Here's the situation: Company A adopts a new pension plan at the end of 2000 with retroactive effect to January 1, 2000. Company A funds the plan within the prescribed time after the end of 2000. Company A does not file the first 5500 for the new plan until the 2001 plan year even though the plan was effective in 2000 and was funded.

Company A advances several arguments in favor of this approach: B5 accounting firm said it was OK and we really really don't want to file for 2000; it's OK to combine what would nominally be the first year's filing with the second year's filing as long as the first year is "really" only a couple of months; or the plan is deemed to have been established on the last day of 2000 because that was technically when it was funded.

None of these seem particularly satisfying, mainly because there doesn't appear to be any authority for any of them. It appears that if you adopt a plan, whether on December 31, 2000 or January 1, 2000, it's up and running for 2000 and you have a potential filing obligation even if the plan was not actually funded until the first couple of months of 2001.

Anyone have any input on this? Is it DFVC time?

I hope this is the correct forum to post this question.

I am currently 44 years old and my employer is getting rid of our pension plan. I have been told I can get $1,105.23 at age 65. However, I can elect to receive this as a lump sum of approx. $29,400 now.

My question is, how can I verify the lump sum is correct? I understand that I have to use the plan's interest rate (they tell me it is 8%). Also, that I have to use the mortality factor. I am lost.

I am not completely dumb though. I do understand present values. I assumed that I could calculate the lump sum I was eligible to receive at age 65, and then discount it back to my age now (21 years) using the same 8% rate. Is this correct?

Help.:confused:

What have others (brokers, employers, TPA's) seen in the way of reinsurers' behavior in this ever-tightening market?

We have seen lasers imposed on individuals up to four months after the plan effective date, claims denied because someone was diagnosed and treated (not hospitalized) for an "alarming" diagnosis in the final days of a prior plan year. If a TPA does not have a report that summarizes EVERYTHING that may be "in the hopper" prior ro a carrier change, the employer cannot disclose, but the reinsurer still lasers or denies coverage for non-disclosure.

Employer groups and their TPA's are being held to a standard of PERFECT knowledge, whether it is reasonable or not. Carriers are, it seems, looking for ways to deny claims the moment they appear! "Rules" that were followed only loosly in the past are being adhered to tightly, without any prior notice. New requirements appear out of nowhere! Groups are being completely re-underwritten based on a full 12 months of claim data, and often the final terms are not available until well after the employer group has either lost their prior coverage or given a termination notice!

We understand that carriers and reinsurers are still recovering from two or three very bad years, but the climate seems to be getting hostile! Please tell me we aren't the only ones experiencing this!

A doctor client will soon be creating a new service entity (Service Corp) with 5 other doctors. Each of the doctors will continue to maintain his own professional corporation (PC), and each PC will employ one or more nurses. The Service Corp will employ about 12 administrative, billing and shared employees. We clearly will have an affiliated service group consisting of the Service Corp and the 6 PCs. My question relates to the transition relief under 410(B)(6)© and 401(a)(26)(F). Will this be treated as an "acquisition or disposition" giving rise to the transition relief? If so, will the transition period begin on the date the doctors acquire their interests in the Service Corp or the date on which they are "regularly associated with the Service Corp in performing services for third persons?

We have a plan sponsor who wanted to sell and reallocate participant account balances under $5k to active plan participants because they can not be located. What guidance can I find to let this guy know that this is not a possibility. I discussed forcing them out of the plan, and escheating those balances to the state if we cannot locate the participant. Can anyone think of anywhere I could look on the web to see this in writing, or have some insight on this issue. Thanks,

Jim J.

I'm looking for information on how to add plan specific links to the Quantech Web Module 6.0.

I want to list link(s) specific to the plan that is being accessed.

Any info is greatly appreciated

Thanks

Our 401(k) plan includes a discretionary match, made at the end of the year in company stock. Not surprisingly, participants cannot diversify out of that fund until they are 55 and 100% vested (5 years of service). But the part that I find odd is that the diversification rules apply even after termination of employment.

I don't have any reason to think this is not legal, but my question is whether this is unusual, common or somewhere in between.

RCK

I am looking at using a VEBA to base health benefits out of for an association. The people I am working with indicate that there is no tail end exposure for claims run off since there is an insurance carrier that is insuring the back end.

I am simply concerned that there may be some liability for us since this is effectively a self funded plan. However, as I understand it, I shouldn't be concerned due to the insurance company on the back end.

Any thoughts on this?

Thanks

I was reading an article in the CPA Journal today that contained the following statement:

"The DOL has stated that a plan sponsor will not be liable for the advice provided by a third-party investment advisor if the sponsor acts prudently

in selecting and monitoring the advisor, the advisor is licensed to provide advice, and the sponsor obtains written documentation that the advisor will be acting as a fiduciary."

While I think this is a good statement of the law, I don't know of any formal DOL guidance where this was explicitly stated. Could someone point me to where DOL may have said this? Could it relate to the informal statements made by Olena Berg a few years ago?

Thanks!

card

My understanding on the new EGTRRA rules on automatic distributions indicates that an IRA is the default choice for distribution amounts over $1,000, but under $5,000. However, the fiduciary has liability for this IRA, until the earlier of when the participant moves the money to a different IRA, or 1 year after the date the money goes into the IRA.

A question I have is that if the employer has fiduciary liability for a year, is this still considered a distribution at the time the money goes into this IRA? It would seem odd that the employer can be held liable for amounts that are outside of a Plan.

Also, consider the following scenario: A 401(k) plan has self-directed accounts, in which a participant has made investment elections, lets assume all of which would be considered aggressive investment decisions. This participant terminates with an account balance of $4,000. Plan document instructs the employer to pay out immediately. Paperwork is sent to the participant, who does nothing. Employer sets up an IRA and moves the money into that IRA. For the next year (unless the participant intervenes), employer has liability.

The problem I see with this scenario is that you go from a participant account in a plan in which the participant has made his own investment choices, to an IRA account where for up to a year, the money is invested at the employer's discretion. I realize that most employers will want to make this IRA investment choice prudently, but isn't the employer taking on liability that could otherwise be avoided if the money stayed in the Plan?

Any comments are appreciated.

Finally, am I correct in that these new automatic distribution rules are not effective for up to 3 years, until the Secratary of Labor issues final regs? If so, do you see a problem if an employer would in fact decide to follow them starting now?

Thanks

Our company is planning to offer VEBA benefits to its employees. Which are the existing VEBA trusts in Virginia and consultants/ Plan administrators whom I can turn to for advise in forming / subscribing to VEBA. P.S. We have around 700 employees.

Thanks in advance for your advise.

Does anyone have an idea about what the new Carve Out Testing methodolgy involves ?

I have read the regulations which simply tells us that an alternative to the age groups testing is available provided the plan satisfy the Minimum Allocation Gateway.

But just how different are the two? :confused:

What is an employer's responsibility to notify former employees when the employer moves the company's 401(k) plan to a different company (i.e., Aetna to Fidelity)? And, if they are not required to notify the former employees, who determines what funds the former employees' money is invested in?

I just need some clarification on Late Enrollees. An employee waived coverage through her employer due to having coverage through her husband's employer. The husband's benefit plan changed at the last open enrollment to higher copays and employee contribution. This couple has now realized that the benefit plan through the wife's employer is a better deal and want to enroll. Is this a qualifying event under late enrollee provisions? If so, doesn't enrollment have to happen within 30 days of the qualifying event?

A company currently sponsors a non-safe harbor 401k plan where very few NHCEs defer, limiting the owner to very small deferrals and matching contributions for himself. Present match is 100% up to 3% of comp with a 2/20 vesting schedule. It would appear amending the plan to a safe harbor design where the match would be 100% vested and be increased for an additional 50% match on the deferrals between 3 and 5% of comp. would be worthwhile so that the owner could defer $11,000 next year and receive the full match.

Since the owner stands to significantly benefit while contributing a match to a very small portion of the employees, would the plan have to be cross-tested for 401(a)(4), or does the safe harbor design eliminate this concern?

The plan has about 20 employees and is currently not top-heavy, but if the owner will be making maximum deferrals and receiving full matches, he will have to provide all participants a min. TH benefit of 3% of comp. in an estimated eight years.

Have found next to nothing with regard to and have no prior experience with "multiple employer plans". I would appreciate any and all comments from my "esteemed and learned peers" regarding the following situation:

"Dad's" company sponsors a 401(k) Plan. Dad's adult "Son" owns his own small business. No overlapping ownership interests, so I am assuming (hoping?!) not a controlled group.

Dad wants to let Son's company become an adopting employer of Dad's company's 401(k) Plan (to save start up document costs and to help defray ongoing admin costs).

Would this be a "multiple employer plan"?

What are the considerations, ramifications, benefits, downsides, etc., of such an arrangement (e.g., recordkeeping, testing, 5500, etc.)?

Thanks to all for your valued input!

Assume client owns 100% of company A and 50% of company B. Must these clients be combined for tax qualification (i.e. non-discrimination,etc.) testing purposes by the contract administrator?

A company provides a group health plan to its employees through a cafeteria plan. The benefits of the group health plan are fully insured. Both the group health plan and the cafeteria plan pass applicable nondiscrimination tests.

The company wants to give its executives (all of whom are HCEs) the opportunity to take an annual physical on a strictly voluntary basis. This physical is not provided by the medical insurance purchased by the company for purposes of its group health plan. Instead, executives will take physicals at a hospital, and the company will pay the cost of the physicals to the hospital. The company will not receive any information regarding the physicals except that they have been taken.

No employees other than executives will be given the opportunity to take the annual physical at company expense.

1) Does this arrangement for executive physicals constitute a self-insured medical reimbursement plan within the meaning of Code Sec. 105(h)(6)?

2) Is it per se discriminatory?

3) Could the cost of the physical be justified as an ordinary and necessary business expense and therefore beyond the scope of Code Secs. 105/106?

4) If the arrangement is a self-insured medical reimbursement plan and is discriminatory, is the consequence merely that the cost of the physicals would be includible in compensation for the executives?

Thank you.

John

While completing the 2000 5500, I noticed that the financial information on the 1999 Schedule I is incorrect.

When filing an amended return, Should I send a 1999 5500 with box B(2) marked, along with a corrected Schedule I? Or should I include all Schedules, even those that required no corrections?

What penalties are imposed when a "top hat plan" is deemed to have failed and is no longer considered a top hat plan?

Also, what rights, if any, do other employees (who were not part of the "select group" in the plan) have against the employer since the "top hat plan" is no longer deemed such a plan?