We have added an HMO to our health plan - all we had before was an administrative services only arrangement. Am I correct that a Schedule A will be required for the HMO?

Can the parties to a collectively bargained agreement waive interest on delinquent payments in a pre court settlement?

Any help would be appreciated.

A client of ours had a system glitch where about 30% of participants did not have any amounts withheld from they paychecks for their 401k for 1 pay period. Also employer matches were not calculated for those same employees.

Is the employer under the obligation to figure out the total amount of this error and take corrective action? Are they subject to any ERISA penalties for this type of error? Are they any other problems that they could be in because of this?

Thanks for the help

Participant Jones just now informed us that in Plan Year 2001, he deferred $4,000 in excess of his 402(g) limitation due to deferrals he made in the 401(k) plan and 401(B) plan respectively of two separate employers. Since the Plan we administer paid no match, he wishes to make the corrective distribution from our Client's 401(k) Plan. (Our Client's Plan is a 401(k) Safe Harbor using the 3% SHNEC so there's no ADP or ACP issues for us to deal with.)

Assume we make the distribution yet here in 2002, adjusted for gains/losses.

Anything special we must do with the 1099 to indicate that, one, the 402(g) violation was in year 2001; and two, the problem is the Participant's and not the Plan's violation?

The Plan pays no excise tax. Correct?

Participant handles his penalties for excess contributions on his 1040. Correct?

Thanks.

PERS stands for Public Employees Retirement System. Is a PERS a qualified retirement plan? Is it legal to rollover a distribution from a PERS into a 401(k) Plan? Obviously, it must be allowed in the plan document. I am not familiar with a PERS plan. Thank you!

Last October we gave plan participants a "maybe notice" that for 2002 we might do a Safe Harbor 3%.

The client has now determined that they will pass APD hand down and has no interest in the safe harbor.

As I read Notice 2000-3 I don't think we need to do anything at this point. ---(If he want to implement the safe harbor we would need to amend the plan before November 30)

This is the only "maybe safe harbor" plan we have, want to be sure I have it right

Thanks

ED

We recently took over administrative services for a 401(k) plan. One participant has a loan that is in default and we have told the company that we will provide Form 1099 for the deemed distribution of this loan. The company agrees.

In reading the rules about defaulted loans, it seems that although the loan is in default and is considered a deemed distribution, the participant is still supposed to pay it back. And, according to the ERISA Outline Book, the plan sponsor should continue to try to get the loan repaid.

The participant with the defaulted loan could begin making payroll-deducted loan payments. However, if she is going to pay the tax on the deemed distribution anyway, why would she pay the loan back? If she did, would the loan repayments then be after-tax dollars in the plan? What if the plan does not allow for after-tax money?

Here is the situation:

Defined benefit plan for a corporation with a 10/31 year-end terminates at 10/31/01. For that year-end there is a minimum contribution of $0 and a maximum contribution of $50,000. A contribution is made for 30,000 on 2/1/02. Another contribution is made 8/1/02 for the additional 20,000. However, the 8 1/2 month deadline for funding is 7/15/02.

Is there a way that this second contribution is deductible in the future?

A partnership has a SIMPLE IRA in place. The employer contribution can be limited to a percentage of compensation. Does anyone have a template to assist in the calculation of earned income so that we can help determine the partner's employer contribution?

Plan year changes in 2002 creating a short year from 7/1-12/31.

If a Plan has a last day 1,000 hours requirement for a profit sharing contribuiton allocation what do you do with the 1,000 hours requirement?

You can find some guidance on short years regarding vesting, initial participation, 415, and 401(a)(17) on short years, but I haven't seen anything on benefit accrual?

Outside counsel for a plan sponsor submitted the GUST restatement of its individually designed, calendar-year plan in proposed form on February 28, 2002 and asserts that under Rev. Proc. 2002-6 the deadline for actually adopting the plan will be 91 days after the IRS issues a favorable determination letter.

Rev. Proc. 2002-6 (which covers determination letters in general, not just for GUST) does not say that; it does, however, provide that determination letter requests may be submitted on "proposed" transactions." The regulations under Section 401(B) provide for the 91 day extension, but I don't think it is applicable here. I think the deadline was February 28, 2002 for adopting the restatement (not just submitting the restatement), and the 91 days will be for adopting an amendment to reflect any changes that the IRS may request before issuing the determination letter.

For TRA '86, the IRS specifically allowed for submission in proposed form if the document was submitted by December 31, 1994, but if the plan was signed by December 31, 1994, it could be timely submitted as late as March 31, 1994 (I think, if I'm remembering correctly).

Does anyone have any insight as to whether the proposed approach would be permissible for GUST?

First and foremost I am an employee of Company XYZ. Second, I am the 401(k) Administrator and recordkeeper for Company XYZ. Company XYZ is a small payroll services company. Third, Company XYZ administrates its own 401(k) plan. We are a First Party Administrator for our company's plan and a Third Party Administrator (TPA) for 50+ other companies with 401(k) plans. We are a competitor to Paychex and ADP. I am a particpant in the Company XYZ 401(k) Plan. The Plan Trustee of Company XYZ asked me to recommend plan amendment changes. I feel that I have a conflct of interest. My duties are ministerial. I am not a fiduciary. Company XYZ respects my opinion. I have ten years of experience as a 401(k) Administrator. Would a prudent man give recommendations to the Plan Trustee in this situation? My manager has told me to provide the requested advise to the Trustee. The Trustee is the CFO of Company XYZ. Ironically, my manager instructed me to act towards our own company's plan like I woud towards a client. I would not provide plan design recommendations to a client. To me that is equivalent to legal advice. Just like I would not give investment advise. I am neither an ERISA Attorney, nor a Registered Investment Advisor. I have no problem with interpreting the law. I certainly have and would counsel a client on what the law provides. Why should I act any differently with respect to my own company's plan? Do I have a conflict of interest to provide legal advice and make recommentations to the Plan Trustee? Or, am I really blowing this all out of proportion? Is this my chance to shine and show upper managment my knowledge and skills? Sincerely, Scott in Mason, OH.

We are getting conflicting advice regarding whether or not a SIMPLE IRA plan would be considered a successor plan to a 401(k) Plan.

Client wants to terminate the 401(k), distribute funds and then start a SIMPLE IRA. I don't see anything in the code that exempts a SIMPLE from being a successor plan. SEPs yes, but not SIMPLEs.

Any help? (Cites wuld be helpful, thanks)

Looking for some clarification on an action our TPA is proposing to make to correct for a failed ADP and ACP test.

I have read the sections ERISA outline book that explain shifting, and it describes both a conservative position and an aggressive position for shifting. Our TPA proposes to use the aggressive approach. This approach involves first distributing the excess deferrals to make the ADP pass. The next step is to shift percentages of BOTH HCE and NHCE deferrals to the ACP test to make the ACP test pass.

I have to wonder if that more aggressive approach is allowable, since the book I am reading is a bit out of date.

Here is an explanation our TPA gave us. If I understand it, she is calling the conservative approach "Shifting" and the aggressive approach "Optimizing".

"You asked for an explanation about shifting and optimization. Here goes: 1. "Shift" means transfer a percentage point (or fraction of a percentage

point) from its original category of contribution to another category (ADP to ACP for example). Shifting is simply the reassignment of percentage points, not shifting of amounts credited to participants' accounts. Shifting should always be tried first, and used to the greatest permissible extent before going to any other curing approach. 2. If, after shifting, the test still fails, shift from the HCE average and from the NHCE average in one test, the greatest permissible flat percentage, or the flat percentage that will reduce the HCE average in one test to 4 and the NHCE average in the same test to 2 (whichever comes first). This part is called optimization. Like shifting, no money is reclassified in participants' accounts - the points are moved for testing only."

Also curious what anyone thinks of the 2 and 4 in her explanation. Is that statutory? She said it is, but I cannot find a cite to support that.

Thanks in advance!

Can a profit sharing plan allow in-service distributions immediately (no matter how long the funds have been in the plan and no matter how little service the participant has) for everyone in the plan by specifying that in-service distributions will be available upon attaining age 1 (or 18)? What would prevent this?

I have a PS and MP plans that both terminated as of 10/31/00. Plan years end 10/31. The plan term included the GUST amendments, but not total restatement of documents. Final distr of assets took place prior to 10/31/02. Does the document need to be restated in full for GUST or was the GUST amendment sufficient?? Thanks.

Maybe I'll be breaking new ground, so I'll ask the question carefully:

What are market surcharges for administration of cross tested ps/401(k) plans, as opposed to, for example, integrated profit sharing plans, i.e. what might a typical testing fee be? I've seen $250 to $750.

I'm not asking what you charge, just what charges you have seen or heard.

Our company is looking at increasing our current health insurance plan from a $250 deductible to a $1000 deductible. We would still only hold the employees responsible for the first $250, and would reimburse for the $750 beyond that, until the deductible is met. Our plan is a simple 80/20 plan with no co-pays, etc. We would offer this to all employees and dependents enrolled in the health care plan.

Reasoning for this is much greater savings on premium with the high-deductible plan. We are a small company (29 employees, 40 lives on the health plan).

We would like to self administer the plan through employee submittal of EOBs. All personal health info would be blocked out -- we would just have to see the portion that states. "Employee has met X amount of year-to-date deductible" and reimburse for the difference. (Probably on a quarterly basis).

Can we do this as a MERP (Medical Expense Reimbursement Account) under a Section 105?

Is it essentially then an HRA?

Any feedback would be greatly appreciated. I have done a good deal of research, and can't seem to get a straight answer.

I think I read in a thread here, that once a participant reaches $200,000 in compensation for the year, he or she cannot defer to a 401k any more.

is that true?

does anyone ahve a link to that thread? i can't seem to find it.

any help is appreciated.

I am completing Form 5330 for late deposit of employee deferrals. The deferrals were deposited approximately 60 days late. The employer has now also deposited the lost earnings on the late deposit.

I have calculated the excise tax as 15% of the earnings on the late deposit from the date it should have been made until the date it actually was made. Is there an additional excise tax on the deposit of the lost earnings? The lost earnings were deposited approximately 1 year after the deferral. Please note that we used compounding when we computed the lost earning amount.:confused: