Former company permits 401K diversification of 10% of total ESOP valuation as calculated on the last fiscal year, Sept. Employee diversification opportunity notification arrived 3/28.

As an employee of 12+ years, I was notified of termination on 3/20 with a final employment termination date of 4/14.

Termination guarantees employee rights to first distribution which can be rolled into an IRA. The company has complied to this.

Based on review of articles of the plan, it is my contention that I am also entitled to the diversification rollover as an active employee not only for all of fiscal 99 on which the diversification value is based but as an active employee for the first half of fiscal 2000 and through 4/14.

I have made my case to the corp, they have not responded. I am interested in knowing if anyone has found himself in the same situation and was able to obtain a rollover resolution from his company.

Am interested in any law, organizations that represent employee ESOP rights.

We have a profit sharing plan based on a Corbel document that does not seem to address how to correct a failed 410(B) test. There are 13 NHCEs participating at some point during the year in question, but only 9 are entitled to receive an allocation. All of the HCEs are eligible for an allocation - meaning that I need at least 10 NHCEs to pass the test (I assume you have to round up after calculating 70% of NHCEs). Plan is not top heavy.

The document has both a 1,000 hours and a last day of the year requirement for a participant to receive an allocation. The four remaining NHCEs were new participants who terminated during the year, 2 with >1,000 hours and two with 500-1,000 hours.

I've heard about the "failsafe" method that lowers the hours requirement until enough participants receive an allocation so that 410(B) passes, but I don't know how I could use this here - I only need 1 more NHCE and there's 2 with more than 1,000 hours. I'm guessing you can't just give an allocation to the one with the most hours.

Would the solution be to waive the last day requirement as the "failsafe" and give an allocation to the 2 terminated participants with >1,000 hours? Are there other options and can they be used without the document specifying them? Any info is much appreciated.

Can anyone recommend a good source for E and O insurance? I have a small TPA firm (no product) and am surprised that the half dozen or so huge national insurance firms that I contacted at random don't even offer this. I found several firms via the internet (all in other states) and they all recommended using a firm in the state where I'm located - Arizona. All info will be much appreciated.

This would be a prohibited transaction, correct? The brokerage firm is a party-in-interest and they are essentially loaning money to the plan. Has there ever been a DOL exemption for something like this?

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Andy Treece

Employer maintains a number of nonqualified plans for elective deferral of bonus and other incentive compensation. A rabbi trust holds assets to fund such payments in the event of a change in control, etc. Employer is forming a joint venture in which it will have an exact 50% ownership interest. A number of employees who have deferred compensation are being asked to terminate service with the employer and become employees of the joint venture. In ordinary circumstances, their termination of employment would trigger distribution of their nonqualified deferred compensation, but the employer wants to "spin off" the deferred compensation liabilites and transfer rabbi trust assets to a deferred compensation plan and rabbi trust to be established by the joint venture company. The employees will not be given an opportunity to do anything with respect to the proposed process (because of constructive receipt issues).

My question: does anyone know of an IRS

ruling or GCM/TAM which addresses a rabbi trust "spin off" to a non-related entity?

I'm grateful for any thoughts you might have on the proposed transaction.

If a plan is Top Heavy on 1/1/2000 and participant "A" gets 18% of average comp. as his TH minimum & then the plan is not TH on 1/1/2001 does he get 20% of average comp. as his TH min. on 1/1/2001 ??

Does anyone know if the IRS has made a determination on negative elections for 403(B) plans? I understand that in the light of the 401(k) ruling, it was being contemplated.

In 1999, the court and Plan approved a QDRO. Alternate Payee rolled over the award to a conduit IRA. Now the plan is being asked to take back the funds as a rollover into the PT's account - the original QDRO apparently did not properly divide all assets and the attorneys want it reversed. Tax avoidance is key. How can this be done?

How should these investment products be reported on Schdule H? There is no line item for them. Must you report the underlying assets of these products?

How is the rule of parity applied when using a 6 month service requirement? For example, an employee works 4 months and quits. Three years later the employee is rehired. Must the Company count those 4 months?

Also, is "month" a defined term? In the above example, if the employee had first worked 4 months and 10 days and upon his return works 1 month and 20 days, has he completed six months?

I would appreciate any thoughts.

Employer provides group term life insurance to all employees with employer paid premiums as part of ERISA employee benefit plan.

Employer provides supplemental optional group term life insurance to employees who choose the coverage, make application for the coverage and employee pays premiums through payroll deduction. Employer provides booklet called Employer's Supplemental Group Term Life Benefits which describes the terms of the optional coverage.

Employer is administrator ERISA plan with authority to interpret plan.

Insurance company is also administrator of plan.

Is the optional group term life insurance with premium paid by employee through payroll deduction governed by ERISA?

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John R

I have given my nitice to leave my current job, and my last day is June 30. The 125 Plan Year at my employer is 1/1-12/31. The employer has informed me that the amount in my account on my last day of employment must be forfeited. I've spoken with several Human Resource professionals who've told me this is not legal. They say that i am eligible by law to continue to draw from the account until the end of the year. Who is correct? thanks for the help!

Is an employee who terminates employment with a balance remaining in a DCAP FSA entitled to reimbursement for claims incured after termination?

Does anyone offer, or know anyone who offers, pet health insurance to employees at a group rate? Is this a popular benefit? Any feedback on this topic would be great.

I am looking to benchamrk benefit plans with other organizations in our field and need sugestions on how to get this data.

If an underfunded plan is frozen, and 5 years later the sponsor wishes to provide an unscheduled COLA (flat % for example) to retirees only, is this permissable? The assumption is that the plan continues to be frozen (not terminated).

[This message has been edited by AndyH (edited 06-08-2000).]

if an employer goes bankrupt and a successor employer hires the employees to do the identical job, has there been a separation from service? Do we need to pay out the participants as a result of this situation?

the new company would like to assume sponsorship of the plan and not make distributions.

In 1999, the court and Plan approved a QDRO. Alternate Payee rolled over the award to a conduit IRA. Now the plan is being asked to take back the funds as a rollover into the PT's account - the original QDRO apparently did not properly divide all assets and the attorneys want it reversed. Tax avoidance is key. How can this be done?

Whatis a KEYSOP? From what we know it seems to be a nonqualified deferred comp plan that invests in employer options contracts. What are the advantages, tax and otherwise, of doing this? Any info would be helpful.

Our firm has assumed responsibility for a 401(k) plan as of 1/1/99. In reviewing the files for 1998 we discovered the plan was "Top Heavy". The prior TPA advised the client of that fact in 1998; however, the minimum contribution was not calculated properly - Entry Date compensation was used for new entrants rather the plan year compensation.

One of our staff feels that unless the client corrects the problem we will be held liable as we know about the problem. Others disagree with that position. Question: who is correct?

Also, another staffer feels that if the client makes up the shortfall (and includes earnings) by 12/31/99 under the VCR program, this will correct the problem, HOWEVER, they feel the corrective deposit is not deductible. Their rationale is that since the corrective deposit relates to 1998 and that year is closed no deduction is possible. Another staffer feels that if the 1999 contributions plus the 1998 correction are within the 1999 415 limits the full amount is deductible in 1999. Who is correct or is there another answer?

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W.J. Parks, Jr., CLU, ChFC, JD, LLM