This answer to this question may be contrary to the present understanding of many practioners.

A client’s defined benefit plan (“Plan”) presently provides for lump sum benefits to be calculated using the Plan’s applicable interest rate (PBGC) and mortality table (UP-1984) for actuarial. The applicable interest rate is determined by reference to the rates which would be used as of the first day of the plan year (January 1) in which the lump sum distribution occurs, by the PBGC to value a benefit upon termination of an insufficiently funded trusteed single-employer plan.

The Plan is being updated for the GUST amendments in anticipation of its termination, effective June 15, 2000. It is desired that Plan be amended, post GUST amendment effective date, to provide that lump sum benefits be calculated using the applicable mortality table and the applicable interest rate for the first full calendar month preceding the calendar month that contains the annuity starting date. The Plan has been in effect before December 8, 1994. Distribution of Plan benefits as a result of the termination will likely be made beginning in December of 2000.

We are attempting to determine whether Code section 411(d)(6) relief is provided in the event that the Plan is amended for GATT to provide that the “applicable interest rate” will be determined in accordance with, and solely on account of, regulation section 1.417(e)-1(d)(10)(iii) (i.e, Section 411(d)(6) Relief For Plan Amendments Pursuant To Changes To Section 417 Made By RPA '94 Providing For Statutory Interest Rate Determination Date) without regard to the requirements of regulation sections 1.417(e)-1(d)(10)(ii) (i.e., Section 411(d)(6) Relief For Change In Time For Determining Interest Rate).

In other words, as a result of the GATT amendment, can the participants’ benefits be calculated using an applicable interest rate determined as of October of 2000 without violating Code section 411(d)(6) and without the need for a “greater than” calculation for the one-year look back period under regulation section 1.417(e)-1(d)(10)(ii)? Additionally, a local IRS agent in Cincinnati indicated that he would approve the change without the need to conduct a greater than calculation during the one year lookback period because this is a safe harbor for such interest rate determinate date changes. Thanks.

Are there any good articles on the most recent rules/guidelines on what circumstances pensions are subject to the bankruptcy estate, or subject to attachment in a court judgment?

One more point on this topic. The participant should also realize that during the entire time his assets were invested in the plan, he was receiving the extra earnings from former participants who received a distribution and had to wait the 50-60 days.

A personal representative in the estate of a deceased participant is not a beneficiary in any of the participant's pension or welfare plans with an employer. What duty does the plan administrator have to supply the personal representative with information about plan benefits and beneficiary information?

Have any of you explored using a service other than Quantech (maybe an investment company) to download investment values into Quantech? Maybe this isn't possible, but it seems like it might avoid some expensive Quantech licensing/maintenance fees.

Any insights or discussion on daily valuation experiences would be appreciated.

We currently use Quantech on a balance forward basis. We are looking into acquiring daily valuation capability. How are you all receiving your daily valuation information? Do you use software provided by your administrative package provider? Has anyone explored trying to download fund/stock values in any other way? For example, some investment companies offer download services. Any insights you can offer would be greatly appreciated.

Ok everyone, here's a mind bender for us to chew on . . .

A lot of employers allow employees who take non-FMLA unpaid leaves of absence to continue their health plan coverage during the leave if the employee continues to pay the premium on an after-tax basis. Which also means the same employee can drop coverage during the leave if desired.

Question: How does this work, and is this allowed, under the final Section 125 regulations.

The commencement or return from an unpaid leave of absence is a change in status event under 1.125-4©(2)(iii). But the consistency rule requires that the change in status affect "eligiblity for coverage under an employer's plan." 1.125-4©(3). Because a person taking a non-FMLA unpaid leave is allowed to continue coverage, taking the leave does not affect that employee's eligiblity for coverage under the plan. So it really is NOT a change in status, right?

I think we can distinguish a few different situations:

1. A plan that allows the person to continue by paying the normal active employee rate, but on an after-tax. The employee that continues arguably is not making a change. But the employee that drops the coverages is making a change. Can we allow this by considering it a cessation of required contributions (under the original proposed regs 1.125-2 Q&A-6(e) which are unaffected by the final regs) and locking the employee out of the plan for the rest of the plan year?

2. The plan that requires the employee to continue coverage by paying 100% of the premium. This is clearly a change whether the employee continues or drops. Will we be forced to rely on COBRA to get to the desired result? What a pain!!

3. This same issue exists for plans which allow both full-time and part-time employees in the plan, but require PT employees to pay a higher employee contribution.

Thoughts? Comments?

P.S. I have a call into the IRS on this issue. I'll let you know if I hear anything.

[This message has been edited by HIPAAdrome (edited 04-17-2000).]

We are currently looking for a Defined Benefit Calculation System. We have received several proposals from vendors, but are looking for recommendations from people who are currently using insourced (or co-sourced) solutions and are happy with their systems.

We sponsor a group health plan and a 403(B) program. We have been under the assumption that our plans are church plans, and that we have not been required to file 5500s. Now, we are not so sure and are looking into our potential penalty exposure under ERISA and the Code. Under ERISA, how many years do we have to go back and file?

I read Notice 2000-3 as providing that an existing non-401(k) defined contribution can convert to a safe harbor 401(k) as late as October 1. I do not read anything that permits an existing 401(k) plan to convert to a safe harbor arrangement mid plan year. Am I correct?

Last March I made my 1999 contribution in error to a traditional IRA. I had intended on making the contribution to a Roth IRA. The trustee said no problem. We'll just recharacterize the contribution. Later in the year, I had an unexpected increase in my income that now makes me ineligible to contribute to a Roth IRA in 1999. I can’t recode it to the previous year since I made the maximum contribution in 1998. I wanted to recharacterize it back to the original traditional IRA, but was told I couldn’t do that (though Turbo tax seems to suggest otherwise.) If I take it out as excess, it will cost me about $480 since the fund did really well (10% penalty and taxes on the earnings.)

The other suggestion I’ve received is to carry forward the contributions into a 2000 Roth IRA (costing me 6% tax per form 5329). They then advised me to request a return of excess now since I will in all likelihood not be eligible to make a contribution to a Roth IRA this year either. The 10% penalty and taxes on earning would be $0 since the fund has lost money since January.

My question – can anyone confirm that 1) I can not recharacterize a second time (I can’t find anything in writing to preclude this option), and 2) if I can’t recharacterize again, is the second paragraph my best alternative?

I converted to a roth IRA last year and elected to sprerad the tax over four years. I however, would now like to pay the outstanding balance this year. I can;t find anything that says I can or can't.

What is a plan administrator's duty to disclose information about pension and other employee benefits plans to parties who are related to deceased participant, but not named anywhere as beneficiaries? Attorney requests information for beneficiaries name on all employee benefit plans.

If someone knows the answer to this, I'd be grateful...I contribute to a 401K through work, and I want to start a Roth IRA. I have no other IRAs. This would be my first ever. Does anyone know if there's a certain set limit on how much a person is allowed to contribute when they have both a 401K and a Roth IRA? Before I set up the IRA, I need to know if I need to cut back on either the 401K or the new Roth IRA.

I've looked on various Web pages about this issue (and to its credit, the official Roth IRA page is overwhelmingly and amazingly comprehensive), and this specific issue doesn't seem to be addressed.

Thank-you!

Jim Bauman

We currently have a voluntary short-term disability buy up for hourly and non exempt employees. Participants share in the cost and the premium is deducted pre-tax from their checks. If they do not elect the plan, they only receive the California STD.

For exempt employees we have a self-insured salary continuation plan at no cost to the employees. Exempt employees are not eligible for the STD plan.

We occasionally have employees promoted into the exempt ranks. At that point, they are no longer eligible for the STD plan. We were just told by our TPA that according to the IRS, this is not a qualifying event and we must still continue to withhold the premiums from their check for the rest of the plan year.

We think this is more a case of lost revenue to the TPA then a rule. The employee cannot participate in the plan, so why should they pay premiums. The STD is not a benefit for them any more. They receive a higher benefit in the form of 100% salary continuation.

Is the TPA correct? If not, can you provide a reference point so I can take it into the meeting next week and prove my point?

Thanks for your help.

Must a flex plan allow an employee who is on a leave of absence to enroll in a health FSA, and must the plan pay benefits prior to receiving any contributions to the plan from the employee? The FMLA/125 rules require that someone on FMLA leave be allowed to continue participating if already enrolled, but do not, to my recollection, address the new enrollment issue.

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I am self-employed and paid my 3 year old daughter $2,000 for modeling promotional photographs for my business. I set up a Roth IRA for her for 1999. She has to file a state income tax return, but for Federal, it says that she is below the income limit to have to file (Federal). Is it an absolute requirement for her to file since she has a Roth? I could send in the EZ form with zero due, if it is a requirement. I want to make sure everything is done right. Any help is greatly appreciated! Thanks!

The Consumer Price Index came out today.

In addition to causing the stock market to drop, it has big news for us pension people.

The value is currently at 171.1.

Using the formula provided under SBJPA,

(171.1 / 145.7667) * 30,000 = 35,213

even if I am off a little bit, it looks like the contribution limit next year will be 35,000! It will take an act of congress to keep the cap at 30,000 or for the index to drop dramatically in the next 6 months to drop the value under 35,000! Never thought I would see it happen, but unless something dramatic happens in the next 6 months, it looks like we may have good news for those that want a larger contribution next year.

Has the 402(g) deadline been extended for the weekend? Is it 4/17?

The adoption agreement for the PPD/Corbel prototype plan for a client has a section for what to do with forfeitures that result from less than 100% vesting, and a later part of the same section for what to do with forfeitures that result from ACP test failures (forfeited excess aggregate contributions). However, the adoption agreement and the plan document seem to be silent about what to do with forfeitures (sometimes called "hanging match" or "orphan match") resulting from ADP test failures (the ACP test is passing). It is not that the client left a section blank - there is no section for choosing what to do with this type of forfeiture. Is this a PPD/Corbel plan document defect?

The plan document does seem clear that the match related to the corrective distributions of excess contributions need to be forfeited. We cannot find any guidance or any adoption agreement choices presented as to what to do with the forfeitures. The amount of the forfeitures is relatively significant.

Any suggestions?