As Dave Baker has noted, BenefitsLink and I have collaberated on an expanded Employee Benefits Library of legal research links. Members of this board may be interested to know that one of the pages in the Library deals specifically with governmental plans research links.

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Employee benefits legal resource site

[This message has been edited by CVCalhoun (edited 09-27-1999).]

How much can or should a school district get involved with vendor selection and still keep a plan "non-ERISA"? In assisting a financial planning client, I discovered that the school system she works for has a list of vendors that seems to be a haphazard list of the first 25 insurance companies that any employee came forward and asked for. Very few on the list seem to be quality choices and many major players are missing. I would like to approach the school system to help them rationalize this process of selecting vendors. So my question is, How much can the sponsor get involved? Can there be a procedure that limits the number of vendors? Can or should any "due dilligence" be done? I would appreciate any comments or information on the subject? Thanks

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Geoff

We were just hired by an employer to provide consulting sevices (document, testing, etc) to a 401k plan. They are investing their assets with MFS, where each participant will have an individual account. MFS will be responsible for receiving, processing and maintaining records of employee contributions and accounts. Pretty standard stuff.

MFS wants to have a service agreement signed between us and them (even though we don't work for them or get paid by them). Perhaps, it might be a condition of us being allowed to view electronically the employee/employer accounts.

The service agreement requires information that we consider proprietary and confidential. It does delineate (somewhat) which organization is responsible for what functions -- which we would clarify with the client anyway -- that's OK. However, the service agreement in addition asks for things that a prospect/client might ask (fee structure, number of clients, references, ownership structure, etc.), and confidential information, and they are not the prospect/client.

What's going on? What is the experience of you folks out there? We work with other investment firms and haven't seen this before. Have you? What do you do?

How are esops used in estate planning ot reduce estate tax liability?

If I have a client who owns all of the stock of a corporation and he pays income tax of about $400,000 every year, how can starting an esop reduce his taxable income? He is only willing to give up about 20% of the company to key employees.

[This message has been edited by Angie Horn (edited 09-27-1999).]

Is it acceptable to use a rate lower than the IRS acceptable rate of 120% of the Annual Long-Term Applicable Federal Rate when calculating a pre-59 1/2 Qualified Plan Distribution? Also, I was told by Universal Pension that the rate for September is 7.16% but Brentmark lists 7.53% for the rate for September. Who is right and what rate do we take 120% of? I appreciate any help!!

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[This message has been edited by SPollock (edited 09-25-1999).]

I have a question about COBRA eligibility.

I have voluntarily terminated employment with my previous employer and is offered COBRA; however, I have yet to make an election to accept or decline COBRA and is still within the 60 days limit.

I then accepted employement with my current employer and is covered under a group plan. If I terminate employement with my current employer, can I still elect to accept COBRA from my previous employer?

My bank is custodian for an IRA. The customer is having securities trades directed by his broker (with a major brokerage house). The broker claims he needs the bank's own TIN for tax reporting purposes. I thought that the customer's SSN was normally used. Am I missing something?

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Code Section 401(a)(26), which required that qualified plans cover the lesser of 40% of an employer's workforce or 50 employees, since the plan year beginning in 1997 doesn't apply to defined contribution plans. However, there's still a cross-reference to 401(a)(26) in Code Section 403(B)(12).

Normally, I'd say that 401(a)(26) doesn't apply to the nonelective deferral portion of a 403(B) plan either because it's not a defined benefit plan. However, the IRS audit guidelines that were updated this summer still refer to 401(a)(26) rules, not that they elaborate at all.

Does this mean that the IRS thinks that the nonelective deferral portion of a 403(B) is still subject to the 50 employee / 40% rule? Has anyone already spoken to the IRS about this?

A question has come up regarding adding dependents following a family status change. Scenario is this, an employee is enrolled as employee only but has children that are not currently enrolled in the group plan. The employee has a family status change, gets married, and makes a mid year change from single to family coverage. Can he add dependents, the children not covered previously, and new dependents at the same time or will the children he had not previously covered have to wait for the next open enrollment period?

A question has come up regarding adding dependents following a family status change. Scenario is this, an employee is enrolled as employee only but has children that are not currently enrolled in the group plan. That employee has a family status change, gets married, and makes a mid year change from single to family coverage. Can he add dependents, the children not covered previously, and new dependents at the same time or will the children he had not previously covered have to wait for the next open enrollment period?

The accounting firm for a new client performed a limited scope audit on the defined contribution plan. The problem is that a limited scope audit is only available if the plan's assets are in trust and the plan's assets are in custodial accounts. The problem has been corrected prospectively, but what do we do about past years?

We have plans written that Normal Retirement Date is anniversary date nearest attainment of Normal Retirement Age.

If NRA is 65 and plan is calendar year, a person born prior to 6/30 will have a NRD of 64 years and x months.

We would like to change NRD to first of month coinciding with or next following attainment of NRA.

Will this be a cutback that is not permissable?

A parent company with several subsidiaries, all of which participate under the parent's 401(k) plan, is about to acquire another company (the "target") which maintains a SIMPLE IRA. The acquisition will take place before the end of 1999. The parent would like the target's employees to participate in the parent's 401(k) plan after the acquisition.

What would be the best way to accomplish this, in light of the prohibition against maintaining a qualified plan and a SIMPLE IRA? There are 3 options as I see it, but I'm not sure whether each can be done or what the ramifications of each are.

First, the parent could require the target to terminate its SIMPLE IRA prior to the acquisition. The target's employees would begin participation in the parent's 401(k) immediately. Note: this has been the parent's practice in past acquisitions of companies with 401(k) plans to avoid the "successor plan" rules under 401(k). It seems to me that this might avoid the possibility of an "employer" maintaining a qualified plan and a SIMPLE IRA at the same time.

Second, the SIMPLE IRA could be continued until the end of 1999, with the target employees continuing their contributions, at which time the SIMPLE IRA would be terminated and the target employees would begin participation under the parent's 401(k) plan effective 1/1/2000.

Third, the parent could terminate the SIMPLE IRA after the acquisition at some time in 1999, at which time the target employees would begin participation in the parent's 401(k) plan.

Any thoughts or suggestions?

I need to ascertain whether people's plans are electing to use the top paid group rule when determining HCEs.

Your help and experience with this is greatly appreciated!!

Samantha

In 1998, I met all the criteria to roll my traditional and Simple IRA's to a Roth. My Fiancial Planner received my signed paperwork and acknowledged receipt with their signature. In Feb. 99', I found that they never rolled the money. Amount to roll as of 12/31/99 was $118,000. How can I find out how much this mistake cost me?

Pursuant to a corporate merger, a top heavy plan and a non-top heavy plan merge mid year. The resulting plan would be top heavy. However, since the "determination" date is the last day of the preceding plan year--what do you do? The plans were not in a required aggregation group as of the determination date. Could you have an argument that the top heavy contribution only needs to be made on the participants in the "old" top heavy plan? The "transfer" rules indicate that you include all amounts in the top heavy determination, but do you do this retroactively for periods prior to the actual transfer?

[This message has been edited by KJohnson (edited 09-24-1999).]

Yes, it can.

There's plenty of conditions to be met, but the fact that the contribution is made to a separate money purchase plan doesn't prevent it from being a safe harbor contribution. All NHCEs in the 401(k) plan must be eligible to receive that year's money purchase pension plan contribution.

MY HUSBAND AND I WERE MARRIED IN AZ IN 1987 AND LIVED TOGETHER UNTIL WE SEPARATED IN 1993

ALTHOUGH WE NEVER AGAIN MAINTAINED A HOME TOGETHER WE NEVER DIVORCED OR MADE ANY ARRANGEMENTS ON DIVIDING OF OUR ASSETS. WE SIMPLY MAINTAINED SEPARATE HOMES. ON AUG. 15TH OF LAST YEAR MY HUSBAND TOOK HIS LIFE. FOUND AMONG HIS PERSONAL THINGS WAS A DIVORCE DEGREE ALLEGEDLY ISSUED FROM A MEXICAN COURT DISSOLVING OUR MARRIAGE IN 1994. FURTHER WAS A NEVADA MARRIAGE LICENSE TO ANOTHER WOMAN IN 1994. APPARENTLY THEY HAD MAINTAINED A HOME TOGETHER IN COLORADO FOR A FEW MONTHS. IN THE SUPERIOR COURT OF AZ WE HAVE ESTABLISHED THAT THE MEXICAN DIVORCE IS NOT LEGAL EVEN IN MEXICO AND COULD NOT LEGALLY TERMINATE OUR MARRIAGE. THE COURT FOUND I WAS ASTOPPED FROM CONTESTING THE MARRIAGE OF HE AND THE OTHER WOMAN AS I DID NOTHING ABOUT IT TILL AFTER HIS DEATH. THE FALSE CLAIM BEING MADE BY THE OTHER WOMAN THAT I HAD KNOWLAGE OF THE DIVORCE AND THEIR MARRIAGE BEFORE HIS DEATH. SINCE THERE WAS NEVER A LEGAL DIVORCE OR SETTLEMENT BETWEEN MY HUSBAND AND I, DOSE THE STATES ASTOPPLE ISSUE DICTATE THE LEGAL SPOUSE FOR PURPOSES OF ERISA ON OUR 401K?

When matching contributions that are not used to satisfy the ACP test are used to satisfy the top-heavy minimum requirement, are they still considered matching contributions or do they need to be reclassifed as nonelective employer (profit sharing) contributions? Since the sources have different vesting schedules, the answer is important. Regulations 1.416-1 M19 Q&A, and 1.401(m)-1 (12) (iii) cover this issue, but I am not sure how to interpret them. Which vesting schedule should apply, the one for match or the one for nonelective employer contributions?