Plan year ends 12/31, conversion expected to be 2/1. Are there any considerations when doing this type of conversion (i.e. non-discrim. testing, 5500), as opposed to a 1/1 conversion? Thanks.

A non-governmental DB plan is terminating and amending the plan to offer a lump sum to current retirees and beneficiaries. If the annuitant wants the monthly benefit to continue, then the plan will purchase a commercial annuity. The lump sum will be calculated as the present value of all future payments, using the form of payment in effect and the definition of actuarial equivalent in the plan.

The question is what spousal signoff is required for those who want the lump sum?

1. If retiree was not married at date of retirement, is any spouse signoff needed? I suggest NO, even if currently married. However, if retiree elected a J&S with a non-spouse contingent beneficiary, would that beneficiary need to signoff?

2. If retiree was married at original annuity commencement date and spouse is still living

a. J&S was elected, spouse signoff is required, whether now married or now divorced? Presence of a subsequent spouse is not relevant.

b. J&S was waived in favor of a single life annuity. Any signoff required?

c. J&S was waived in favor of a 10C&C with spouse as beneficiary. Signoff required if still within 10 years? Signoff required if now beyond 10 years?

d. J&S was waived in favor of a 10C&C with nonspouse as beneficiary. Signoff required if still within 10 years? Signoff required if now beyond 10 years? Signoff by spouse AND by beneficiary?

Do the applicable regs [i think 1.401(a)-20] require the plan to offer a J&S upon the offer of the lump sum, which might effectively create a new annuity commencement date (I don't think so, but looking for cites and reasoning)? If so, this might create a new requirement for the retiree who was single at DOR but is now currently married.

By the way, if the original election was a J&S and the spouse is now deceased, then the lump sum will be the present value of the single life annuity to the retiree. Anyone disagree?

A somewhat rambling question, but would like any other advice related to the offer of lump sums to retirees. Thanks.

[This message has been edited by pax (edited 11-09-1999).]

The IRS Code provides that a plan can "buy back" the 1.0 for 415(e) by providing a 4% DC contribution. See 416(h)(2)(A)(ii)(II) below.

IRS Regs say that a plan can "buy back" the 1.0 for 415(e) by providing a 7.5 DC contribution. See IRS Reg 1.416-1 M-14.

Can the Code be used or does the IRS Reg have to be used?

Does anyone have experience using the 4% in the Code to do the buy-back? Does anyone have experience using 7.5% to do the buy-back? Can anyone tell me if there are specific situations that call for one or the other?

I realize 415(e) is going away soon, but I'd still appreciate any information on this. I have been curious for a long time.

Section 416(h)(2)(A)(ii)(II) is as follows:

(h) Adjustments in Section 415 Limits for Top-Heavy Plans.*

(1) In general.

In the case of any top-heavy plan, paragraphs (2)(B) and (3)(B) of section 415(e) shall be applied by substituting ``1.0'' for ``1.25''.

(2) Exception where benefits for key employees do not exceed 90 percent of total benefits and additional contributions are made for non-key employees.

Paragraph (1) shall not apply with respect to any top-heavy plan if the requirements of subparagraphs (A) and (B) of this paragraph are met with respect to such plan.

(A) Minimum benefit requirements.

(i) In general.

The requirements of this subparagraph are met with respect to any top-heavy plan if such plan (and any plan required to be included in an aggregation group with such plan) meets the requirements of subsection © as modified by clause (ii).

(ii) Modifications.

For purposes of clause (i) --

...

(II) paragraph (2)(A) shall be applied by substituting ``4 percent'' for ``3 percent''.

IRS Reg 1.416-1 M-14 Q. says:

M-14 Q. What minimum contribution or benefit must be received by a non-key employee when he is covered under both a defined benefit plan and defined contribution plan (both of which are top-heavy) of an employer and the employer desires to use a factor of 1.25 in computing the denominators of the defined benefit and defined contribution fractions under section 415(e)?

A. In this particular situation, the employer may use one of the four rules set forth in Question and Answer M-12, subject to the following modifications. The defined benefit minimum must be increased by one percentage point (up to a maximum of ten percentage points) for each year of service described in Question and Answer M-2 of the participant's average compensation for the years described in Question and Answer M-2. The defined contribution minimum is increased to 7-1/2 percent of compensation.

Is there any public agency that enrolls its public employee via the internet? If so, I would like to discuss privacy issues with you.

I have been asked to assist a start-up company establish its full benefits program.

My experience has been with large corporations and this is fairly new to me. Can someone suggest a good starting place -- are there independent agents who handle this sort of program. Appreciate any help you may provide. Thank you.

Non-duplication rule of recent Regs provides that earnings on account balance plan amounts (that have been previously subject to FICA) will not be subject to FICA provided those earnings “reflect a rate of return that does not exceed either the rate of return on a predetermined actual investment ... or, if the income does not reflect the rate of return on a predetermined actual investment, a reasonable rate of interest.” (d)(2)(i)(A) If the NQDC plan account is funded by a managed portfolio of securities w/ actual returns allocated to the account, does this ‘predetermined rate’ rule apply?? That is, is the account portfolio itself an ‘actual investment’ under (d)(2)(i)(B) even though investments in the portfolio will change during the year? Thanks

If I have the date correct, the definition of 415 compensation changed after 12/31/97. For DB plans that are determining the high 3-year average after 12/31/97, does the new definition apply to 1997 and earlier years? Or is the 3-year average based on the old definition for 1997 and earlier years and the new definition for years after 12/31/97?

A plan provides that, for vesting purposes, plan years prior to age 18 will be excluded. The plan year is the calendar year. An employee has a birthdate of November 1, 1979 (so 18th birthday is November 1, 1997) and a hire date of January 1, 1996. The employee has worked 1000 hours in each calendar year which satisfies the plan’s hours requirement for vesting. Which of the years 1996, 1997 and 1998 are counted for vesting? Would the answer change if the 18th birthday was February 1, 1997? Would the answer change if the 18th birthday was July 1, 1997 and the employee worked 1000 hours both before and after July 1 in 1977?

Clearly 1996 is not counted. Clearly 1998 is counted. Is 1997 counted?

There is disagreement on our staff on this.

IRS Reg. 1.411(a)-5(b)(1) says:

1.411(a)-5 Service included in determination of nonforfeitable percentage.

(a) In general.

Under section 411(a)(4), for purposes of determining the nonforfeitable percentage of an employee's right to his employer-derived accrued benefit under section 411(a)(2) and § 1.411(a)-3, all of an employee's years of service with an employer or employers maintaining the plan shall be taken into account except that years of service described in paragraph (b) of this section may be disregarded.

(b) Certain service.

For purposes of paragraph (a) of this section, the following years of service may be disregarded:

(1) Service before age 22.

(i) In the case of a plan which satisfies the requirements of section 411(a)(2) (A) or (b) (relating to 10-year vesting and 5-15-year vesting, respectively), a year of service completed by an employee before he attains age 22.

(ii) In the case of a plan which does not satisfy the requirements of section 411(a)(2) (A) or (b), a year of service completed by an employee before he attains age 22 if the employee is not a participant (for purposes of section 410) in the plan at any time during such year.

(iii) For purposes of this subparagraph in the case of a plan utilizing computation periods, service during a computation period described in section 411(a)(5)(A) within which the employee attains age 22 may not be disregarded. In the case of a plan utilizing the elapsed time method described in § 1.410(a)-7, service on or after the date on which the employee attains age 22 may not be disregarded.

While the reg has clearly not been updated from age 22 to age 18, can it still be relied on to say that, in the example above, 1997 must be counted if the 18th birthday occurs any time during 1997? Or is it possible to disregard 1997 in some circumstances (more up-to-date guidance?)?

For any of you UHC customers, did they let you know how their decision would affect pricing, and/or whether they are making changes with respect to their administration only services?

Has anyone coordinated a health fair for your employees??? What types of services do you make available? Flu shots? Cholesterol testing? Would it seem reasonable to have a blood drive in conjunction with this type of event???

HELP!!

Sheila K 8^)

I'm preparing an SPD on health insurance. wonder if I need to include HIPPA language. If so, any suggestions on text?

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Susan

My employer is a small for-profit LLC. I have been hired as CEO and have been asked to design a production bonus plan for myself that will complement my annual compensation. I want to tie the bonus to quality somehow and need ideas of formulas that measure outcomes and quality as well as volume. Specific formula equations are needed.

I read 4318 to apply to governmental plans. Following is 4318(a)(1)(A).

§ 4318. Employee pension benefit plans

(a) (1) (A) Except as provided in subparagraph (B), in the case of a right provided pursuant to an employee pension benefit plan (including those described in sections 3(2) and 3(33) of the Employee Retirement Income Security Act of 1974) or a right provided under any Federal or State law governing pension benefits for governmental employees, the right to pension benefits of a person reemployed under this chapter shall be determined under this section.

Controlled Group consists of two companies, Company A (with a 10/31 fiscal year) and Company B (with a 12/31 fiscal year). There are owners in each company. They want to start a profit sharing plan (or plans) covering both companies. Under the plan(s), HCEs will receive between 15% and 20% of pay; nonHCEs will receive 3% (older owners, as usual).

How can this plan (or plans) be structured to accelerate the deduction for Company A? [Note that as we speak, we are in early November!]

1. If we have two separate plans (one for Company A with a plan year ending 10/31 and one for Company B with a plan year ending 12/31), the first year for Company A's plan would have to be 11/1/99 to 10/31/00 and the first year for Company B's plan could be calendar year 1999. OK to start with, but can we do better?

2. If we have one plan (with a plan year ending 12/31) covering both companies, the first plan year could be 1/1/99 to 12/31/99. The deduction allocable to Company B would clearly be for calendar year 1999. However, how could the deduction allocation to Company A be structured to accelerate the deduction? Can any part of it be allocated to its fiscal year ended 10/31/99 because the plan was in effect for the entire calendar year?

3. Same as #2 with two separate plans. (I don't think this helps, but it's a thought).

Any other ideas?

What has to done to modify and exising cafeteria plan?

Client has 401(k) plan which also covers employees of other members of controlled group. One of the members is a newly formed financial services company which sells mutual funds unrelated to client (e.g., Fidelity). The client wants to use it's FSC to sell mutual funds to its plan. The FSC will get 12b-1 fees from mutual funds. This sounds like a PT to me since the FSC is a party-in-interest to the plan. Then I think, "Surely local megabank is using its investment affiliate to sell mutual funds (including the bank's proprietary funds) to the bank's plan. Why can't my client do it?" Is there a PTE or DOL Advisory Opinion which allows this?

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can anyone define this term? also, if a dr disables someone and states he needs surgery, can disability benefits be denied if the person doesnt want the surgery? is anything wrong or unusal to turn in paperwork from 2 different types of drs stating you are disabled?

THANX

I understand Rev Rul 81-35 & 81-36 requirement that in order for employee contributions to be considered "picked up" by the employer the ee cannot have the4 option of chhhosing to receive amounts diretly insead of having them paid to er; however, I am confused by more recent PLRs which seem to allow er "pick up" of voluntary contribution amounts (i.e., purchase of "permissive service credits" and "past service credits), so long as such voluntary amounts are contributed pursuant to irrevocable payroll deductions. (e.g. PLR 9737034 & 9832041). We've got a gov't er that has established a money purchase pension plan with a 12% employer contribution (not a picked up contribution) and, in addition, they want to have an option of allowing participants to make voluntary employee contributions which will then be "picked up" under 414(h)(2). Will this work? Did these rulings have the effect of extended the appl8cation of 414(h)(2) to elective contributions (so long as irrevocable salary reduction election is made by participant)?

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LKP

I am looking for anyone to share their telephone enrollment materials. I am also looking for examples of enrollment forms where the employee keys in the dependent names over the phone. We are just implementing telephone enrollment and I need some ideas on the communication/enrollment pieces.

How should the 1099R be issued for plan limit violations? ( For example, if the plan only allows a 10% deferral rate but a participant contributes 15% ) How should the refund be coded? Should the 402(g) rules be followed? Contributions coded as prior year and earnings as current year if distributed before April 15 or should the entire amount with earnings be coded as current year? This was a questions in the Q/A column but I do not think it specifically addressed the 1099R issue.

Any references would help.