I've seen numerous banks and mutual fund companies through their trust banks, offering "full service" pension plans, particularly 401K's. They provide trust or custodial services and TPA services, and offer various mutual funds of money market funds which are sponsored and administered by related companies. Given a relationship of mutual fund and trustee, shouldn't an asterisk appear in column (a). Further, I would assume with so many such arrangements being offered that there is an exemption from prohibited transactions for such investments. I've seen First Union/Evergreen Fds, Fidelity/numerous Fidelity funds and Dreyfus/again numerous funds, and assume there would be more. I would appreciate any insight into this reporting issue.

Where are the requirements for the privacy notice being sent by banks, etc. prior to June 30? I'm trying to determine if a TPA is required to provide one. Or, if anyone has looked at this already, please provide answer...!

Thanks.

The company pays all the administrative fees for their 401(k) plan. They have several terminated participants with balances in excess of $5,000 who will not take a distribution. May the company charge the accounts of the terminated employees a quarterly fee without charging the accounts of active participants?

Can a paired standardized money purchase plan be merged into a profit sharing plan after amending the contribution in the MP plan to 0% of compensation?

Or should the MP plan be terminated, and then the assets transferred to the profit sharing plan?

With the new tax law, can a 90-24 transfer from a 403b annuity be placed in an IRA account or does it still have to be transfered to another 403b account?

I recently have been looking at the ERISA plan asset issues that arise when a plan enters into a derivative contract whereby the investment return to the plan is indexed, in part, to investments held by the counterparty to the derivative contract. The derivative is a type of equity swap (not a total return swap) which would mix and match the returns on several reference hedge fund interests owned by the counterparty. The returns are mixed and matched in a complicated manner so as to match investment diversification goals desired by the plan in order to diversify risks in the plan's investment portfolio. As such, the derivative contract is not a total return swap but rather returns (and losses) to the plan are determined based on a formula that takes into account various apsects of the gain or loss on the hedge fund interests held by the counterparty.

Under paragraph (g) of the plan asset regulations, where a plan jointly owns property with others, or where the value of a plan's equity interest relates solely to identified property of the entity, such property is treated as the sole property of a separate entity. Example 10 in the plan asset regulations involves a plan that acquires a 30% participation in a debt instrument that is held by a bank. The example states that since the value of the participation certificate relates solely to the debt instrument, the debt instrument is, under paragraph (g) of the plan asset regulations, treated as the sole asset of a separate entity. Since the benefit plan investor in Example 10 owns 25% or more of the value of the equity interest in the deemed separate entity (i.e., the participation certificate), the look-through rule under the plan asset regulations applies and the plan's assets are deemed to include the participation certificate and an undivided interest in the debt instrument. Consequently, the bank becomes a fiduciary with respect to the plan and the bank's actions with respect to the debt instrument are subject to ERISA's prohibited transaction rules of ERISA.

Depending how derivative contracts are structured, a similar result may apply to the property held by the coutnerparty thereby subjecting the counterparty to ERISA fiduciary and prohibited transaction rules. There appears to be little published authortiy concerning the application of the plan asset regulations to derivative contracts. I would be intersted in hearing from anyone who is aware of any authority or articles on the issue (or similar types of contracts). Thanks.

Is it discriminatory or against DOL regulations for a local govt to offer employees with single coverage and those with family coverage different fixed rates to apply toward their health insurance premiums? Obviously, the fixed rate for family coverage is higher and some employees on single coverage feel they should be afforded the same amount to apply toward other plans, e.g., dental vision, etc.

When borrowing from your 401k, does this "loan" appear on your credit reports?

Thank You

An employee had a baby 4 months ago. She thought the change forms would be sent to her automatically ( ha ha ) so the employee would now like to enroll the baby in the group health care and increase both the FSA and the DCAP.

My thought is the employee can't do any of the above because of the time lasp from the date of birth.

However, I cannot find anything that specially says the employee has 30 days from the qualifying event ( is that a HIPPA item? )

I would appreciate any help!!

Does anybody have an opinion on the following situation? An employer has a 7/01/00-6/30/01 fiscal year. We adopt a plan today with a 2/1/01-1/31/02 plan year-limitation year. under section 1.404(a)-14©1 , he intends to take a deduction for the defined benefit plan for the plan year commencing within the taxable year. We will use plan year compensation limited to 170000. He will extend his corporate return to 3/15/02 and make his contribution at that time. Can we do a 1/31/02 valuation based on the new law section 415 limitations and take the deduction on the 6/30/01 return?

Independent contractor would work 36 weeks out of the year (>1000 hrs), and the remainder she would work other places. Her income would be reported on a 1099. Could this employee be excluded from the plan since she is not being paid any W2 income?

A non-profit client sponsors a 403(B) plan, to which it makes employer contributions. It has recently acquired a for-profit subsidiary which has a 401(k) Plan. I understand that under EGTRRA, signed on June 7, 2001, eligible rollover distributions from a 403(B) may be rolled over into a 401(k) and vice versa.

The client would like to consolidate the two plans into one, but I am not sure that the new law gets me there. The problem, as I see it, is that if I terminate either plan, the rule that prohibits distributions of deferrals while the individual still works for the control group and maintains another defined contribution plan would prohibit the distribtuion and rollover. Is it possible to do a plan merger now - i.e. freeze the 403(B) plan and transfer the assets to the 401(k)?

Distribution date is the August 1st of the plan year following a participant's separation from service. Can the plan sponsor payout earlier than the distribution date as long as they do this on a consistent basis?

One of our clients failed their discrimination test and had to have money returned. By mistake, the asset company made two distributions instead of one. That is, the participant received twice the amount he should have received. The checks were issued a week or two apart and the participant cashed each check. My question is, what is the solution for this? Can the participant return the amount that was issued to him by mistake? Can he keep the money and just pay the taxes on it? Is there some other solution?

Spouse beneficiary is electing to treat the deceased's IRA as her own. He died after his required beginning date, but before he satisfied his 2001 RMD (he died earlier this year). I understand that the amount that represents his RMD must be reported under the spouse beneficiary's social security number. However I am being challenged on this because the rules state that the spouse beneficiary cannot rollover the amount that represents the deceased's RMD. . Can you provide me with a citation (regulation etc.) which states the amount representing the RMD of the deceased, if distributed after the deceased dies, must be reported in the SS# of the spouse beneficiary?

Thanks

My plan failed top heavy testing using determination date 3/31/98 which means we were top heavy for the 4/1/98 to 3/31/99 plan year. I understand the 3% top heavy contribution for non-key employees is based on the compensation earned from 4/1/98 to 3/31/99. But, are the non-keys that are entitled to the 3% the non-keys from the 4/1/97 to 3/31/98 plan year or those from 4/1/98 to 3/31/99 plan year? Exactly who gets the 3%?

Facts: A DC plan merged with another existing plan 12/31/99 and thus was terminated effective 12/31/99. The 1999 form 5500 had required the IQPA because the participant count was over 100 as of 1/1/1999. The 1998 filing also required the IQPA so the plan was consistantly over 100 lives (>120 rule). The assets of the terminated plan were not physically transferred to the new plan, Trust, until April 2000. As of 1/1/00 there were no "participants" in the terminated plan however the terminated plan held the assets until they could be moved in April 2000. There will be a beginning balance in the terminated plan however for 5500 purposes.

Question: Do you feel the terminated/merged plan would be required to file an IQPA with the 5500 for the 2000 plan year? DOL seems to be "gray" on this matter. Do you feel the DOL would include in its definition of the participant for Form 5500 purposes people with an account balance who are not eligible under the plan since it is terminated? We do assume that the new plan will be filing a 5500 with an IQPA for 2000 on it's plan.

I have heard something about a plan sponsor taking two plan years worth of deductions in one tax year for a new plan with a plan year which is not the same as the tax year. Does anyone know if this is valid and if so, how it works?

DOES ANYBODY HAVE AN OPINION ON THE FOLLOWING SITUATION? AN EMPLOYER HAS A 7/01/00-6/30/01 FISCAL YEAR. WE ADOPT A PLAN TODAY WITH A 2/1/01-1/31/02 PLAN YEAR-LIMITATION YEAR. UNDER SECTION 1.404(a)-14©1 , HE INTENDS TO TAKE A DEDUCTION FOR THE DEFINED BENEFIT PLAN FOR THE PLAN YEAR COMMENCING WITHIN THE TAXABLE YEAR. WE WILL USE PLAN YEAR COMPENSATION LIMITED TO 170000. HE WILL EXTEND HIS CORPORATE RETURN TO 3/15/02 AND MAKE HIS CONTRIBUTION AT THAT TIME. CAN WE DO A 1/31/02 VALUATION BASED ON THE NEW LAW SECTION 415 LIMITATIONS AND TAKE THE DEDUCTION ON THE 6/30/01 RETURN?

Participant is terminated from Company and subsequently becomes lost. Participant's beneficiary (wife) is requesting distribution of account balance - $500. Participant has been missing for approx. six months and even the State Department can't find him. He was last known to be in India. Wife has Power of Attorney for husband. Can the Plan distribute?