We have a client--owner of a small (20- employee) business--who wants to terminate the company's DB plan. The plan has a substantial liability on a termination basis, but most of the liability relates to benefits owed to the owner. He'd rather waiver a large portion of his accrual than find the cash to completely fund the existing accruals on a termination basis.

I seem to recall that the PBBG has no problem with waivers under certain circumstances (are there limits?), but what's the IRS's view? Is the waiver an impermissible forfeiture? Does the waiver have to be reflected in the plan document, or does the document have to at least permit waivers?

[This message has been edited by Ed F (edited 01-25-2000).]

All this is within the 60 days election period:

Employee elects COBRA and pays first month premium.

Gets a new job, becomes covered by new plan, tells former employer to cancel COBRA.

Quits new job, calls former employer and wants to re-elect COBRA.

Must the former employee allow him/her to re-elect?

There is a PEO with 6 (so far) client employers. the PEO sponsors a multiple employer Cafeteria Plan with the Flexible Benefits options. It allows the co-employers to opt out of the flex and only offer the POP option to its leased employees. How can they do this, if all benefits are supposed to be reasonably available to all employees? Can each co-employer choose its own cap for the medical reimbursement?

Could someone tell me their admin procedure when a 401(k) fails the ADP - do you reduce the deferral to the amount given on the first ADP report (where it shows it fails) and then include in your report to the client the RTS report showing it failed? I just ran across I think a first for me where I noticed there continually was a reduction in the ADP (a loop)and was wondering if the loop would continue on so the ADP would never pass? Appreciate any insight into this. Thanks.

We were just notified we failed our dep care disc test. Does anyone out there have experience with this? How did you handle? I've gotten some general guidelines about - that we have to go back and deduct monies from highly comps - that is, they will have to pay taxes on monies. Any resources on web to help? Thanks.

As I read VIII. B. of Notice 98-52, an employer profit sharing contribution of 3% of pay, which satisfies the vesting and other rules for a safe harbor nonelective contribution, can also be used to satisfy 401(a)(4). So if the plan is NOT integrated, the safe harbor does "double duty"- the employer can avoid the ADP test by committing itself to make a portion of the otherwise discretionary profit sharing contribution. However, if the plan is integrated (3% of pay up to the taxable wage base, then 3% of pay over the taxable wage base), the 3% nonelective safe harbor CANNOT be used as the base (or first) allocation of the profit sharing contribution. In effect, the safe harbor nonelective contribution is in addition to the amount allocated per the integrated formula. Is this correct?

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Two of my clients received notice last year that they must use EFTPS for all tax payments. To do this they would have to deposit the 20% withholding in to the employer checking account. Is this a prohibited transaction?

I suggested an in leu of 125 plan to a company and they are looking at simply denying coveraage to anyone covered under the insurance of a spouse? Does anyone know of any problems with this idea?

A plan will be contributing amounts for employees who were not able to begin participation in a 401k plan w/ match as of their entry dates into the plan. This operational failure occurred in years in which the plan was valued first as a quarterly valued plan, and then also after plan switched to daily valuation. I would think that lost earnings on the contributions should be calculated/compounded on a quartely basis when the plan was valued quarterly, but what about after the plan switched to daily valuation? Can plan still calculate a quarterly rate? Monthly? Is there any requirement to do calculation on daily basis? Any guidance would be appreciated.

A plan sponsor did not make their total Top Heavy contribution for a PYE in ‘98. As TPA, our firm completed Form 5330 for them and instructed them to deposit the additional amount and file the Form 5330 with the IRS. The plan sponsor signed the form in 1999 and sent it to the IRS along with the penalty. The IRS is now asking for the date the deposit was made (Part IX- Form 5330). In conversation with the plan sponsor, it appears the plan sponsor never deposited the amount to make up the Top Heavy contribution. What should we as TPA do now? What should the plan sponsor do?

Facts: 401(k) plan with lump sums and installments - payable "as soon as administratively feasible" upon termination of employment. Plan is amended to state that

payments will be made no sooner than 145 days after termination of employment. It seems to me that this could be a violation of Reg. section 1.411(d)-4. Although the regulations allow a change in timing of distribution by up to "two months" for distributions after termination of employment (6 months for distributions during employment)(see Reg. Q&A-2(B)(2)(ix)), the 145 days could exceed the de minimus rule. Of course, "as soon as administratively feasible" is subjective and differs among plans based on number of participants, valuation methods, etc.. Any thoughts? I am being too picky and conservative? Would anyone else be concerned about making this change? (By the way, they have already done the amendment).

We have a terminated DB plan that has had some money returned to the corporation, how do you handle issuing a 1099-R for the corporation?

We were just notified we failed our dep care disc test. Does anyone out there have experience with this? How did you handle? I've gotten some general guidelines about - that we have to go back and deduct monies from highly comps - that is, they will have to pay taxes on monies. Any resources on web to help? Thanks.

I've been asked to research this potential employee benefit? Where do I start?

Any, and I mean, any information would be greatly appreciated!

I have a client with a Top Heavy DB & DC Plan. The DB Plan is frozen and the TH min is to be provided in the DC Plan. In 1999 the client did not make a PS contribution and therefor I assume that short of telling the client he must make a PS contrib. the TH min could be provided in the DB Plan.

The problem is, I have several participants who were employed on the last day, but did not work 1000 hours. The DC Top Heavy rules say that they are entitled since they were employed on the last day, but the DB rules would exclude them because they did not complete 1000 hours.

Does either Plan owe them a TH min? Could I argue that since there was no PS contrib. the TH min reverts to the DB Plan and since they did not work 1000 hours then neither plan owes them anything?

Employer has MPPP that has been frozen for several years. During that time forfeitures accumulated from termination payouts because forf. were supposed to be used to reduce. Employer also has 401(k) plan. What are options with regards to the forfeited amounts from the MPP?. Can MPPP be merged into 401(k)? If MPPP is terminated and forfeitures are reallocated, what employee base should be used? Are 401(k) participants who would have normally entered MPPP eligible for forfeiture reallocation? We are trying to avoid a reversion if at all possible.

Company X has an ESOP which owns approximately 70% of X. X wants to grant stock options to some of its key employees which will cause some dilution. Do most companies take a conservative approach and obtain a fairness opinion or do most take the position that the decision to grant options is a business decision that does not relate to administration of the ESOP or use of the ESOP's assets? I would just like an idea of what the more common approach is. Also, if anyone knows of any specific cases, rulings, articles, etc. that specifically address the grant of options in a company maintaining an ESOP, please let me know. (I am already familiar with the Martin v. Feilin case). Thanks in advance for any comments.

An LLC consisting of all key employees would like to set up a SIMPLE plan. However, some of the LLC owners are common law employees of other unrelated businesses where they participate in qualified plans. Since they are only common law employees is it ok, for them to participate in both the SIMPLE and a qualified plan???

Thanks.

Participant is getting ready to take distributions from pension plans (DC and DB). Participant's first marriage ended in a Mexican divorce. He cannot verify that the divorce was valid, nor can he locate his first spouse, who initiated the divorce. He has remarried. What fiduciary duties does the Plan Adminstrator have in accepting the validity of the first divorce? How should this be reflected in the plan documents?

We've got a profit sharing plan where the employer has not made a contribution in several years (the plan is then deemed to be terminated). The client does not actually close out the plan. Are there any ramifications?