chris

Thanks Tom.

For instance, they could leave the PSP contribution at age 21 and 1 year of service with the entry date retro to the first day of the plan year. However, shouldn't the eligibility requirements for the safe harbor 401(k) and for the deferrals be the same since the use of the safe harbor allows for deferrals to not be tested?

I believe there was change in the Regs. issued in the last year or so re taking J&S annuities out as a distribution option. Does that mean that the J&S option would no longer apply across the board even to benefits accrued prior to such an amendment? Or would that option need to be preserved for accrued benefits as in the case of a PSP that has MPPP assets from a plan merger?

If by tactics you mean selling someone on a product just to get the investment $$$$ regardless of whether the product meshes with/ does not conflict with the current retirement plan in place, then yes...

Yeah, tell me about it....

I've got a P.A. client where 2 of the 4 trustees on the P.A.'s PSP and MPPP refuse to sign the amended and restated documents until I show/tell them 1) who/what/why required the plan doc's to be amended and restated and 2) all of the changes required by GUST/EGTRAA. Any idea where I can find IRS language which explicitly states that if plans aren't amended for GUST/EGTRRA by the deadline, then disqualifiaction will result as well as an easily accessible list of the changes brought about by GUST and EGTRRA?? Would any of the IRS rev. proc.'s re restatement have any such disqualification language in them? Also, would the IRS' List of Required Modifications provide what I need? Thanks for the help.

Client's PSP has age 21/1 yr of svc. req's for eligibility. Entry date is retroactive to the first day of the plan year in which eligibility req's are met. Client now wants to add safe harbor 401(k) provisions to the plan. Client is considering having all e/ee's employed on Mar. 1, 2003 be eligible for the deferral as well as the safe harbor contribution, but Client is unsure as to eligibility req's thereafter. Would it be unreasonable to have the 1 YOS/ age 21 requirements apply across the board? That would seem to be easier administratively speaking. Also, as to entry dates is there a happy medium regarding salary deferrals and safe harbor contributions? What appears to be the most common approach(es) regarding eligibility requirements and entry dates for the PSP, safe harbor and deferrals? thanks for the help.

Mbozek.... You mentioned that there are two sets of agreements. One , of course, is the agreement b/t the plan trustees and the particular broker. What is the second agreement you referred to? Also, do you draft a participant directed account procedure for each plan? For example, the procedure may mandate that all directed accounts will be through broker x who also handles the assets of the general trust or the procedure may set an objective $$ amount at which a participant may direct the investment of his/her account...???

Off the top of my head I think it was December 31, 1994, generally speaking. I believe there was an IRS Notice? regarding sample language/sample amendment for the comp. limits. That Notice most likely has the deadline in it....

Regarding your comment that "The obvious solution is for the plan fiduciary to have counsel prepare an agreement for all the brokers to sign which spells out their responsibilities and liabilities to the plan and the participants under ERISA." any idea where sample agreements may be available? Also, how practical is drafting such an agreement where the plan is b/t 30 and 50 e/ee's? I guess the answer to the last one is how much risk are the fiduciaries willing to stomach without such an agreement...... From my experience dealing with smaller employers, it seems that the participant directs the broker and the trustees are left out of the loop. Also, regardless of whether or not the plan is implementing 404© the trustees would need to be a party to any such agreement to have any authority to deal with the account, e.g., preventing a participant from engaging in a prohibited transaction.....

Profit sharing plan allows for participants to direct the investment of their account balances. In the past, participants have been selecting their own broker to handle their accounts. The trustees of the plan did not have much involvement with the set-up of the directed accounts. Recently, as other participants have elected to direct the investment of their own accounts, their brokers are requiring the plan trustees to sign off on a myriad of forms, including indemnification/hold harmless language, etc...... The trustees are somewhat squeamish about signing off on such documents especially given the way that the typical directed investment account works, e.g., participant calls up broker/advisor and says let's buy that condo in the Bahamas..... Is there a practical way to handle this other than the trustees' combing through each account agreement and telling the broker which language they will and will not accept and sign off on???

I e-mailed the IRS and asked whether an employer who employed only HCE's could have a cafeteria plan. The following is the response I received: " NOTE: Our response to your tax law question appears below. If you have a follow-up question or another general tax law question, please return to our web site at: (http://www.irs.gov/help/page/0,,id=13162,00.html) to submit it. Please do not use your "reply" button to respond to this message. More helpful information is provided at the end of this message. For privacy and security purposes, your incoming e-mail text has been deleted in this response because it either asked a tax account question, which we do not answer (we answer tax law issues only), or it contained personal identification information. The Answer To Your Question Is: Please accept our apology for the delay in answering your e-mail inquiry. You can not have a Cafeteria Plan if there are no non-highly compensated employees. You will not pass the nondiscrimination test. Please refer to Introduction to Cafeteria Plans at http://www.valuedesign.com/HRforms/IRSIntr...ria%20Plans.pdf and Publication 15-B, Employer s Tax Guide to Fringe Benefits, at the IRS web site listed below. You can view the Internal Revenue Code (Title) 26, Section 125, at the U. S. House of Representatives web site at http://uscode.house.gov/usc.htm and you can view the Code of Federal Regulations 26, Sections 1.125-1 and 1.125-2, at the U. S. National Archives and Records Administration web site at http://www.access.gpo.gov/nara/cfr/cfr-tab...ble-search.html IRS forms and publications may be accessed on our web site at the following address: http://www.irs.gov/formspubs/index.html or ordered through our toll-free forms lines at: 800-829-1040 IRS Tax Help Line for Individuals (NEW) 800-829-4933 Business and Specialty Tax Help Line (NEW) 800-829-1954 Refund Hotline which are available 24 hours a day, 7 days a week, with 7-10 days delivery time. We are interested in your opinion and providing the best possible service to you. Please take a moment to answer our survey at: http://www.irs.gov/help/page/0,,id=13155,00.html This answer is based on our understanding of the facts you presented in your question. Omission of facts may affect the answer given. Here's a tip for navigating the IRS web site. Use the "search" button at the bottom of the home page. Enter key words or phrases for your topic in the entry box. It could help you find your answer immediately. EMPLOYEE ID: 04-06189 Mr. Hayes Tel.:(800)829-1040 msg#: 1282128 "

what's the e/er's reasoning for treating them differently? Not that it makes it right.....

Plan received a DRO in mid-December, 2002. DRO identified plan (which is a PSP) as the "XYZ, Inc. Defined Benefit Plan". DRO was returned citing the error and noting the correct name of the plan. Amended DRO was received and all correct thereon as of 1/20/03. Is interest normally payable from the date the DRO was submitted until the date actually paid? Or is the start date the date the DRO is determined to be "qualified"? Thanks for the help....

Upon the termination of a plan the plan participants become 100% vested in their account balances and generally are entitled to those balances unless there is plan doc language to the contrary. I have always advised sponsors to make participants aware that they can roll over to the new plan. This purges any protected benefits/distibution options, etc..

Deals with a loan situation, but see TAM 9208001 where the fiduciary had a 7.5% interest in the partnership that received the loan from the plan. Even if participant is not a fiduciary of the plan, e.g., trustee, etc... he is a fiduciary with respect to his directed investment account as pointed out above.

Wouldn't the terminated plan's assets be distributable to the individual participants??? Thus, they would be able to rollover the monies into the new plan and as such those amounts would be tracked as "rollovers". Maybe I missed something in the initial post, but how can you both terminate and merge a plan at the same time?

I would guess some form of correction under EPCRS where an ineligible participant is otherwise included would be the technically correct way to handle it, but some of the other persons on the board may have other alternatives???

I know that the 25% test is specific to 125 plans. I was only raising the tax policy issue as to why an e/er with only HCE's as e/ee's can have a profit sharing plan, but cannot maintain a cafeteria plan. In the profit sharing plan context, no non-highly's employed means no discrimination issue. I was just questioning why there is not a similar outcaome with respect to 125 plans. Again, I understand your analysis re the 25% concentration test...

Who made that rule....?? I have run into this before as well where all 3 e/ee's of a medical practice are HCE's. In the qualified plan (401(a)) area, it's OK to have a plan that benefits only HCE's. What's the policy difference here?

The employer is planning to handle the administration of the arrangement and the fee is apparently only for drafting the cafeteria plan document...

Thanks for the reply.... The plan is a volume submitter plan (Corbel document) and the employer has executed an employer certification to take advantage of the extended remedial amendment period. I would think that the fact that the certification was signed should be enough even though the employer actually only amended the plan document using a fairly lengthy snap-on amendment and did not actually adopt the volume submitter practitioner's (Corbel) plan document. The snap-on amendment is one I got from Corbel a year or so ago and I have been adding the IRS approved language to it for the various recent Acts predating EGTRRA, e.g., Community Tax Renewal Act of 2000 (name may not be entirely correct..). I did review the text of the EGTRRA Amendment and as you said there are some required provisions...

Client's PSP was terminated on September 30, 2002 and submitted to the IRS via Form 5310 shortly thereafter. IRS has now requested additional information including the "EGTRRA Amendment since the plan is terminating in 2002." Two questions: 1) Isn't the EGTRRA Amendment only required in order to take advantage of the new limits (annual addition, comp limit...)? 2) If no EGTRRA Amendment had been adopted prior to 12/31/02, will the fact that the IRS is requesting it pursuant to the plan termination have an effect on that deadline? No contribution will be made for the 2002 plan year. Also, I'm going to take a look at the current EGTRRA Amendment text to see if there are any changes that are required to be adopted..... Thanks for your help.

Client's PSP was terminated on September 30, 2002 and submitted to the IRS via Form 5310 shortly thereafter. IRS has now requested additional information including the "EGTRRA Amendment since the plan is terminating in 2002." Two questions: 1) Isn't the EGTRRA Amendment only required in order to take advantage of the new limits (annual addition, comp limit...)? 2) If no EGTRRA Amendment had been adopted prior to 12/31/02, will the fact that the IRS is requesting it pursuant to the plan termination have an effect on that deadline? No contribution will be made for the 2002 plan year. Also, I'm going to take a look at the current EGTRRA Amendment text to see if there are any changes that are required to be adopted..... Thanks for your help.

I've had someone tell me that the deferral limit of 12K currently is not part of the 40K maximum annual addition. Looking at 415©(2) I do not see anything that takes deferrals out of the definition of "employee contributions". I had run into this issue once before shortly after EGTRRA was passed, but wanted to verify that the answer was still the same, i.e., 40K is the max (except for 1K catch-up contributions) and that 401(k) deferrals counted in that 40K figure. Thanks for the feedback.