four01kman

We're still a long way from having those proposed regulations finalized. All of us hope there will be a relaxation of some of the disclosure rules.

You also may have to send a copy of the prospectus, if you are using a single fund; or several, if there are multiple funds. Or, in the absence of mutual funds, a "detailed" explanation of how the investment works.

"Section 412 of ERISA, subject to certain exceptions, requires that every fiduciary of an employee benefit plan and every person who handles funds or other property of such a plan shall be covered by a fidelity bond that meets the requirements of section 412 of ERISA and the Department of Labor’s implementing regulations. Section 412(a)(2) provides, in relevant part, that no bond shall be required of a fiduciary (or of any director, officer, or employee of such fiduciary) if such fiduciary – (A) is a corporation organized and doing business under the laws of the United States or of any State; (B) is authorized under such laws to exercise trust powers or to conduct an insurance business; © is subject to supervision or examination by Federal or State authority; and (D) has at all times a combined capital and surplus in excess of such a minimum amount as may be established by regulations issued by the Secretary, which amount shall be at least $1,000,000.(2)" The above is from DOL Advisory Opinion 2004-07A. For me, the key is ©, investment advisors generally are subject to Federal (and in some cases State) supervision or examination. Accordingly, bonding would not be required. I recognize I may be "finger reading" here, but I have not heard of individual investment advisors needing anything other than their E&O coverage.

My take is it still needs to meet the benefits, rights and features test of 401(a)(4) and 410. If only HCE are around 3+ years and no non-HCE ever reaches the 3rd year, it may be treated as a discriminatory match.

The quick answer is yes, they may reduce the safe harbor contributions. Of course, the plan document must allow that use of forfeitures.

Sure, why not. Hourly fees can range from $10 per hour for pure administrative tasks to $x for high level consultancy. If you don't know what x is, check with local law firms as to what their hourly rates are, and pick something.

Right, the Plan Sponsor is not a fiduciary unless specifically named in the documents. Those individuals who are responsible for certain actions are fiduciaries, and accountable as such for their actions. My sense of the law is most corporations in their state charters do not include the duties of a Trustee as part of what they do. Accordingly, corporations generally are not trustees of the plans they sponsor. Rather, employees of the employer are so designated by the Board of Directors, or the CEO. Because there are certain duties required and expected of Plan Trustees, it may make more sense for a "corporate" (bank) trustee to be designated, especially when the plan assets reach a certain size.

From a plan participant perspective, generally it sounds like a good deal. By reducing or eliminating company stock as an investment option, you reduce your investment risk. Remember you already rely on the company for your day-to-day income. Depending on the total amount of shares involved, 5 (.05%) basis points may be an acceptable charge for liquidation (providing there are no other sales costs). From an employer point-of-view, matching contributions in employer stock allow the employer to make a "cashless" contribution, and take a tax deduction. Additionally, employee who own company stock generally feel more of an "ownership" stance with their company.

Sounds like we have an employer fiduciary who has performed the functions of both, and now wants to be paid for doing what he (or she) was supposed to be doing all along. I don't see any way to pay the individual trustee any money under Section 4, ERISA.

As I understand the question, the plan provides for employee deferrals and discretionary employer contributions. It is possible to have different eligibility requirements for each, provided they meet the minimum requirements set forth by the law and regulations.

Years ago William Mercer published a series of benefit guides for countries around the world. I don't know if they kept it up. I certainly would call someone in their international benefits department.

My recollection is ERISA Section 40? requires the Plan to be bonded, not the fiduciary. This is to protect the Plan from loss. Individual fiduciaries may want to be covered by a fiduciary liability policy.

Tom, The plan is top heavy as a result of the key employees having greater than 60% of the plan assets as of the determination date in 2006 (12/31). The question is if the key employees make deferrals in 2007, are they required to make top heavy contributions to the non-keys. There are no employer contributions being made.

It has been a while since I had a top heavy plan. As of 12/31/2006, owners had greater than 60% of total plan assets, creating a 2007 top heavy plan. For 2006, the only contributions made by all participants were salary deferrals. I know the original 416 regulations said count key employee deferrals and ignore non-key employee deferrals. Have there been any changes? So we can count non-key deferrals, for insatnce. Jim

Yes and Yes. The credit for a new plan for small employers was extended in the recent legislation. The maximum credit is $1,500 for $3,000 in start-up expenses, spread equally over 3 years.

I think not. Without doing any research, regular IRAs are not allowed either to loan or borrow money. A margin account is borrowing.

2006

There are many people "out there" who would be happy to walk you through the process without a fee. Of course, if you like what they say and how they say it, you might want to hire them to do the tasks for you. They are consultants or brokers who specialize in 401k plans.

also look at internal revenue code sections 401(a)(4) and 410(b) and the regulations issued under those code sections.

I seem to recall there are a number of ways the IRS (or the appeal process) determines if a partial termination occurred. One of them certainly dealt with the 20% (approximate) rule. Another, as I recall, dealt with geography; that is, if a geographically dispersed unit closed down (or was sold), a partial termination was deemed to occur, without regard to the number or percentage of employees. Again, this is my recollection of things in the not recent past, and I don't have a cite.

The US Chamber of Commerce used to publish data on employee benefits. I don't know if they still do.

It sounds like you may have purchased "B" or "C" shares, both of which may have "back-end" loads. That means if you sell the funds before a specified period of time, you will have to pay certain charges.

Internal Revenue Code Section 501(a)

Is it necessary to wait until the 2006 contributions are made in 2007 before the new SIMPLE plan can be adopted?

Sorry for the previous post, hit the reply key instead of the add reply key. Just shows how mistakes can happen under the best of circumstances. Qfile, one of the issues of large company legal departments is the ability to "finger read" the law and/or regulations. If it is not specifically allowed, it is not allowed is their mantra. They don't look for exceptions or work arounds. The original post posited the organization was large and dealing with a prototype plan that covered many small employers. A not unusual situation and certainly not one where sophisticated planning and document drafting would be used. As previously posted, the rollover of a loan specifically is allowed. But ... the sponsoring organization still must allow the distribution of the loan, and the new organization must allow the receipt of the loan. Small employers aren't always able to get the quality of providers that can best serve them for a whole variety of reasons. An indictment of an organization simply for providing the services contracted for and not the services required is not reasonable.