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?

I am looking for help in finding the right person in the IRS to get something done--Ha-ha!!

We have a DB plan termination that was filed almost three years ago. It was questioned because of the method of reallocating the excess assets (we bumped up benefit to a current retiree along with the active participants).

While this termination has been in process, it has been passed along to several different agents, none of whom seem to have the authority to approve it, so it gets passed along again.

Finally, it has gone to a different office. We spoke with the agent today and he stated that although he did receive the files in January, it will likely be another 3-4 months before he opens them.

If anyone has had a good experience working with someone in authority in this area, I would appreciate the contact information.

Thanks so much!

At the 2002 Enrolled Actuaries Meeting, when asked about the 30-year treasury rate, the IRS representatives stated they were working on it and that they expect to have a rate for February 2002 soon (my paraphrase). They seemed to understand the sense of urgency. I expected that we would get a February rate within a week. It is now 15 days.

Anyone heard anything else?

I'd appreciate your collective thoughts on this:

We are a mutual fund company which provides in-house recordkeeping, with the admin work doen through a number of TPA's. We are in the process of developing a self-directed brokerage feature as well, and are putting together some reporting requirements to allow the TPA's to complete the 5500's. Exactly what info do you feel should be included in the reports? Obviously the name of the securities, but should we include the value at the time of purchase/sale? The year end value? If so, I assume plan year end . . .

Any input you may be able to provide will be greatly appreciated.

Thanks.

I just sent my federal tax return. I used Taxact software and I beleive I was to report how much I contributed to my ROTH ($1800) last year. I think I forgot to do this.

Questions:

Do individuals have to report contributions to IRAs?

Doesn't the IRS get this info via form 5498 from the trustie anyway?

Let's suppose you have calendar year 2001 DB plan, and employer also has a 401(k). 401(k) is deferral only. Employer contributes the required amount to the DB, which is more than 25% of compensation. In addition, the employees all defer under the 401(k) plan - no one exceeds 415, a plan limit, or 402(g).

So, the employer has a nondeductible contribution to the 401(k)for 2001. Pays the excise tax. What happens in 2002? How do they go about deducting this, since the DB cost will exceed 25% of comp every year for the forseeable future. Are they stuck paying the 10% tax for every year that it remains nondeductible, or is there another way out? (I'm thinking they are stuck, but I'm hoping one of you clever people can explain otherwise) Thanks.

My $5900 in Roth contributions over a three year period (1998 - 2000) has dwindled down to approximately $2100. If I terminate my Roth, would I be able to take a deduction for 2002 for the $3800 in losses? Would there be any tax or penalty paid by me on the distribution? Also, would I be allowed to open a new Roth immediately so that I could make my 2001 contribution before April 15 and still be able to take the tax deduction?

Can we cover the cost of several employee's Rx costs if they have chosen to take a medicare wrap instead of our group insurance. We would like to pay $60 toward their Rx costs. We don't have a Flex plan, but would still like to pay for it through company funds. Any ideas out there?

My company offers flex credits that employees may apply either to reduce their cost of benefits or receive as a cash-out option, if they waive coverage. I've had a couple of employees, who originally waived coverage, and consequently received a taxable cash payment, request mid-year after-tax election changes so that they can participate in one or more benefit programs. Payroll seems to think that the monies these employees have been paid thus far in the plan year (through the cash-out) should be recouped before they can participate in the benefit plans on an after-tax basis. I can find no regulatory precedent for such an action. Any opinions?

Assume Company A uses a rabbi trust to set aside and accumulate assets to satisfy benefits under a top hat plan. The rabbi trust's assets are divided into several bookkeeping accounts, one bookkeeping account for each participant. Participants are permitted to request that the trust invest the assets attributable to his/her bookkeeping account in Mutual Funds A, B and/or C. The plan is terminating and the Company A wants to liquidate the rabbi trust. Assume one of the participants has requested that the trustee invest 100% of her bookkeeping account in Mutual Fund B and that the trustee has so invested her account. This participant wants to maintain her investment in Mutual Fund B. Is it possible for the trustee to make an in-kind distribution to this participant such that the units in Mutual Fund B presently titled to the trustee may be retitled in the participant's name? Or, must the trustee sell the shares of Mutual Fund B, distribute the cash to the participant, and then the participant can reinvest the cash in Mutual Fund B (although doing things this way may result in certain otherwise avoidable investment fees)?

Assume that the Mutual Fund is agreeable to retitling the shares.

Thanks.

It is my understanding that prior to SBJPA, death benefits provided through life insurance in an "eligible" 457(B) plan was fully taxable to the beneficiary since the employer was the owner of the assets.

Now since the assets are for the exclusive benefit of employees and held in "trust", has the taxation of the life insurance proceeds changed and a therefore should calculate the pure insurance amount and apply the PS-58 costs?

Also, are the life premiums subject to the incidental tests of 25% if using Variable Universal Life?

Company A decides to merge with Company B. Both have plans and notice is given to us that they will merge the plans. This occurred in Sept. 2000. Apparently the merger document stated that either party could back out by a certain date. The merger took effect 9/1/00, but A's existing balances in their plan with us were never moved to B's plan. The merger is now being undone, effective 3/31/02. A's vesting schedule was a 5-yr graded, B's a 3-yr cliff. Also, contributions from A's employees began to go into B's plan on 1/1/01, including the employee in question.

This participant in A's plan terminated 5/2001 and had 80% vesting in their plan at the time of merger. He wants to move his money out of the plan, but feels he is entitled to the 100% vesting provided by B's plan. In my opinion, the merger wasn't completed, so A's schedule prevails. I would appreciate other views.

Thanks

ee completed two year wait, enters plan and quits same year, receives no contribution. Rehired 6 years later.

now what?

adoption agreement doesn't adress issue of rehire, the basic document uses rule of parity, which says

you lose past service if you do not have nonforfeitable right to any benefits.

ugh, ee is 100% vested in nothing when they quit. so do they lose their past service? My understanding is that rule of parity doesn't really apply to 2 year eligiblity plans since it only works with 0 vested participants.

if the above rule does not apply, they enter immediately upon date of rehire.

Does the safe harbor definition of a hardship "expenses for medical care" include dental? I am not finding anything in the EOB or the 401(k) answer book.

Thanks for your help!

What does the IRS consider a mistake of fact for purposes of returning employer contributions?

I'd be interested in any thoughts on following Q for calculating final average pay (FAP)...

Qualified DB plan provisions:

Immediate entry; 100% immediate vesting; CS = one year for each year beginning on employee anniversary date with 1000+ hrs. AB = 5% of 36 month average times CS.

401(a)(17) Limits:

1999: 160000

2000: 170000

Employee A (straightforward):

Hired 7/1/1999, termed 6/30/2000, salary $20K/mo (i.e. in excess of 401(a)(17))

Based on Example 3 of 401(1)(17) regs, it is clear that the monthly average for EmpA is 160000/12 = 13333. (i.e uses 1999 salary limit) This results in an AB of .05*1*13333 = $666.

Employee B (the grey one!):

Hired 1/1/2000, termed 6/30/2000, salary $20K/mo

Option1:

Observe that all pay is recieved in 2000. Therefore, the monthly average for EmpB is ((6/12)*170000)/6 = 14167. This results in an AB of .05*1*14167 = $708.

This gives EmpB a larger benefit than EmpA, even though he worked 6 months less and had the same salary and term date.

Option2:

"Attempt" to apply Ex3 of regs by saying that you need to use (a)(17) limit effected at the beginning of the 12 mo period ending at term date (i.e. 1999 salary limit) Therefore, the monthly average for EmpB is ((6/12)*160000)/6 = 13333. That results in an AB of .05*1*13333 = $666.

This option makes the two employees equal but seems wrong since all employement and pay was 2000.

Comments:

What muddles this for me is that I've never really understood how Example 3 clarifies the text of the (a)(17) regs...rather, the example seems to sort of make it's own rule for plans with monthly averages.

If you're still reading and have any thoughts, I'd really appreciate it!!

Thanks.

Does anyone have a Sample Employer Policy on frequency allowing changes to deferrals? Our document states a policy may be created to do so. I just can not find a sample. Many thanks.

Does ERISA or any other regulation require a company to explain in the SPDs that the retirement benefits are "different" from the benefits employees receive as actives? Specifically, does there need to be a statement to the effect that the benefits cost more and are more restrictive (cover less, higher deductibles, copays, etc.) than the benefits they received as active employees? If so, is there a specific regulation code someone can point me to - Any input appreciated!

I have been asked about a Profit Sharing Trust that owns part of an S Corp and the S Corp pays dividends to the Profit Sharing Trust. Does this arrangement sound kosher?? It doesn't to me.