We continue to struggle with the options provided under EGTRRA to apply the 2/20 schedule to our existing 3/20 schedule plans. Definitely easier to apply 2/20 to all matching balances as of 1/1/02. But for the client that doesn't want to, what are his options? (1) Can he continue to apply the 3/20 schedule to anyone who terminated prior to 1/1/02? (2) Can he apply the new more rapid schedule to SOLELY 2002 matching contributions and beyond? Or would this create a 411 (a)(10) problem for those employees with 3 years of service?

We have a plan with a 6/30/02 year end, entry dates are 7/1/01 and 1/102. Plan was making Deferral and Match contributions. In October of 2001, the sponsor decided to cease making match contributons. A notice was provided to the participants and the match was discontinued. I have plan compensation from 7/1/01-10/31/01.

We are looking for guidance as to whether or not we are allowed to run the ACP test from 7/1/01-10/31/01, or even from 7/1/01-12/31/01, or are we required to test on full year? If we use the short period for testing, this would not include any new plan entrants as of 1/1/02 who would be eligible to receive the match, however they will not be entitled to the match now simply because the employer has ceased making the contribution. The ADP test will be run for the full year.

Thanks for your assistance.

Has anyone ever thought about how to apply the diversification rules applicable to qualified participants (defined as those employees with 10 years of participation and age 55) to an alternate payee? Whose age matters? In counting "years of paricipation" with respect to the AP, does the employee's participation count? My feeling is that you should treat the AP as stepping into the shoes of the employee. However, I don't know if from a policy standpoint (i.e., allowing diversification for those close to retirement) that makes sense. I can't find anything at all on this topic. Thanks.

I'm trying to figure out the difference between W-2 wages and 415 compensation and it's driving me nuts. In particular, I'm trying to find out what the differences are between 415 compensation and a definition of compensation that includes W-2 wages and elective deferrals (125, 132(f)(4) etc...). Could someone please help?

Are SEP's required to file a Form 5500? It is a one person plan (husband and wife) with no employees. The plan asset value is over $300,000. Thanks!

We administer a 90 participant 401(k) Profit Sharing Plan where salary deferrals are self-directed but profit sharing money is pooled.

The company that sponsors the plan is privately held mostly by employees of the company (though not through an ESOP). Next year, two long-time principals will be retiring and selling their stock. It appears the plan qualifies as an eligible individual account plan and can therefore have more than 10% of assets invested in company stock (actually, in their case it would be about 12%). Question: Is it possible for the plan to simply write a check to these individuals in exchange for their stock?

Suppose a few years from now the plan wishes to sell the stock. Can it sell the stock to the company?

Thanks

We administer a 90 participant 401(k) Profit Sharing Plan where salary deferrals are self-directed but profit sharing money is pooled.

The company that sponsors the plan is privately held mostly by employees of the company (though not through an ESOP). Next year, two long-time principals will be retiring and selling their stock. It appears the plan qualifies as an eligible individual account plan and can therefore have more than 10% of assets invested in company stock (actually, in their case it would be about 12%). Question: Is it possible for the plan to simply write a check to these individuals in exchange for their stock?

Suppose a few years from now the plan wishes to sell the stock. Can it sell the stock to the company?

Thanks

GUST is the first required plan amendment that I have had to deal with. We sponsor an M&P standardized prototype plan. If an adopting employer fails to adopt the plan by the deadline of Decemeber 31, or maybe adopts after the deadline, what is the impact to the adopting employer? Is the plan nonqualified for all the restatement years? Anyone have any experience with how the IRS addressed these types of situations in the past?

Any insight would be helpful.

Employer adopts the following plans in 1997:

1. Standardized prototype plan -- excludes union employees.

2. Nonstandardized prototype plan -- covers union only.

However, there was only one 5500 form ever files, that was for plan #1, the standardized plan. The 5500 filing reported plan assets that were equal to the assets of plan #1 and #2.

The error is caught in 2002.

Is the proper corrective action to file amended 5500s for plan #1 for all the years involved (1997 - 2001) and to prepare a late filing under the DFVC program for plan #2 for the same years?

A DC Plan and Cash Balance Plan are aggregated for non discrimination testing. The Accrued to Date Method cross testing method is used.

Some participants have been full time since 1970s. DC Plan has been in existence since 1988. Cash Balance Plan is effective in 2002. The Cash Balance formula is based on compensation and does not reference service.

Assume an employee hired in 1980 and full time since then.

In calculating the DC accrual rate, I believe the following is permitted (no fresh start):

(1) DC Accrual Rate = PS account balance / avg. comp / 14 years testing service (years of DC Plan participation)

Agreed?

In calculating the DB accrual rates, I believe the following is clearly permitted:

(2) DB Accrual Rate = Increase in AB / avg. comp / 1 year testing service (only 1 year of participation)

Agreed?

Does anyone feel comfortable with either of the following:

(3) DB Accrual Rates = Increase in AB / avg. comp / 14 years testing service

or

(4) DB Accrual Rates = Increase in AB / avg. comp / 20 years testing service

Reg §§ 1.401(a)(4)-3(d)(1)(iv) and 1.401(a)(4)-11(d)(3)(i)(B) seem to allow DB Plans to base testing service on years prior to the effective date of the Plan. However, would this only be permitted if such years were considered in the benefit formula?

has it been decided that when applying post EGTRRA Catch-up rules, isn't it's 15 YOS with ONE single employer (in this case the XYZ school district) or 15 YOS within public school education (perhaps with several school districts) so long as the employee is within the SAME employee organization (like the StateTeacher's Retirement System?).

I am trying to ascertain if a 401(k) plan with a brokerage window meets the requirements of 404©. I am struggling with how a brokerage window could meet the requirement of 29 CFR 2550.404c-1(B)(2), which requires that a participant or beneficiary give investment instructions to an identified plan fiduciary. It would seem that in most situations, the broker to whom the participant would give instructions is not a fiduciary of the Plan as the broker doesn't exercise any discretion, they just carry out participant instructions. But if this interpretation is correct, how do regular self-directed accounts meet this requirement (i.e. when employees select and change investments online through direct communication with an investment firm)? Any thoughts?

I've recently been asked to research the cost of outsourcing QDRO Administration for my company, but I haven't been very lucky so far. Before I start soliciting proposals, I just want to educate myself a little bit.

Can anyone tell me what the typical fee structure is (i.e., per QDRO charge, time and expense, per employee inquiry, etc.)? Additionally, I'd like to know what might be reasonable fees.

Thanks!!!

While reviewing a self-insured dental plan for compliance with ERISA et al, I came across an exclusion for "charges for accident repair while in the hospital." "Accident repair" is not defined.

I imagine it would exclude dental work if, for example, a participant had a few teeth knocked out by a steering wheel in a car wreck and was treated in a hospital. The plan sponsor was not sure why the exclusion was put into the plan, or what it excludes. The plan already excludes work not performed by a "Dentist," and I see no reason to exclude dental work just because it was caused by an accident and done in a hospital.

I haven't reviewed many dental plans and haven't seen this exclusion before. Does anyone have any thoughts on why such a provision would be in a dental plan, what it would be designed to exclude, and whether it would be enforceable?

I have a non-profit organization with an old post-tax employee/ employer match plan. I could spend the day writing up material about the advantages of changing to pre-tax, but I'm sure I would be re-inventing the wheel. Does anyone know of anything published or have in-house material I could present to their board of directors? Thanks so much.

If a governmental entity had used an approved 401(a) qualified money purchase prototype plan as their plan document, when would their GUST remedial amendment period end? Would they be entitled to the 12/31/02 extension for prototypes or is the deadline for governmental entities 2/28/02 regardless of the plan document used?

I have a general question in regards to IRS compliance. The Code itself, notwithstanding, I am looking for some high-level instruction on how to explain the differences and reasons behind the separate types of IRS/treasury guidance and other departmental guidance such as the DOL. A short list would be:

- Regulations

- Notices

- Rev. Proc.'s

- Priv. Ltr. Rul.'s

- other

I am not so much looking for an explanation here in this posting, but I am searching for some help on where to look for such information. Is there a publication, website, or 800# that I can refer to in order to get some help? I want to get a comprehensive understanding; not just quick and dirty.

Thank you.

I have a 401(k) plan that includes employer stock. The stock is listed on the pink sheets and is thinly traded. Terminated employees receive cash for their employer stock. Employer is a C-corp.

The company officers have had stock options since 1999 that they must exercise by the end of this year. They would like to exercise them within the plan by using cash in their plan accounts to buy the stock, and then hold the stock in their accounts.

Is this a problem? Sure seems like it to me, but I'd like some outside opinions.

Are there really any significant number of employers about to install or have recently installed any of these "new" consumer directed or DC healthplans or is it still marketing hype (hope)?

Would love to get some feedback about the selling activities also? Have you been getting many offers or solicitations? If yes, are these multiple solicitations from a few vendors or are there many vendors?

What are the laws on an employee termiinating in 1994, who was 100% vested with 25 years of service, age 46, who could receive an early retirement at age 55 with full benefits or age 65 with lower benefits due to the SS offset and is rehired on 2/9/98. In 4/98 he receives a letter stating all employees received this letter in 12/97 stating they were going to a cash balance plan. No provisions were made in the cash balalnce plan for a higher amt for him, although the new plan calls for employees with years of service & age combined = 55 years or more (hubby =71), special conversion rates will apply as well as a lower interest rate which would give you a higher opening balance. (Wow, a long sentence) Doesn't the "old

DB Plan" protect his vested interests? Shouldn't upon being rehired, the Co.

offer something new, or keep him in the old plan as they did other employees? Shouldn't the SS Offset

that the Company calculated and subtracted from the annuity balance be a true figure based upon employees records from 1970 to 1995 vs. an estimate based on some formula.

Final question is if his opening balance is based upon the SS offset (which was subtracted) vs. his age 55 retirement benefit in the old plan, now in the new plan they subtract (year 1998, and increase each year) the SS integration level. Example: Annuity of $100k, is now 94k due to ss. offset, now opening balance of 94K subtract 34K now = the amount of the balance of60 K you receive interest credits and benefit credits legal?

What happened to his vested rights when he left the co. in 1994. He went back to work to increase his pension based on the old plan. I feel like he is being taxed twice. Once on the original plan, and now each year. He never received benefit/interest credits on the full amt, although the Co. subtracted his SS offset from the orignal annuity at age 65. By the way,

he did not have a break in service in either plan. Help?????