Here is an outline of the surrounding issues:

In dealing with permissively aggregating three plans together in order to satisfy NOND testing. Assume that the plans are all designed the same with matching benefits, rights, and features...

Three members of a control group Plans A,B,C.

I assume that mandatory aggregation is applicable here for the HCE's and NHCE's combining eligibility and all the rest, which could increase the count for NHCE's.

I don't understand how the HCE's would look on paper. Meaning, assume an employee is considered an HCE based upon 5% owner. This person has comp of:

Plan A $40,000 defers - $2,000.00

Plan B $100,000 defers - $5,000.00

Plan C $20,000 defers - $1,000.00

When looking at this person under permissively aggregation scenario would the following be true?

The person would be an HCE and counted one time on the aggregated test. The comp would be totaled and the deferrals as well? 160,000 and 8,000 giving 5% deferral%?

How would this look if mandatory aggregation was applied to these plans being tested separately? Any way to avoid combining comp/deferral amts. for the HCE's?

Thanks for any help!!!!!!!!!!!

Matt

I am hoping someone can clear a few questions I have up about the options you have for running Coverage and ADP/ACP testing for related employers, for which I am making an attempt to detail below:

Here is an outline of the surrounding issues:

I am testing three members of a control group and this first discussion deals with trying to get the plans tested

separately AND without having to apply mandatory aggregation of the HCE's.

Here's my understanding of the rules, generally speaking related employers are always treated as single employer for NOND and coverage testing. It is allowable to test each separately if they have separate workforces and maintain separate 401(k) plans. However, the HCE's are subject to mandatory aggregation combining their deferral amts in each plan they participate in order to calculate their deferral %'s in each plan. Backtracking a bit, to determine who are HCE's for related employers 415 comp is considered the employee's compensation from any member of the the related group.

Three questions about this...

1. I found an exception to mandatory aggregation in some of Sal Tripodi's materials that the HCE's do not have to be mandatorily aggregated if the arrangements are part of plans that are disaggregated for coverage. Does this mean that as long as you disaggregate for coverage that mandatory aggregation of HCE's does not apply? Unfortunately, I am also having a hard time understanding what it truely means to disaggregate for coverage purposes

2. Assuming that mandatory agg. is applicable, then when combining deferrals to come up with def% in each plan is compensation combined as well?

3. Is this only compensation from which the employee was eligible?

------------------------------------------------------------

The second discussion involves permissively aggregating the three plans together in order to satisfy NOND testing. Assume that the plans are all designed the same with matching benefits, rights, and features...

Three members of a control group Plans A,B,C.

I assume that mandatory aggregation is applicable here for the HCE's and NHCE's combining eligibility and all the rest, which could increase the count for NHCE's.

I don't understand how the HCE's would look on paper. Meaning, assume an employee is considered an HCE based upon 5% owner. This person has comp of:

Plan A $40,000 defers - $2,000.00

Plan B $100,000 defers - $5,000.00

Plan C $20,000 defers - $1,000.00

When looking at this person under permissively aggregation scenario would the following be true?

The person would be an HCE and counted one time on the aggregated test. The comp would be totaled and the deferrals as well? 160,000 and 8,000 giving 5% deferral%?

How would this look if mandatory aggregation was applied to these plans being tested separately?

Thanks for any help!!!!!!!!!!!

Matt

As a result of several acquisitions, an employer maintains 3 VEBAs. The assets of each of the VEBAs currently provide benefits for active and retired employees. The employer wants to accomplish 2 things: (1) merge the 3 VEBAs into one, and (2) use the VEBA to provide only retiree medical and life benefits.

Are there any tricky issues to be aware of in merging VEBAs?

Is it OK to stop using a VEBA to provide certain benefits (in this case, benefits for active employees)?

Would a PLR be recommended?

Should the employer file Form 1024 for the new VEBA structure?

Anything else the employer should consider?

I made the full $2,000 contribution for the year 2000.

The income reported on my W-2 form is only about $1,700, but I did earn just over $400 in self-employed tutoring in 2000. So theoretically, I'm OK.

The problem is that when I come to line 4 of schedule SE where I multiply my self-employment income by 0.9235 (which brings the number below $400), I am told to NOT file schedule SE.

My question is, if I do not file form SE, how does the IRS know that I earned at least $2,000 in 2000?

Should I just inflate my self-employed income enough to require me to file SE? Or should I file it with the right amount, even though I am told not to?

Thanks,

Robbie Geary

401(k) PSP document allows for forfeitures to be used to reduce ps contribution for that year. If no contribution is made, is there any regulation that "requires" the plan to make a contribution (thus the contribution for the year would be exactly the amount of the forfeitures for the year).

We have carried over forfeitures until the year a ps contribution was made- however, were recently told by an attorney that he was under the impression that there was a regulation that would disallow this....that even if no contribuition was made, we would still need to allocate forfeitures.

Anyone?

Thanks

Lisa

Is it neccessary to report an ineligible tax year 2000 Roth contribution and an ineligible tax year 2000 conversion from traditional to Roth (AGI = 115,000) if I plan to recharacterize them into a traditional IRA before Oct 15? I plan to file my 1040 by April 17 (I'm in Massachusetts; Patriots Day Monday).

I need to know if I am able to view my previous employers "summary plan description" in order to find out if "disability insurance" was part of my plan.

Employee in coma. Family consists of only brothers out of town. Employee elected sufficient funds to cover his unreimbursed medical bills, but family advises they cannot get an emergency guardianship or power of attorney due to element of certainty that our employee will die. How will i be able to remit these funds to the vendors without his (or a qualified guardian's) signature on the checks?

If a self-insured health plan fails the discrimination test of 105(h), can the plan simply add a provision that automatically provides "catastrophic" health coverage to all individuals who do not elect other coverage under the plan? The catastrophic coverage will have a very high deductible, in the range of $15,000, and is only available if an employee does not elect other coverage under the plan? This seems like a shady way around the discrimination rule, but I can't find anything prohibiting it.

At the very end of the proposed Regs, the Plan Aggregation and Restructuring rules (Regs. 1.401(a)(4)-9) are amended to comply with the new gateway requirements. In particular, the Plan Aggregation changes only deal with DB/DC aggregation. It appears that ordinary aggregation of 2 DC plans remains unchanged by the proposed Regs.

So why not have 1 plan for HCE's and another for NHCE's? The plan for NHCE's would not have the gateway requirement, since it does not cover any HCE's. You would then aggregate the plans for 410(B) and 401(a)(4) testing.

Am I missing something here? Will the IRS close this loophole in the final Regs? By the way, do IRS officials read these message boards? :-)

Mutal fund hedge transaction- Has anyone heard about the pending PLR on the mutual fund hedge transaction? The concept is being used by a few firms, albeit small. It works like this, if a pool of mutual funds are purchased to informaly fund a nonqualified deferred compensation plan, and the company received dividend distribution and/or re-balance, the proportion of mutual funds held (triggering what normally would be capital gain event)they can defer those taxable events until the mutual funds are used to pay the nonqualified liabilities. This transaction is being based on Code Section 1221 and 446, and the regs related to both.

It's my understanding, that from an accounting standpoint, you can not record the asset on the balance sheet, as it does not run through the income statement, but runs through equity.

Can anyone suggest a good publication, seminar, etc. to give me a good, basic understanding of issues involved in a Taft-Hartley Health and Welfare Benefits Plan. We are the TPA only. The trust is being set up by an attorney. I just need enough to protect the TPA and spot possible compliance issues.

In a insured health plan (less than 50 employees), can an employer pay 100% of premium for family coverage for some employees and only pay premium for individual coverage for others and if so does this have to be done by class of employee. (not a 125 plan)

Is anyone aware of NEW or impending regs governing timely payment of claims for self-funded health plans? Several people have told me they heard or read something about it somewhere, but I can't find anything specific. Help!

I was wondering if any TPA's or similar organizations out there are currently working on compliance with the new privacy regs, specifically the mandate for employee training, documentation of confidentiality procedures, establishment of a privacy officer, etc.

I know we will have to do this sooner or later, I'm wondering which it should be. Any recommendations?

Damien

A sole proprietor (sp)set up a SEP plan for himself in 1998, fully believing he had selected 3 years eligibility. The accountant confirmed this. At that time, he had no employees. Instead, the bank writes in one year eligibility on the form. He contributes for himself for 1998 and 1999. For 2000, he tells his accountant that several of his employees are now eligible to receive a contribution. The accountant routinely checks the document, and discovers the error. What are the methods to correct for 1999. The bank wants sp to treat the 1999 contribution for himself as an excess, take a refund and file a 5330, which seems draconian. The owner is angry and refuses to fund the missing contributions. Anyone have any other ideas?

NOTE: This thread continues on page 2

Does anyone know how many traditional defined benefit plans have been converted to the cash balance model?

We are a small 3-yo company planning to go public in about 18 months. We are trying to decide between designing a stock option plan vs. an ESOP-- does anyone know of good resources to compare these choices or have opinions on the advantages/disadvantages of these two approaches to increasing our employee's incentive for the company to do well?

Earned income for a sole prop. is not known until after the end of the year, and thus, the deferral contribution cannot be made until such income is known. Also a sole prop. has no employees to give notices to and allow enough time to make a deferral.

With that in mind, does the Oct. 1 deadline for adopting a SIMPLE IRA really apply to a sole prop.? Why not use the SEP guidelines and as long as the SIMPLE IRA is adopted by the due date of the sole prop's tax return, then it is o.k.?

What do you think? Is the 10/1 deadline too clear to ignore?

I recently quit a large fortune-500 firm to try my hand at self employment. For a variety of reasons, I decided to leave at the same time that my baby son was born. Since I didn't know the exact date he would be born or when I would stop working, and also because I wanted to make sure I would receive my year 2000 year-end bonus, I decided to take an UNPAID 3 week FMLA leave of absence and then quit. I informed my boss and his boss of my intentions and they agreed to allow me to do this. I left on very good terms. I could have used some of my remaining PTO vacation time to cover this leave, but I didn't think that would be fair to the company, so I opted to use only unpaid FMLA leave.

However, the company's HR department messed up. They took several weeks to process my unpaid FMLA request and ended up paying me for 8 days of work during my leave.

I was busy with my newborn son when I noticed that HR had messed up and that too much money had been direct deposited into my bank account. At the time, I figured this was par for the course--in the seven years I worked at that company, HR has always been unfriendly, beaurucratic, and incompetent.

That was a month and a half ago. Now, I got a letter from HR that they want me to return $1100 for those 8 days of leave. This creates a big cash flow problem for me and I am loathe to return it. To me, it seems like I did everything in my power to try to NOT receive this money and did nothing to actively receive it--it was automatically direct deposited.

How should I respond to the company's request? I understand that I should not have received the deposit, but then again, I never agreed to be their corporate escrow account to protect the company against their own incompetence. At this point, what can they do? Any suggestions?