katieinny

I think the problem I'm having is getting across to the employer what a "plan" is. They (and the CPA) are only focusing on the cafeteria plan as if that's "the plan" that governs the health care, Rx, vision and dental. I can't seem to make them understand that all the cafeteria plan does is allow employees to pay their share of the costs with pre-tax dollars. I have a feeling that the insurance company provides a basic contract, which is probably the plan. Is there a situation where the insurance company files the 5500?

P.S. I've read the instructions for the 5500 form.

The company employs well over 100 people -- probably more than 1,000 actually. The plans include medical, dental, Rx and vision coverage.

I've been trying to explain that while no 5500 needs to be filed for the cafeteria plan, there should be 5500s filed for the welfare benefit plans. Is it possible that there is no underlying plans because the insurance company handles everything? When I ask for plan documents I only get things that relate to the cafeteria plan.

This question relates to a Form 5500 filing for a group health insurance plan. A company was filing 5500s as an S-Corp, but recently established a new LLC and transferred everything from the S-Corp to the LLC. The insurance contracts are renewing under the new LLC name. Due to the timing of the entity changeover, most of the Schedule A's show the old company name and EIN. Now, we're wondering how to do the 2009 Form 5500. Can we change the entity name on page 2, item 4? Should a final 5500 be filed for the S-Corp and another 5500 be filed for the new LLC?

Kevin: Thanks -- I think that's what we'll have to go with.

An employer thought he could apply the plan's 2 year waiting period for PS contributions to safe harbor contributions. Several years went by before the waiting period error was discovered. The ER is willing to go back some number of years, but we're wondering if a statute of limitations might apply. Documentation to determine when, who, how much, etc. probably isn't available going back more than 3 years.

The Trustee is a directed Trustee, not discretionary, so fiduciary liability is limited at best. The ER has 30 days to review statements and notify the Trustee if there's a problem, which he didn't do. From the research we have done to date, it's not even definite that there was a breach of fiduciary duty on the ER's part. He looked at the statements, but didn't notice that the PS assets weren't in the right fund. It's just as likely that the investment that was selected several years ago could have done worse than the one the money was in. Even if he had noticed the error, he might have decided that the current investment was the better one. The whole thing seems too subjective. It's definitely a gray area.

The employer is responsibile for selecting the investments for non-elective PS contributions going into the plan. EEs handle the investments of their own deferrals and the match. The employer discovered that, for several years, the PS assets hadn't been invested in accordance with instructions that were sent to the Trustee many years ago. He admits that he hadn't been closely monitoring statements and didn't discover the error until recently. The employer is willing to make the earnings adjustment, but this error doesn't seem to fit under the "covered transactions" section of the Voluntary Fiduciary Correction Program. Should it be submitted under that program anyway? We're also wondering how far back he needs to go. Isn't there a statute of limitations?

In order for an HCE to take a lump sum from his employer's DB plan, he was required to invest 125% of the distribution amount in a restricted IRA. There is a Security Agreement in place. He invested the assets in a variable annuity. The financial institution is both the owner and the beneficiary of the annuity. The participant is the annuitant. This took place about 3 years ago. Now, we're trying to determine what options are available to him if he wants to get out of this annuity (understanding that the Restricted IRA provisions must remain in effect wherever he invests). Paying the surrender charge will be the first deterrent, but if he decides to bite the bullet, the Security Agreement says that the DB Plan Administrator and the Participant can agree on a successor custodian or trustee and provide the current financial institution with transfer instructions. The original investment representative is now out of the picture, and the replacement rep doesn't seem to understand what this Restricted IRA is. I'm hoping that the fact that the institution is the owner and beneficiary under this annuity won't cause a problem. Any thoughts from those of you who have run into this type of arrangement before? I don't see any problem with the Restricted IRA itself -- I'm just not sure that an annuity was the way to go.

Sieve: Your point is well taken. Since I'm doing the VCP anyway, might as well get the DL letter, whether it's required or not. Since it's a small plan with a 2004 start date, I don't think they need to pay a user fee, so there isn't much of a down side to applying for the letter.

I am also doing a VCP filing for a plan that didn't get restated in time. The GUST document was a volume submitter plan (I think the prior document sponsor did all their plans that way), but we're putting them on a prototype this time around. If I'm reading the Rev Proc correctly, I don't think I need to do a 5307 for a determination letter, since the employer can rely on the opinion letter (per the last sentence of Section 6.05(1)). I would feel better though if I could get other readers' confirmation, or not, as the case may be.

But if a 457 plan is for government and/or tax-exempt entities, how can an HCE from a for-profit entity be allowed to participate? Is it because the for-profit business is a division of the not-for-profit and that makes it okay? That doesn't change the fact that it is still a for-profit business.

The issue is employer contributions, of course. The current 401(k) plan does have ER money going into the plan. I suppose they could set up a separate plan(s) for the for-profit businesses that only allows EE deferrals, but does that solve anything? I'm told that the type of businesses they are buying does not traditionally provide retirement benefits, at least not with ER money going into them. I don't understand your question about the for-profit companies providing benefits to the not-for-profit EEs. My off-the-cuff response is no. For the most part, these will be small companies in various states that will not be involved in the not-for-profit business.

I'm thinking that as long as the 401(k) plan passes coverage, they can exclude the EEs from the for-profit businesses. But as more and more companies are added, they will no longer pass coverage if they continue to exclude that group of EEs. Are there other plan design options that they could consider? Or will they just have to bite the bullet and include the EEs from the for-profit businesses once they fail the coverage test?

A not-for-profit entity expects to add several for-profit businesses to it's growing list of companies. They currently have a 457(b) plan that includes only a couple of HCEs. They would like to include one or more HCEs from the new for-profit businesses in the 457(b) plan, but that's setting off alarm bells in my head. They also have a 401(k) plan, but I'll post that question under the 401(k) heading. Can HCEs from not-for-profit and for-profit businesses be included in an organization's 457(b) plan?

Hi, Tom. Me again. You've confirmed my belief that when someone asks me questions about a church plan, I need to know what type of church plan they are talking about. I was starting to second guess what I thought I knew.

Thank you, Tom. In this case, it's a school plan, and not associated with a church, so it comes under your "other" classification. I certainly appreciate and agree with your comment about this not being for the faint of heart.

There are lots of references to "church plans" out there, but am I right in thinking that they must all be set up under some section of the code, such as a 403(b) church plan, 401(a) church plan, etc? So, that if someone starts talking about a church plan, it's important to determine what type of church plan we're discussing because 403(b) regs aren't the same as those under 401(a). Can there be a 457 church plan? I know that churches can be electing or non-electing when it comes to ERISA, and that in many cases they don't even need to have a plan document, but doesn't there have to be some set of rules to go by other than saying they have a church plan?

I continue to struggle with the differences between 401(k) and 403(b) plans. I would think that there has to be a compensation cap, but I've put my foot in my mouth enough times when it comes to 403(b) plans because I keep applying 401(k) logic. Thanks to anybody who chimes in.

I want to get a few 5307s filed before the April 30, 2010 deadline. These are not new plans. Some have prior determination letters and some never applied for a determination letter. I'm thinking that all of these clients need to pay the user fee because their plans existed prior to 2005. This is in reference to the part of the instructions that says "within the first five plan years." Only new plans that started out on an EGTRRA document would be exempt from the filing fee. But then, the IRS says that "a plan that was first effective on or after January 2, 1997 will automatically meet this requirement." I'm so confused!

A large VEBA had 100+ whole life insurance policies. The policies have been surrendered. The cash went back into the VEBA and is being used to pay retiree benefits. The cash received was more than the premiums paid, so there was a gain. Is that gain taxable to the VEBA? the person whose life was insured, the retiree getting benefits? The insurance company issued 1099s in the name of the person whose life was insured. That doesn't make sense to me. If the money went back into the VEBA, I wouldn't think it would be taxable at all. However, VEBAs aren't my forte, so I'm asking for help.

David: That would be lovely, but not the case here. QDROphile: I'm interpreting your response to mean that the usual beneficiary rule we would apply to an ERISA plan (i.e., spouse) does not apply to a Top Hat plan. The named beneficiary(ies) would be entitled to the benefit, whoever they might be. A spouse does not have automatic rights to the benefit.

A participant in a Top Hat Plan died. He was divorced from his first wife, and married to his second wife when he died. He named his children from his first marriage as his beneficiaries, but if the usual QP beneficiary rules apply, his second wife would be the beneficiary. The employer just wants to make sure they pay out the money correctly.

The lawyers that are partners in a law firm also own a title insurance company. That has to fall under the A-Org affiliated service group rules. Clients use the law firm for their real estate closings and get the title insurance for the property from the title company. However, the title company does not have employees. Rather, the employees of the law firm are subcontractors for the title insurance company. They get 1099s for the work they do for the title company. Maybe because the law firm employees are NOT employees of the title company, their 1099 income does not need to be considered for the law firm's retirement plan?