected income counted for 415 limit purposes? Is “effectively connected income” taxable in the U.S.? Can a participant contribute pre-tax salary deferrals from “effectively connected income?” Is "effectively connected income" the same as U.S.-source income?

If I file for an extension for my personal income tax for 2002 (and pay the anticipated tax due by 4/15/2003), can I make deductible IRA contributions for the 2002 tax year after 4/15/2003 (but before I file my final 2002 return)?

How does an employee transfering from one unrelated employer to another affect top heavy testing in a multiple employer profit sharing plan? For example, unrelated Companies A & B maintain a calendar year multiple employer plan. Top heavy testing is performed separately for each employer. An employee worked for Company A and had an account balance of $10,000 on 12/1/02. The employee transfers to Company B on 12/1/02 and receives a $1,000 allocation from Company B during December 2002. Ignoring market gain/loss, on the determination date 12/31/02, what amount is included in the top heavy tests for this employee for Companies A and B respectively? Does 1.416-1 Q&A T-2 mean I have to recordkeep these contributions separately for the life of the plan?? Or would it be treated similar to a related rollover since the employee in essence has no choice but to "rollover" into Company B's plan? Thanks!

A Custodian incorrectly charged a 3% surrender fee on one particular fund to participants when the money was moved to a new custodian.

At a later date that money was refunded by the custodian.

The problem is that several participants affected by the surrender fee left, and the $ amount is pretty immaterial.

Q: Can the $ amount be allocated to participants in the plan based upon account balances and not to those who actually were charged the surrender fee?

We are familiar with Labor Regulation Section 2520.107-1(d), which provides that original paper records may be disposed of any time after they are transferred to an electronic recordkeeping system (provided that the system complies with the rules), unless the electronic record “would not constitute a duplicate or substitute record under the terms of the plan and applicable federal or state law”.

As a practical matter, what does this mean? For example:

* What original paper records are Plan Administrators and Employers retaining, even after these records have been transferred to an electronic recordkeeping system?

Original distribution and loan forms that are notarized?

Original distribution and loan forms that are not notarized?

Certified copies of QDROs or death certificates?

Plan amendments?

Powers of Attorney?

* Am I correct in assuming that TPAs typically return the original paper documents listed above to Plan Administrators and Employers, regardless of whether the TPA is transferring documents to an electronic recordkeeping system?

Thanks in advance for any thoughts on this.

Can a 401(k) profit sharing plan participant waive participation in the plan (i.e., no 401(k) elective deferral OR profit sharing contribution) on a going forward (and, I assume, irrevocable) basis if he or she has already been in the plan for years?

I'm quite certain that the answer to this question is "no". The only waiver that I am aware of that is permissible under the Code is the "one-time irrevocable election upon an employee's commencement of employment with the employer or upon the employee's first becoming eligible under any plan of the employer . . ." under Reg. s. 1.401(k)-1(a)(3)(iv). This rule is in place to prevent plans from being interpreted by the Service as a cash or deferred arrangement. Is there another form of waiver or election that applies to folks who are already participants?

We took over the administration of a plan in March and discovered that a participant was not paid their MRD for 2002. (The participant is 75 and retired in 1995, so the MRD is required.) We just paid the 2002 MRD and will be submitting to the IRS under VCP to obtain a waiver of the 4974 excise tax.

Would the distribution be taxable to the participant in 2002 or 2003? If it is taxable to the participant in 2002, do we issue a late 1099-R for 2002, even though the distribution was made in 2003?

Any assistance would be greatly appreciated.

I have a situation where an employer failed to deposit the deferrals for their retirement plan within the maximum time limit (often 2-3 months late... and EVERY deposit was late). I checked Yes to box 4a on Schedule I but now am unsure how to proceed. I have not had this problem come up before and want to make sure I complete all forms necessary.

As a TPA, is it my responsibility to complete a form 5330 or is that a form for an accountant to complete?

Is there anything else I need to do? I am working on the employer to get the deposits done and am looking into the VFCP program but this employer seems to think he will never get caught! (Yikes)

Any insight/advice is greatly appreciated.

Rachel

I am trying to complete a Schedule R for a client whose plan had distributions during the year. However, I am not sure exactly how to fill out the form. The client does not have a trust ID for this plan so when 1099's were completed, the employer's EIN was used. In reviewing the instructions for this Schedule, it states to "Enter the EIN(s) of any payor(s) (other than the plan sponsor or plan administrator on line 2b or 3b of the Form 5500) who paid benefits reportable on Form 1099-R on behalf of the plan to participants or beneficiaries during the plan year. This is is the EIN that appears on the Forms 1099-R that are issued to report the payments."

There weren't any other EIN's used to distribute account balances besides the employer's EIN.

Do I just list this EIN or leave it blank?

Thanks,

Rachel

Does anybody think that submitting a DFVC filing and paying the appropriate fee would somehow earmark that plan for a future audit, even if there wouldn't be an obvious reason for an audit?

Also, has anyone heard of the IRS and/or DOL assess any additional penalties (civil or otherwise) after a plan has filed with the DFVC program.

Thanks for any info - I'm curious to hear about people's experiences with the above.

Are S-Corp distributions ever allowed to be included as plan comp? If so, what definition of comp is needed? It would seem that it would be 415©(3).

To change the EIN on a welfare plan, is it necessary to terminate one plan and start a new one, or can that be adopted through a plan amendment?

My question is on TIPS. Tips are included as gross compensation in my definition of compensation. For this employer, tips are paid out in cash at the end of each day. Many employees earn 80% or 90% of their pay in tips. With FICA, medical, etc, being withheld on the remaining 10-20% there is often a zero net paycheck. Many of these employees want to participate in the 401(k) plan, especially since there is a generous match. Is there any way to do this 401(k) withholding on the tip income since there is not enough of cash running through payroll to withhold on?