E as in ERISA

Another thing to consider: Most people don't plan to have $10,000 of medical expenses during the year -- they usually meet their deductibles, etc. under any insured plan at a much lower level than that. Certainly there are many situations in which these expenses might qualify for reimbursement. But we also see a lot of situations on these boards where employees are seeking reimbursement through their FSAs for expenses that don't qualify. You might want to find out what the person is planning on getting reimbursement for and make sure that it will be paid by the FSA.

But you could use lenient requirements for hardships for non-401(k) money (e.g., you don't have to suspend contributions; you could make purchase of a car a hardship event, etc). And these withdrawals would not be subject to 20% withholding now?

I stand corrected! Interesting....So a plan can have "hardship" provisions for the non-401(k) sections of the plan (that don't comply with the strict 401(k) hardship rules) and avoid mandatory 20% withholding?

It is my understanding the the only hardship withdrawals that are "not eligible for rollover" are 401(k) hardship withdrawals (those described section 401(k)(2)(B)(i)(IV)). (Those are the only ones subject to the strict IRS rules; a plan can have its own rules for hardship withdrawals from other sources). I assume that any other hardships would be eligible for rollover. See IRS Notice 99-5 at http://www.benefitslink.com/IRS/notice99-5.shtml .

Rev. Proc. 94-13 ?

Blackout notices are not required for scheduled temporary suspensions that are disclosed to participants in the SPD.

$7.500 to my LSA, $7,500 to my RSA, $15,000 to my ERSA

Change the investment option?

GBurns -- bayarea1 had indicated "worthy consultants" wouldn't do an hourly project, and "substandard consultants" might but would not perform well. I interpreted that to mean that no one would do this. I am questioning that conclusion -- noting that the first step for an experienced consultant would normally be to go in and get an understanding of the plan(s) and what the opportunities and issues are. Most can perform that step as a stand-alone project. (Although their willingness to do so might depend on availablity, value of the customer, etc.)

Because its a merger, Plan C is technically a continuation of Plan A and Plan B. It's like you amended Plan A or Plan B changing the terms to those of Plan C. Therefore anyone, who is already a participant in A or B will maintain that status. If you want to keep them out, you have to start up a new Plan C and freeze Plans A and B.

In my prior job, we had on occasion used the certified mail/return receipt to prove timely mailing of a return that the IRS said was late. (Sometimes it seems that when they are sending a notice for another reason, they will automatically "late filing" to anything that was received into the department more than five days or so after a deadline.)

Problems with a plan loan result in taxation to the participant, not disqualification of the plan. Therefore, they aren't particularly going to be on the employee plans auditors' radar screen. The question would be whether the agents who audit individuals have the 72 rules on their radar screen. Probably not? But I wouldn't want to be the person who messed up if the CEO or CFO got audited and they got taxed on an extra $50,000 just because there was no 58 month rule.

It can't be posted, it has to be delivered to participants. That is generally done with a paper copy, but it can be electronic if it complies with the DOL's regulations on "use of electronic technologies by employee pension and welfare benefit plans." The latter allows electronic copies to be delivered to employees who use company computers as part of their job. Employees without computers and former employees can only get electronic copies if the additional consent requirements, etc. are met.

What about DOL Reg Sec 2520.104-23, which generally exempts top hat plans from the reporting and disclosure requirements in Part 1 of Title I (including Section 101 through 111)?

I would want the correct plan number on the current year return if i was preparing it. But as you suggest, you want the IRS to be able to track the filings. Ideally this would be done by going back and amending for the errors on prior returns. But they generally aren't going to do that. So the next best thing would probably be to show a change on the current year 5500 (I presume that is Q #4 but I don't have a 5500). But I would let the client know that is not the right way to fix this problem. Tell the client to make sure everything matches with the right plan number (e.g., SPD, typed Schedules attached to return -- assets held for investment and reportable transactions, SARs, etc.)

A lot of plans limit loan repayments to 58 months (just a little less than 5 years) to accomodate a lag of over a month or two between the signing of the paperwork (and/or the check) and the first payment. I think that is just to be safe since there is no guidance re what is five years. When in doubt I often recommend going with industry practice.

What type of plan? What type of updates are you thinking of? There is limited guidance regarding technical requirements relating to for-profit nonqualified deferred compensation plans. So there are not "updates" like there are for a qualified plan.

There is a "Cash Balance Plans" topic on the benefitslinks home page. For example, it provides a link to a series of papers by the Society of Actuaries: http://www.soa.org/library/monographs/reti...ofcontents.html Are do you just want an explanation like this: A cash balance plan is technically a defined benefit plan -- but the "defined benefit" is that which would be derived from a hypothetical account balance for the participant. Each year the hypothetical account is credited with a contribution equal to a stated percentage of the participant's compensation and earnings at a stated rate. The employer bears the investment risk. There are other variations on the formula. During the early years of participation, a participant's accrued benefit typically increases faster than it would under a comparable final average pay plan. Therefore it is sometimes considered better for a mobile work force. But for a participant with significant years of service, the cash balance benefit might be leveling off just at the time it would be spiking under a final average pay plan. Hence, the age discrimination issues raised in regard to conversions. In addition, in a defined benefit plan a lump sum is calculated by determining the present value of the benefit that the participant would be entitled to at retirement. So if you project the cash balance participant's hypothetical account balance out to retirement at the plan's crediting rate and then present value it back at the required rate, the lump sum will not be the same as the participant's current hypothetical account balance. Hence, the "whipsaw" issue.

I would assume that you don't, provided that the "termination date" of the plan (as reported in your application for d-letter on termination) was pre-GUST/pre-EGTRRA effective date.

Ask good consultants to describe a "phased" approach for you: Stage 1 they look for issues at a high level, Stage 2 they target the areas which have the most issues, Stage 3 they prepare a written report, Stage 4 they recommend solutions, Stage 5 they help implement solutions etc. Stage 1 might be done in a reasonable amount of time -- one day to one week depending on how plan specific you want to get. (An experienced consultant generally knows what the recurring problems are in plans in general and can quickly identify some of them that apply to your plan. But to find the ones that really create the biggest issues for you might take some additional time and may well be worth it). You can hire them stage by stage (depending on how well you work with them and whether there is any chance that you will ever followup on the issues yourself once they leave). The price may depend on your location and the person's experience. Even bigger firms may have some cheaper personnel to offer -- but it will generally take them longer ($100 x 40 hours may get you the same or less than what you can get for $400 x 10 hours).

See Rev. Proc. 94-13 for model language?

No matter what the circumstances, the regulation primarily only affects the timing of the audit not the number of audits. In circumstances to which the regulation applies, the auditor can simulataneously perform both the short year and the full year audit. And the auditor can put them both in the same report. But the bulk of the work is in the testing and they still have to do separate testing for both years. So the economies of scale are limited.

That was the $150,000 compensation limit. For a starting point for a DC plan, see items number 6 (definition of compensation) and 61 (top heavy) of the IRS' LRMs at http://www.irs.gov/pub/irs-tege/dc_lrm.pdf

"Seven months or less" is correct. I was too focused on correcting the conclusion that no audit is needed -- since one appears to be needed and soon. So I stated the "seven months" rule wrong. It is my understanding that the MP would be assumed to have a plan year ending 7/31/2003 even though it is technically continuing in existence as part of the 401k plan. I think that the DOL has made that clear based on its discussions about plan mergers taking effect on January 1. In those cases, it has indicated that an audit and 5500 are due for that one day plan year (although I think that informally they had backed off on that recently).

The accountant's opinion is always required for a plan with more than 100 participants at the beginning of the year. The rule on short plan years of less than seven months merely allows a possible delay in the timing of the report for that seven months (or the period preceding it). There would be extra columns on the financial statements to include the multiple periods covered. And the accountant's opinion would cover the period ended July 31, 2002. And the auditors would perform all the necessary testing for that period. I think you need an audit done for the MP plan by February, 2003 or 2-1/2 months later, if extended. (I don't think that auditors would combine the report for the MP short plan year with the report 401k full plan year).