My plan requires excess aggregate forfeitures to be used to reduce employer contributions.

I am looking for suggestions on how to handle this without violating regulations regardings assets held in trust.

Basically, this is the issue: can a check be cut to the Trustee FBO of the plan. The trustee deposits the check into an account that is used only to pay employer contributions.

OR, must the forfeitures stay in the trust, and be reduced by future employer contributions requirements until depleted.

Just wondering how other people might be handling this.

Can three months of service be required before an otherwise eligible employee is able to make employee deferrals? If not, is this a disqualification issue (Note: 1 year of service is required for employer match - further note: this message also posted on the gov't plan board)?

Many of you may have wondered why your message has ended up with a little note at the bottom saying, "This message was edited by CVCalhoun," and whether anything you may have said might have been distorted by the editing. Although as moderator of this board, I have the ability to edit any message, I try very hard to avoid changing the meaning of anyone's message. So, just for general information, the following are my standards for editing:

1. I never edit a message for substance. If I feel like a message violates the standards of this board (e.g., if it advertises a Ponzi scheme which has nothing to do with employee benefits, or attacks another writer), I will remove it entirely, but I will not edit it. I suppose that if I found a part of an otherwise useful message to be objectionable, I might delete the whole message but send a copy back to the original writer suggesting a rewrite, but so far, that hasn't happened.

2. I will edit a topic heading, either for typos, or because the topic has drifted into a more general discussion than its original heading might have suggested. (I don't edit specific messages for typos, but I do like people at least to know what each topic as a whole is about.)

3. I will edit specific messages to insert links to articles, cases, or statutory provisions referenced in them, when I believe that the link may contribute to understanding what the message is about.

4. I will edit specific messages when the peculiarities of this board cause a message to get garbled. For example, if you use a % sign on this board, neither it nor the rest of the paragraph in which it appears will show on the board. Instead, you have to use %, which will insert the % sign into the message. If someone does not know that (which I consider quite understandable!), I would edit the person's message to put it back the way the person originally intended it.

And that's all the editing I do. If you want to know why your personal message got edited, feel free to e-mail me. My e-mail is ccalhoun@cwlaw.com

Many of you may have wondered why your message has ended up with a little note at the bottom saying, "This message was edited by CVCalhoun," and whether anything you may have said might have been distorted by the editing. Although as moderator of this board, I have the ability to edit any message, I try very hard to avoid changing the meaning of anyone's message. So, just for general information, the following are my standards for editing:

1. I never edit a message for substance. If I feel like a message violates the standards of this board (e.g., if it advertises a Ponzi scheme which has nothing to do with employee benefits, or attacks another writer), I will remove it entirely, but I will not edit it. I suppose that if I found a part of an otherwise useful message to be objectionable, I might delete the whole message but send a copy back to the original writer suggesting a rewrite, but so far, that hasn't happened.

2. I will edit a topic heading, either for typos, or because the topic has drifted into a more general discussion than its original heading might have suggested. (I don't edit specific messages for typos, but I do like people at least to know what each topic as a whole is about.)

3. I will edit specific messages to insert links to articles, cases, or statutory provisions referenced in them, when I believe that the link may contribute to understanding what the message is about.

4. I will edit specific messages when the peculiarities of this board cause a message to get garbled. For example, if you use a % sign on this board, neither it nor the rest of the paragraph in which it appears will show on the board. Instead, you have to use %, which will insert the % sign into the message. If someone does not know that (which I consider quite understandable!), I would edit the person's message to put it back the way the person originally intended it.

And that's all the editing I do. If you want to know why your personal message got edited, feel free to e-mail me. My e-mail is ccalhoun@cwlaw.com

[Note: This message was edited by CVCalhoun]

I am currently preparing a Private Letter Ruling regarding income of a trader of options, futures and other short term stock gains as being viable compensation for pension purposes. Any information that you have to that effect would be greatly appreciated.

Does anyone have a draft of a notice they can share with our readers?

For the free offer e- mail us at:

moreinfo4u@mailexcite.com

Also cafeteria plans(POP)only at NO charge

AVAILABLE IN CALIFORNIA ONLY

[This message has been edited by Sathi Rajadurai (edited 11-20-98).]

Is the universal eligibility provision of Section 403(B)(12) applicable to 403(B) plans sponsored public schools? At an IRS EP/EO council, someone seemed to mention that it did not apply to governmental agencies/public schools. Is that what 403(B)(12)© is talking about?

[This message has been edited by derek (edited 11-09-98).]

a credit union client of ours would like to offer an additional retirement program for their CEO. They currently have a money purchase plan and 401(k). Can we set up a deferred comp plan for the CEO funded with life insurance or are we limited to a 457 plan, which, as I understand, would reduce the deferrel of the CEO from $10,000 to $8,000? Please advise. Thanks

Recently our company acquired a small company in the northwest. As part of the management agreement, we included our pension plan for a few key employees (no one in benefits was involved). In terms of nondiscrimination testing, can we give this benefit to just a few key employees? Given that the entire test is done on about 40,000 employees and this division is only 60 employees, are we headed for trouble? My initial reaction is yes, but I want to be sure.

The prototype document we use allows for tiered matching contributions based on years of service. Will/can this not result in discriminatory amounts for the HCEs if they receive the higher rate of match? Doesn't this cause you to have to pass under benefits rights and features as well as ACP?

Does anyone know what DOL Form EBS-1 is for? Where can I find it? I have checked on the DOL and IRS websites, but have found nothing. The IRS is asking for this from one of our clients. Thanks!

I was wondering if anybody has knowledge as to whether or not surety bonds are being purchased in order to pay out benefits to highly compensated employees that would otherwise be restricted. If so, what companies are issuing the bonds, and how extensive is this practice? Any guidance would be greatly appreciated.

I was wondering if anybody could recommend a good article that discusses planning opportunities after the elimination of Code Section 415(e). Anything out there that discusses interplay between 415 limits and 404 limitations? Thanks. Ed

Under IRS Notice 98-1, an employer who maintains a 401(k) plan that utilizes the prior plan year trsting method may treat NHCEs as deferring 3% during the first plan year. If NHCEs actually deferred 2.5% during the first plan year, what is the NHCE ADP for the second plan year ... 3% (based on prior plan year attribution) or 2.5% (based on actual contributions)? Any thoughts? Thanks. Ed

>>>With Dave's kind permission, I am posting the text of my letter concerning this article, the text of which is linked thru BL What' New for 11/04/98. Please feel free to copy this posting, but only if you keep it intact; I don't want my words edited without my knowledge or permission. I've had to do some editing here, as my MSWord formatting doesn't translate well.<<<

Americans for Tax Reform

1320 18th Street, NW Suite 200

Washington, DC 20036

November 6, 1998

To whom it may concern:

I am a pension plan administration professional. I have been directly or indirectly involved with qualified pension plans for over 20 years. I am also a subscriber to BenefitsLink, a WWW service for people like me who want or need to keep current on benefits issues. BenefitsLink recently had a link to your web site publication of an article titled "Pension Liberation", by Peter J. Ferrara.

I am quite frankly appalled by this article. It is obviously written for the layman who knows that there is an issue here but depends on experts to explain the ramifications of the issue. The article is full of emotionally laden usages, intended to raise the blood pressure of the reader while avoiding educating the reader in the facts. I admit up front that the quotes I use below are taken out of context, but I do this with the belief that the context has no effect on the intended meaning of the quoted text.

• "Over the past 20 years, the private sector has shifted dramatically towards "defined contribution" pension programs, where the employer pays a specified amount into an investment account for the worker and benefits equal what these accumulated invested funds can finance. The number of private sector employees in such plans soared from 11 million in 1975 to 43 million in 1995, an increase of about 300%. Contrast that with the stagnation of private defined benefit plans, where the employer promises a specified retirement benefit and saves and invests the funds in a common investment pool to finance those benefits. From 1975 to 1995, the number of private sector employees in such plans grew by less than 10%, from 33 million to 36 million."

This opening statement is a clear abuse of statistical data. The author makes no mention of why private sector employers have been moving away from Defined Benefit plans, starting with Congressional action adding to the administrative cost of DB plans, and ending with the recent combination of leveraged buyouts and hostile takeovers raiding the surplus assets of "rich" DB plan investments.

"Yet, in the public sector, government employees remain overwhelmingly tied to old-fashion defined benefit plans." Emphasis added. DC plans have been around as long or longer than DB plans. This description of DB plans is intended to manipulate the reader.

Mr. Ferrara begins a detailed comparison of Defined Benefit and Defined Contribution plans. I preface my comments with two facts: a pension plan is usually designed by committee often subject to collective bargaining agreements, and when there is a choice available such as the vesting schedule the same choices are available to both types of plans.

DB: "The workers may be required to make some contribution as well." Some DC plans may require employees to make contributions in order to receive matching employer contributions.

DC: "...the employer simply contributes a specified percentage of the worker’s salary, typically 7%-10%, to an individual investment account for the worker. The orker may be required to make a contribution as well, perhaps 3% of salary." The author fails to mention that the percentage of salary for employee contributions to a DB plan is typically 3% and often is less than in DC plans because of the matching contribution provisions mentioned above.

DB: "The worker typically gets back any contributions he made to the common pool, plus interest." Emphasis added. I asked my daughter this morning what she thought "typically" means, always or usually. She correctly chose usually. I challenge Mr. Ferrara to cite a public sector plan at any time during the last 24 years (since the passage of ERISA) that was designed to refuse to refund an employee’s contributions.

I could go on to more detailed comments, but I’ll limit myself to Mr. Ferrara’s creative comparison of vesting provisions. It is true that public sector plans of both types require relatively long terms of service for employees to become 100% vested in their pension benefits. I have seen many Summary Plan Descriptions use language that explicitly states the employee is being rewarded for his longevity with the employer. An employer’s perspective on vesting is often to limit the immediate gratification desired by some workers who look to profit from generous contributions, and to curb employee turnover; we all know that it is expensive to frequently train new employees. It is also true that public sector employees and their unions are pressing for better vesting schedules in line with those imposed on qualified plans.

My personal reaction to Mr. Ferrara’s article is two-fold. If he intended to get the reader angry at the alleged waste in public sector pension plans, he fails to mention the best possible reason for choosing DC plans: the whole point of pension contributions in the private sector is that they are tax deductible; this is obviously not true of the public sector; DB plans by far provide the largest deductible contributions. If he intended to present the objective facts, his article needed to be at least three times as long. Either way, Mr. Ferrara’s article is, in my opinion, at best dangerous in its use of partial truth and its omissions.

I am writing as a private citizen. The views expressed by me do not represent the views of my employer. I am open to discuss any issues pertaining to pension plans with the author or any member of ATR.

Sincerely,

Franklin J. Evans

762 S. 18th St.

Philadelphia, PA 19146-1836

Franklin_J_Evans@vanguard.com

[Note: This message was edited by CVCalhoun]

Are there requirements spelled out by ERISA, or other legislation, on who must be allowed to enroll in a self funded employer health insurance plan (especially if the employee initially declined coverage during their open enrollment period)?

Doing study for mid size for profit hospital. They desire to benchmark contribution to 401(k) plan to like size and type employers. Does anyone have info which is relevant to such a study?

Texas apparently has a law or attorney general opinion that prevents public school districts from limiting the number of annuity providers that are allowed to "sell" their products to employees who participate in 403(B) "plans". Does anyone know of other states with similar provisions? How have the schools dealt with this issue? Anyone in Texas who has found a way around this?

I know of a number of large school districts that have over 100 annuity providers serving their employees. From the schools' perspective it makes it almost impossible to monitor the providers, or ensure that employees are not being scammed out of their retirement money.

Several people have told me that when they refer to a case, article, etc., they would like a way to put in a link to it (i.e., something that people can click on to get to the case or article). So although this is a little off-topic, I thought I'd give a quick lesson in how to do that.

The basic format is to type in the address. For example, to link to my employee benefits legal resource site, you would type

http://cvcalhoun.com

Happy linking!