Can a publicly-traded employer contribute its common stock to its defined benefit plan? I'm aware of Keystone and the DOL's Interpretive Bulletin in which the DOL basically states that any in-kind contribution to a DB plan is a prohibited transaction. However, both Keystone and the examples in the DOL Bulletin involve real property. I have seen other guidance addressing the contribution of other types of property, but nothing on employer securities.

It appears that ERISA Section 408(e) would allow this contribution, as long as the contribution does not cause the total employer stock held by the plan to exceed 10% of the fair market value of the plan's assets. Can anyone confirm this?

I'm working with a VEBA that has a vacation property as its only asset. The property has lost value since it was purchased, and the VEBA no longer has any employees!! There isn't much guidance, but it appears to me that the employer could try to sell the property to a third party to get it out of the VEBA - but at what price? Obviously, a third party would only pay FMV. Any ideas? Could the VEBA hang onto the property and amend the VEBA trust to benefit different employees with a common employer bond?

EGTRRA permits in-service distributions (eg. current, active employee who is a plan participant) from a governmental 457 plan to purchase governmental DB service credit. As a trustee-to-trustee transfer, this is not a taxable event.

Question: Can a post-service distribution (eg. former employee who still has money in your plan) to purchase governmental DB service credit be handled in the same way, without tax consequences, as a trustee-to-trustee transfer?

For the discussion, let's assume that the 457 plan has fully adopted EGTRRA flexibility and the separate DB plan will accept the distribution.

We can't find where this is prohibited, but neither can we find where it is permitted. Any cites greatly appreciated! Thanks in advance to all.

I'm looking for problems that would arise from amending a defined benefit plan to suspend benefit accruals for 2 or 3 years.

Assume the plan provides a monthly benefit at normal retirement age of $30 per year of service and is amended to provide that the benefit will be $0 for service during 2004-2005 and $30 per year of service after 2005.

The plan now satisfies the 133 1/3 percent rule. As so amended the plan would satisfy the 133 1/3 percent rule, according to 1.411(b)-1(b)(2)(ii)(B), the conference committee report on ERISA, and IRS Document 6390.

Is there something else I'm missing that would cause a problem?

F.S. 112.0805 Employer notice of insurance eligibility to employees who retire.--Any employer who provides insurance coverage under s. 110.123 or s. 112.0801 shall notify those employees who retire of their eligibility to participate in either the same group insurance plan or self-insurance plan as provided in ss. 110.123 and 112.0801, or the insurance coverage as provided by this law.

Question: Based on the above statute, when does the city have to inform the retiree regarding the insurance plan if a vested employee leaves a city and does not wish to start collecting pension at that time, and the city does not consider them to be a retiree until the time they do begin collecting pension? Can the city inform them at time of departure or must they also be informed at time they start collecting?

We would like to eliminate lump sum option effective 1-1-03.

Normal form is life only.

Actuarial equivalence for lump sums is 417(e)

What future benefits must be offered to participants?

An example:

on 12-31-02 we have a participant with an accrued benefit of $1,000 per month

on 12-31-06 the participant terminates with accrued benefit of $1,500 per month

Which of the following options is the participant entitled to?

1. A lump sum based upon $1,000 accrued benefit as of the amendment date

plus

life only benefit of $500 payable at retirement ($1,500 - 1,000).

2. The choice of:

lump sum based upon $1,000 accrued benefit as of amendment date

or

life only annuity of $1,500

3. Life only annuity of $1,500. Clearly we have to provide this option.

My hope is that we would only have to provide options 2 and 3 and that the protected benefit would work in a manner similar to the changing of actuarial equivalence.

What amounts have to be protected?

Thanks

F.S. 112.0805 Employer notice of insurance eligibility to employees who retire.--Any employer who provides insurance coverage under s. 110.123 or s. 112.0801 shall notify those employees who retire of their eligibility to participate in either the same group insurance plan or self-insurance plan as provided in ss. 110.123 and 112.0801, or the insurance coverage as provided by this law.

Question: Based on the above statute, when does the city have to inform the retiree regarding the insurance plan if a vested employee leaves a city and does not wish to start collecting pension at that time, and the city does not consider them to be a retiree until the time they do begin collecting pension? Can the city inform them at time of departure or must they also be informed at time they start collecting?

If during an unpaid FMLA absence an employee fails to make payment for benefits.......

1. May the employer cancel the benefits?

2. Would that then be a qualifying event for COBRA?

A plan defines an eligibilty computation period as the 12 consecutive months starting on hire date. Future computation periods are the plan year (calendar). The employee is required to work 1000 hours in a computation period. For a fractional year there are no hours required. Plan entry is semi-annual. Service is credited at the end of the computation period.

If the year of service requirement is 18 months, and the employee does not work 1000 hours in the intial computation period, should the eligiblity date be based on the first entry date after a 12 month period in which an employee meets the 1000 hours plus 6 more months.

Hire date is 7/2/02

Initial computation period is 7/2/02 - 7/1/03 (<1000 hours worked)

Second computation period is 1/1/03 - 12/31/03 (>1000 worked)

Is the plan entry date 1/1/04 or 7/1/04?

I am new to multi-er issues, but I have a quick question.

My wife and I are Self employed. Are there any issues preventing us from forming a multi-er plan?

Would it matter who the plan sponsor is for 5500 filing?

Any ideas on how to handle a union member who wants his prescription card ID number to be changed because his id number is currently his SS#. He wants us to change his ID # because he maintains it violates his privacy to have his SS# on the card.

My thought is that since he is the one w/ the card and it is only being distributed to him, that would not be any HIPAA violation and would not require any changes.

He mentioned a concern that whoever makes his card now has access to his SS #.

Please help!!!!!

A calendar year employer adopts a non-safe harbor defined benefit plan January 1. Some employees leave the company by mid year without accruing a benefit and the plan fails 401(a)(4) by December 31. Can the employer provide additional benefits to a group of currently eligible NHCE's to pass 401(a)(4) for the first year of the plan? 1.401(a)(4)-11(g) does not seem to say you cannot. It only appears to indicate you cannot have a pattern of such amendments.

I seem to remember reading something about corrective amendments being questionable in the first year of a DB plan.

Anyone know about this?

Thanks.

Hi,

I'm having a senior moment. A plan terminated. Do terminated participants with balances in the plan have to be 100% vested due to the termination if they quit before the plan termination date?

Any help in refreshing my memory is greatly appreciated.

Any suggestions on the following fact pattern?

IRA owner's spouse dies late 2001. IRA owner himself has terminal cancer, sees attorney to update estate documents. IRA owner and spouse had 3 kids, all in mid-30's. (No other spouses or children for either owner/spouse.)

Attorney prepares attachment naming each child 1/3 beneficiary, to be used for IRA and other beneficiary accounts. (Will likewise names each child 1/3, and default state intestecy law would yield same 1/3 result.)

In February of 2002, attorney sends change of beneficiary designation form with custom beneficiary attachment for IRA with Bank 1. IRA certificate comes due in April 2002. Intent all along was to roll over IRA to different bank. Estate planning materials (letter from attorney to IRA owner) show this intent plainly.

IRA owner in fact does roll over IRA to Bank 2 in April 2002 and handles the paperwork in person, without attorney. Dies later in 2002. IRA is currently in certificate of deposit, worth about $80,000.

Upon checking the IRA documents, the beneficiary attachment was not included. The space for a beneficiary designation is blank. Bank 2's position is that no beneficiary designation was made. Default under Bank 2's IRA contract is that estate is beneficiary.

Bank has been provided copies of Bank 1 designation and attorney's correspondence, but is firm that without a designation saying "Bank 2", there is no valid beneficiary designation. Doesn't matter to Bank 2 that each child gets 1/3 either way but takes less of a tax hit if they are the beneficiaries of the IRA rather than the estate.

Beneficiaries want to know what their options are and if they have any recourse against the bank. Assume all 3 would keep the IRA in tax deferred soloution, taking only required minimum distributions.

As for options, I see the following:

1. Don't fight the bank. Let the estate get the IRA; stretch out payments as long as possible. I believe this is five years. Is this correct? If so, does the estate need to be kept open until the IRA paid out?

2. Fight the bank. Take Bank 2 to court to require it to treat them as 1/3 beneficiaries each. My concern in pursuing this option is both the likelihood of success and the cost/benefit analysis.

As to the bank, I believe there is an argument that:

1. They had a duty to obtain beneficiary information and neglected to do so; or

2. They must have had the attachment but lost it. (Why else would the beneficiary designation be blank?)

Either way, it appears to be a negligence case. If so, I don't collecting anything more than the tax difference between paying taxes now (or next 5 yrs) by naming the estate or paying taxes later (over the 3's life expectancy), plus any deferred growth.

I'd appreciate comments on the above, and especially answers to the following:

1. Are my assumptions above (e.g., 5 yr payout for estate; amount Bank 2 could be on the hook for) correct?

2. Any other theories of liability against Bank 2? (Especially ones with award of attorneys fees available?)

3. Any idea what the relative tax hit would be if they took the $ now into the estate, rather than were able to keep as direct beneficiaries?

4. Can you suggest any other options/strategies?

Thanks for any help.

If a company ceases operations on April 30, and begins the process of terminating it's plan, can ADP refunds be distributed prior to any plan distributions?

I understand it that they'd have to wait until after the plan year end (December 31). They could have a short year if all assets were distributed, but that would require distributing the potential adp refund.

Second question - same scenario except the company stays in operation. Deferrals cease April 30th and the plan begins work on terminating the plan. They expect all assets to be distributed in the following plan year. Would adp compensation include all of 2003 compensation or would it be up to April 30th?

Thank you

A client has a plan with no active participants. The funding method is Individual Aggregate. What is permissible for valuation purposes??

1993 - IRS stated, one acceptable method, that for an Aggregate funding method that assuming the deferred vested were still active (compute the funding period to their expected retirement age)

What if all the partcipants are actually retired??

Obviously, IF the plan is fully funded, it is no big deal (Contribution is zero and get on with life!).

This client has a plan where they are short assets (by several 100,000) and they want no cost.

A switch in funding method would enable the monies to be amortized over a period of years but they can not change funding method (they already did within the last couple of years).

Any ideas??

Thanks in advance for any and all input.

My firm has a company with multiple participating employers on a prototype nonstandardized document. The employer no longer wishes to allow one participating employer to be part of the plan. As of some date in the near future, the participating employer will no longer be able to participate in the plan.

We have several issues we are dealing with. Can these former participants continue to new loans, hardships, and other in-service withdrawals available under the plan? My thoughts are no as they are no longer participants. IF this holds, then can they take a distribution of their plan assets when the participation agreement ends? Again, they haven't really obtained a distributable event.

I then thought about a partial plan termination, but am not sure if this meets that criteria. They don't intend to spin the plan off, it seems as if they simply want to freeze those assets. However, if no longer participating in the plan, but still employed by the sponsor (via subsidiary) they have no access to this money.

Does anyone have any thoughts on this? It would be appreciated.

Can a traditional IRA invest in real estate? If so, are there any penalties or special reporting requirements?

I've read the IRS publication and know about the prohibited transactions but I wasn't sure if the property could be purchased from a third party.

Thanks in advance for your responses.

Facts: A company sponsored ESOP was terminated late 2002 and payouts were made based upon an independent appraisal value as of the termination date.

The owner of the company now has a potential buyer. If the selling price of the company differs from the final appraisal for the ESOP distribution (which it will), what is the liability of the company to increase payout payments to the former ESOP shareholders, or, if the value is below, any reprecussions?

Thought would be appreciated.

Thanks,

Diane

Can anyone point me to any helpful resources on this topic?

I am aware of (1) an article titled Avoiding Difficulties When Unwinding an ESOP and Selling the Company in the September/October 1997 issue of the Journal of Taxation of Employee Benefits, (2) BenefitsLink's ESOP Q&A 11 (1999) and (3) certain discussions on this message board (including a number of helpful posts by RLL).

In the deal I'm working on, the company maintaining the ESOP will receive cash for its shares. The goal is to convert the ESOP to a profit-sharing plan and eliminate the right to stock distributions, while avoiding a termination.

The article referred to above suggests one approach would be to simply amend the ESOP to remove the right to take stock distributions. But it notes "Congress, the DOL and the IRS have all addressed and imposed conditions for an ESOP attempting this strategy." I'm aware of the 411(d)(6)© guidance that says such changes must be nondiscriminatory. Are there other "conditions" I ought to bear in mind?

Any other words of wisdom from those of you who may have dealt with this before?