A plan sponsor/trustee has decided to change 401(k) providers. The PS/T sends letters to all participants, including former employees with remaining account balances.

Letter says 1) accounts under $5,000 will be cashed out.

2) accounts over $5,000 have two choices - to do nothing and have money transferred with the rest of the plan, or 2) to fill out the appropriate paperwork and have an IRA rollover account set up with the current provider.

Former EE/Participant fills out paperwork for choice #2 - wants to have his funds stay with current provider in an IRA account.

PS/T sends notification to former EE/participant, stating that funds have been rolled over to new provider. It appears that the PS/T ignored the election made by this particular participant.

Aside from the annoyance factor (having to undo what was done), is there a misappropriation of funds issue or some other fiduciary breach issue here?

What would be the maximum deferral for a participant in a 401k plan that is under 50 years of age in a plan that has a plan year 12/1/02 - 11/30/03?

Would it be $12,000?

Thanks,

Ronnie

We are about to takeover Auto Dealer's Plan. Auto Dealer is owned by ABCD Partnership. I am trying to analyze controlled group issues. Clearly I need to be concerned about other businesses owed ABCD Partnership. It seems to me I should also be concerned with any underlying businesses that may be commonly owned by A, B, C & D as individuals.

Am I missing something here? I just want to be safe; employer's are often times reluctant to give me such information & I don't want to ask for more than I have to.

Plan Year is 12/31-12/30. Plan defines comp as comp for calendar year ending with or within the plan year. A participant's 2001 W2 was 100,000, but only 27,000 in 2002. Which do I use to determine his status as an HCE for the plan year beginning 12/31/02? The comp actually earned in the lookback year (27,000), or the comp that applies for benefit accrual and funding (100,000). Assume the calendar year election is not made.

Can a profit sharing plan designed for prevailing wage/Davis-Bacon type fringe benifites have vesting requirements? I have resurched the USDOL and Washington State Labor Dept. codes and the information is both confusing and conflicting. The law does state that contributions are to be irrevocable.

A company sponsors a 401k and a PS Plan. They allow participants to buy term insurance in the PS. The incidental benefit limit has been exceeded for some participants, even using the 100% rule for PS plan with contributions greater than 2 years old. We are counting the historical PS contributions and the deferrals made to the 401k as employer contributions for this purpose. The employer has not made a PS contribution in several years- that has caused the limit test to be violated for a few participants.

What is the corrective measure to fix this problem for those participants?

I'm presently with a financial advisor at American Express. Although they do have no-load index funds, their family of funds are loaded. I'm trying to decide whether to invest in Class A or Class B shares. I know that A shares are front loaded, but that the load in reduced if certain $ ammounts are invested. B shares are back end loaded, but after 6 years they convert to A shares and there is subsequently no-load. However, A shares have a .25% 12b expense/year, while B shares have 1.00%. My advosor says that A shares are better in the long run, and the brochures seem to back that up. I just hate to give up that front load and reduce my initial investment with A shares.

Any and all suggestions will be greatly appreciated.

Employee's dependent was added to plan (against ee's will) because of court order. Plan is a 125 POP.

Court order is rescinded after several years. Can employee (or employer?) make election change to drop dependent from coverage as a mid-year change? Let's assume that the dependet is otherwise still eligible for coverage and that dropping dependent changes premium from "ee+1" to individual coverage level.

Any cites appreciated. Thanks in advance.

Presume a large group of retirees have won a class-action settlement arising from a broken promise to provide lifetime health benefits. Individual award amounts will range from $1K to $100K. Is there any way to use a VEBA or other arrangement such that settlement funds will be put towards medical coverage or care in a manner that is nontaxable to the plaintiffs?

I am exploring VEBAs, 401(h) arrangements, 105(h) arrangements, HRAs, "retiree medical accounts (a Watson Wyatt product, I believe), and uninsured plans under 104(a)(3). Any and all comments and suggestions are appreciated.

Can anyone give me some insight on why a PEO organization would tell me it's illegal for them to offer Health FSA to their worksite employees? If they are the common-law employer and are providing benefits, why wouldn't it be okay?

We have received a notice of a tax levy from the IRS for one of our 401(k) plan participants. Is there any fiduciary obligation on the part of the plan to investigate the tax levy, or not? I understand that a participant's benefit in his or her 401(k) is subject to a tax levy, I have been unable to find what fiduciary duty the plan has to investigate and/or what the Plan should do.

Can a retired doctor whose practice participated in a MEWA close the doors to that practice and still participate in the MEWA? I'm thinking not, since his particular participating employer has gone away. Any thoughts?

If one has made a rollover from an regular IRA to a Roth IRA prior to 1999 and is eligible for the four year averaging option, can one elect out of this option and increase his tax payment in a given year, resuming the averaging in subsequent years.?

Assume an employee elects to participate in a medical flex (125 plan) for the current plan year. During the plan year, the employee is terminated and later rehired by the same employer. When the employee is rehired, may the employee change (increase, decrease, discontinue) the amount committed to the medical flex plan? Is there any coloration to the time period that the employee is not employed?

A participant terminates employment, leaves an account balance in excess of $5,000 in the plan. Some months later, former ee is told that the company is switching 401(k) plan providers. He is given all paperwork necessary to elect to roll his funds into an IRA at the current provider. He does this in December 2002. He sends follow up requests to company to determine status of rollover. Finally gets information indicating that the company has ignored his request, transferred his funds to new provider. What is his recourse?

I need a consensus to resolve a debate I've been having with outside counsel. We have a SERP. It is unfunded, contributions are stated to come directly from the general assets of the company. And, the stated purpose is to provide excess benefits curtailed by 415 and 401(a)(17). The formula specifically states that the benefits are those that WOULD have been provided under the regular plan but for the curtailment, net of benefits actually provided under the regular plan due to 415 and 401(a)(17) limits.

My understanding is that an unfunded excess benfit plan meeting the test that it's purpose is limited to making up for 415 and 401(a)(17) curtailments is not subject to ERISA AT ALL (ERISA 4(B)(5)). But that a funded excess benefit plan is subject to Title I except for participation, vesting and funding requirements.

However, our outside counsel maintains that our unfunded excess benefit plan is subject to Part 1, reporting and disclosure requirements. He states that this is because it is, "intended to be a top hat plan."

He thinks it is subject to Part 1 for the very same reasons I think it is not.

What's the right answer? Am I way off base in my thinking here, or am I missing something that he has failed to articulate?

Company currently has spousal coverage under it's life insurance plan ($7,500 or $3,500 depending on group). For $7,500 group, ER paid, for $3,500 group - employee pays. Considering opening Spousal benefit to allow Domestic Partners (as allowed in health plans).

Q1. If DP's allowed, is there imputed income on the cost?

Q2. Should there be imputed income on full $7,500 since ER pay all.

Q3. Should there be imputed income for the amount over $2,000 under the group where Employee pays.

I read somewhere that the imputed income for this optional life insurance is necessary for amounts over $2,000 and if the Employer pays all, then the full amount is, including the initial $2,000 is taxable.

Can someone point me in the right direction to find the answer?

Thanks!!

How do you get around the fact that to designate a beneficiary other than your spouse you have to have spousal consent? How can this be accomplished with the participant web?

A client is 100% owner of two companies. Company A, he is only HCE and has about 20 other employees. Company B, there is an additional HCE and about 20 other employees (not same employees as company A). Company A is not very profitable and he would only like to contribute 3% TH min. Company B is profitable and he would like to max out himself while somewhat minimizing employees. Is there a way to set up a plan for each company and accomplish this?? Is there a way to set up new comparability plans and avoid giving 5% to employees of company A?? Thanks.

If a plan excludes all HCEs, and also excludes some NHCEs, must coverage testing be done?