We are now engaged in terminating a profit-sharing plan for a small corporation. The plan was terminated in April 2001. We received the IRS determination letter on March 1, 2002. Currently, we are preparing a termination package for the participants containing the required tax notices. In the personnel files, we find old signed QJSA waiver forms for some participants. Some of these forms are several years old. Are these old wavier forms still valid? Must a participanct re-excute a QJSA?

much confusion surrounding interpretation of the new Safe Harbor plan ADP "testing":

An Early Entry Eligible participant is someone who hasn't met the 1 yr./age 21 reqs......that person is eligible to contribute 401k after 90 days, and will get the safe-harbor match after one year of service.

How should this be "tested"? (assuming calendar year plan ending 2001) Does an employee need to be included in the "test" if he reaches his 1 yr at any point in the year (making the assumption that if he received SOME match, therefore he doesn't need to be tested.)

Or would we have to "test" just the first part of the year in which he wasn't match eligible? Also, how would this effect who would be considered an HCE? (I'd still look at the lookback comp to determine, right?).

Our plan RK is advising us one way, and our attorneys another. Please help if you have any tips! Thanks.

I am currently working on a plan for a large healthcare network. 20+ locations. According to a message posted previously there was an opinion that a 457(B) tax-exempt (top-hat) plan could not be set up under a master trust.

In the case I am working on, there is a master trust in place with each location submitting their respective payrole deductions for the qualified savings programs. They want to establish a 457(B) plan for the highly compensated employees and there intent is to operate one 457(B) plan and allow the select group of employees from each location to participate. CAN THEY DO THIS????

This sounds like a master trust arrangement to me.......

Before I suggest that this may not be a viable option with the new Pension Reform regulations I would like your opinion. Hopefully I have communicated this situation clearly enough for an opinion to be formed. Thanks in advance for your feedback!

Great Site by the way!!!

We have a self insured health plan and about 18 HMO's as well

We are in the process of rewriting our Health Benefit Plan SPD for new SPD rules

Will our HMO's be required to write SPD's now that the prior exemption forHMO's doesn't exist?

We get certificates of coverage outlining HMO contract benefits, etc...

Would this suffice as long as our main SPD included other necessary stuff like QMSCO, COBRA, etc... language?

What are others doing who are in same boat?

Thanks

Background - Client A currently has DB plan and would like to terminate the plan and start a 401(k). Their current actuary has told them that the termination process is between 18-26 months and they will not be able to provide the funding liability nor their cost until well into the process. I am not very familiar with DB plans and assumed much like a DC plan that once a sponsor decides to terminate that the hard cost can be determined up front. I also believed that once the process began and accruals have ceased the funding liability could be determined.

My questions are this:

What is the typical time frame to terminate a DB plan?

How soon into the process should the employer know what liability they have to terminate the plan? Including the actuaries cost.

What is the basic process for terminating a DB plan?

Thank you for your help and responses.

JimJ

An acquaintance is faced with deciding for himself whether he should convert from his existing pension plan to a new cash balance plan, both under his current employer. I've been away from administration for way too long to help him myself, so I offered to post a message here for him. Before you ask for details, I know that he is 40 with 20 years of service, but I know no details about either plan.

1) Where can he go for some objective advice? For example, which category(ies) in our Yellow Pages should he look into?

2) If I recall correctly, it used to be that the employer bore the responsibility for providing comparison calculations. Is this still true? What questions should he be asking? I get the impression that his HR dept is leaving him high and dry with this.

Many thanks,

Franklin Evans

Idaho and West Virginia seem to have conformed their income tax codes to reflect the EGTRRA amendments to the Internal Revenue Code.

Idaho: http://www3.state.id.us/oasis/H0492.html

West Virginia: http://129.71.164.29/bill_status/2002sql/H...t-First_Sen.cfm (bill number 140)

Thanks to Paul Young of Union Bank of California's SelectBenefit ® Online for this information! URL: https://www.selectbenefit.com

An LLC member receives guaranteed payments throughout the year and defers from those payments into the company's 401(k) plan. However, the member's portion of the LLC ordinary losses netted with these guarenteed payments renders a net loss for the year. Is earned income the net of the LLC loss and guarenteed payments or just the guaranteed payments when considering how much someone can defer?

Situation:

Employer sets eligibility at 1 year. The employer hired a new employee on October 1st, 2001. It is now Oct 2, 2002. The employee is eligible to participate in the SEP. As the employer I made a SEP employer contribution on behalf of my other two eligible employees who have been with the company for awhile, do I have to make a contribution to the third employee for the year 2002. Wouldn't the entry date for the new employee start in January of 2003? Is there any ruling somewhere on this????

Employer wants to adopt a profit sharing formula of a set percent of compensation, reduced by any matching contributions a participant receives. Is this a permissible profit sharing formula?

I have a 401k plan with a former employer and I would like them to provide me the name and number of the company that administers the fund so I can contact them regarding a rollover. My former employer has yet to provide me this information (With other past employers I have gotten a notice in the mail within 30 days). I have requested the information verbally and by email and they have not provided it. Is there any law that they have to provide me this information... If so in what time period.

Also of concern to me is that this employer is not depositing funds on a regular basis. I know this because when I quit they offered to re-imburse me for the previous 3 months withholding because they had not yet deposited them (an act of kindness I guess).

Thanks in advance,

Russ Dietz

If I receive income from a pension plan, am I able to make an IRA contribution & is it deductible?

My spouse currently is employed and is covered by a plan at work. Is she able to make a deductible contribution?

Thanks for your help!

JimJ

Company A sponsors a 401(k) plan. In 2001, Company A acquires all of the stock of Company B, which also has a 401(k) plan, and merges Company B's plan into Company A's plan. Employee X is an employee of Company B. During 2000 and 2001, Employee X received $100,000 of compensation.

Assuming Employee X is not a 5-percent owner, would Employee X be considered a highly compensated employee for 2001, or since his 2000 compensation was earned before he became an employee of Company A's controlled group, is he considered to have zero compensation during 2000, making him a non-highly compensated employee for 2001?

Would it make any difference if Company B did not have a 401(k) plan?

Terminated participant elects family coverage under COBRA

Later determines premiums are too expensive and wants to drop himself and a son from coverage, outside of open enrollment and not related to any change in status event.

Is this permissible?

From what I can gather, a COBRA election change (including dropping coverage) is limited to open enrollment and/or a change in status, ala Section 125 plans.

We are new to Relius and was wondering if anyone out there uses Microsoft Word to produce reports such as participant statements. We do not currently have Crystal and do not have any capability of customizing the Participant Statements to our liking. If someone does export the data to a word format, I would greatly appreciate some input.

Can an Employer fully, or partially, fund a Medical FSA? I am working with an employer who wants to provide a $1500 FSA for the employees who do not participate in the group medical insurance plan. This will not be a salary reduction arrangement since it is employer paid.

What if the employer wants to also allow employees to contribute through salary reduction? Could this money be put into the same account. employer/employee?

I'm looking for a second opinion, so please chime in:

ESOP dividends paid to participants and reported on Form 1099-DIV should obviously be included in Schedule E. Should such dividends be reported on Schedule H, part 2, line e(1): benefit payments to participants or beneficiaries?

Additional information requested by "Disco Stu" below:

These dividends are not allocated to the participant accounts but rather are paid to the participants directly as taxable income reported on Form 1099-DIV. The Plan pays stock dividends to active employees and allows the employees to make an offsetting pre-tax contribution equal to the amount of the dividend. Are such dividend payments considered "benefit payments" for Form 5500 reporting purposes?

We mailed a 402(f) notice to a participant with less than a $5,000 balance. A month after that, we sent a check to the address of record. Turns out she had moved. She found the check at her parent's house. Unfortunately, she was advised to return the check to us with rollover instructions. She did this on the 60th day after the check was cut. She was told by a CPA during the 60 days to roll the check to an IRA and make up the 20% withholding with her own money, but, she chose to return the check instead.

Now she wants us to roll the 80% to an IRA. What can we do?

For purposes of running a comp test, Reg. 1.414(s)-1(d)(3)(vi) limits an individual employee's compensation percentage to 1.00 for alternative definitions of comp that use rate of compensation or include prior-employer or imputed compensation (that is, the numerator can't be more than the denominator). The instructions to Demo 9 of Sch. Q hint that this limitation is also true for all alternative definitions of comp, but the regs only state the limitation for alternative definitions that use rate of comp or include prior-employer or imputed comp. Does anyone have experience with this issue? For a 414(s) comp test, can the numerator be greater than the denominator in calculating an individual comp percentage?