austin3515

I'm going to correct myself: Page 14 of the 2003 5500 instructions: "A separate Form 5500, with box A(2) checked, must be filed by each employer participating in a plan or program of benefits in which the funds attributable to each employer are available to pay benefits only for that employer's employees, even if the plan is maintained by a controlled group." Based on this I have changed my response. Because even members of a controlled group would file a separate form, certainly unrelated employers would file a separate form if they met that requirement. Even though Box A(2) indicates that the plan is a single employer plan, when it is not, it seems that the instructions are telling you to indicate that the Plan is a single employer plan if the stipulation in that paragraph is satisfied. Unfortunately, I don't think that it's easy to determine whether or not this test is met. It is likely not as easy as looking at a report, but rather gets into the nitty gritty of some legal document somewhere... You learn something new every day...

This post was responding to the fact the Plan does require a true-up each quarter... I think we all agree that if the Plan says match on a pay period basis with no true-up, then you do no true-up...

Do you have any references to support that? My understanding is one plan document, one plan, one 5500, etc. no matter the number of unrelated employers or what their relationship is, if any. Remember, all of the ownership rules and controlled group rules are all in the IRC, not ERISA or the DOL Regs. I agree that commingling of funds is not the issue. I'm no expert on PEO's but I think that logic will hold in that environment as well. But regardless, that is not the situation here. In fact, just because you have adopting employers doesn't mean you have multiple employer plan in the first place. You need to have two separate controlled groups (not simply two adopting entities). For example, a 100% owned subsidiary participating in the parent company's plan does not a ME Plan make. That may be known here, but I wanted to clarify.

If you don't true up on a YTD basis each quarter, your defeating the purpose of the true up in the first place. I.e, the biggest issue is people maxing out before year end at the 402(g) limit. If they max out in the 4th quarter (as most would) and you do the true-up for just the 4th quarter, you're gonna leave a lot on the table.

Line I of the 5500 asks you to check a box if this is a multiple employer plan. Schedule T asks you to file a Schedule T for each "employer". So anyone who says each ER files their own 5500 is definitely mistaken. Further, the DOL could care less if there were 2 or 1,000 employers in a plan. Figuring out who the "employer" is is an IRS issue. The DOL wants to know how many people are in the Plan. When adding up all of the employees of all of the "employers" if you've got more than 100 you've got an audit (subject to the 80/120 rule). In fact, if you had two separate plans with 70 unique participants each, and one employer, you would have no audit requirement because neither plan breaks 100. As a former public accountant who specialized in retirement plan audits I can tell you that I did a few audits for ME plans, all filed one 5500, and none of them would have needed an audit without counting all of the employees of all of the employers. None of the ERISA attorneys involved, nor the TPA's, seemed to have any issues. The TPA firm I work for now handles this the same way.

I'm not sure whether participant directed brokerages exonerate you from fiduciary liaibility. I think it makes it worse? If 99.9% of people get put into the fund corresponding with their retirement date under the Plan (i.e., age 65) they're still better off than 50% of the participants investing in the money market fund for 30 years (an extreme example of course, but I've certainly seen plans very highly leveraged into the money markets). I'm just against participant-direction of investments in most cases. I think it's asking too much of participants, and I think a lot participants would agree. Alhough there are no punitive damages, you're market is every baby boomer. So what you lack in margin, you make up for in volume... But your argument does bring me some comfort, and I hadn't considered it. As far as I can tell there are no good answers to this!

http://www.reish.com/publications/article_...m?ARTICLEID=475 Frankly, I like the idea. I've always believed that people, who may well be experts at whatever it is they "do", more often than not are bad investors. I have a public accounting background, I took finance classes in college, and I still am a very poor investor (although due more to a lack of diligence on my part than anything else). What chance does a factory worker for whom English is a second language have at navigating the Wall Street Journal? Is it prudent to require them to navigate on their own? I don't think so. If I was a fiduciary, as Reish recommends, I would default everyone automatically to the life style fund corresponding to their retirement date (don't even give them the chance on the enrollment form). If they want to change later, that's their perogrative but I bet most will stay put (as does Reish). Maybe don't even give them the option to shift out. This is an improvement from 10 or 15 years ago when all the funds were pooled and invested with one set of objectives-at least with a lifestyle fund, the objectives are specific to your age, which should be the most important factor. I can't think of a solution that meets the practical and prudent objectives as handily as lifestyle funds. As the article suggests, no one complies fully with 404© (the requirements are extensive and extremely costly), so alternate solutions are advisable. I once read that all of the class action lawsuit lawyers who won billions on the tobacco settlements are gearing up for their next bigg initiative - helping "disenfranchised" baby-boomers get their due from "careless and imprudent" fiduciaries. Quotations denote my guess at the language they'll be using. I'd be scared stiff about this if I was the fiduciary of a self directed plan where the participants were not savvy investors. Better make sure you have a good fiduciary policy!

I know that for ADP testing, the union people must be tested separately (i.e., the ADP test must be passed when considering only the union HCE's and NHCE's). I'm not sure if there is a similar requirement for general nondiscrimination testing and design based safe harbors. If there is, because the owner is a union employee, he would need to be included in the testing and therefore, there would be much more limited benefit from starting a plan just for the owner.

I think he just wants to use $205K of comp and not some lesser amount for the ADP testing. As for the safe harbor plan and 98-52's requirement for a 3 month plan year, the point is that people need to have the opportunity to defer for at least three months.

If they don't define "actively employed", I think the client has a reasonable intepretation. Active employment seems to indicate ongoing services, which by defintion, is not occuring in a leave of absence. I would pay more attention to the Plan's definition of Leave of Absence though. If it doesn't say they will continue to be treated as actively employed, I think they're case is pretty solid. Just giving them credit for at least 501 hours doesn't mean they're treated as actively employed at year end. How about recommending a "clarifying amendment" that LOA's at pye are excluded?

Is there by any chance an "Other" option for the caluclation of the match? What would the implications be of amending the prototype to add this a) for the plan sponsor?, and b) for the TPA whose prototype is adopted? I know it reduces reliance on the opinion letter, but are there more practical issues as well? The biggest thing to watch out for is 414(s), which discusses a discriminatory definition of compensation. For example, let's say the owner (and only HCE) just takes straight compensation, while the employees receive a hefty amount of bonus at year end depending on whether or not they meet targets. The definition of comp would llikely not meet 414(s), which in and of itself is not a problem - it just means you need to pass the ACP test using gross comp (including bonus). That may or may not be a problem.

Two conflicting view points: 1) Don't you have until the last day of the Plan Year to retroactively amend? 2) Wouldn't it be a prohibitted cut-back of benefits because the right to the benefit accrued on 1/1/? Participant communications should be given the heaviest weight in my opinion (and to the best of my knowledge, the courts seem to agree), so I would go with answer #1... It seems that this is nothing more than an administrative oversight. You could take the position that the Plan was amended before year end, as evidenced by the revised notice, and that 401(b) allows you until the end of the year to get the document in line...

Tom - I think I may correct you, if I dare, only because I researched this extensively recently. You CAN integrate a QNEC with SS, simply because there is nothing to say you can't (unlike a SHNEC, which is right in 401(k)(12)). BUT why would you ever want to, because you must pass 401(a)(4) with and WITHOUT QNECS, so if you offset your integrated contribution with the QNEC, you no longer have a safe harbor, oh and by the way because only NHC's get the QNEC, you won't pass the rate group test (absent cross-testing). My research included a question to TAG Data, who are usually pretty thorough...

Thank you both for your responses, but perhaps I was unsuccessful at pinpointing my question: As a TPA, what actions do you take to ensure that the Plan Administrator is not aware of any divorce proceedings, especially considering that the Administrator may not put two and together that the distribution should be questioned. For example, do you add a clause to the coverletter? Do you add a field to the form to have the participant certify that he/she has no knowledge of a pending QDRO? Etc. etc... I should have mentioned that our QDRO procedures put a hold after a verbal communication - not the QDRO itself.

What do other TPA firms do to ensure that a participant requesting an in-service distribution or a loan is not being taken after the administrative "hears" that a participant is going through a divorce? Although most administrators will recognize the issue and a flag will go off, it's possible that the flag won't go off. Any recommendations? Or do you just process the distributions so long as the Plan Administrator doesn't mention anything...

If you can terminate the Plan altogether why can't you kick a few people out?

No deduction. 404(a) applies, which requires that the deposits be made before the filing deadline, or extensions thereof.

What is meant by "provide the notice." For example, would posting the notice in a central location satisfy the notice requirement?

Owner of a business gets a windfall of cash after closing a big deal. He wants to set up a DB plan to shelter the income from taxes. Participants in the Plan will be himself, his son and two employees. Here's the catch: He has cancer and will likely not survive beyond a year or two. Can he set this plan up under the optimism that he will survive the cancer? Take it as a given that the intent is to shelter the income for his heirs.

Thanks Tom - But I'm not 100% comforted, because the key question is can the participant choose between a contriubtion and a paycheck, and that was not included in the fact pattern. The facts outlined in this Q&A are tantamount to a bonus program - you either get a bonus, or you do not, is how I read the facts. Thanks,

Anyone have any examples of the IRS finding that one person allocation groups resulted in a deemed CODA?

I don't know but I sure am surprised that after 9/11 they didn't add "directly affected by a disaster area" to the list of deemed hardships, or something like it. Maybe they will soon...

Restructure the Plan's into two component plans: Plan 1: Employees getting SHNEC only, Plan 2: Employees getting SHNEC and integrated contribution. Both are design based safe harbors. Plan 1 and Plan 2 must pass coverage independently. Another chapter is closed...

Somethign with the game "telephone," right? Is that how you get them to repeat whet they said??? This thread is falling apart...

You have a way with words... Purple Monkey Dishwasher????