I have a group of churches (diocese) who has adopted a 401(k) plan that we are now the TPA for. Under their old 403(b) plan, they had a church plan election. I'm not sure if something special needs to be done to have the church plan election or do they automatically have it (ie. do we need a private letter ruling?)? It appears as though Forms 5500 have been filed for the last two years. What do I do about that? Any help would be greatly appreciated!!

I have a client who has been out on short term disability. When he returns can he change his annual election? or Does he just have to make up deductions from while he was gone for the annual amount he had originally elected at the enrollment? He is wondering if he can increase his amount.

I am reviewing a participant's distribution.

He received an early out window lump sum.

I disagree with two items of lump sum calculation.

1) interest rate

2) age used to determine lump sum factor.

1) Interest Rate - section 5.22 includes "rate shall be App Int Rate ... 417(e) for the month of December preceding the first day of the Plan Year in which the distribution occurs ..."

This is a Plan amended for GATT (i.e. 30 year Treasury) with a calendar plan year.

What 30 year rate do you interpret this plan provision to mean?

2) Age - The window amendment provided for 5 additional years for purposes of the early ret factor and for additional credited service. Say a person is age 55 and the lump sum was based on the immediate annuity due him. Would you then compute the lump sum based on his age 55 or would you use age 60 (55+5) and use an immediate annuity factor based on that age?

Look forward to other observations.

Gary

Small company, 1 owner (100%) 4 employees. The 4 employees are excluded because they do not meet the age/service requirements.

Can this plan file a 5500-EZ? Is this plan subject to ERISA's fiduciary bond requirements?

Thanks!

I am trying to get a sense of whether state university medical systems (to the extent they sponsor retirement plans of their own) typically seek and obtain status as governmental employers under Code Section 414(d). I understand that in each case, it will depend on how a system is organized under state law, but am interested in any actual experiences anyone has had with this.

If you have any experience or insight into this, I would greatly appreciate hearing from you.

Thanks!

Silly questions:

Can a participant make IRA contributions directly to a qualified plan?

AND, can a sole proprietor roll a SEP into a 401(k) plan?

An EE contribution for 1/11/03 that was mailed 1/16/03 was just received with a note of apology from the postal service. Client never questioned that their check had not cleared.

Should this be reported as a "late" contribution or will the documentation of the lost mail be sufficient if any questions come up?

I made my first contribution to my Roth IRA in 1998 and made succeeding contributions since then. Let us say the total cumulative contribution was $15,000 until the end of 2001. Because the stock market has been declining since Dec 1999, the final value of the Roth IRA, by the beginning of 2002, was $10,000 -- a decline in value of $5,000, from the cumulative contribution.

Kindly help me clarify the following:

1) Is 2002 considered the 5th Year (if the first contribution was in 1998) of the Roth IRA? or is the 5th year in 2003?

2) If an early withdrawal in 2002, was made for the total balance of $10,000 (note that the cumulative actual contribution was $15,000 up to the end of December 2001 -- a loss in value of $5,000), please respond to the following (separate but related questions):

2a) If 2002 is considered the 5th Year of the Roth IRA, will the withdrawal in 2002 be considered a qualified distribution? If so, will the total amount ($10,000) be tax free, if the total cumulative contribution was $15,000 (i.e., a loss in value of $5,000)?

2b) If 2002 is considered only the 4th of the Roth IRA, the withdrawal in 2002 will not be a qualified distribution. If so, how much of the total amount of ($10,000) withdrawn be taxable, if the total cumulative contribution was $15,000 (i.e., a lost in value of $5,000)? How much will be subject to the 10% penalty?

Thanks!

Cornelio

I have 2 education IRA's with less than $800 each and 2 Roth IRA's with

less than $3000 each. From this year the brokerage will charge a yearly maintenace fee of $35. These fees are waived if you have more than $100,000 in the account. I was not aware of these fees when I opened the accounts 3 years ago. These fees are very counter productive for people with lower incomes and those just starting out. All my IRA's are stock puchases which are significantly lower than when I bought them. Should I close the accounts or is it even possible to do that?

I know a lot of people who are on the same boat , slowly sinking unless those fee's are waived. Thanks in advance for the reply.

I have a client whose 412 minimum contribution was due 3/15/03 and was not made. He thinks he can show that he has reasonable cause. What is the procedure for making his case for reasonable cause? Just make the explanation now and wait for the Service to respond? Or file the 5330 with the penalty and file for a refund?

Code Section 415©(3)© permits an employer to contine contributions to a defined contribution plan with respect to any employee who is permanently and totally disabled, as defined in Code Section 22. If the employer elects to do this, the employee is treated as receiving the compensation s/he received prior to disability. If an employer purchases disability insurance to prefund this liability, many LTD policies pay benefits for 24 months if the employee's disability prevents him/her from performing the duties of his/her own occupation. After that time, LTD continues only if the employee is unable to perform any occupation for which s/he is qualified in light of training, education and experience. The Code definition is one in which an individual is unable perform "any substantial gainful employment." If the employer continues contributions for the first 24 months of an employee's receipt of LTD benefits, does the employer violate Code Section 415 by making contributions when the employee is deemed to receive no compensation?

I have a cash balance plan (which was adopted last year and not converted) that has as its participants Target Employees (owner-doctors) and all employees who customarily work less than 20 hours a week and are not able to participate in the 401(k) (the 401(k) requires a year of service for eligibility). I just ran into a problem - the vesting schedule is a 6 year graded vesting schedule where a year of service is defined (in accordance with IRC 411(a)(5)) as 1000 hours within a plan year.

Problem is, the part-time employees will never accumulate a year of service (we are talking really part-time here). And if they do they then become eligible to participate in the 401(k) and therefore not elgibile for the CB plan. Therefore only the HCE doctors will ever vest in the benefits (this seems pretty discriminatory).

I cannot find any authority stating that a year of service can be defined as less than 1000 hours (except for the exception carved out for seasonal and maritime employees). Does anyone have any thoughts or can anyone direct me to any authority regarding the 1000 hours (why it is defined as 1000 hours, the intent for such a definition, etc.)

Thanks.

Situation:

Cross-tested profit sharing plan of a company owned by two brothers. Both brothers have their children (in their 20's) working for the company. The two owners are in the top rate group receiving $40,000 each and the rest of the employees receive the gateway minimum (5%). In the past, plan had no problems with testing. However, one of the sons is now turning 22 this year and will be newly eligible in the plan, wrecking all the testing since he would be in a rate group all by himself (even at 5%). Is there a way to exclude him by himself and still allow the other HCE children to participate? Can you exclude all HCE's under age 25 for instance? Or should a new group be formed for all HCE's under age 25 and then contribute 0% for them? Plan passes without him but not with him. Any other options?

Thanks...

A PEO is sponsoring an 401(k) multiple-employer plan. A new client of the PEO is a non-profit client organization with a 403(b). Can the multiple-employer plan contain both 401(k) and 403(b) provisions?

Employer has plan where he has been only participant for years. It has a two year eligibility period based on anniversary dates, with semi-annual entry dates.

Employer's sole employee was hired on 7/17/2000 and worked full time. At the end of 2002, employer put in ps contribution for himself and this employee under the idea that she was eligible.

Upon research, it appears that she would not be eligible until 1/1/03 and thus no contribution. Employer wants her in.

Is it possible to amend the plan retroactively to 1-1-02 to have quarterly entry dates, thus making her eligible as of 10-01-02?

In the past the D.O.L. has not frowned on this type of situation because it is favoring the non-highly compensated and getting them into the plan quicker.

Thoughts?

Thanks,

RW

Has anyone heard that there is now a requirement, per the new HIPAA Privacy Regulations, that when a health plan sends out an EOB for a dependent ,which typically goes to the employee including any applicable check, that a DUPLICATE EOB also needs to be sent to the dependent even if the dependent lives at the same address (i.e., spouse or full-time student living at home)?

If you have heard that this is requirement, please let me know where this requirement appears. I have heard talk of this, but I cannot seem to find any solid documentation that it is true required. Thanks for your help!

I have a plan that covers three groups of employees. There is a fourth group that is excluded from all plan participation. Each of the first two groups has its own specific match formula written into the plan, and each passes the availabilty test. The plan is totally silent wrt the third group. How should they be considered for purposes of 410b? They are eligible, but for nothing. It seems rather flimsy to treat them as benefiting for coverage puposes.

This is a critical issue because the coverage ratio is 55% if they are treated as benfiting, so I have the abt available. If they're treated as not benefiting the ratio drops to 14%

I have a situation where the plan sponsor of a leveraged ESOP made a substantial prepayment on its ESOP loan via a "dividend." Now it has missed over a year's worth of required installments under the ESOP loan agreement. Sponsor says that it has "prepaid" the installments.

The note itself permits loan prepayments but does not contain any langauge supporting the plan sponsor's position (i.e., prepayment relieves obligation for future regular installments until one would become due under the normal amortization schedule).

These facts raise several issues:

1) Presumably the missed installments cause the note to be in default notwithstanding the prepayment. What actions must the plan's fiduciaries take?

2) How are shares allocated with respect to the prepayment. The amount of the prepayment exceeded the deduction limits, so the deduction is limited. I assume that shares can be released up to the 415 limits, but no more. Thus, should a pre-payment "suspense" account be created for the shares that have been paid for but cannot be released due to section 415?

3) What other issues are lurking out there?

A flexible benefits account plan states that participation (with respect to a participant's ability to make pre-tax payments for group medical insurance premiums) ends upon the termination of an individual's employment. If read in conjunction with the old 125-4 temporary regs, this suggests that the plan sponsor need not offer a terminating employee (who will receive monthly severance payments) the opportunity to pay COBRA medical premiums on a pre-tax basis out of their future severance payments (although I believe that they would be permitted to modify their FBA election so that their last actual paycheck from employment could be adjusted to allow for some COBRA health premium payments - but only to the extent that final paycheck is sufficient to cover some or all COBRA premiums). The FBA plan's language suggests however that the plan need not allow this former employee to continue to pay COBRA health insurance premiums on a pre-tax basis out of their severance payments. Does this sound right?

Can a terminating db plan that holds employer stock and cash assets offer participants the option to receive a lump sum distribution upon termination in the form of stock? I haven't been able to find specific guidance on this issue, but in the normal course, wouldn't the plan liquidate the stock and make distributions in cash?

Thanks.