John Feldt ERPA CPC QPA

A governmental employer sponsored plan is not subject to ERISA, and thus they do not have to provide SPDs, SARs, or benefit statements. But, according to §1.401-1(a)(2), the plan must still be somehow communicated to employees in some manner. If you do provide some sort of a plan summary, many of the "rights" that you see in private sector plan SPDs should probably not be listed in the gov plan's summary, assuming they weren't included in the plan document either.

At the Los Angeles Benefits Conference in January 2007, W. Thomas Reeder stated that they will probably be published within the next 6 months. At the Washington Non-Profit Legal and Tax Conference in March, Robert Architect said they should be out by the end of June with an effective date of January 1, 2008. My source is attached, see Page 5: http://www.reish.com/publications/pdf/labcmar07.pdf Also, TAG (tagdata.com) also sent a message regarding Robert Architect's announcement. I think termination provisions will be included, otherwise I know of no provisions now for terminating a 403(b) plan. You could try getting a private letter ruling. Our firm has not had to do that with any of our 403(b)plans yet.

David, That has been our interpretation also. However, we have only had the need to utilize that with a few clients, and it's never been brought up in an IRS examination with any of them.

Listen to Blinky, wait the 60 days. For employees who are actually separated from service, you may distribute their benefits as usual. It is possible to submit the 500 before the date of plan termination (DOPT). Last year we submitted one 60 days before the official date of plan termination (we gave out the notice of intent to terminate and the individual notices of plan benefits, among other things, before the 500 was submitted). Then, since we did not receive a notice of non-compliance from the PBGC, we began distributing after the 60 day period was over (but not before the DOPT).

So if you need an extra year for 415 purposes, instead of freezing the plan, the plan should adopt a really small formula, and then freeze at termination? Cite please.

So they are the usual tax-exempt organization. Consider using the DFVC program. Here's a link for a start: http://www.dol.gov/ebsa/newsroom/0302fact_sheet.html You asked: Q1. "Can they still be responsible for fines if they go through a voluntary correction program for the 5500's?" A1. Not directly because of the DFVC filing, but perhaps indirectly: after filing DFVC the plan could be audited. Who knows what they might find then. Was the plan in compliance operationally all of those prior years? In addition, the document issue should be resolved as well. Perhaps at the same time the DVFC filing is sent, an EPCRS filing can be made to correct the plan document failure. Here's a link to some EPCRS information: http://www.irs.gov/retirement/article/0,,id=96907,00.html Q2. "They were told by the current provider that they do not need to file one." (a 5500) A2. Consider asking that provider to issue a written statement confirming this, ask them to cite their reasons that they think the plan is exempt from filing. If you find that their reasons appear to be in error and this firm really still believes that they are correct, see if they would be willing to accept (in writing) all financial responsibilities for any potential costs to the plan or plan sponsor (including time and expense for corrections) if a failure to file issue ever arises where the government requires that they file. Q3. "Would it be easiest to look for a custodian that holds plan assets in an omnibus account and recordkeeps participant balances seperately?" A3. Probably a good idea. Make sure due diligence is done to avoid paying high fees for low service, etc.

What you have described looks like reversed substantial risk of forfeiture. I assume you are talking about 457(f). If I read this right, his termination (for any reason) currently triggers 100% vesting - thus no risk of forfeiture (and thus taxable now). But, if the termination occurs after a specific future date, it triggers 0% vesting? I don't think termination of employment is allowed anymore under the rules to trigger 100% vesting. I'd like to see others comment. I am not sure when this becomes effective.

Good point Tom. I cannot see the IRS saying an easy "Yes" to this. Does the IRS ever really just say "Yes" without adding strings and caveats?

Are they a government employer? If so, the 5500 should not be required for the 403(b). Are they a church entity? If so, they have certainly not made a voluntary election under 410(d) to subject the plan to ERISA and then the 5500 should not be required for the 403(b). An election under 410(d) would be made as an attachment to the first 5500 filed (which you say they have filed) or alternatively, such an election could be made as a statement attached when the plan files for a D letter for the document (which you say they don't have). Be careful though, they might be church-controlled, which is different than being a church. A church (or a church school) would be considered a church and no 5500 is required. But, generally, any other church controlled entity would still have to file. I am not involved in cafeteria plans. Bummer about the plan document not being there.

How about where the document drafting peoples' boss is an attorney, but the attorney has no real significant document drafting knowledge or retirement plan drafting / design knowledge, and thus the attorney does not review any of the documents?

Yes.

To close this out: We replied to the IRS examiner and explained how 2002-42 applies to the merger of a money purchase plan, not a profit sharing plan, and further provided an example from 1.411(d)-3(a)(3), example 4(i), and included language from the conclusion after 4(ii) to support our position. For the 410(b) issue, we gently encouraged him to rely on the regulations to interpret the meaning of the code, specifically 1.410(b)-2 in this instance. We quoted 1.410(b)-2(a) and pointed out 1.410(b)-2(b)(1), which requires just one of (b)(2) to (b)(7) to be satisfied. We explained that 1.410(b)-2(b)(2) supports our position and we provided him with the definition of "ratio percentage" as found under 1.410(b)-9. The case then went to his supervisor, we received a 'no change' letter from the supervisor stating that they have closed the audit, accepted the returns as filed, and that no action was needed. At least we didn't have to get an ERISA attorney involved. Score! WDIK - correct zimbo - correct

Thanks!

We have a client that has a small amount of excess (over the 415 limit) in their 3 person DB plan - about $30,000 extra (all employees are at the 415 limit). They are a corporation - for profit (not a tax-exempt employer). They are still a functioning company and will have enough wages to support the allocation in the QRP. So, if they transfer 100% of the excess assets to a qualified replacement plan, according to 2003-85 it looks like they pay no excise tax, since no reversion occurred (and also avoid income taxes of course). Is this how you would read this? Is Revenue Ruling 2003-85 still the most current guidance for this?

Nice posting wsp!

Also, the place where the funds are invested may want a trust ID number for the plan's assets.

You may want to use one for reporting distributions, having a trust ID identify the trust of plan as the payor of the distibution, for forms 1099-R and 1098.

The new expectation is that the Final 403(b) regulations will be coming out this summer (2007).

I haven't looked up anything regarding #1, I assume you are talking about vesting service. I don't recall that would be a problem, unless one of the plans terminates with 5 years of the startup of the other or something like that (don't hold me to this answer, it is Friday the 13th). For #2, the dividend payments on the stock won't count as annual additions. Also, if this is a leveraged ESOP, then a portion of the allocation is payment toward principal and some is payment of interest on the loan, so only a portion of that entire allocation counts as an annual addition. I have not looked at the ESOP sections in the recent final 415 regs, though, so take the above response with caution.

I have heard that it has become a political issue. Certain companies are upset that their GICs or their money market, or [you name the fund type here], was not on the DOL's initial guidance and those companies/industries are placing a lot of pressure on the DOL to add their investment vehicles to the final guidance. The DOL probably does not want to add some of those because they do not feel that they are appropriate for long-term retirement investing. A standstill appears to be the result so far.

That's all good. Be sure to look out for any deferring employees who quit right after that one goofed up paycheck is paid, and thus they do not have enough pay in the next payroll to cover the double deferrals.

That means the 2007 Form 5500-EZ has a $250,000 threshold for requiring the Form to be filed. The 2006 Form 5500-EZ still has a $100,000 threshold.

Also on the board today: http://benefitslink.com/boards/index.php?s...c=34145&hl=

Thanks Tom, that is somewhat along the vein of what I was curious about.

Yes, the ebar possibility is what has caused the question. If no one on this board has been doing anything like this, that's fine. Perhaps a 50-year old owner with 5 years and a 51 year old NHCE (just hired) would be a better example, using age 50 and 5 years as the NRA. The owner gets tested using age 50, the employee gets tested projecting to age 56. Anyway, just wondering if others have gone there.