Employer X sponsored a DB plan prior to 1986 and terminated plan. The same employer now wants to put in a new DB plan in which he will have only 5 years of participation. Can he count the participation in the prior plan toward meeting the 10 year participation requirement to get a full DB benefit? I understand that we will need to offset the current benefit with the prior benefit. Do we offset 50% of the DB limit or the DB limit adjusted for the sum of the prior participation and the current participation.

Facts: Disabled former employee and spouse on 29 month COBRA. Emp. turns 65 in Jan. and will drop our plan for Medicare.

Question: Can spouse continue COBRA for remainder of 29 months?

There isn't an IRS regulation on this topic.

What you're probably looking for is in Sections 404-407 of ERISA. There's an exception to the 404(a) duty to diversify investments (and the prudence duty to the extent it requires diversification) for employer securities. Because shares of the former parent's stock are no longer employer securities, this exception will cease to apply. The effect is that a sizeable portion of the plan assets may no longer be invested in the former parent company's stock.

[This message has been edited by MWeddell (edited 12-22-1999).]

Sheila - thanks for posting your PTO policy. I have a few questions:

1. When employees leave your employment, do you pay them off for the PTO time

they have on the books?

2. Playing "devils advocate" - I would think combining "vacation" and "sick/personal"

time under PTO actually gives the employees more paid time off than keeping the two

programs separate. Your thoughts...

3. I love the part of your policy indicating that during someone's final two-week

notice of separation, PTO will not be granted. In reality, how successful have you

been in upholding this? What keeps your employees from using PTO the week prior

to a notice and then possibly even only giving you a 1 week notice.

4. What do you do when someone does not have enough PTO to fill in for their

absence/s (i.e., they haven't earned enough time or they are the typical earn it/use it

employee and all of the sudden find themselves needing time they should have

banked!)? Are they allowed so many hours of unpaid time and then you move into

disciplinary procedures, etc., etc. - or what???

Thanks - look forward to your feedback. Feedback from others would also be great.

Candy Vande Ven

HR Director, International Arabian Horse Assoc.

Denver, CO candy.vandeven@iaha.com or

303-696-4563

[This message has been edited by Sheila k (edited 12-22-1999).]

What policies have companies implemented that attempt to keep employees from using up their "personal time off" once they have submitted a resignation notice (typically our employees will provide a 1-2 week notice and then call in "sick" during that time - applying personal time off that they have on the books which is not paid off at time of separation).

Annually each November, we provide eligible employees with an estimate of their MEA for the next year (based on assumptions using prior year data). Then, we run the MEA calcs again at the end of the year using actual year data. From what I understand, the actual test needs to be completed before the end of the year to correctly process W-2's, yet, this means estimating at least a month or two of data which we then need to manually re-verify. We always seem to be scrambling around at the 11th hour doing data analysis so that correct final refund information makes it to the payroll by year end. Does anyone have a more simple approach to this madness? (It would seem logical to run the year end tests shortly following the end of the year when you'd know what the data is exactly, but we have been advised against it.)

I've heard that one can't but would like this confirmed. The IRS Publication that addresses this issue is not available on their website; the Chicago phone number I was referred to that addresses it does not work correctly - it automatically hangs up (perhaps it is working correctly??). Thanks for anticipated assistance.

I’ve heard recently about a technique whereby a leveraged ESOP would be used to acquire preferred stock in a company, where the value of the preferred stock was tied to a fund of assets set aside by such company. The ESOP debt would also be assigned to that fund. The net result would be that the preferred stock would have a lower value post transaction than it did pretransaction, similar to a traditional leveraged buyout situation. Has anybody seen this preferred stock technique used? If so, by any public company?

This would seem to raise a whole host of issues, for example, could a “security” (preferred stock convertible into common stock of the company, but where the conversion is based on the value of the fund) be structured so as to be a qualifying employer security for the purposes of the Code and ERISA? Could such a conversion scheme be “reasonable” within the meaning of Section 409(l) of the Code?

How can a DB plan address the effect of inflation for an employee if there is a significant period between the time of termination and benefit effectice date? Example: Employee completed 20 years of service at age 45, but can not collect benefits until 55.

Is there any exception to the 401(a)(26) requirement that at least 2 EEs must participate, in a situation where there are only 2 EEs who are both owners of the business, but only 1 wants to participate? The 2 EEs are father and daughter and the father would like to waive participation.

The latest news I have heard is that the new 5500 forms that are to be used for the 1999 plan year filings will not be available until the end of January or in February. That certainly does not give practitioners much time to react in order to get systems updated. Does anyone know if the IRS is considering delaying the effective date of the forms, or at least waiving extensions for the 1999 plan year filings? We are a high volume producer, and we certainly do not want to be faced with filing extensions for thousands of plans (nor do we want our clients to be upset with having to have extensions filed). I spoke with ASPA and they are considering lobbying for a waiving of the requirement to file extensions (i.e. moving the due date back 2 1/2 or 3 months). What do others intend to do?

Does anyone have employers provide statements to participants that their plan complies with Section 404©and if so what does the statement contain? Does the employer gain additional fiduciary relief in doing this?

If a block of people in a 401k plan are going to work for an unrelated employer because of a company sale (assume same desk rule is an issue), and the unrelated employer sponsors a 401k plan, and the intention is that the 401k balances of the people moving to the new employer will be transferred to the plan of the new employer, do the transferred employees have the option to leave their 401k balances in the plan of the company they are leaving (some don't want to move their assets - but understand that if they begin deferring it would be into the plan of the new employer).

Thanks in advance for any help.

Company A, B and C are participating employers in the XYZ plan the companies are a controlled group. Company C was sold to an unrelated buyer and is no longer part of the controlled group. Employees will continue at effectively the same job as they had before with this unrelated buyer (hence I think same desk rules apply?).

The gameplan is for former employees of C to have their 401k balances rolled to an existing plan of the unrelated buyer. I know I need to look at vesting issues.

If an employee does not want his balance moved to the new new company's plan, can he leave it with XYZ? Hence effectively giving the participants of C two choices for investment - either stay w/ the old or roll to the new. I'm just not sure in a spin off situation if the employees have the option. Thanks in advance for any help.

A DB plan terminated and some of the particpants rolled their balance into the company's 401(k) plan which was not subject to the QJSA rules. Is the 401(k) plan now subject to these rules? If so, does the plan need to be amended?

I hate asking this question, but what risk is an employer taking by not following the deemed distribution rules?

2 specific examples where an employer does not want to follow deemed distribution rules:

1. Participant is a few days beyond the grace period on a 3-year loan due to being out on leave. Employer would like to either reamortize loan or allow participant to double up on payments until caught up on the loan and does not want to report a deemed distribution.

2. Participant takes a 20-year loan for a principal residence. 6 months later, employer discovers loan was for property on which a residence might be built later. Employer would like to reamortize the loan over 4 1/2 years and not treat the loan as a deemed distribution.

I have talked to other practitioners that don't seem to have too much of a problem with the above.

Yes, I know the rules are the rules. But I would like to know what risks the employers would be taking (and should be advised of) by not following the deemed distribution rules. Is it a plan qualification issue?

I have been comparing charts from many sources listing items included or excluded in different compensation definitions. It seems pretty clear that "Severance Pay" is included in W-2. However, sources seem about equally split between saying "Severance Pay" is included or excluded for Long list 415, Short List 415, and 3401(a). Does anyone have a strong opinion on which is correct for Long List, Short List, and 3401(a). If so, reasons and/or cites would be appreciated.

I know this has been discussed before, but are people using employer or trust EINs on Form 1099R. Has anyone ever had the IRS specifically tell them which number to use.

Got a self funded plan, and need to rent a network of doc's and hospitals for SF area. Any suggestions??? HELP!!

Does anyone know if a local agency's withdrawal from a state retirement system constitutes a plan termination for defined benefit distribution purposes? In other words, if a local agency participates in a state's retirement system and then elects insttead to join a county retirement system, has the "plan" been terminated? Are the participants entitled to a distribution? Thanks!