Tax-exempt non-governmental employer has a 403(B) Tax-deferred Annuity Plan and a 403(B) Defined Contribution (Money Purchase)Plan with TIAA-CREF funding vehicles. Employer contributes 4% of regular salary to the Def. Cont. Plan annually. Employer sends the contributions to TIAA-CREF. Vesting under the Def. Cont. Plan is two year cliff. If employees do not meet the two year requirement, TIAA-CREF returns the portion of the contributions made on that employee's behalf to the employer. According to TIAA-CREF, the employer can use the returned contribution amounts to reduce future contributions or it can use them for whatever purpose it wants and the employer does not have to maintain any type of separate suspense account or otherwise segregate the funds. Per TIAA-CREF, that is the standard practice. The Def. Cont. Plan contains a provision regarding "no reversion of contributions to the employer..." I deal exclusively with 401(a) plans and am not extremely well-versed in the 403 area, however, it appears to me that there clearly is a reversion of plan assets here. Do 403(B) plans really work that way or am I just hung up on 401(a)(2)?? Any comments or suggestions that may help?????

After originally posting above paragraph I took a look at 403(a), 404(a)(2) and 4980. Looks like, per 403(a) via 404(a)(2), even a 403(a) plan is not subject to 401(a)(2). With respect to 4980 (tax on reversion of qualified plan assets to employer), 4980 applies to 401(a) plans and 403(a) plans but in no event to a plan maintained by a tax exempt employer. I'm still concerned that the plan document speaks to no reversion but, in fact, there is a reversion. Also, wondering if 403©(1) of ERISA applies. There's no trust arrangement with a 403(B) plan, however, a 403(B) plan is subject to ERISA. Any comments or suggestions???

------------------

[This message has been edited by chris (edited 07-14-99).]

Is there any way to fix a situation where money has been roll-over to an "IRA" which turns out does not have a qualified custodian? What are the consequences of this?

For 410(B) a Controlled group of corporations need to be tested. What date would you use if the plans of the Controlled Groups have different Plan Year Ends?

I would like to comment on several items raised by Daily401k. I am one of the designers for the Quantech system so am possibly biased (OK am biased).

Anyone should feel free to make comments positive or negative about the Quantech product on this bulletin board. That is one of the ways to determine future enhancements of the product. Yes, there are Corbel people that view the site BUT negative feedback should NOT be suppressed or prohibited.

Let's look at the individual items you have raised:

1) This requires some explanation. Are you attempting to allocate earnings to a particular fund and that fund is being used to hold forfeitures?? Same question for fees?? (IF yes, I agree that these should be enhancements to the system) Quantech 5.0 will enable you to forfeit simultaneously with the distribution. A non-cash account can now be used for forfeitures including leaving the monies in the funds from which they were forfeited

2) Eligibility requires an understanding of the processes being performed. It is not something that a new user, such as yourself, would feel comfortable with in a short time. It is also one of the areas being reviewed to simplify the calculations and make them more understandable. If you provide some examples of problems you are having there are numerous 'experts' willing to assist you in understanding the logic both on this site and at Corbel

3) Interesting comments on the VRU. I will forward this comment to those working with the VRU

4) Ah yes - trust accounting. Quantech should have trust accounting this fall. Designs are already being reviewed and you should see excellent integration with the participant recordkeeping.

5) This comment refers to the display of transactions at the detail level on the account screen?? Good suggestion! We currently have a plan specification that controls the reports but it sounds reasonable to allow it to control the sorting in Census with an override capability.

6) Activity tracking?? Are you talking client management?

7) Global interest rates for loans is a future project. Loans now use the participant's current payroll schedule. You can currently process a loan and process the fee simultaneously. You are correct that there were issues with straddled transactions. The current release has numerous changes to the loan system which will make it run very smoothly.

8) There is at least one report that perform a reconciliation of some kind. What did you have in mind?

9) Takeovers require extra effort in administration - I remember that from when I did them (even though it was LONG ago). What information did you want to populate with respect to the hardship? There are several new features at 5.0 which may solve these problems for you.

10) Census DER has been expanded to display significantly more characters. The reports should show the match contributions being imported - I will check it out. Recognition of 32 bit filenames is a future enhancement. The easiest way to extract information on any particular date is to use Crystal BUT I will enter an enhancement to allow the user to enter a date for export.

11) I do not understand the issue. I do not believe that it is necessary to reverse the transaction to see what was accomplished. Please offer an example.

12) Hardship distributions have been enhanced in 5.0. Let us know what you think.

13) Many of these items are being reviewed to make them trackable - make a single change and it will carry through. Vesting has been modified at 5.0 to track by source and investment elections have an effective date attached to them which should make things easier.

14) What is a negative match contribution? Is this coming through payroll? This can be processed as an adjustment transaction for the participant.

15) Fund prices are as they are received from our source.

16) Excellent point! Enhancement was already considered to add the transaction identifier to the trade screen.

17) What reports? There is a link to Hyperprep.

18) Good suggestion!

19) What problems are created with pay schedules ending on the same date? Quantech should be handling these situations correctly.

Problems in operating in the daily environment can be dealt with as they are raised by you and the other users. For example, another gentleman suggested that the dollar amount actually posted would appear in the transaction entry screen (after posting) - another good suggestion.

ALL users should continue to post comments and suggestions both positive and negative so that the system can be enhanced.

NOW, all of the above being said, the support provided to our clients does NOT in any way, shape, or form depend on whether a particular client agrees with us. We have many clients who are EXTREMELY vocal regarding deficiencies in the system and they get the best treatment we can provide as do all clients do not complain. Therefore, the reason for the anonymity of this user is troublesome. It is difficult to have communication when parties are unknown.

Please feel free to offer any and all suggestions to me at my email address OR you are certainly welcome to call and discuss any particular items. I will do my best to enter suggestions, resolve issues, or provide the correct avenue to obtain information that I can.

Thanks

Frank Prager

(904) 396-3220 ext 1337

frank.prager@corbel.com

My employer effective 12/31/98 switched

our defined benefit plan to a cash balance plan. Prior to the conversion they amended the plan to provide for the GATT rate to be used for those employees under 50 rather the PBGC rate as called for in the current plan document. The amendment was effective

Nov. 1, l998. I'm 49 years old with over 30 years of service - is what they did legal? It would appear to be a violation of ERISA to discriminate based on age.

A client phoned and stated they have an excellent employee with a 401(k) participant loan who was in a serious car accident and will not be back to work for 4 months. The payroll will run out in 2 weeks and the employee is flat broke (cannot afford to send personal checks in to make the loan payments). Is there any way to avoid having the loan go into default and reporting it on a 1099R?

Any ideas out there?

What are the regulations with regards to providing health insurance benefits to employees. All of the employees of my wife's company receive healthcare benefits while holding similar positions, yet her employer has refused her request for coverage. The company has over 30 employees.

We have an gov't employer with a qualified pension plan that provides for employee contributions and an employer match. The plan also provides that any forfeitures of the match be applied to reduce the matching contribution amount. Because they contribute match each payroll with the employee contributions, they contend that it would be too difficult adminstratively to offset the matching amount with the forfeitures and would like to instead go ahead and contribute the full match on a payroll basis and receive a "reimbursement" at the close of the year of the matching forfeiture amount which should have been used to reduce the amount they are putting in on a payroll basis. Any thoughts as to whether this might be considered a "reversion" or other violation of the exclusive benefit rule?

------------------

LKP

Can a church or church affiliated org opt out of ERISA with a 401(k)?

I have a plan which has one participant who was mistakenly skipped over for t-h min. in 1996 and 1997. How do you correct.

Does anyone know what the IRS means by "significant cost of coverage changes", found in A-6(B)? The employer I work with is having a 9% increase in medical insurance premiums mid-year (that's mid cafeteria plan year). Is 9% considered significant? The employer would like for their employees to be able to drop or change their current coverage at this time.

If a parent company has 4 wholly owned subs and then aquires a new sub that is owned 25% by each of the 4 wholly owned subs, can the new sub participate in the parent's 423 plan? I did not see any attribution rules associated with this section.

How do you calculate imputed income in a group term life plan that discriminates in favor of key employees? I do not understand the "tabular" premium described in 1.79-4T, A-6. I'd be interested to see an example of how the imputed income is calculated.

I am building a COBRA manaul (policies and procedures) and don't want to leave anything out. Would anyone be willing to share just the table of contents or topic headings from you companies COBRA manual?

Please feel free to post it here our you can email me at spiwowar@geneer.com or fax at 847-294-0358.

Thanks.

Sarah Piwowar

HR Coordinator

Geneer Corporation

What are 'booster contributions'? are they the same thing as 'catch-up contributions'? are 'catch-up contributions' still permitted? thanks.

I am looking for information about the recourse (if any) that employees may have when they believe that the ESOP trustee is not protecting their interests. In this case, there is only one trustee for the 30% ESOP share of the company, who also happens to be the sole owner of the other 70% and the CEO. The ESOP was originally funded by a former profit sharing plan, against employee protest. There are two issues: 1) Redirection of employee retirement funds from a diversified portfolio to 100% investment in the ESOP, and

2) subsequent mismanagement of the company, which now reduces the value of employees' stock (down over 50% in 1998 alone).

Employee questions or critism of management are met with derision. Any employee generated official complaint would be cause for dismissal. Many of these employees are unskilled factory workers who are facing unemployment plus loss of their entire retirement "savings". They don't have the resources to retain legal counsel. As a former officer of this company, who "got out in time", I still feel a responsability for these people and would like to help if I can.

If a U.S. based company sponsoring a DC/401(k) plan acquires a company in Canada, whose employees are Candadian citizens, and who have no U.S. earned income, and a standardized prototype document is being used......

Does the plan document have to specifically exclude non-res aliens in order for the plan sponsor to not have to offer the plan to the Canadian employees (I know Canada doesn't recognize 401k as tax-free wage)? I think I know the answer but just want to make sure before I advise a client.

Thanks for any help.

A DC/401(k) plan is sponsored by Company X. Three years after plan effective date, Company Y becomes a bro-sis controlled group with X. All of Y's ee's are collectively bargained union hence statutorily excludable from the plan.

Plan document is standardized prototype and the adoption agreement box that could be checked to exclude collectively bargained ee's from plan participation is not checked.

TPA does not ask the questions "do you have union ee's" and "are you a controlled group." TPA is responsible for plan document maintenance. As a result of TPA not asking the questions, the prototype is not amended to exclude union folks. Union employees are not offered the plan.

Four more years pass and the plan sponsor discovers this error. If the only contributions to the plan were deferral and match, does the employer deposit a QNEC (based on ADP of NHCE's for the years in question) and corresponding match for the union folks? Is that the proper remedy? Thanks for any help.

an individual retired and took a lump sum. several years later it was determined that the amount was 5k too little. however the person has now deceased. can the spouse or estate get the make up payment or is there any recourse to anyone's knowledge. A reference would be appreciated.

thanks

A company has a 401(k) plan on a 2/1-1/31 plan year (2/1-1/31 limitation year also).

They amend the plan effective 1/1/99 to a calendar year (with a calendar limitation year), thus creating an eleven-month plan year (2/1/98 to 12/31/98) with an eleven-month limitation year.

Meanwhile, they start a profit sharing plan effective 1/1/98, with a calendar plan year and a calendar limitation year.

Starting in 1999, life is simple, since the limitation years are both the calendar year. However, for 1998, what is the maximum 415 contribution for the owner, based on the following?

1998 pay (full year) = $100,000

1998 pay (from 2/1/98 to 12/31/98) = $91,666

1998 401(k) deferral = $10,000 for the calendar year.

(Don't worry about the 15% of payroll aggregate limit; there are enough other employees around.)

If we were simply on a calendar year, the limit would be 25% of $100,000, or $25,000; and the maximum allocation to the profit for him would be $15,000.

But, we have an eleven-month limitation year for the 401(k) plan -- 2/1/98 to 12/31/98.

The regulations discuss the 415 limit for a short limitation year at 1.415-2(B)(4)(iii) with an example at 1.415-2(B)(4)(iv). In this case, the 415 limit is prorated downward, and the pay used is the pay during the short limitation year.

However, the regulations are vague when an employee is covered by 2 DC plans with different limitation years; with the only reference that I could find at 1.415--2(B)(3): "Election of multiple limitation years. Any employer that maintains more than one qualified plan may elect to use different limnitation years for each such plan in accordance with rules determined by the Commissioner." I could find no further guidance.

Is his 415 limit equal to 25% of $100,000, 25% of $91,667, 25% of something else?

Any ideas?