E as in ERISA

An LLC is treated consistently for all tax purposes. So if it "checks the box" to be a division, then technically it is supposed to be considered a division for all tax purposes. However, the reality is that the LLC is a separate legal entity. And plans are affected by a number of other laws. So I would respect the separate legal status and have them sign adoption agreements, etc.

But QDROphile has a good point. It is the fiduciaries who want the protection and who have the obligation to provide the explanation required by the 404© regulations. So even if the plan sponsor doesn't make the decision in the plan document, the fiduciaries still have an opportunity to make the designation. I think that the plan administrator (who is generally a fiduciary) is generally responsible for the SPD. But I don't know that failure to include the 404© status in the SPD necessarily causes the fiduciaries to lose their protection under 404©? It's just a reporting requirement....

The 401(k)(2)(D) requirement itself does NOT apply to the profit sharing or matching portion. It is only incorporating by reference part of the timing rule of 410(a) for limited purposes. Note that 410(a) is the minimum participation requirements, which only applies to DB plans now -- it does not apply directly to profit sharing or matching contributions! The same timing rules just end up being applied to them because they are picked up in the minimum coverage rules.

Don't forget ASPA Q&As. E.g., http://www.aspa.org/archivepages/gac/1999/99irsq&a.htm

If an audit is required for the plan, then you need to have one performed IMMEDIATELY. If they don't correct, their ability to reduce penalties is limited. The client may not have previously understood that an audit was required, but once the DOL informs them that one is required it expects the client to respond accordingly. The extent to which they can have the penalty reduced may depend on their level of responsiveness. In the past, it was possible to have penalties reduced to zero for a client who had completely corrected a defect by the time of the Notice of Intent to Assess. However, the DOL has more recently only reduced the penalty to only $5,000 for clients who waited until that notice to completely correct. I don't know what happens if you don't completely correct. So I would make sure that the client had the audit completed.

I haven't heard much about them lately. But they are conducted primarily by payroll auditors. And I believe that they started in the Southwest region and then expanded somewhat in recent years.

"Participant" would include terms with vested balances. The ERISA Section 3(7) definition of participant says: "The term ``participant'' means any employee or former employee ...who is or may become eligible to receive a benefit of any type from an employee benefit plan ..." Once they have money in the plan, they are a participant until its distributed. The only question that is answered by the reg is at what point in time do you have to start counting employees who don't currently have any money in a 401(k) plan as participants (i.e., who "may become eligible")

My prior employer -- had been providing online access to dynamic statements for a number of years -- and paper statements once a year. My current employer doesn't provide the dynamic statements and provides quarterly paper statements.

§ 103.131 of the joint final regs says: Customer identification programs for mutual funds. (a) Definitions. For purposes of this section: (1)(i) Account means any contractual or other business relationship between a person and a mutual fund established to effect transactions in securities issued by the mutual fund, including the purchase or sale of securities. (ii) Account does not include: (A) An account that a mutual fund acquires through any acquisition, merger, purchase of assets, or assumption of liabilities; or (B) An account opened for the purpose of participating in an employee benefit plan established under the Employee Retirement Income Security Act of 1974. I don't see an exception that would apply to non-ERISA Section 403(b)s.

"Customer Identification Program" under Section 326 of the USA Patriot Act? There is an exclusion for accounts established for ERISA benefit plans. I'm not aware of an exclusion for non-ERISA Section 403(b). And maybe the same logic doesn't apply -- because the broker-dealers etc. create the account for the individual and track the info for the individual. Whereas in the case of a qualified plan, the recordkeeping for the individual accounts is done by the plan's recordkeeper.

The plan document (or lack thereof) is one of the main thing that the IRS examiners are looking for when they audit cafeteria plans.

Exactly.

In order for a fiduciary to avail itself of the protection of ERISA Section 404©, it must meet ALL of the regulatory requirements. One of those requirements is to notify the participants that the plan is intended to be a Section 404© plan and the implications of that: Sec. 2550.404c-1(b)(2)(i)(B)(1) "The participant ...is provided ...An explanation that the plan is intended to constitute a plan described in section 404© ...and that the fiduciaries of the plan may be relieved of liability for any losses which are the direct and necessary result of investment instructions given by such participant or beneficiary" The updated SPD regulations (at Section 2520.102-3 (d)) require that, if applicable, a plan be identified as a Section 404© plan in the SPD. There is nothing in the statute or regs that specifically says anything about including this in the plan document itself.

And in the regulations under Section 3 of ERISA, "participant" (for purposes of retirement plans) is defined as follows: (ii) An individual becomes a participant covered under an employee pension plan-- (A) In the case of a plan which provides for employee contributions or defines participation to include employees who have not yet retired, on the earlier of-- (1) The date on which the individual makes a contribution, whether voluntary or mandatory, or (2) The date designated by the plan as the date on which the individual has satisfied the plan's age and service requirements for participation. So if you're talking about a 401(k) plan, all eligibles should get the SPD regardless of whether they are actually contributing.

No.

As of 12/31/02, $1,000 of the $12,000 will have been re-characterized as catch-ups under 402(g). That uses up the 2002 catch-up dollar amount. At 1/1/03, you start fresh again on the catch-up dollar amount. As of 6/30/03, $2,000 of the $14,000 will have been re-characterized as catch-ups under 402(g). That uses up the 2003 catch-up dollar amount. Of the total $26,000 of elective deferrals, only $23,000 is considered when performing the 415 test. You calculate the profit sharing contribution based on the formula. If the total of that contribution plus the $23,000 exceeds $40,000, then you correct the excess according to the plan terms. (It is possible that part of the $23,000 is returned to the participant and that the profit sharing contribution will be more than $17,000).

Same as G8R, I've seen a lot of plans with determination letters that have a one year/1,000 hours of service requirement but essentially allow "EARLY" entry for those that meet some other standard (one which only full timers would meet).

The auditors should NOT be preparing anything. They are reviewing the financial statements prepared by the client -- and or its other service providers. They are supposed to be independent of the reports they are reviewing. (Remember Enron -- the whole issue of the client being too involved in advising clients how to structure and report transactions while simultaneously auditing the financial statements?) After Sarbanes Oxley they are probably more adamant about NOT doing the prep -- or at least they should be. The client or other service provider should prepare the schedules. The auditors can't sign the audit report if the audited financials and Form 5500 are inconsistent. So either the client has to change the financial statements or add a footnote saying why the audited financials are inconsistent with the Form 5500. Or the service provider has to change the Form 5500. Guess who loses that one?

If you're doing the books on an accrual basis, you would accrue the contribution for the year and then the transfer out would include the value of the receivable.

Why didn't you merge the plans effective 9/30/2002 if you weren't planning on doing a contribution for the short year? I don't think that the funding requirements in a merger with a short year are clear. Hopefully legal counsel has analyzed them and can provide insight on how to best answer the 5500 questions.

You probably have a PS plan short year filing for 10/1/2002 to 12/31/2002, and a MPPP plan short year filing for 10/1/2002 to 1/1/2003 but it depends on the exact wording of the documents.

If the documents are prepared properly on a merger (with both the plan and trust amended effective on the same day), then you wouldn't file a 5500 for the MPPP after date of merger. The assets should legally belong to the PS trust at that date. The MP trust is legally zeroed out at that date, even if the physical possession has not been transferred. (That is different than a termination -- where you can't zero the trust out until you actually distribute).

It depends on whether its a paper or electronic filing. See the instructions at http://www.dol.gov/EBSA/PDF/2002-5500inst.pdf that generally indicate that you file the changed pages on a paper form and the entire return for an electronic file. But if it is paper, make sure that the client has a complete copy with all schedules that includes the changed Schedule H and the audit report. If (or when) they get a DOL notice about the missing audit -- and possibly other errors affecting other schedules -- you want to make sure that they are using the amended Form 5500 in their response -- otherwise they might end up with multiple versions floating around.

Merger is different than termination. If your plan and trust amendments were done properly, then the last day for the MPPP would be 1/1/02 -- with possibly a one-day filing for 2002 and no filing for 2003.