Has the IRS extended the EP Compliance Resolution System to SIMPLE IRA Plans, or provided any other guidance on correcting defects in such plans? I've been contacted by a small company that appears to have both design and operational defects extending back to 1999, involving both failure to contribute and excess contributions. Since these involve IRA accounts, it's not clear to me how an employer could correct excess contributions with employee cooperation. Also, if EPCRS applies, I'm not sure how one calculates appropriate returns for determining corrections for failure to contribute. Thanks for any direction or suggestions.

In light of the new EGTRRA portability rules, except to preserve favorable capital gains treatment for participants born before 1936, would you agree that there is no need for a conduit IRA? What purpose would it serve? Assuming you already had an IRA, if you were afraid that you wouldn't have a job or be covered by another plan within 60 days after the date of your distribution, wouldn't you just roll the amounts over to the IRA that you already had (even if it had amounts not attributable to rollovers from qualified plans) and then roll the amounts later to an eligible retirement plan?

Thanks.

Does the EP Compliance Resolusion System of Rev Proc 2001-17 apply, expressly or by extension, to design and operation problems for SIMPLE Plans?

Does line 7c include employees who have left the company and decide to leave their balances in the plan, such as in a 401(k) plan.

I am getting concerned that as more and more of these people do not opt to get paid or rollover, the participant count, which determines whether the plan is "small" or "large" and thereby also dictates whether an auditor's report will be needed, will cross the 100 level.

Part I of the schedule D......

I am somewhat confused how to correctly complete this section.

Example:

I have a client whose funds are parked w/ Penn Mutual Life Insurace who has funds in Fidelity Equity Income and Putnam Large cap.

So...

PART I

a. name of Mtia, [PSA etc.....: Fidelity Eq Income?

b. Sponsor: Penn Mutual

c. EIN: Penn Mutuals EIN - 000

d. entity code: P

does the above seem correct or should it be:

b: Fidelity

c: Fidelity's ein for the Equity income fund - XXX extension that corresponds with fidelity's classification

THanks

I am very confused about something. Does 415(n) allow me to use any funds at all to purchase service credit? For example, can I have a rollover to a DB plan and then use these funds to purchase service credit? When I read the conference report to EGTRRA, it intimates that only after-tax contributions could have been used in the past. Now it permits plan-to-plan transfers from 403(B) or 457 amounts. I am inclined to take a very conservative position and state that rollovers from an IRA or another qualified plan may NOT be used to purchase service credit. Of course, these amounts can be rolled over into the plan (but, of course, why would anyone in their right mind do that if it is a DB plan?), but just not used to purchase credit.

Does anyone agree with me? Disagree?

Thanks!

Is the following scenario ok?

Plan Yr 4/1/01 - 3/31/02:

4/1/02 - 12/31/02 $10,500 Def (Did not defer in 1st qtr of 2002)

1/1/02 - 3/31/02 $11,000 Def

Plan Yr 4/1/02 - 3/31/03:

4/1/02 - 12/31/02 $1,000 Catch-up

1/1/03 - 3/31/03 $12,000 Def

$ 2,000 Catch-up

----------

$14,000 Total

Does not defer from 4/1/03 to 12/31/03.

Buyer is interested in purchasing, in a stock sale, Company that is owned 100% by an S Corp ESOP. The Stock purchase agreement provides for the establishment of an escrow account to cover any pending or potential claims of the Company. The escrow account will be funded with a portion of the proceeds from the sale of the stock. After two years, any remaining money in the escrow account will be distributed.

Are there any fiduciary issues that we should be concerned about with respect to this escrow account?

Suppose an employee visits an optometrist late in December, is examined, and orders new contact lenses paying a $225 deposit. The FSA plan's year is CY-based (i.e., Jan through Dec). The employee subsequently receives the lenses in February and pays the remaining $200. Referencing IRS Code, the plan specifies that an expense is "incurred" on the date when the underlying services giving rise to the medical expense are performed and not on the date that the services are billed and or paid. Using this logic, any subsequent purchase of lenses in CY 02 not precipitated by an exam would likewise be the result of the CY 01 underlying service and not a qualified expense. However, if the statutory or case law stipulates that an expense in "incurred" when the item or good is provided, would the entire $425 or just the $200 be categorized as a qualified expense for CY 02?

Thanks

From what I can tell, JCWAA changed the RPA CL range from 90%-105% to 90%-120% for 2 years for DRC calculations, RPA minimum FFL calculations, and determination whether late quarterlies are required.

I currently have no plans that require DRCs, so I don't know exactly how they work (and hopefully will continue not to need to know). The RPA minimum change seems straightforward enough - when I do a 1/1/02 valuation I can use 120% of the weighted average to determine my minimum FFL. My question is regarding late quarterlies.

For plan years beginning in 2002, the determination whether quarterlies are required is based on the 2001 funded CL %. 412(m)(7)(A) seems to say I can recalculate my CL % for 2001 to determine if quarterlies are required for 2002. If I do this, how do I complete the 2001 Schedule B? What would I enter for RPA CL and RPA CL interest rate?

Is anyone aware of a voluntary LTD tax-free benefit option available under new Private Letter Rulings and Treasury regulations?

Does anybody have any practical experience with this? Here's what I'm wondering:

In the "old days" when the 5500's were filed with the IRS, the IRS was pretty good about waiving the 25.00 per day penalty for late filing. And out of the many, many plans that have filed late with the IRS that I've seen, I have NEVER seen one where the DOL imposed their penalties, even if the IRS imposed the penalty.

Now that these are being filed with DOL, does anybody have a feeling as to how reasonable the DOL will be about waiving their penalties? Since they will obviously now know directly if filed late, this is a real concern - do you opt for DFVC up-front, which is still expensive, or do you take your chances on penalties being waived? (And of course, the EZ filers aren't eligible for DFVC, so they will have to pray for reasonableness anyway) I also realize that under IRS Notice 2002-23, the IRS automatically waives the 25.00 per day if you are eligible for, and satisfy, the DFVC requirements.

Anybody have "contacts" at the DOL to have garnered a feeling as to the mood on this? All discussion appreciated!

if a partner in an LLC wishes to purchase life insurance through his plan, it looks like the premiums are not deductible to the LLC. It may be, however, only the PS58 costs that are not deductible. For example, if the premium is $6,000 and the PS58 cost is $200, the employer could deduct $5,800. True?

Also, can a trust be the beneficiary of such a policy?

I have recently started to use fool around with the testing components of Relius. Can you make Relius exclude participants that have not met the 1 year/ age 21 eligibility?

I am attempting to perform cross-testing on a plan that defines normal retirement age as the later of age 65 or the 5th anniversary of plan entry. The normal retirement date is the anniversary date coinciding with or following attainment of the above age. Relius appears to be "rounding" the "Tst Ann Age" and the "Tst Age". All participants born during the first six months of the year have values of 65, while all participants born in the second six months of the year have values of 66. The rounding does not appear to apply to "Cur Age".

This yields some interesting results. For example, one participant born in March 1935 shows "Cur Age" of 66, "Nrm Ret Age" of 65 and 67 for "Tst Ann Age" and "Tst Age".

After reading the nondiscrimination thread from February, I changed the plan specs to "Date of Event" to remove the Normal Retirement Date from the equation. I got exactly the same results for the participant mentioned above. It did change the "Tst Ann Age" and "Tst Age" to 65 for participants who had not already exceeded age 65, however.

Has anyone else encountered this problem? If so, does anyone have a workaround?

Can the balance in a participant's medical FSA be transferred to an FSA under another plan? We have a situation where a subsidiary is merging into the parent and its employees will become covered under the parent's benefits plan, including its FSA. We are worried about what will happen to balances in employees' current FSA's.

A client refuses to purchase reinsurance protection but instead imposes a yearly plan payment limit on each employee. Does anyone know of federal laws or court rulings speaking to this type of exposure?

Facts:

ACP test has failed. HCE is 40% vested. $1,000 needs to be distributed. Plan year is 12/31. Testing is done after March 15th deadline. HCE would receive $400 and $600 would be forfeited.

However here comes the kicker. The plan termination date is as of February 28, 2002. Do you consider HCE 100% vested and return entire $1,000 due to ACP failure or do you still return only $400 to HCE?

My feeling is you would still return only $400 for correcting the ACP failure. Since testing is done for last year 2001 and plan terminated in 2002 you still do the refund based on 2001 vesting.

Anybody agree or disagree with my reasoning?

Company A owns 80% of Company B, thus a controlled group. Company A & Company B each have their own plan benifiting their own employees. We have just taken over the adminsitration of Company A's plan. Prior administrator never aggregated for top heavy. Current administrator of Company B's plan is not aggregating.

I hope I am missing something, but it seems to me the Plans must be aggregated for top heavy. Am I wrong?

Can an employer who sponsors a self-insured medical plan in a cafeteria plan unilaterally raise employee contributions mid-year? If so, what issues may this raise?