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.

Takeover cross tested profit sharing plan under IRS audit.

Discovered in 2002 that a person was left out of the profit sharing contribution incorrectly for 1999.

Plan is not a safe harbor; general test not done (being done now).

Company will contribute amount that employee should have received. Should the omitted contribution be included in the general test for 1999?

I'm inclined to say no, unless IRS sanctions such treatment as part of audit closing agreement, because it's too late to be considered an annual addition for that year, and too late to be considered a 401(a)(4)(11)(g) corrective amendment.

But, what if not under audit? Need to go through VCO?

Other opinions?

Generally, when do non-required contributions have to be made to be included in general test?

IF A PARTICIPANT IS ELIGIBLE ON 1/1 BUT TERMINATES BEFORE 12/31(WHETHER 1000 HOURS OR NOT), CAN YOU USE THAT PARTICIPANT'S COMPENSATION TO COMPUTE THE 25% LIMIT EVEN THOUGH THAT PARTICIPANT WILL NOT GET AN ALLOCATION?

THANK YOU!!

The revised Special Tax Notice was added this morning to the IRS "drop" directory. There are three changes in the notice for qualified plans and one change in the notice for 457 plans.

Senator Kennedy has suggested mandatory health coverage for employees at companies with more than 100 employees. Is this a workable approach to decreasing the number of uninsureds in the U.S.?

Number of uninsured is likely to be on the increase with the many recent layoffs. I personally feel the large number of uninsured is a disgrace and needs to be addressed. Any other ideas on how to reduce the number of uninsured?

When is a Money Purchase Plan required to attach Schedule B to its Form 5500 Annual Report?

When calculating the 3% match for a SIMPLE plan do you include deferrals under a 125 plan as part of compensation?

The definition of compensation in the code says Wages as defined in Code Sec. 6051(a)(3) and §6051(a)(8).

6051(a)(3) references the definition of wages for income tax reporting purposes under Code Sec. 3401(a). I scanned this code section and I don't think it includes cafeteria deferrals. This would make sense because there is no income tax withheld on pay deferred under a cafeteria plan.

6051(a)(8) references elective deferrals under §402(g)(3) and §457. §402(g)(3) covers 401(k) deferrals, SAR-SEP deferrals, 403(B) deferrals and SIMPLE deferrals. 402(g)(3) doesn't include cafeteria deferrals. Once again, this makes sense since the purpose of 402(g) is to impose a limit on compensation deferred under various retirement plan vehicles and this limit doesn't apply to cafeteria plans.

Based on this I think the match shoudl be calculated on gross minus cafeteria plan amounts. Most of the time I see it calculated on gross including the cafeteria amounts. Does my reasoning look correct. Thanks for any insights you can provide.

Is there anything wrong with the following transaction?

Trustee and participant in a small non-participant directed plan wants to make a loan to his brother (not a participant). The loan amounts to 70% of the total assets in the plan. Is this a prohibited transaction?

My thought it is not because the brother is not a party in interest as defined by the statutute. However, my thought is that it violates some the prudent investment standard, even if the loan is made at a reasonable interest rate and with other acceptable terms.

SECOND REQUEST -

are there any comparable provisions under ERISA and the SEC that deal with PARTY IN INTEREST rules????

Has anyone heard any good HIPAA stories or seen any good political HIPAA cartoons...especially Administration Simplification? I've been asked to dress up a HIPAA presentation with some humor. Frankly, I don't see anything humorous about this, but then again, maybe I'm just too cynical.

Can I transfer my variable annuity funds to

my Roth IRA funds without penalty?

If yes, what form(s) to use?

If not, then what penalty will I incur if I just

withdraw my annuity funds and put them in my

Roth IRA?

Thank you.

Not all state laws automatically conform to changes made in federal law. With this in mind, I'd like feedback about how practitioners are handling the limits in those states which need to adopt conforming laws. Are you going on the assumption that the states will conform? Are you being cautious and not permitting participants to take advantage of the increased federal limits until the state actually adopts conforming laws? Are you still calculating limits using the 3 tiers even though EGTRRA eliminated the MEA portion?