I have a SIMPLE 401(k) plan where two HCEs have exceeded the 415 Limits for the year. The deferrals plus earnings are returned to them in the following plan year. I am wondering how others report the return of this money to the employees. Do you show it in the plan year where the excesses occurred or do you show it in the year that the money was actually returned to the employee?

I have a question on the actions needed under 414(L) to properly complete a spinoff/merger from a defined benefit pension plan.

The rules make it clear that if you have an "asset transfer" from one defined benefit plan to another, it is viewed as a spinoff, followed by a merger. T.R. 1.414(L)-1(o). And the spinoff rules then present a "safe harbor," stating that everything will be okay if the value of the assets allocated to the spun off plan is not less than the value of the benefits, on a termination basis, in orginal plan for each transferred participant. T.R. 1.414(L)-1(n)(ii).

Here is the question. Often the original plan will not be fully funded on a termination basis. So the above safe harbor will not be available. If you do NOT use the safe harbor, is there ANY rule on the amount of assets that have to be transferred to a spinoff plan (maintained by an unrelated employer)?

The main thrust of the statute and the regs here is on preserving the BENEFITS for the transferred employees, and not on required amounts of assets to be transferred. And the rules about dividing up any "excess assets" in the original plan do not apply if there are no excess assets (and they also do not apply if the transfer goes outside of the controlled group). IRC 414(L)(2).

A. So is there any rule on any "minimum" amount that must be transferred to the spinoff plan, if the safe harbor rule is not going to be used? Or is this just a business decision for the parties to agree upon?

B. If a tiny amount is transferred, does that just mean that the spinoff plan simply has some contribution obligations, pursuant to the 412 funding requirements? Could the parties agree to a tiny asset transfer, or to no asset transfer?

C. Similarly, would there be any 414(L) limitation upon an agreement that the assets transferred would be reduced for any market declines in the assets that were held by the original plan, after the calculation of the benefits that were being transferred had occurred, but before the actual transfer of assets?

D. Is there any express authority on these points?

Am looking for sources of information on costs associated with benefits communications, more specifically: What is the cost for providing employees (on an annual cost basis) with the following information broken down by:

1. SPDs and Plan Documents (brochures on plan design) mailing and printing costs

2. Enrollment information

3. Cost of distribution of provider directories

4. Other costs (explain and estimate costs)

Looking for verifyable sources of information from large employers to Health Plans.

Thank you.

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I have a question on the requirements in Section 423 of the Internal Revenue Code, regarding Employee Stock Purchase Plans ("ESPPs").

An ESPP that meets the requirements in Section 423 receives the tax treatment provided under Section 421 -- in particular, the treatment that no income results for the employee/participants at the time of the transfer of shares of stock to that person, pursuant to that person's exercise of the underlying stock options.

One of the 423 requirements is that the options under the ESPP can be granted only to employees of the employer corporation, or of its parent or subsidiary corporations. This rule does not allow options to be granted to employees of a subsidiary joint venture, because that would be a partnership and not a corporation. PLR 8826053.

Here is the question. If a ESPP inadvertantly grants some options to employees of a subsidiary partnership (which is not allowed), is the result just that those particular employees lose the ability to no have income when they exercise their options? Or does the entire ESPP lose the ability to not create income for ALL persons who participate in the program?

Is there any specific authority on this point?

Also, has anyone had any experience with regard to the best way to "fix" a situation like this?

Does anyone have experience with this and can you please comment?

Why would you "file a claim"? If the benefits have not commenced, then nothing improper has happened. I would suggest that your client contact his employer and discuss your concerns. If that doesn't work, maybe you can talk to the actuary/individual responsible for the calculation.

I find that many of these disputes can be handled by a simple phone call or two.

Does anyone know of a COBRA compliance software package that would assist a small employer with low turnover?

Are increases in the 415 Compensation limit from 150,000 taken in account for determining persons benefit under a DB Plan? For example: high three comp earned in Plan Years 92-94. In calculating the 2000 accrued benefit can you include compensation in excess of 150,000 even if those amounts were earned in 92-94?

Thanks

I want to get my hands on PC-based software that provides the foundation for a company wanting to put together an employee benefits manual. This software does not have to involve personnel policies, just employee benefits. Please e-mail me at rwolffd12@aol.com. Thank you.

for anyone using unit value system: Anyone set up/recieve from mutual fund company an excel file with daily values that can be imported to multiple plan files (one by one as processed?)

Are pick up contributions counted as annual additions when the employer actually picks up the contributions (no salary reduction for employee)? Are pick up contribution counted as annual additions when the employer says there is a pick up arrangement but the contribution is actually made via the employee's salary reduction? I have seen elsewhere a statement that they are not counted as annual additions in either case but can't find any cite to support that.

Any suggestions on best method to correct this?

Here's the scenario: employee age 72 takes in-service withdrawal of entire plan balances during first quarter of 2000, then retires in second quarter 2000.

His required beginning date is April 1, 2001, and his first distribution calendar year is 2000.

Is it proper that part of his in-service withdrawal from earlier in the year be not eligible for rollover, with the amount not eligible determined by the account balance on December 31, 1999 (the last valuation date of the year prior to the first distribution year)?

Thanks.

I have the following situation. The owners of a company want to freeze or partially freeze their DB plan. The DB plan is over funded and the owners would like to place more money into the DC plan that they have. (New-Comparability 30K limit/ I know about IRS notice 2000-14.)The owners are basically getting frustrated with the T-bill rate that they are tied to in the DB plan.

The following are what I believe are some of the pertinent facts. Company established the DB plan for the plan year 1994 and subsequently amended to a cash balance plan for plan year of 1996. Plan document has specific language saying "an amendment to freeze all future benefit accruals but otherwise continue maintenance of the plan, is not a termination..." Current benefit accruals are as follows:

Owners = A $ amount equal to the present value of 10% of participants maximum annual benefit.

Employees= A $ amount equal to 5.7% of the participants compensation for the plan year.

Can the company amend the DB plan to reduce the future benefit accrual amounts for both the owners and the employees? What is the process for freezing a DB plan? Is the DB plan to young to terminate? Where can I find more information on the process of freezing a DB plan?

Everyone is in agreement that the 3% of pay safe harbor non-elective contribution can pull triple duty: (1) be applied to Section 416 minimum required allocation for top heavy plans, (2) avoid ADP 401(k) non-discrimination test, and (3)be used for 401(a)(4) non-discrimination testing (popularly used in cross testing on a benefits basis).

Everyone also agrees that the non-elective CANNOT pull a 4th duty: Be used as the first 3% of pay base tier in the integrated PSP allocation formula because Notice 98-52 precludes its usage towards 401(l).

Question: If one is willing to do general testing to pass 401(a)(4) rather than rely on the 401(l) safe harbor, the "PSP" allocation (including the non-elective) is not discriminatory if it passes one of six (a)(4) methods: Two on a contributions basis (w/o permitted disparity and with) and four on a benefits basis (annual w & w/o PD or accrued to date w & w/o PD).

Could I use the 3% non-elective in my first base tier of the "traditional" integrated PSP formula if the plan passes 1.401(a)(4)-2©(2)(iv) [the annual contribution basis with permitted disparity method] for the year? Only the HCE would get the next tier of the integration formula (3% of excess pay). The HCE's are younger than the NHCE's, so cross testing on a benefits basis doesn't work.

It probably doesn't pass the smell test, but what does everyone think? Your comments would be very much appreciated!

Two thoughts. Could an Employer with only HCE's(four Owners 25% each) establish a 401(k) Plan? If so how would you test? I sapose you could set it up as a safe harbor.

Second, what if a Plan lost all NHCE's due to termination or quit. If Plan was using current year method and ther were no eligible NHCE's how would you test.

If your ADP for NHCE is zero, if you test at lessor of 2+ or 2* the result would be zero.

Any thoughts?

We will be looking to hire new 401(k) plan counsel. We can come up with questions to ask on our own but were wondering if there was anything out there already. Basically, looking for around 10 "must ask" questions to prospectives. Thanks!!

[This message has been edited by Dave Baker (edited 05-26-2000).]

We have a client that currently maintains a defined benefit plan that it wants to terminate. Current distributions options are limited to annuities. The client wants to require active participants to transfer the lump sum value of their accrued beneft to the replacement plan, most likely a 401(k) plan. I did not think a plan sponsor could do this but another consultant has suggested the plan be amended to add a lump sum option and anyone who elects it must have their balance rolled to the replacement plan. My question is can this be done and if so, what is the citation that permits it? Also, could the plan be amended instead to offer the direct transfer to the replacement plan as a distribution option? I would think it could but if not please let me know why not. Any other suggestions would be welcomed as well. THANK YOU!!

Ex-spouse signed away her surviving spousal rights to her ex-spouse's retirement plan after taking 50% lump-sum. It was an erisa plan. She had a QDRO. Now she is claiming there was fraud, stating her ex-spouse lied a out assests and she is entitled to some or all of his retirement. I have been named as the surviving spouse by the plan. We were married at the time of his death (last yr. 5/27/99) She has been denied twice by the plan. Now I understand her attorney is asking the plan to interplead the funds into federal court and let them decide. What can she do? How far can she go? She has no proof of fraud, there divorce was 12 yrs ago

We have a self-funded welfare plan. The TPA sends a check register for claims processed and we in turn cut a check for the claims from general assets. A reserve is set up but actual reserve monies are not deposited. Is an audit required by a CPA firm to be attached to the 5500 or can we prepare the 5500 ourselves without an audit.