austin3515

Long story short - an SAR is required in the final year. I was a toddler when this was released DOL Advisory Opinion 79-64A (July 19, 1979) ERISA Sec. 502(a)(5) Mr. L. A. Jarasz The Wyatt Company 200 First National Building Detroit, Michigan 48226 Re: Newspaper Drivers and Handlers’ Local 372 and Detroit Free Press, Inc. Welfare Trust Fund Dear Mr. Jarasz: 　This is in response to your inquiry whether section 104(b)(3) of the Employee Retirement Income Security Act of 1974 (ERISA) requires distribution of a summary annual report (SAR) for a terminated welfare plan. You ask whether failure to distribute an SAR for calendar year 1978 for the above-named plan (the Plan) would result in "non compliance" with ERISA. You also ask whether financial penalties could be levied against the Plan or its former trustees. Finally, you request information regarding an exemption under section 104(a)(3) in conjunction with the distribution of the SAR for calendar year 1978 for the Plan. 　In this regard, you represent the following: 1. The Plan terminated effective May 31, 1978. 　2. The only remaining asset of the Plan at that time was cash in the amount of $13,110.61, which was anticipated to be disbursed shortly in payment for auditor’s and administrative fees. Any excess funds were to go directly to Blue Cross/Blue Shield of Michigan in payment for insurance premiums for former participants of the Plan. 　3. A supplement to the summary plan description (SPD) has been distributed advising participants of the termination and related information. 　4. As of June 1, 1978, there were no participants or beneficiaries of the Plan. 　Section 104(b)(3) ERISA provides in part that, each year, plan administrators must furnish to participants and beneficiaries receiving benefits under a plan materials that fairly summarize the plan’s annual report for that year. Assuming that all assets of the Plan were distributed prior to the close of calendar year 1978, the Plan administrator would be required to file a "Final Return" for calendar year 1978 with the appropriate Internal Revenue Service Center (see General Instructions D and I of the 1978 Instructions to Forms 5500 and 5500-C). Accordingly, it is the view of the Department of Labor (the Department) that section 104(b)(3) requires the preparation and distribution of a summary of such "Final Return", in accordance with the requirements of 29 CFR S2520.104b-10. 　You suggest that no SAR should be required for the final Plan year because the Plan would not have any participants and beneficiaries after the date of termination the Plan. We believe, however, that the relevant provisions of ERISA and regulations thereunder (see 29 CFR S2510.3-3(d)(2)(i)) should not be interpreted to provide automatic relief to a terminating plan from the requirement to furnish an SAR for the year in which the plan terminates. On the contrary, it is our view that furnishing an SAR, in the context of a terminating plan, serves a legitimate and important disclosure function, and, specifically, is consistent with the purpose of the SAR. 　The SAR is intended to fairly summarize the latest full annual report in order to protect the interests of plan participants and beneficiaries by providing them financial information with respect to the plan (see section 2(b) of ERISA). The SAR provides basic financial information about the plan and advises participants and beneficiaries of the specific types of information contained in the full annual report and their rights to examine or receive a copy of the full annual report (see 29 CFR S2520.104b-10©). We believe the foregoing provisions of ERISA and the regulations require SARs to be distributed in order to provide affected participants and beneficiaries financial information with respect to the distribution of the residual assets of the Plan. 　In order to grant an exemption or simplified disclosure method under section 104(a)(3) of ERISA, the Department must find that the disclosure method required by Title I is inappropriate as applied to the requesting welfare plan. Based on the foregoing, we are unable to conclude that the requirement to distribute copies of the SAR to participants and beneficiaries under the Plan is inappropriate. Distributing a supplemental SPD statement to participants and beneficiaries advising them that the Plan has terminated does not afford the same type or full form of disclosure as distributing to each participant and beneficiary receiving benefits a copy of the SAR containing the information specified by S2520.104b-10. 　Section 501 of ERISA states that any person who willfully violates any provision of Part 1, Subtitle 3, of Title I of ERISA, or any regulation or order issued under any such provision, shall upon conviction be fined not more than $5,000 or imprisoned not more than one year, or both; except that in the case of such violation by a person not an individual, the fine imposed upon such person shall be a fine not exceeding $100,000. Thus, willful failure to distribute the SAR for a plan for any year in violation of the provisions of section 104(b)(3) of ERISA and section 2520.104b-10 of the regulations, would be subject to the provisions of section 501. Moreover, under section 502(a)(3) and (5), plan participants and beneficiaries, as well as the Department, may bring a civil action to enforce compliance with any provision of Title I of ERISA, including those related to the SAR. 　We are enclosing, for your information, a copy of 29 CFR S2520.104b-10, as revised (44 FR 19400, April 3, 1979). The revised regulation simplifies the preparation of the SAR by prescribing a form to be used as the SAR. Plan administrators complete the form by inserting information in the appropriate blank spaces. Following the regulation is an appendix cross-referencing the SAR items to the line items of the annual report for 1978 (Forms 5500, 5500-C, 5500-K). Complete copies of the statements of assets and liabilities and of income and expenses and accompanying notes do not have to be attached to the SAR. 　We sincerely regret the delay in replying to your inquiry. If we may be of any further assistance, please contact us. 　Sincerely, 　 Ian D. Lanoff Administrator of Pension and Welfare Benefit Programs

OMG, that's them!!!

OK then that makes point three all the more valid - each employer should have discretion here. I'm a little iffy on how all of a sudden a single plan is split into multiple plans as the result of a corporate transaction. I'd like to see some formal guidance on this. It might be treated as separate plans, but IS IT REALLY separate plans? Beats me. This is all very new so I suspect it might be among the things not yet settled...

Little Plan merges into Big Plan as of 9/30/2011. Question is, do we need to send the SAR to the participants of little Plan, who, as of 9/30/2011, have no money left in Little Plan (it was all transferred to Big Plan). If Little Plan was TERMINATED, I typically would not send anyone an SAR, for the same reason that I would not send SAR to a participant who closed their account during the plan year. But in this situaiton, Little Plan sort of exists within Big Plan because Little Plan was MERGED INTO Big Plan. So for that reason I struggle not sending the SAR to the Little Plan Participants. Please let me know what you think!

Was there a break in service for the people being kicked out? If not, then terminating the plan precludes a new 401k plan for at least 12 months. In fact, can you even create a distributable event by terminating only a portion of the plan? I actually dont think so. Also, clearly any of these changes could only be done prospectively. There is not basis for invalidating deferrals retroactively. Also, as an adopting employer (who also might be a trustee) the other owner might have his/her own rights to do a spin-off. If they're getting into a fihgt, I think you need an ERISA attorney to figure out who can do what. I'm not sure who calls the shots in your scenario, but I think that is an important question to have the answer to.

Personally, I think my comment applies to pooled accounts equally.

OK, so now we're talking about forfeiting 401k money, which is not much easier to defend What provision of the plan, or EPCRS for that matter, supports this course of action? Also, one would presume that somehow the owners are goign to get back their money, so I'm not sure moving money from your left pocket to your right pocket before paying the money necessarily helps you out here. You're leaving out I'm sure that the owners will get a bonus to make them whole. The point is, I think you are playing with fire. I would not recommend putting this idea in writing on your letterhead and giving it to your client. If it doesn't meet that test, then that means it is not advice that should be given. I'll tell ya what, I wouldn't even submit the question to the IRS at a Q&A for fear of being added to a watch-list!

"If it is still 2011, and you make the discovery that it is top-heavy before the year closes out, could the employer leave the funds contributed by the key ee's in the plan - but recharacterize them as employer non-elective or match to be used for all participants - and adjsut the payroll records for the keys to refelct that they did not defer to the plan?" I have a hard time understanding how this would be legal. What is the basis for this distribution? How could it be considered a mistake of fact? I get that the feds have bigger fish to fry but this is the number one issue facing small retirement plans. Why they have chosen to stick it to small business on this one for so many years without resolution is beyond me. I get that it's directly correlated to the size of their campaing contributions. Imagine if such a rule applied to the fortune 500 companies, how quickly it would be removed!! Oh wait, it does apply, in the form of minimum funding on their pensions. How many laws have been passed for funding relief??

I was wondering if such a provsion in a CBA was even legal. I wonder if anyone here would know that??

I've also been struggling with that. I actually began writing the question and then I decided I didn't care what the answer was The quesiton was, could a union exclude exclude people working less than 30 hours per week as a class, and does that create a 410(a) issue?

I looked it up in the EOB now that I am in the office, and it's one of the shortest write-ups! Collectively bargained plans are deemed to pass coverage. End of discussion. In my case they all get the same percent of pay so nondiscrimination is not an issue. But I did read in the next paragraph exactly what you mentioned regarding each distinct CBA.

Have a plan that covers ONLY Union Employees. It just so happens that all the full-time employees of this organization happen to be hihgly paid skilled professionals, and they get quite a generous contribution and make a decent salary; some earn more than the $115,000. Is there some sort of a piercing of the coverage exemption? There is no plan covering the part-time staff. To make this really controversial, let's assume they work 1,100 hours a year and make up 40% of the workforce, and average benefits would never pass... Of course, the union covers the "trades people" - coverage in the union is not based on how many hours you work.

Which is why I was finally convinced to check the extension box.

Filing accepted, no errors.

If you were the IRS, wouldn't you clarify that point in the instructions? OK, I'm moving forward with the box checked for extension!!

Doing an amended 2010 5500 today. Should I check the extension box? Getting a validation error from FT Williams because there is an extension created, but the box isn't check. It seems silly to check the extension box for an amended return. Thoughts?

Plan has 3 NHCE's: 1 Is Otherwise excludable and gets only Safe Harbor 3% 1 is a terminated non-highly getting only the gwm 1 is a full-time active NHCE getting enough PS to pass testing. How do I apply the limitaiton on the number of allocation groups? If 3 NHCE's the limit is 2; if 2 NHCE's, the limit is 1 rate. But should providing the GWM be counted as an allocation rate? Should the Otherwise Excludable participant (whom my document permits disaggregating for testing) be considered an allocation rate?

I think it's debatable whether or not merely writing a check actually segregates it. I think the actual funds would have to move. To me, this is not the kind of thng that warrants "pushing the envelope" or taking an "aggressive" position. You're doing lost earnings, correct? It's irreconcilable to me to do lost earnings and not report them as late. We've done LOTS of these over our client based due to cpa audits, missed deposits, etc. I cannot think of a one situation where something actually came of it. (now if the participant's call and complain, that's a different story altogether).

Why not just report it, nothing every comes of these disclosures anyway (Ok, maybe a form letter inviting you into VFCP). But it's not like if you put it on there the feds are going to show up in haul you away

So what you are saying is that in my example, we cannot shift deferrals to the ACP test for only the NHCE's to make the [edit: ADP]test fail by more, resulting in additional deferrals being reclassified as catch-ups, correct? Put another way, even though there are unused catch-ups, there is no way to recapture the catch-ups by shifting NHCE deferrals? Thanks Tom!!

The quesiton references that the shifting is being done AFTER recharacterizing excess deferrals as catch-ups. Do you want to read through one more time? I just think it veyr clearly states that this is the case. Also, the question that follows clearly suggests that a passing grade is not a requirement to use shifting.

You don;'t think the IRS Q&A gives the green light for shifting even a failed ADP test, provided you shift for both HCE's and NHCE's? I thought that was pretty plainly what they said. And yes there is only one HCE. Funny you should mention that because here in the office we had that same conversation about how this clearly backfires with more than on HCE.

ADP test fails and just $2,000 is reclassed as catch-ups (leaving $3,500 "available"). The IRS came out once before and said that if the test is failing you can still use shifting, but now you must shift for both HCE's and NHCE's, because the "plan is passing right at the passing percentage." See questions 15 and 16 of the attached. The question is, can we shift elective deferrals over to the ACP Test in order to increase the amount reclassified as catch-ups, thus avoiding the need to shift any HCE deferrals? Shifting___ADP_Test_Failed_IRS_Q_A.pdf

Let's say you pair a 403(b) Plan with a 401k covering just the HCE's. Let's say there are two HCE's, one of whom is an office making more than the officer threshhold, and is therefore a key-employee. Assume further that more than 60% of the assets in the 401k plan are allocated to the key employee. Is there any opportunity to aggregate the 401k and the 403b?

I mostly post in the 401k voard. Not sure if this is the right board but I'm trying to findout if there is a text book regarding the long term disability insurance claims process, such as information on important case law and regulations. In 401k world we have Erica outline book, which codifies almost everything you would want to know... Anything like that for lt disability?