chris

From my research thus far it appears that LTC under 7702B is treated under the rules for 105 and 106 with adjustments/exceptions. Specifically, LTC insurance provided by the employer would be subject to the regular "plan for employees" issues under 105 and would only be subject to the discrimination requirements if they were self-insured. Thus, appears to be back to the if the ins. co. will write it then it's not discriminatory rule of thumb.....

I just recently looked at Code Sec. 7702B re long term care. Appears that it is to be treated as an accident and health plan. Do the same discrimination requirements apply? Employer wanted to provide e/ee's with choice between long term care insurance and cash knowing that only one of the highly compensated e/ee's would choose the long term care insurance. My thought was that would fail the discrimination req's for cafeteria plans. Employer then gave me a brochure from insurance agent which stated that an employer could provide long term care insurance under 7702B under a discriminatory basis. I am trying to find the Code justification for this. In the past, what I had found was that if an insurance company was willing to write it, then it wasn't discriminatory. Anybody able to shed some light on the discrimination rules which may or may not apply to long term care insurance? Thanks.

Blinky's right. The whole purpose of separately tracking them is to prevent MPPP monies from coming out under PSP distribution options, hence, Rev Rul 94-76 with approved language re the same. If all dist. options were originally available to all funds, then there's nothing to prevent by keeping them separate.

You can't just stop filing the Form 5500. See the link re Corbel's synopsis of dealing with the lost participant issue http://www.corbel.com/News/technicalupdates.asp?ID=251&T=P Also, I'm sure you could search the Plan Terminations Board for prior discussion on the subject. A few years back I used the IRS Letter Forwarding Program for a client w/ approx. 60 lost participants. Took a little time to jump through the hoops of dealing with the IRS, but all 60 participants responded. I would think you would have a good chance with the IRS or SSA locating them. Once they know that "free money" is involved, they'll find you.

Good point.

I would think the unpaid balance would be treated as an additional distribution upon termination of the Plan since there would be no Plan to pay it back to. I'm sure there is a cite out there for a Reg. or a Tax Court case but don't have it off the top of my head. From the distribution side of it wouldn't you be in the same place even if the participant were able to pay it all back, i.e., ( unrepaid balance on date of termination + actual amount in plan = distribution ) = ( actual amount in plan (which includes repaid balance) = distribution)?

As already stated somewhat, the asset purchase agreement should address whether Company A keeps the 401(k) or whether Company B is going to agree to maintain it. My guess would be that Company B probably won't maintain it b/c it will take on whatever inherent liabilities there may be with respect to the prior operation of the plan. As already pointed out, Company B would probably want Company A to keep it and do whatever it wanted, i.e., terminate it, with it. Check the documents.

Technically, it should happen that way, but, practically speaking, as long as the spouse understands the effect of consenting (signing off on the form signifies consent...), then probably not a problem. I'm assuming the notary is notarizing the spouse's (and not the participant's) signature. Otherwise, the notary may have a problem......

From Q/A-20 of the Regs: (2) Loans that repay a prior loan and have a later repayment date. For purposes of section 72(p)(2) and this section (including the amount limitations of section 72(p)(2)(A)), if a loan that satisfies section 72(p)(2) is replaced by a loan (a replacement loan) and the term of the replacement loan ends after the latest permissible term of the loan it replaces (the replaced loan), then the replacement loan and the replaced loan are both treated as outstanding on the date of the transaction. For purposes of the preceding sentence, the latest permissible term of the replaced loan is the latest date permitted under section 72(p)(2)© (i.e., five years from the original date of the replaced loan, assuming that the replaced loan does not qualify for the exception at section 72(p)(2)(B)(ii) for principal residence plan loans and that no additional period of suspension applied to the replaced loan under Q&A–9 (b) of this section). I guess it depends on how you interpret the underlined text above. One interpretation could be that the "latest permissible term" of the replaced loan, ie, the 5 yr loan would actually be 20 yrs. b/c that's what the plan allows for MTG loans (which is via the exception at section 72(p)(2)(B)(ii)). Query why the participant didn't get a 20 yr. MTG loan from the plan in the first place.

Don't know that refinancing would meet the Sec. 72 requirements. See the discussion at http://benefitslink.com/boards/index.php?showtopic=25857

Forfeitures are to be used to pay plan administrative expenses first. Remaining forfietures are to be allocated with the employer contribution.

PSP currently provides for forfetures to occur after 5 one-year breaks in service. Plan is to be amended such that forfeitures occur upon the distribution of a terminated participant's vested benefit. Was considering making said amendment effective as of first day of current plan year, i.e., Jan. 1, 2004. Anyone see any issues here re the effective date? It's clearly easier from the plan administration perspective than having to track the amounts for 5 years.... From a practical standpoint, the amendment would cause participants to receive a greater amount of $$ quicker, i.e., allocation of a larger number at year end. I could see a difference if the amendment were going the other way...from immediate forfeiture to 5 one-year breaks.... The only possible issue might be discrimination in favor of HCE's, however, there are far more NHCE's in the plan who would benefit from the amendment.

I'm assuming there are no minutes of a meeting or corporate resolution which discusses getting rid of the plan? I have a few clients who have done the same thing. Many of them did not want to take the time or $$ to fix it. In those cases, I had them sign off on an acknowledgement that the plan may not have been qualified at its termination, that the rollover may be adversely affected, etc.......

E/er maintains a PSP, MPPP and a 401(k)(safe harbor met by 3% nonelective contribution). There are investments within the MPPP and PSP which are locked in at favorable rates. E/er wants to get rid of the duplicative administrative costs with maintaining three plans. E/er is trustee of PSP and MPPP assets. 401(k) assets are participant directed. E/er would like to end up with just the 401(k) plan and thus be obligated for the safe harbor contribution (but still be able to contrubte more if possible), but keep all investments intact. Freezing the MPPP, i.e., amending to reduce contribution to 0% of compensation as well as not allowing any more participants in, will partially get it done. I am assuming a merger of the frozen MPPP into the 401(k) would be a possible next step regarding trying to consolidate the plans. Merger would allow for the investments to stay intact as well as consolidate everything. Only drawbacks would be tracking vesting and maintaining the separate distribution options once inside the 401(k) . Any others? Alternative would be to terminate the MPPP and distribute out to participants. Termination gets rid of the vesting issue (by requiring 100% vesting) as well as the maintenance of separate distribution options within the 401(k). I would assume the PSP could be merged into the 401(k) with no problems. Any suggestions as to the big picture alternatives? Thanks.

Wouldn't the termination of the plan give rise to a distributable event?

We've used Corbel for twenty years at least back when they were a much smaller outfit. We always get very competent advice regarding document issues, etc.... Also, the volume submitter documents (incl. the checklists) are not that difficult to work with. Robert Richter at Corbel has been dealing with retirement plan issues for years and is very knowledgeable.

Does following the tracing rules also mean that the loan has to be secured by the residence? Q & A #6 states that a residential loan need not be secured by the residence itself. Also, if the tracing rules are the guiding language don't they allow for a loan for exactly the same circumstances, e.g., constructing/substantially improving a residence, that were amended out of the Code language as a result of TRA '86? Not trying to be difficult but it looks like the conservative approach would be to not allow a loan for construction. Thanks for all the prior (and any future) replies.

I'm referring to the exception to the 5 year requirement, specifically, meeting the "acquire" definition. As I understand it, prior to amendment the Code language provided for the exception for "substantial rehabilitation, construction and acquisition" of a dwelling. The result of the amendment to the Code was that now it only says to "acquire" any dwelling....used as a principal residence.

Any clearer guidance from IRS or DOL regarding whether a loan from a plan can be used for the construction (vs. acquisition) of a home? Plan participant has 50K in PSP account balance and wants to get a loan for 25K for purposes of building a house. Thanks for your help.

Participant has approx. 4 MIL in PSP. Particpant also owns real estate (low basis) worth approx. 4 MIL. Participant plans to take a distribution of entire 4 MIL in same year that participant plans to donate the 4 MIL of real estate to charity. Participant believes it will be a wash; however, I think the charitable deduction rules may allow for up to 50% of AGI deduction (will need to verify). Anybody see any issues with this? Alternative Minimum Tax issues? Assuming the distribution is per a distributable event under the plan document I don't think the PSP is impacted at all.

Turns out employer has two plans -- one which is purely a tax deferred annuity plan and which appears to meet the exception in the Regs. and one which is a defined contribution plan in which the employer makes a 4% contribution on behalf of participants. Any problem in the big picture with filing a 5500 for the def. cont. plan and not filing a 5500 for the TDA plan? Thanks.

I took a look at the Reg. cite located in the Instructions for the 5500 as to those plans not required to file. I believe it was 2510.3-2(f). The Reg. basically states that tax sheltered annuities are not deemed to be "established or maintained by an employer" if ... a number of factors are present. One of those factors is a list of employer actions/involvement which starts out "The sole involvement of the employer,...." The list of "approved" employer actions does not include making contributions on behalf of the participants. The employer not only handles employee deferrals BUT ALSO makes a contribution aprt from the deferrals. For this reason I would take the position that the Reg. factors are not met and that a 5500 is still required. Thanks for the reply.

Employer is a non-profit school which maintains a 403(b) annuity plan through TIAA-CREF. Employer makes a % contribution on behalf of employees in the plan as well as handles employees' salary deferrals as per plan document. CPA has questioned whether the employer needs to continue filing a 5500......? Thanks for your help.

Can you have a premium only plan for staff employees and still have the employer pay full premium for the owners/shareholders of the business?

Employer is considering setting up a premium only plan providing for e/ee's to pay a portion of the health insurance premium. I assume that the Sec. 125 nondiscrimination rules apply. Employer has 14 HCE's and 34 NHCE's. Is there any way to assess the potential of failing the nondiscrimination req's prior to actually adopting the premium only plan? How feasible would it be to survey the e/ee's to see who would stay in and who would opt out in order to get a handle on the potential nondiscrimination issue? Thanks for your help.