Company A acquires company B in june of 99'. Company B's employees can't contribute to Company A's 401k plan. Company B employees must contribute to the existing plan. My question is why can't Company B's employees contribute to Company A's 401k plan? Are there Govt. Regulations preventing company B employee from contributing to company A's plan? I'm a company B employee and my company is telling me I can't contribute to the plan offered to new employees due to govt. regulations and that the company is in the process of merging the two plans. Should it take over two years to merge the plans?

We took over a plan this year with a plan year end of 10/31. I was just preparing their 5500 and discovered that the company that prepared the 5500 last year listed an incorrect number for the End of Year Total Plan Assets. The number they listed does not include the outstanding loan balance. I believe that balance should be part of this number.

I want to include the loan balance in the beginning balance for this year's 5500 but then the ending balance from last year would not match the beginning balance for this year.

1.) Am I correct in thinking the loan balance should be included?

2.) What should I do about it if I am right?

Thanks.

Our group of companies has one combined 401(k) plan. During 2001 our parent company sold one division and closed down a second resulting in a partial plan termination. These people were subsequently fully vested on termination. In addition we had one person let go and two laid off from other divisions unrelated to the above plant closures. Do we need to vest the three people who terminated but had no connections to the plant closures. Are they "affected employees"? Thanks for the advice.

In an article called "The pitfalls of defined benefit schemes" at

http://www.townhall.com/columnists/bruceba...b20011123.shtml

the author says a "new study suggests that defined-benefit pension plans were a key culprit in the stock market bubble of recent years. As the value of such plans were inflated by stock market gains, companies were able to withdraw excess pension assets, which went directly into corporate profits, further buoying stock prices. This is yet another reason for shifting workers away from defined benefit (DB) plans to defined contribution (DC) plans."

The article was included in the list of linked articles in the November 26 issue of the BenefitsLink Newsletter, Retirement Plans Edition.

A reader, Eric Hansen, has the following comments about the article, which he asked me to use to start a message thread:

The above article appears to be a poorly veiled attempt at convincing us we should abandon traditional pension plans in favor of defined contribution plans.

First, the author suggests pension plan sponsors have withdrawn "vast sums" from their pension plans and that these withdrawals were "a key culprit in the stock market bubble of recent years." He goes on to suggest "shifting workers away from defined benefit plans to defined contribution plans" will solve this problem. Nonsense. In my experience, since the excise tax on "reversions" was generally increased to 50% (effective October 1, 1990), the number of pension plan sponsors taking reversions has decreased dramatically. And he neglects to mentions the vast sums being withdrawn (and spent) from defined contribution plans by participants who change jobs. Who is going to pick up the tab for these folks when they retire?

Next, the author suggests the back-loaded nature of traditional pension accruals is bad. What makes a back-loaded accrual worse than a front loaded accrual? These patterns are simply a function of the ERISA requirement that retirement plans not discriminate in (pick one) contributions or benefits.

The author also says participants "cannot withdraw their assets before retirement without paying a hefty penalty" and suggests defined contribution dollars are more likely to be available at retirement. Again, this is nonsense. The hefty penalty is just a fraction of the reversion penalty. In fact, as employees quit or change jobs, there is a ton of money pouring out of defined contribution plans.

I'm not suggesting traditional pension plans are superior to defined contribution plans. Rather, they have different characteristics and are more appropriate in some circumstances than others. But to suggest we should shift workers away from defined benefit plans to defined contribution plans regardless of circumstances is naive.

Is there any problem with the following situation:

Floor Offset arrangement with DB benefits offset by actuarial eqivalent of employer contributions to a profit sharing/401(k) plan, where the sole employer contributions to the dc plan are safe harbor non-elective (3% contributions) used to automatically satisfy the ADP test.

I guess the more precise question is whether such an arrangement could qualify as a safe harbor under 1.401(a)(4)(8)(d).

Anybody see a problem using the 3% SHNEC contribution towards the safe harbor?

Any official information (or educated estimates) about whether the $85,000 prior year compensation amount will change for 2002 determination years?

We have a client who provides a daycare facility there. All employees who utilize that Daycare per the client automatically has the money coming out of the employees check with taxable money. If that employee wants the Dependent Care Account on FSA how would it work?

Individual inherits an IRA from her father who passed away in 2000. The father reached age 70 1/2 a couple of years before his death. The beneficiary (daughter) took a distribution in 2000 based on 1/5 of the balance of the IRA. Does this constitue some kind of irrevocable election requiring her to complete the distribution over 5 years or can she take the 2001 distribution based on her life expectancy?

Can an IRA invest in real property located in a foreign country? I haven't found a prohibition of such an investment, and the ERISA prohibition on foreign investments doesn't apply.

I understand that an individual who converts to a Roth IRA prior to his required beginning date will never have to take distributions and that his children will be able to use their entire life expectancies if they are the beneficiaries at the participant's death. What happens if the spouse is the beneficiary and she rolls the Roth over as her own. Is she permitted to continue not taking minimum distributions or must she start taking MRD?

I appreciate anyone's thoughts.

What is the potential for successful personal liability claims against ENRON fiduciaries for breach of fiduciary duty under ERISA?

A. definitely liable under ERISA

B. definitely NOT liable under ERISA

C. will depend on facts not yet determined.

Dr. X is the sole owner of an LLC. Is Dr. X permitted to have salary reductions from his Section 125 Plan?

PSP Client uses Kemper document. Kemper is not allowing them to adopt GUST restated document because the funds for the plan are not held at Kemper. So, client wants to use Smith Barney Document as funds are held there. Smith Barney has not been issued a DOL opinion letter yet. So, client needs to have a letter of intent to adopt Smith Barney document when the opinion letter IS issued. Who drafts this letter of intent to adopt? (Plan is self trusteed). I understand it has to be signed by the employer as well as the document sponsor. Document sponsor says they have no idea what the intent letter is. Plan year end is 12/31.

thanks a lot

Someone on medical leave in our health plan pays a higher premium while on medical leave.

Would this violate the HIPPA health nodiscrimination regs?

Or could one use the current ee vs. former ee distinction under the similarly situated rules?

two plans, one for hourly ee's and one for salary ee's. both currently exclude hce's. company is debating letting hce's in 2002. can the plan use the average deferral % for the nhce's for 2001 to determine what the hce's can defer in 2002. no testing in the past because no hce's. thanks for any help on this one.

jimj

I'm with a TPA that does COBRA.

We have a new group coming on 12/1 and they have 3 people currently on COBRA. One of the 3 left of very bad terms and is very antagonistic.

The group wants to put in a new health benefit on 12/1, but needs all the health apps in to get a quote, amd Mr. Grumpy won't get in the app. If the price ends up being too high, they will stay with the old benefit. (I don't know if they have renewal rates for that group or not.)

The group sent Mr. Grumpy the application via certified mail. He held onto it past the deadline, but says he just mailed it back, and it's starting to go over the "typical" mailing time from his location.

The group wants to kick him off for being un cooperative, which I don't think they can do.

My bigger concern is the rates before the plan year/determination period, which they won't be able to get a quote before 12/1. Any ways around this?

Mara

The below questions all relate to 2002.

1. Will a participant who elects to roll over 100% of his assets have to be given the OPTION of either rolling over everything or rolling over everything except her after-tax basis?

2. Can a participant elect to have his assets distributed to him (with appropriate withholding) and then roll over the entire amount, INCLUDING after-tax basis, to an IRA or another Qualified Plan within 60 days? If rolled over to another QP, will the new administrator take the participant's word as to how much is after-tax basis, or is some documentation necessary? I assume the new administrator will also have to track the after-tax basis?

3. If assets that include after-tax basis are rolled over from a QP to an IRA, can any of it be rolled over again to another QP at a later date?

An employer with a 401(k) plan wants to terminate the plan's loan policy. Is a resolution to terminate the policy all that is needed?

According to its report posted at http://www.icmarc.org/retirementreform/cal457.html, ICMA Corp. is of the opinion that employers should wait until California tax law is updated before implementing EGTRRA's higher ($11k/$12k vs. $8.5k) 457 limits, "taxable when received" provisions, and 457-to-qualified plan rollovers.

According to ICMA, California law could consider any 2002 457 deferrals over the 2001 $8,500 limit (adjusted for inflation) to be excess contributions for California state income tax purposes.

According to ICMA, under state law, EGTRRA rollovers from a 457 plan to a non-457 plan could be a taxable distribution, and under state law participants may not be able to change their benefit payment schedules. (It seems California law still applies the pre-EGTRRA "constructive receipt"/"taxable when made available" concept instead of EGTRRA's "taxable when received" recognition model.)

According to ICMA, current California law does not prohibit a state and local governmental 457 plan from implementing EGTRRA, but doing so could have a negative impact on its participants' California state income tax liability.

ICMA says it is likely that in early 2002 the California legislature will modify state tax law to conform to EGTRRA, retroactive to 1/1/2002. ICMA encourages employers to urge our elected state representatives and the Governor to resolve this matter as swiftly as possible.

I am researching the possibility of moving our 401(k) plan to safe harbor and would like to know the percentage of plans that are already safe harbor. We have about 6500 employees. Any info on data resources would be appreciated.