For the plan year 2003, we are going to make two attorneys partners. They will each own exactly 5% and compensation will be al least $150,000. They will not be officers. I needed some clarification on whether they will be considered key employees for 2003 top-heavy testing. Is it 5% or more than 5% ownership that makes them key. If they own at least 1% but make more than a certain amount are they still considered key. Any other clarificaition will be greatly appreciated. Thanks

Scenario a) two participants inadvertently did not receive an allocation of the employer's profit sharing contribution, and it is now well past the extended due date of the employer's tax return.

I used to think this was a deemed loan to the Plan. Now I'm reading that employer contributions are not plan assets until contributed. Rather, the Plan document is enforceable as a contract, so the employer can be forced to contribute, but the foregone contributions are not plan assets. If the foregone contribution is not a plan asset, then no prohibitted transaction can exist, right? Therefore, in this scenario the excluded participants would definitely get the foregone contribution plus earnings, but there would not be a prohibitted transaction. Am I right on this?

Scenario b) Same as above, except the entire profit sharing contribution was remitted three months after the extended due date of the employer's tax return. Prohibitted transaction? Based on above I'd say no...

There appears to be no guidance whatever on this published! Please provide references if possible!!

When an employer sponsors 2 welfare plans - one fully insured and one self insured - and the employer pays 100% of the premiums on behalf of the employees, what does the ER charge for COBRA continuation coverage to a terminated EE who is participating under both plans?

Any assistance is appreciated.

Client maintains 401(k) plan. Company x (unrelated to Client)maintains 401(k) plan as well. Client calls and says Client acquired ALL of e/ee's of Company x as of y date. Client and company x say no assets changed hands and no stock changed hands, but that all e/ee's terminated employment with Company x and began working for Client. On its face, it ooks like Company x's 401(k) plan is de facto terminated and Client's 401(k) just has to deal with counting/not counting prior service of Company x's e/ee's????? Another example of clients' doing things first and not letting you know until after the fact............. Suggestions/comments?? Thanks for any help.

I have a prototype profit sharing plan. It now provides that for distributions made more than 90 days after the last valuation date the participant will be paid 5% interest in lieu of re-valuing the plan to reallocate the earnings. Plan provides for annual valuations and has pooled accounts. TPA has requested using 0% interest. My mind is screaming that this can't be done, but I can't find any authority on this. Any suggestions?

Does NYS law apply at all to a governmental plan that is not part of the NYS retirement system or any other NYS system (ie firemen, police)

If you established a Roth IRA when your AGI was below the threshold, what happens if your AGI now exceeds that amount?

According to the Governmental Plans Answer Book (Q 2:65), thought not subject to 401(a)(11)/417 (federal) J&S requirements, state retirement systems (as opposed to other governmental plans, e.g. a farmers co-op) may be subject to state J&S requirements; i.e., governmental plans OTHER THAN state retirement systems are NEVER subject to ANY J&S requirements, with the exception of three states that require automatic survivor benefits for ALL governmental plans in those states.

1. Does anyone tend to agree or disagree with the above statement concerning Q 2:65?

2. Does anyone know what the three states are?

3. I have written to the AARP to acquire a copy of the survey cited by the Governmental Plans Answer Book , "AARP, Falling Short, A 50-State Survey of Spousal Rights under State Pension Plans"; does anyone have this survey? I was unable to acquire it over the telephone from AARP, as I was unable to cite the publication it was originally published in.

Does anyone have any experience regarding required minimum distributions under 401(a)(9) where the participant's entire account balance in a qualified plan is held in an illiquid asset (such as a frozen Executive Life GIC)?

The participant has taken a distribution of the rest of their account and all that remains is a small amount (say $300) of the Executive Life GIC which is still pending payout.

Are there exceptions to 401(a)(9) if there are no liquid assets? Can the plan sponsor "contribute" the cash to the participant's account and use that to pay the RMD? If so, how does the company get made whole for the advances made to the participant?

I am looking for some authority for a basic provision.

In a nonqualified deferred compensation arrangement, the deferred compensation typically gains an "interest equivalent" during the deferral period. It is my contention and the contention of those that I have spoken with that this "interest equivalent" is actually additional compensation and not interest. The characterization of the inocme is important in my situation.

I am looking for authority that backs up this proposition.

Thanks for the help.

Can an employer who gave timely notice of its intention to make a 3% nonelective safe harbor contribution and whose prototype adoption agreement provides for a 3% safe harbor nonelective contribution amend its adoption agreement in mid-year to remove the commitment to make the 3% safe harbor contribution? I recognize that the plan would have to satisfy the ADP test for the entire plan year using current year testing. I also recognize that 411(d)(6) will require the employer to make the 3% contribution with respect to compensation earned through the date of the amendment. But does this 411(d)(6) protection attach at the beginning of the year to the participant's compensation for the entire year? My analysis is that the employer would be able to terminate the plan in mid-year and avoid having to make the 3% contribution on compensation paid after the termination date, so the employer should also be able to accomplish the same result by a plan amendment. Notice 2000-3 addresses this issue for matching safe harbor contributions, but not for nonelective safe harbor contributions. I would appreciate any input on this.

Hello - I posted this message in the "Welfare Plans General" section, but I thought it might be helpful to post it here as well. Thanks.

"If an employer sponsored health plan allows for certain independent contractors (assuming they are in fact independent contractors and not merely employees titled as such) to participate in the plan along with its employees, would the plan be considered a MEWA? ERISA Section 3(40)(A) states that a MEWA means an employee welfare benefit plan, or any other arrangement, which is established...for the purpose of...providing any benefit...(1) to the employees of two or more employers (including one or more self-employed individuals)...

Does this language mean that if an independent contractor participates in the health plan, it will be considered a MEWA? Any suggestions? Thanks!"

Is there are correction program for a rollover distribution made from a plan simply because the participant didn't like the investment options. The participants is not 59 1/2, dead, disabled, or terminated. I'm not sure how to correct and what the employer's exposure is.

If an employer sponsored health plan allows for certain independent contractors (assuming they are in fact independent contractors and not merely employees titled as such) to participate in the plan along with its employees, would the plan be considered a MEWA? ERISA Section 3(40)(A) states that a MEWA means an employee welfare benefit plan, or any other arrangement, which is established...for the purpose of...providing any benefit...(1) to the employees of two or more employers (including one or more self-employed individuals)...

Does this language mean that if an independent contractor participates in the health plan, it will be considered a MEWA? Any suggestions? Thanks!

Situation:

- 401(k) Plan with 100% vested match.

- Several years ago the tpa (not me, thank God) administered the plan using an SPD that erroneously stated that the match was subject to vesting. Why they didn't follow the adoption agreement is beyond me.

- For the year in question, the tpa made distributions and forfeited matching dollars to the tune of approx $6,000.

- The forfeited match was used to reduce the next year's matching contribution.Someone stumbled across this during the 5500 audit (large plan).

Okay, what now? I figured the forfeitures need to be "restored" and distributed to everyone who was paid out. Plus make-up interest, of course.

Here's the $64,000 question:

Is this a 4975 prohibited transaction like late submission of 401k deferrals (by using the forf to reduce ER matching contribution, it is deemed that the employer/party in interest took an unauthorized loan from plan assets), thus triggering a "yes" answer to line 4d of Schedule H (did the plan engage in any nonexempt transaction with any party in interet?), Schedule G (Part III), and Form 5330, Part VII [tax on prohibited transaction (Section 4975)]???

Thanks in advance for your learned responses.

Is acquiring health insurance through the military (a governmental plan?) a life status change that would allow revocation of a health plan election? In this case, the affected employee receives supplemental military pay, including full health benefits. Reducing coverage would increase the supplemental pay. Could also apply to the spouse of an activated military member who is covered as a dependent under the military health insurance plan.

Your insights appreciated.

Assuming that the employee maintained the SIMPLE account for over 2 years, may an employee rollover his SIMPLE IRA into a ROTH IRA (assuming he meets the AGI requirements)?

If so, how would this work? Is it automatically considered a conversion ROTH?

Anyone out there using Relius Proposal software for cross-tested plans? I am just starting to work with it and feeling a little frustrated. Inerested to hear comments from others who may have more experience with it. Do you find it user friendly, complete, accurate, etc. Thanks.

These rules are very complex and I am wondering who is advising self-insured plans, hospitals, and the like on compliance.

Is it the "turnkey" HIPAA compliance consultants? Attorneys? Information systems experts?

Just wondering.....

Do you have an opinion on a financial statement auditor's responsiblity when it is discovered that an audit client does not maintain fidelity bond coverage on a pension plan? They are in the process of obtaining the coverage, but it will not be in place before the 10/15/02 filing deadline. Auditors are opining on the financial statements and not the operational compliance of the plan, so would it be necessary to disclose this finding in the notes to the financial statements?