chris

My initial thought would be yes, but I didn't know if there was an exemption in the statutes or the regulations that someone was aware of. Please let me know your observations. Thanks.

Thanks for the reply. What is the purpose of 1.411(a)-5(B)(5) if 1.411(a)-5(B)(6) allows such service to be disregarded anyway? ------------------

Brian4: In pre-76 plan, service is defined as continuous employment. Nothing as to rehires. 76 plan does not exclude any prior periods of service as described in 411(a)(5). Pre-76 plan speaks of "vesting requirements as set forth herein" but never lays them out. There's only a short one sentence paragraph that says that if you terminate employment and you're 55 and have 10 years of service then you're entitled to retirement benefits under the plan; otherwise, you have 0. The issue is whether the 76 plan doc can exclude prior service without actually saying that. See the thread in the Retirement Plans in General message board. Chris ------------------ [This message has been edited by chris (edited 03-16-2000).]

Pre-76 Plan The pre-76 plan defines service as "continuous employment with the Company. Leave of absence shall not constitute an interruption of such service." The pre-76 plan contains the following as Article VIII Termination of Employment and Termination of Membership : "In the event of termination of a member's service before his retirement date and after attainment of age 55 and 10 years of service with the Hospital, the member shall receive at his retirement date an annuity based on his service to the date of termination of employment." 76 Plan Defines "Continuous Service" as "an Employee's period of broken(the doc actually says this) service with the Employer with no breaks in service which would terminate employment." "Continuous Service shall be deemed to be broken, for purposes of the Plan, by absence due to: (a) voluntary quit; (B) discharge or termination of employment; © failure to return to the service of the Employer after expiration of an authorized leave of absence or final release from Active Duty." The plan then has a provision re breaks in service to the effect that Continuous Service will be reinstated if participant was vested prior to the break or if the time period between the break and the re-hire date is less than pre break service. Keys "Credited Service" to completed years and months of Continuous Service subsequent to date of hire or age 25, if later. Caps Credited Service at 35 years. Provides a formula for Credited Service. States that Credited service prior to jan 1, 1976 shall be determined under this plan in effect prior to jan 1, 1976. Defines eligibility for employees not employed on Dec 31, 1975 as age 25 and 1 year of Continuous Service with the initial eligibility computation period as beginning on the date of hire (or re-hire). Section 8 Vesting Upon Termination of Employment provides that "There shall be no benefit payable from the Plan if a participant's employment is terminated prior to qualifying for any benefits under the Plan and prior to completion of the requirements for vesting." Also, "No participant's accrued benefit derived from employer contributions shall be nonforfeitable until the completion of ten years of Continuous Service, at which time such participant's accrued benefit derived from employer contributions shall be fully (100%) vested." Other than that the 76 Plan does not expressly say what, if any, service is disregarded for vesting purposes. Maybe the intent was that Continuous Service means what it says. Even so, wouldn't the doc have to expressly state what service is and is not counted? Pursuant to Reg. 1.411(a)-5(B)(5), wouldn't pre-1971 service be automatically counted since employee had 3 years of service after Dec 31, 1970 regardless of what the plan doc said? I apologize for the length/depth of this post. Thanks for your help thus far. ------------------ [This message has been edited by chris (edited 03-16-2000).]

I'm in the process of reviewing the doc's carefully including the terms/definitions you pointed out. How can the plan be operated in such a way that the 1957 through 1974 service is ignored if the plan doc doesn't actually state that such service will be ignored? ------------------

Thanks, PAX. More generous is not the problem. I've got a hospital that's telling me that a former employee is not entitled to any benefits under its DB plan established in 1968 because the individual does not have 10 years of continuous service. The individual worked there from 1957 through 1974 and then again from 1976 through 1979. The plan doc in effect prior to Jan 1, 1976, said that an employee who worked for the hospital five years as of Jan 1, 1968 would be eligible to be a participant in the DB plan. The section regarding vesting only says that a participant must be age 55 and have 10 years of service with the hospital to receive a vested benefit. The DB plan was amended effective Jan 1, 1976 purportedly to comply with ERISA. That doc defines credited service as any service after the later of age 25 or date of hire but in any event not to exceed 35 years. The doc has one sentence that states that credited service prior to Jan 1, 1976 will be computed under the plan document then in effect. That's it, no provisions regarding exclusion of service as laid out in §411. The vesting section has a paragraph which reads that a participant that terminates employment with 10 years continuous service will be 100% vested. All of the commentary, pension reference guides, etc. that I've run across state that those exclusions are permissive and in order to take advantage of them, they must be expressly stated in the plan document. If that's the case, then the former employee has 10 years of continuous service and should be 100% vested. Not to run on forever, but just wanted you to know the whole story. By the way, where in NC are you from? I'm in Kinston (eastern NC). ------------------

I know it's implied, but is there anything in black and white stating that the plan document must set forth the service which will be disregarded? Regs say "shall" take into account, but "may disregard the following service"..... So the implication is that if it's not in the document as being disregarded then it's counted. Just wanted to know if there was a positive statement in print to that effect?? ------------------

Any way to get a copy of the tack on amendment for post 1999 terminations? ------------------

Client terminated employment with hospital early in 1974 after 17 years of service. Client rehired mid- 1976 and then terminated mid 1979. HR department says client is not entitled to anything because client was: 1) not 55 years old and 2) did not have 10 years of service at date of termination in 1979. I've requested copies of SPD's and plan doc's for the requisite years. DB plan was amended effective Jan 1, 1976 (I assume to comply with ERISA/IRC requirements). The plan doc as of Jan 1, 1976 says that credited service prior to Jan 1, 1976 shall be computed under the terms of the plan in effect prior to jan 1, 1976. That plan doc is silent on breaks in service other than to say that an authorized leave of absence is not to be considered termination of employment under the plan. SPD for plan doc effective Jan 1, 1976 says that employees who terminate with 10 years of service or more will be entitled to 100% of their accrued benefit. That short paragraph comes right after the paragraph which says that if you terminate employment before you are eligible under the plan and before you are vested, you get nothing. Of course, SPD's final paragraph states that it is not a contract and provisions in the plan trump anything in the SPD. If prior service could be counted, then client definitely has 10 years of service. Client however was 44 years old at date of termination in 1979. So, it may be that client's not entitled to anything. It just doesn't sound right that an employee can work for almost twenty years for one employer and then not be entitled to anything in the DB plan because the e/ee wasn't 55 at the date employee terminated employment. I work mostly with DC plans so maybe that's why it doesn't seem to fit. After looking at this issue I ran across Reg. §1.411(a)-5(b)(5) which says that pre-1971 service cannot be disregarded for vesting purposes if the participant has at least three years of service post 1971. Pursuant to language in the Reg. this trumps the §411(a)(4)(F) provision regarding pre-ERISA break in service rules. Thus, in the client's situation, it appears client has 10 years of service which would entitle client to 100% vesting. Anyone dealt with this issue or dealt with Reg. §1.411(a)-5(b)(5) before??? ------------------

This is an added note to my post above. I've been looking at the issue and have run across Reg. §1.411(a)-5(B)(5). That Reg. seems to say that pre-1971 service will count, notwithstanding §411(a)(4)(F) (the disregard of pre-ERISA service under plan's pre-ERISA break in service provisions), if a participant has at least three years of service at any time after Dec 31, 1970. In my situation above, client's pre-1971 service (approx. 13 years) would appear to count for purposes of vesting such that at termination of employment client had 10 years of service which entitled her to 100% vesting. Anyone else familiar with the operation of this Reg??? ------------------

Client terminated employment with hospital early in 1974 after 17 years of service. Client rehired mid- 1976 and then terminated mid 1979. HR department says client is not entitled to anything because client was: 1) not 55 years old and 2) did not have 10 years of service at date of termination in 1979. I've requested copies of SPD's and plan doc's for the requisite years. DB plan was amended effective Jan 1, 1976 (I assume to comply with ERISA/IRC requirements). The plan doc as of Jan 1, 1976 says that credited service prior to Jan 1, 1976 shall be computed under the terms of the plan in effect prior to jan 1, 1976. That plan doc is silent on breaks in service other than to say that an authorized leave of absence is not to be considered termination of employment under the plan. SPD for plan doc effective Jan 1, 1976 says that employees who terminate with 10 years of service or more will be entitled to 100% of their accrued benefit. That short paragraph comes right after the paragraph which says that if you terminate employment before you are eligible under the plan and before you are vested, you get nothing. Of course, SPD's final paragraph states that it is not a contract and provisions in the plan trump anything in the SPD. If prior service could be counted, then client definitely has 10 years of service. Client however was 44 years old at date of termination in 1979. So, it may be that client's not entitled to anything. It just doesn't sound right that an employee can work for almost twenty years for one employer and then not be entitled to anything in the DB plan because the e/ee wasn't 55 at the date employee terminated employment. I work mostly with DC plans so maybe that's why it doesn't seem to fit. Anybody have any observations??? Any comments appreciated. ------------------

To what extent can an individual have a SEP-IRA and be a participant in a qualified plan, e.g., a profit sharing plan? In other words, does the 415© limit on annual additions apply per individual or per employer? Could an individual have two jobs with unrelated employers and be a participant in two profit sharing plans and receive contributions under the two plans that exceed the 415© limit? ------------------

Client adopted a Northwestern Prototype document with the assistance of a purported professional employee benefits firm in 1996. Client looking to terminate the plan now. Upon contacting Northwestern, I learn that Northwestern ceased sponsoring said prototype on July 14 of 1995. Northwetsern notified all prototype users on said date as well as provided them with an updated (as of 1995) plan doc. It appears that the actual plan document ( and adoption agreement)that the e/ee ben firm used was a doc from 1986. Thus, the doc did not contain the required rollover provisions, comp limits, and who knows what else. I know there is/are correction programs for late amenders, but would correction be possible where the doc was not qualified from the start?? I wouldn't think so, but just wanted to ask.. Thanks. ------------------

I've got a client who adopted a standardized target benefit prototype from Northwestern Mutual in late 1996. Client is terminating it in 2000. Anyone know a contact at Nortwestern Mutual who can supply a current amendment for one of their prototype plans? I've left messages at Northwestern's reitrement services tel. line but gotten no response. I've also tried to contact the e/ee benefits firm that got them into the prototype, but they are not responding. That's probably because they've screwed things up so badly that they don't want to talk to me. The doc needs to be amended upon termination....doesn't that apply to prototypes as well? Thanks for any help.. ------------------

Can fees/expenses for restating our plan be paid from the general plan assets?

What is a reasonable range of the cost to set up a profit sharing plan including requesting a determination letter from the IRS? Do you have to request such a letter?

Client is a 50% general partner and a 51% limited partner in a limited partnership which has as its sole purpose to purchase, hold, sell, etc... any and all types of business investments. Client wants bank who is custodian on client's IRA to invest $X from client's IRA in the limited partnership. The transfer would fall under 4975©(1)(D) but the issue is whether or not the limited partnership is a disqualified person. Clearly the 50% or more limit of 4975(e)(2)(G) is met, but would the fact that the limited partnership has no employees cause it to fail 4975(e)(2)©? Also, IRC 408(e)(2) provides that an IRA will lose its qualified status if the IRA owner engages in a 4975 prohibited transaction with respect to the IRA. 408(e)(2) provides that the person for whose benefit the IRA was established will be treated as the creator of the IRA. Does anyone have any comments as to the application of 408(e)(2)? It appears to me that the only thing that might possibly prevent the application of 4975 is the fact that the limited partnership does not have any employees. Possibly the IRS could deem client to be an "employee" of the limited partnership, in which case 4975(e)(2)© would be satisfied? Can anyone help me out on this?? Thanks.... ------------------ [This message has been edited by chris (edited 01-14-2000).]

Maybe I overlooked it, but where is the What's New page? Thanks for your help. ------------------

Anyone have the recent guidance issued by the IRS with respect to safe-harbor 401(k)'s? If so, what's it say? ------------------

I apologize with respect to the info provided in my question. The $1,200 cap is on the health care reimbursement account and not the dependent care assistance account as it is limited by statute as you stated. No salary reductions by employees; all employer contributions. ------------------

kclark: Thank you very much for your help. By the way, I didn't mind the history lesson. Thanks again. ------------------

Caf plan provides for cash, health care fsa and dependent care fsa. To what extent must either of the nontaxable benefits be funded through a trust? My understanding is that they are to be funded from the general assets of the employer (i.e., no trust required). Any replies greatly appreciated. ------------------

Employer to set up cafeteria plan with FSA for Health Care Reimbursement as well as Dependent Care Assistance. Employer initially going to cap the Dep. Care at 1,200, but possibly will change it later. If said change is made effective for the next plan year then it's a no-brainer. BUT what if employer wants to change the limit mid-year 2000? Employer to make contributions to the caf Plan on a quarterly basis so would it be possible for employer to notify e/ee's that the limit will be increased by $x effective next quarter and have all eligible employees make an election prior to that quarter?? ------------------

Cafeteria plan will be effective January 1, 2000. All employees employed as of that date will be eligible to participate. Election period is 30 days after entry date, i.e., January 1. Employees are paid semi-monthly. Assuming that all employees made their elections and returned them to the employer on January 2, would the elections be effective as to the payroll period beginning January 15 or February 1? ------------------

Thanks for your reply. The only thing I can see is possibly allowing the e/ee to make an election to reduce salary prior to the beginning of the year with the understanding that the e/er may give a year-end bonus. The employer is a medical practice so the ability to give out bonuses is not a problem. One practical problem if I'm the e/ee is that I'm reducing my salary per pay period (assuming I want the med/dental reimbursement account) with the expectation, and nothing more, that I'll get a year-end bonus. ------------------