Where can I go (internet, trade journal, etc.) to obtain comprehensive info re the advantages/disadvantges of self-tusteeship vs. corporate trusteeship (such as trusteeship provided by a bank trust department)? Fiduciary liability and legal ramifications for the plan sponsor as result of self-trusteeship?

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I am currently working with a 501©(3) org. that sponsors a MPPP and offers a voluntary 403(B) arrangement for its employees. Due to the fact that the assets of the MPPP are significant (relative to those held by the few participants with TDA's,i.e.,only 10% of all eligible ees are deferring), this org. would like to know if the MPPP can be restated as a profit sharing 401(k) plan going forward? It has no desire to terminate the MPPP.

I have been informed by three consultants that this restatement can be done and has been done in the past. If this is truly the case, how do I prove to/reassure the plan sponsor of the validity of this assertion? For example, where can I obtain info that would support this assertion? Any help on this matter would be greatly appreciated.

I am negotiating to take over the pension client list from my employer and start my own TPA firm. My employer is getting out of the pension admin. business to concentrate on §125 plans. The client list has been built up over the past 10 years.

We have discussed a buyout fee for the client list equal to 1 x annual billings, payable as 20% of annual billings each year for 5 years. Is this a reasonable amount? What do other firms pay when taking over a large book of business at one time?

[This message has been edited by David Dye (edited 03-14-2000).]

After doling out my share of answers, I have a question.

Back in May 99, we had a bonus pay run that was misread by our payroll company as an adjustment run. 401(k) contributions were deducted, but never reported to the investment company so no one had this money invested. This problem surfaced this past month.

First, how much trouble are we in?

Second, would it be in our best interest to figure the earnings since May 99 and credit this to each account? This may mean that some are over the annual max.

Third, what about the terminated people? Some still have money in their accounts.

Greetings,

I have a client who is 76 years old. He doesn't need the forced distributions from his traditional IRA and his AGI will allow him to convert the IRA to a Roth. However, I'm wondering if he will need to wait 5 years after the initial conversion to access the money?

5% owner turned 70 1/2 last year and will roll his account into an IRA. He is still employed by Corporation and will still be receiving profit sharing and money purchase contributions from the Employer. In the future, can he roll the contributions over to the IRA and not have them be subject to the Min Distribution rules in the plans or will he automatically have to take minimum distributions from the Plan?

Are loans permitted in Section 457 Government Deferred Compensation Plans? If so, please provide written information to prove to plan administrator>

Thank you,

E. Brian Cox

I have a Profit Sharing plan administrator who is being audited on his plan. IRS is asking for a copy of form EBS-1 (a DOL form). I have not heard of this form and could not locate any info about it on their website. Has anyone seen this form? What is the purpose of it and who must file it?

Can one individual be considered a "leased employee" of more than one employer? To be a leased employee of an employer, the individual has to be working "on a substantially full-time basis" for the employer. Is it possible to be "substantially full-time" for more than one employer? For example, what if an individual works 35 hours a week for Corp. A and 35 hours a week for Corp. B and meets all other requirements for a leased employee? Any citations and/or thoughts would be appreciated. Thanks.

We currently administer a frozen group annuity contract by allocating the contract's earnings/losses prorata across the participants.

Does anyone see a problem with this considering that the participant is not seeing a true reflection of his account balance?

Does anyone have any information concerning the average annual lapse rate (percentage of cases lost each year due to plan termination, switching of recordkeepers, etc.) for Defined Contribution Recordkeepers?

If an average is not available, I would also be interested in any information for a single company (no need to name the company, just whether insurance, bank, mutual fund family, etc.) Thanks.

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GM

Taxpayer intended to roll traditional IRA from a CD at bank into a Roth IRA with broker in 1998. Reported as Roth conversion on 1998 return and paid tax on 1/4. Broker or taxpayer erred and R/O went into traditional IRA at broker. Is there a fix for this error? (Other than amending 1998)

Thank you.

Client terminated employment with hospital early in 1974 after 17 years of service. Client rehired mid- 1976 and then terminated mid 1979. HR department says client is not entitled to anything because client was: 1) not 55 years old and 2) did not have 10 years of service at date of termination in 1979.

I've requested copies of SPD's and plan doc's for the requisite years. DB plan was amended effective Jan 1, 1976 (I assume to comply with ERISA/IRC requirements). The plan doc as of Jan 1, 1976 says that credited service prior to Jan 1, 1976 shall be computed under the terms of the plan in effect prior to jan 1, 1976. That plan doc is silent on breaks in service other than to say that an authorized leave of absence is not to be considered termination of employment under the plan.

SPD for plan doc effective Jan 1, 1976 says that employees who terminate with 10 years of service or more will be entitled to 100% of their accrued benefit. That short paragraph comes right after the paragraph which says that if you terminate employment before you are eligible under the plan and before you are vested, you get nothing. Of course, SPD's final paragraph states that it is not a contract and provisions in the plan trump anything in the SPD.

If prior service could be counted, then client definitely has 10 years of service. Client however was 44 years old at date of termination in 1979. So, it may be that client's not entitled to anything. It just doesn't sound right that an employee can work for almost twenty years for one employer and then not be entitled to anything in the DB plan because the e/ee wasn't 55 at the date employee terminated employment. I work mostly with DC plans so maybe that's why it doesn't seem to fit.

Anybody have any observations??? Any comments appreciated.

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Can a terminating plan still use the tack on amendment for terminating plans that the Cincinnati office issued in 1998? Or is something additional required for full GUST compliance?

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I have reviewed several prior threads on this topic, but I am still unclear on one question:

Can a plan document have a provision that requires 500 hours in a 6-month period for eligibility, without also having a provision that anyone that completes 1,000 hours in a 12-month period meets the eligibility requirements?

A 12-17-98 post from MWeddell in a thread titled "Years of Service" stated:

"A 6-month period with 500 hours of service eligibility requirement is legally permitted because it's impossible for someone to meet the 410(a) maximum eligibility period of 1 year with 1,000 requirement without meeting a 6-month with 500 hours requirement."

Other threads have seemed to indicate that it is only acceptable to have the pro-rated hours requirement if the plan document also provided language for the 1,000 hour requirement. It seemed well-established from other threads that many plan documents have been approved with the dual provisions.

Does anyone know of a plan document that has been submitted and either rejected or approved that only had the 500 hours requirement without the 1,000 hour language?

Do you agree or disagree with MWeddell's reasoning for the pro-rating being acceptable (without the additional language)?

Prototype 401(k) plan provides for several annuity forms of distribution as well as lump sums. Sponsor wants to terminate plan. Code section 401(k)(10(B) says distributions upon plan termination must be lump sum. How does this work if a participant elects an annuity? Can the plan not be terminated? Can the plan satisfy this requirement by purchasing an annuity contract for the participant?

Prototype 401(k) plan provides for several annuity forms of distribution as well as lump sums. Sponsor wants to terminate plan. Code section 401(k)(10(B) says distributions upon plan termination must be lump sum. How does this work if a participant elects an annuity? Can the plan not be terminated? Can the plan satisfy this requirement by purchasing an annuity contract for the participant?

I think your administrator is being too cautious.

Reg. 1.401(a)(4)-4(B)(1) does say the benefit, right or feature must be currently available "during the plan year" to an employee group that passes the nondiscriminatory classification test. However, that stops a long way from saying that the only way to run the currently available test is to create annual plan year rates of effective match divided by compensation. As the IRS' waffling back and forth on the 401(k) safe harbor match rates show, there's more than one way to interpret general testing provisions.

I'd argue that a 3% match was currently available to all employees for the first 9 months and then no match was available the last 3 months of the plan year. If this is the approach you take, you could complete the demos for your determination letter accordingly and try to obtain IRS approval.

Note that even if the administrator is right, it only shows that you would have to perform benefit, right and features testing, not that the plan was discriminatory. There's no reason why your plan needs to be hamstrung in handling distributions in the meantime.

3 doctors are incorporated, and own XYZ Corporation that employes their staff and pays other shared expenses (rent, etc.) The doctors do not owns any other businesses or practices.

Each doctor's corporation receives income from patients. The doctors' corporations reimburse XYZ for expenses, and pay themselves W2 salary from their own corporation. The staff receives W2 from XYZ.

The doctors want to have a pension plan that covers the 3 doctors and the staff.

Would the plan be sponsored by XYZ, and base benefits on doctor's W2 salaries from their own corporations and the staff W2 salaries from XYZ.

Or, would the doctors have to become employees of XYZ and receive W2 salaries from XYZ. (In this case, would the patient revenue continue to be paid to the doctor's corporation and then paid to XYZ, which would then pay the doctor a salary? Or would the patient revenue have to be paid directly to XYZ, which would thgen pay the doctor a salary?)

Any ideas? What is typical?