Under the new proposed regs, who has the onus for sending a 70.5 distribution notice to a terminated participant from a non-Title I 403(B) arrangement.

It would appear that under the new regs, the plan sponsor is off the hook at termination of employment and that the custodian of a rollover IRA has such responsiblities.

However, assume for this argument that the new notice was provided at termination by the plan sponsor, but the participant leaves the 403(B) account intact and does not roll it into an IRA.

Does the account custodian have to onus to remind the terminated participant of his/her obligation to distribute from the 403(B) account at 70.5?

OR

Does the onus fall on the plan sponsor, since the account is still a "plan asset" as it never was removed and is technically, still part of the plan?

I have a design-based problem. A company wants a plan for salaried employees....some of which are HCEs. The total number of salaried employees is approx. 100, 20 of which are HCEs.

The company wants a separate plan for hourlies.......none of which are HCEs, totaling approx. 1000.

The problem is that the company is only interested in making a match on the contributions of the salaried employees. The company will not have it any other way... otherwise the company is considering not having 401(k) plans for anyone as a possible option..... Not pretty.

Is there any way to design a plan for hourlies, without a match, that will pass 410(B)? Any ideas? It would be a shame for hourlies to lose out on a plan.

Two questions:

1)Have you ever encountered a ps plan with an annual contribution by the company that is

- determined according to a formula contained in the Plan, AND

-formula is based on a multi-year measurement period

(An example would be a plan under which the annual contribution is determined by the company's average pre-tax profits over the previous three years.)

**********

2)I am looking for different examples of formulas in PS plans that are used to determine the company's annual contribution. An obvious example would the level of pre-tax contributions for the current year. Can you provide others?

Thank you

We will be upgrading to SP7 and SP8 over the coming weekend. Has anyone run into any issues regarding these two releases?

Thanks in advance!

We recently had an open enrollment for our health care plan. On the enrollment form there were several employees that listed individuals as children or spouse altho their last name is different from our employee. My question is what type of document may we ask them to provide for verification of the legal relationship? Any help would be greatly appreciated!!!!!

We have some people in our company who are lax about turning in signed vacation forms. Is it legal to advise people that not turning in a vacation form before the vacation time starts will result in one-half day penalization from their vacation time? If so, would we need to add it to our employee manual? Do we need to follow that rule with all employees, or can we categorize the groups of employees that need to comply?

Thanks,

Yvonne

The relevant facts are set forth below:

· DB Plan initially established to benefit business owner as sole participant. Plan excludes collective bargaining unit (“CBU”) members from participation.

· The owner’s two sons work in the family business and become members of the applicable union, performing collective bargaining unit work, and participating in union benefit plans.

· Six years later, the business owner transfers ownership of the business to the sons, who each receive a 50% interest.

· At the same time, the business owner amends the DB Plan so that it will not exclude the sons: specifically, the Plan is amended to include, as eligible participants, employees who are “members of a collective bargaining agreement [sic]” and who receive either a salary or a bonus from the company.

Note: when the sons became owners/managers of the business, they by definition dropped out of the CBU. They may have retained Union cards, and may have also remained eligible to participate in the Union benefit plans, most likely as “bargaining unit alumni.” But as owners/managers they were not part of the collective bargaining unit. Therefore, it should not have been necessary to amend the DB Plan to include collective bargaining unit employees, in order for the sons to participate.

The amendment, as continued in a later restatement of the DB Plan, requires the Plan to provide benefits on behalf of employees that the business owner never intended to participate in the plan, namely, rank and file employees who receive benefits under the Union benefit plans.

It would appear that whoever amended the Plan, did so under the misapprehension that the sons remained members of the collective bargaining unit after they took over ownership and management of the business. This would seem to be a fundamental misunderstanding. Would this be a basis to retroactively correct the DB plan to restore the original exclusion of collective bargaining unit employees?

I have an established SEP with a 1 year waiting period.

Employee X started employment on 01/15/01, the plan year end is 12/31/01.

Does the employee become eligible on 01/16/02?

What is confusing me is the plan statement saying, "An employee is eligible if at least 21, has worked for your business during any one of the past five years, and earned at least $450"

At 12/31/01 she had not worked for me at least 1 year, so no contributions will be made for 2001.

For 2002, if the SEp contribution will be 10%, is she eligible to receive 10% of comp for all wages or only those from 1/16/02 to year end.

She is a valuable employee and I just want to make sure I get it right.

Cross Tested 401(k) PS and DB Plans

I am using the accrued to date method to calculate the EBARs and rate groups.

The rate group ratios are greater than the midpoint of safe and unsafe harbors.

When showing that the average benefits ratio is greater than 70% in order to use the midpoints in the rate group ratios, how is the average benefits ratio calculated?

1. Considering current year contributions and accruals only

2. Considering contributions and accruals for the same period as used in calculating the rate group EBARs

3. Either of 1 or 2

I know a company can use experience gains from a Flexible Spending Account to increase the election amount or reduce the premium for participants in the next plan year. What happens if only one person is participating in the new plan year?

Also, what if that person participated last year? I don't believe, per Prop. Treas. Reg. 1.125-2 Q&A7 (B)(7), that any one particpant can get their full amount back from a previous year. Can we give them a portion of their claim experience back and use the rest to offset the cost of the plan?

I’d like to start a dialogue on the HIPAA privacy regulations. Specifically, I would be interested in thoughts on the application of Section 164.504(f) to a single employer self-insured group health plan. Section 164.504(f) applies to disclosures by a group health plan to a plan sponsor (i.e., the employer). In this context, who is the “group health plan”?

If Section 164.504(f) is meant to apply to the transfer of PHI from a TPA to the employer, does that mean the TPA is the “group health plan” (and not merely a business associate)?

Or, is Section 164.504(f) meant to apply to the transfer of PHI from some designated group of employees of the employer (e.g., the benefits department) to other employees of the employer outside of the designated group? In that case, the designated group of employees would be the “group health plan.”

Please comment!

We have a defined benefit plan that continuously credits benefits to participants (there is no 1000 hours of service requirement for benefit accrual). Benefits are credited monthly. We originally adopted the amendment increasing the annual compensation limit to $200,000 for the 2002 plan year. Now we'd like to reduce the annual compensation for the 2002 plan year back down to $170,000. I realize that there is a 204(h) notice that needs to go out a reasonable period of time before the effective date of the amendment.

However, what, if anything will we have to do with respect to benefits credited from January 1, 2002 to the effective date of the amendment? Can we treat the annual compensation limit as $170,000 for the entire year? Would we have to prorate the $200,000 limit for the short period of time during which that limit was in effect for the 2002 plan year to avoid violating the anti-cutback rule? Would any of this matter if we are certain that no one has exceeded the $170,000 compensation limit for this short period of time?

Employer A and Employer B are unrelated in the controlled group sense. Both have DB plans. Employer A's plan is underfunded and Employer B's plan is overfunded. If the two employers merge their plans and establish a multiple employer plan under IRC Sec. 413©, can the excess assets attributable to Employer B's plan be used to offset the liabilities under Employer A's plan? I'm not an actuary, but it looks like IRC Sec. 413©(4) says that this cannot be done. Am I missing something? Does it matter whether there is a single trust?

Thanks for any help.

when submitting a cross-tested plan for approval, is there any reason to complete question 11 on the 5307? the question is applicable to plans that are requesting a determination regarding the ratio percentage test.

most of the pension attorneys are having us complete this section, but i'm not convinced its of any value.

thoughts?

Disclosure of Eligibility to Participants - Is it sufficient to have an employee sign for Receipt of an Employee Handbook at the time of hire? Even if they do not become eligible for 12 - 18 months after hire?

We were looking for operational guidance for EGTRRA regarding the increase from 15% to 25% for maximum annual comined contribution ~ anybody seen it yet?

Thanks!

Under the new regs, are there any restrictions on the rollover of funds from an employer's simple 401(k) plan to the same employer's new 401(k) plan effective 1/1/2002. A CPA is indicating it must be first rolled into an IRA then rolled into the 401K. Is this true?

Can anyone tell me if they have seen a model notice or an example of an adverse benefit determination letter that includes all of the new language and requirements. I'd prefer to make changes to sample document rather than start from scratch.

I have a Section 125 Plan with over 100 participants that includes both pre-tax premium reimbursement and health FSA. A Form 5500 has never been filed for this plan. (Note: A Form 5500 has been filed for the welfare plan, which is required by the DOL)

Clearly, I have to file the late Forms 5500 under IRC 6039D. My question is "Am I also required to file the Form 5500 by the DOL?"

I have always been under the impression that a Section 125 plan is NOT required to file by the DOL; however, someone recently told me that a Section 125 plan MAY BE required to file by the DOL.

This becomes an issue because I need to know if DFVC is an option. Obviously, if the filing is not required by the DOL, then we won't file under DFVC.

Thanks!

Just to let those who took the Fall 2001 c-4, ASPA has the candidates who passed the exam in their "What's New" section. You just need to know your candidate number.