I am asking for someone's help clarifying some of my interpretations regarding minimum benefits for all Top Heavy defined contribution plans for which a participant is covered.

And I have a couple of questions following...

We are testing a companies' Profit Sharing and Money Purchase Plan. These are paired plans. If I interpret correctly the minimum benefit for all defined contribution plans maintained by an employer is 3%. So, if someone is covered under more than one Top Heavy Defined Contribution Plan the minimum benefit is satisfied by either the non-elective cont. in Profit sharing plan or the required cont. in the MP Plan, provided it is at least 3%.

It is not required for each plan to make 3% cont.

1. So, is it always the case that the 3% minimum can be satisfied in either the MPP or the Profit Sharing Plan for any year in which either plan is Top Heavy?

2. Does it need to be stated clearly in Plan Document which plan the minimum benefit will be allocated provided either or both paired plans are Top Heavy?

What does it really mean to have a paired plan? Are there some kind of testing advantages for having paired plan or is this just a referrence type of notation indicating that the plans are maintained by the same employer?

Any help is much appreciated!

Plan provides that an employee becomes eligible to participate 6 months after his or her employment commencement date. There is no hours requirement. How is this administered for employees who are hired, terminate before becoming eligible, and then are rehired? When can we disregard the initial period of service?

Company A & Company B form a controlled group. Each company has its own plan. I have each plan set up separately on Quantech. Is there anyway I can get Quantech to do the 410(B) testing without me manually going an adding Company A's employees to Company B and vice-versa?

Thanks for any guidance.

If a client provides their attribution check to an agent of a company prior to the April 15 deadline, and the agent puts it into the mail to send to the processing area.

The check gets lost. Can the company allow the client to provide a replacement check - dated of course after 4/15?

Is there any Private Letter Rulings to substantiate this?

Thanks

J

Under EGTRRA amounts under an eligible 457 plan of a state or local government are includible in income when paid. It also provides that the definition of "wages" for withholding purposes does not include payments under or to such plans. I take all this to mean that payments under such plans are now subject, for income tax purposes, to withholding in the same fashion as 401(a) qualified plans and reporting under Form 1099-R rather than W-2. Is this correct?

Also, I didn't notice any changes in the definition of "wages" for FICA purposes.

Presumably then, payments from such 457 plans would still be subject to FICA taxes at the applicable time and these amounts would still have to be reported on a W-2 for FICA purposes. Is this correct?

Bottom line, under such 457 plans, for income tax purposes a payment would be withheld and reported (Form 1099-R, no W-2) in the same fashion as a 401(a) payment. However, such payment would still be subject to FICA taxes and related reporting would be done on W-2.

Thanks for any comments/guidance.

This is a two part scenario:

(I.) It is my understanding that an standized prototype does not allow entitlement or excluded class provisions; However, I have a basic document (with a section specific to the profit sharing plan, under standardized document) that says "Any participant who is actively employed by the employer and all terminated participants who performed less that 501 hours of service during any plan year shall not share in Employer Contributions," written into the document. While the Employer does not have an opportunity to elect an entitlement provision, this seems to be an entitlement provison.

*Would someone please clarify this for me. Basically, I am stuck on the statement that says "any participant who is actively employed."

(II.) It is my understanding the 501 hour requirement for terminated participants as described in Part I. above, is a statuatory exclusion from a compliance standpoint, for example the 410(B) Ratio Percentage Test/Actual Contribution Percentage Test, which allows you to remove anyone in that population from your denominator when your Plan has entitlement, increasing the chances for better results.

However, in the case of a standardized plan that should not have entitlement, why would this language be there? Is this considered and entitlement provision and are the IRC regs. written to include "active employees," as well as terminated? This document also has a determination letter. What am I missing?

Thanks Nabiyah

This is a two part scenario:

(I.) It is my understanding that an standized prototype does not allow entitlement or excluded class provisions; However, I have a basic document (with a section specific to the profit sharing plan, under standardized document) that says "Any participant who is actively employed by the employer and all terminated participants who performed less that 501 hours of service during any plan year shall not share in Employer Contributions," written into the document. While the Employer does not have an opportunity to elect an entitlement provision, this seems to be an entitlement provison.

*Would someone please clarify this for me. Basically, I am stuck on the statement that says "any participant who is actively employed."

(II.) It is my understanding the 501 hour requirement for terminated participants as described in Part I. above, is a statuatory exclusion from a compliance standpoint, for example the 410(B) Ratio Percentage Test/Actual Contribution Percentage Test, which allows you to remove anyone in that population from your denominator when your Plan has entitlement, increasing the chances for better results.

However, in the case of a standardized plan that should not have entitlement, why would this language be there? Is this considered and entitlement provision and are the IRC regs. written to include "active employees," as well as terminated? This document also has a determination letter. What am I missing?

Thanks Nabiyah

It is my understanding per a 9th Circuit Court Opinion that if a lump sum was received (ERISA or NOT) it is considered Exempt from levy (or exempt from creditors). That is only on disability benefits received. I believe it is Standard Ins. co. v Saklad in 1997. Basically it states that in almost all states that disability benefits are exempt from levy. Does anyone know much about this? I also understand that it can refer to the "offset" or "setoff" of SSDI benefits too. In otherwords, they can't take them out..

Any thoughts would be of great help and interest. Thanks.

Employer adopts a restated Plan containing all GUST admendments in 2001. The plan year is the calendar year, as is the Employer's tax year. The last day of the GUST remedial amendment period (RAP) applicable to the plan is December 31, 2001 (per Announcement 2001-12). I need the answer to the following two questions:

1) What is the latest date Employer can file for a determination letter that covers all of the GUST RAP? Is it: a) December 31, 2001; b) the time prescribed by law, including extensions, for filing the income tax return for 2001; or c) some other date.

2) What is the latest date Employer can file for a determination letter so that, if the IRS requires changes to the plan, those changes will relate back to the entire GUST RAP? Is it: a) December 31, 2001; b) the time prescribed by law, including extensions, for filing the income tax return for 2001; or c) some other date.

Do the answers above change if the restated plan was adopted in 2000 rather than in 2001?

Thanks for any cites and advice you can give me.

Yuck!!!! We've got a potentially ugly situation. We have a cross-tested plan that also has an excluded class of employees. The excluded class includes NHCEs. Obviously, the plan has passed 401(a)(4) previously with these NHCEs not benefitting, but in 2002, I don't see any way to keep these previously excluded ees out! Any comments?

In reading Notice 2000-3 Q10, it appears that as long as ee's not having met stat elig but that are elig under the terms of the plan do not have to receive the safe harbor contribution as long as the non stat group meets coverage and ADP on it's own. This may be a dumb question, but are 401k and 410b test passing the only stipulations?

The reason I ask is when I search in Benefitslink for Ntc 2000-3, part of Q10 is cut off and the last sentence seems to state "However, in such a case, the plan must specifically provide that elective contributions (and, if applicable, matching contributions) on behalf of those employees will satisfy the ADP test (and, if applicable, the..." and that's where it ends.

Does this mean that if the plan doc does not stipulate that normal matching contribs must be used to satisfy the ADP test and are 100% vested, then the non stat elig's must receive the safe harbor contribution? I haven't come across the non stat elig issue in practice before, any clarification would be appreciated.

What are the implications of having investment management fees for self-directed brokerage account within 401k paid by the corporation, not from the assets of the plan? I.E. Owners and some employees self direct utilizing a money manager and other employees utilize mutual funds and the corporation not plan assets pay fees for individual money managers.

I just had a call from a client. One of their plan participants changed their salary deferral election from 5% to 10% in 1999. The person who does the payroll never made the adjustment. Suddenly the participant has noticed this error - almost 2 years later - and thinks he should receive a matching contribution on the missing salary deferral contributions. I guess I believe that even though the company obviously made a mistake, the participant has some responsibility to pay attention to what is being withheld from his paycheck. Does anyone have an idea of whether or not the employer has to do anything to make up for this error?

Deceased Participant was single and the plan administrator has no beneficiary designation. The plan document states that in this case the distribution goes to the estate of the deceased. The sister of the deceased informs the plan administrator that the deceased had no will, and that the legal costs of establishing an estate for this purpose would be more than the amount of distribution. Is there a solution that would allow the plan administrator to be sensitive to the issue but keep the plan in compliance? Thanks.

Could someone explain why a public school district would want to set up a 401(a) plan rather than or in addition to a 403(B) plan? Thank you.

We are a not-for-profit (a 403©6). We already have a 401(k) plan and a DB plan. We are looking at putting in a NQDC arrangement. We had been looking at 457(f) and its substantial risk of forfeiture because contributions to 457(B) would be offset by our 401(k) plan.

Under the new tax bill, however, it appears that contributions to 457(B) plans would NOT be reduced by 401(k) contributions. What's more, the limit under 457 (B) is being increased to $11,000 and balances will be eligible for rollover! These changes are all be effective in 2002.

Am I missing something? Can I really give my executives the opportunity to defer $11,000 in the 401(k) and another $11,000 in a 457(B) -- all eligible for rollover?

I am also wondering this: can my plan have both a 457(B) side and a 457(f) side to allow executives to defer amounts in excess of $11,000 -- understanding, of course, that any amount that goes over into the 457(f) side is subject to the substantial risk of forfeiture rules?

Thanks for your help.

WilliamC

For a short plan year (new plan 7/1/01, year end 12/31) is the de

401(k) plan failed ADP test for 1999 (calendar year plan year). Corrective distributions to HCEs were not made by the end of 2000. Consequently, correction of failed ADP test for 1999 plan year still needs to be effected. QNECs to all NHCEs would be prohibitively expensive.

I heard, read (or dreamed!) somewhere of a correction method called "dollar for dollar" where corrective distributions are made to the HCEs and a QNEC equal to the total amount of the corrective distributions is made and allocated to the NHCEs.

Can anyone point me to a prior post or information regarding this

subject? Thanks!

I am looking at standardized adoption agreement for a 401(k) plan that our company is taking over. According to this adoption agreement, an otherwise eligible participant must be employed on the last day of the plan year in order to receive an allocation of any employer non-elective contributions and/or employer matching contributions. I hate to sound stupid, but I always thought you could not have a last day of plan year rule in a standardized plan. Could someone please explain this to me?

What makes a severance plan an ERISA plan and have the requirement for a 5500 filing?