chris

Haven't looked in a while, but is there a correction progarm for a situation where the employer haphazardly forgot to sign the adoption agreement? All trustees signed it, but officer of employer for whatever reason didn't get his/her signature in the blank.

Tax exempt organization employs disabled individuals (blind persons) to do various types of work. Organization wants to set up a 401(k). Any special issues to be aware of? The only thing that comes to mind is possibly no full vesting upon a participant's becoming disabled (since all participants are such from day one). Any reasons why it wouldn't be possible to set up a 401(k) in this situation? Thanks for the help.

My issue concerns the fact that all of these employees are disabled according to the employer. The employer only employees blind individuals. On the basis of being blind, these individuals are already receiving Social Secuirty disability as well as Medicaid in some cases. The go-by medical expense reimbursement plan document was a sample document in the Appendix of one of the Tax Management Portfolios published by the Bureau of National Affairs (BNA). Thus, the employer reviewed the sample plan document and pointed out that the language re disability causing a participant to cease eligibility, the COBRA language, etc...... would apply at day one since all of the employees are blind, i.e., disabled.

There will most likely be an additional PSP contribution. Thus, the question as to changing comp. to full year comp so that top heavy testing/contriution won't have to be dealt with, i.e., the e/er makes the 3% nonelective contribution and that's it as far as dealing with top heavy. My impression from the e/er is that they continually have a top-heavy issue every year in their 401(k) and were looking at adding the safe harbor contribution (3% nonelective) to remedy that. Hence, the comp. question as raised in the above section of the ERISA Outline Book.

The following language at p. 11.414 in the ERISA Outline Book (2003) raised the question in my mind..... "...if the safe harbor 401(k) plan satisfies the safe harbor contribution requirement through the nonelective contribution formula, the top heavy minimum contribution liability is automatically being satisfied, unless the formula is using a definition of compensation that takes into account a lesser amount of compensation than the section 415 compensation. Note that the safe harbor nonelective contribution might be based on compensation for only a portion of the plan year (i.e., the employee is eligible for the 401(k) arrangement for only part of the year), whereas the top heavy minimum contribution is always calculated on a participant's section 415 compensation for the entire plan year." Thanks for the help thus far.

Just curious... I'm assuming the safe harbor 401(k) was added to the PSP, so the PSP is still in place, ie, there could be deferrals, safe harbor 401(k) contribution, as well as the PSP contribution, if any, made to the plan during a given year....??? Also, what are the eligibility rules for the safe harbor 401(K), eg, everyone employed on 1/1/04 is eligible or everyone must wait until they're 21 and have 1 year of service? I would think the PSP portion of the plan is still subject to the 7 year vesting schedule. I would also assume that if the safe ahrbor 401(k) allows for immediate eligibility on 1/1/04, then she'd be entitled to 3% of compensation (assuming 3% nonelective contribution is safe harbor contribution) from 1/1/04 thru 3/??/04. If there's an age 21 and 1 year wait for the safe harbor 401(k), then she'd not be eligible for the safe harbor contribution whatever it is.... Need more info.

Employer's current 401(k) plan provides for dual entry dates and compensation is counted from a participant's date of participation. Employer constantly has a top-heavy contribution issue every year and is considering going the safe harbor route (3% nonelective contribution) to remedy the top heavy issue. It appears to me that recognized compensation under the plan will need to be amended to include full plan year compensation instead of just compensation from effective date of participation. Otherwise, employer will still be dealing with a top-heavy issue at year end, albeit half of the top-heavy contribution will already have been satisfied by virtue of the 3% safe harbor contribution on compensation from the effective date of participation assuming the participant enters the plan mid-year, ie., 7/1..... End result would be to amend the definition of compensation to full year compensation in order for top-heavy issue to completely go away, correct?? Thanks.

Not sure as to the exact answer, but if the 3% safe harbor has already been funded for the entire plan year what's the problem with terminating the plan as of 5/31/04....?? There seems to be no advantage or savings by terminating the plan as of 5/14/04, for example, as opposed to having the date of termination be 5/31/04.

Employer is a non-profit that employees blind indivudals. Employer wants to put in a medical expense reimbursement plan. Any way to do this given the disability issue? Plan document for medical expense reimbursement plan generally provides for ineligibility once participant becomes disabled. Also, disability seems to be a qualifying event under COBRA upon which the disabled individual is to pay 150% of the costs of the benefits under the plan. Any ways around those two issues. Bottom line is that employer wants to provide as much as it can to the employees without negatively affecting their SSI Disability, Medicare, Medicaid, etc... coverages......? Thanks for any help.

Anyone filed Form 5310 answering Line 3c in the affirmative for a volume submitter plan and attaching a copy of the volume submitter specimen plan's opinion letter? Not technically a "determination letter" but per Ann. 2001-77 it serves the same purpose.

Given the recent GUST/EGTRRA (incl. 401(a)(9)) amendment activity, I would doubt that there are any amendments which would be required of a terminating money purchase pension plan. However,........ Anyone submitted a defined contribution to the IRS recently and had to amend to bring it up to speed with the current legislation, etc....? Was going to submit the 5310 with the current plan doc. plus the good faith EGTRRA amendment, but just wanted to know if there were any other amendments I needed to get into place instead of waiting for the IRS to kick it back to me. Thanks for your help.

Thanks Blinky.

Currently, e/er's plans provide for distribution to terminated participants on or after plan's anniversary date coinciding with or next following termination of employment. E/er would like to change this to as soon as administratively feasible after termination of employment due to recent employee layoff's. Terminated e/ee's want their money and E/er doesn't want to hold it any longer than it has to. Regarding an amendment to the plans is there any problem with having the amendment effective for all participants who terminated on or after the first day of the current plan year, ie, January 1, 2004? Thanks.

Add a 401(k) component.... I don't do any testing work, but I don't see how one e/ee will be able to request the $$$$ in hand, much less the plan's ability to honor such a request without a 401(k) arrangement in place. To do so would be operating the plan not in accordance with the plan document, ie, allocation formula.

Assume A's vested balance in PSP account is 50K and A takes out a loan for 25K. Can A then apply for a hardship distribution for the remaining 25K? ERISA Outline Book has an example in the discussion regarding how subsequent distributions don't affect 50% loan limit which would imply that it could be done. However, it doesn't seem prudent from a Plan standpoint b/c the remaining 1/2 of the account is generally held as security for the loan.... Any suggestions? Thanks in advance.

Is the plan actually a VEBA? If so, you may get more responses in the VEBA section of this message board. The VEBA non-discrimination rules are a lot more complex/different from the non-discrimination rules that apply to regular profit sharing plans. You mentioned that it was a "qualified retirement plan". Has a determination letter been received from the IRS. If so, I would assume that the provisions you are referring to, eg, different contribution rates for married vs. single employees, would be contained in the plan document that was submitted to the IRS. If that's the case, then there may be less of a problem than first perceived.... Maybe others can address your questions as well.....

As to the ADP/ACP issue in hpaine's post, adopt a safe harbor 401(k) and do away with the ADP/ACP testing.

Sal Tripodi's book refers you to the guidance in Notice 98-1 which states that if the plan is one under which at least 50% of the eligible employees were eligible in the prior year for another 401(k) plan maintained by the employer then it is a successor plan..... Other than being one step removed, the new PSP amended to safe harbor 401(k) would appear to still be subject to the successor plan rule.....???

E/er has 401(k) plan which e/er said would be terminated as of 12/31/03. E/er wanted to set up safe harbor 401(k) effective 1/1/04 but did not want to amend the earlier 401(k) plan. Now e/er says that the old 401(k) was never terminated. Clearly there are operational issues with the old 401(k) if the e/er has not been following the plan document. Assuming a proper resolution to terminate was adopted, is there any way to address the "successor plan" issue in 98-52 in regards to setting up a new safe harbor 401(k) effective as of 7/1/04, e.g., set up new profit sharing plan effective 1/1/04 and then amend that PSP effective 7/1/04 to add safe harbor 401(k) provisions....??

I would think that the "double counting" of service is only as to the participants employed on the date of the amendment who actually had hours of service in the requisite periods. In an attempt to simplify what I just said.... I think the double counting is solely for the purpose of determining the year of service for the short plan year period. I would think that the employee hired after 12/31 would be subject to the plan's normal 1,000 hours of service = 1 year of service (assuming that to be the case) rule and there would be no short year issues concerning that employee.....

My understanding is that the employer sets aside X cents per hour worked by an employee for medical expense reimbursement. The employee has not signed off on anything stating they want to set aside any said amount.

Employer has been operating med. exp. reimb. plan in a manner that e/ee's can accumulate expense dollars? from year to year. E/er now wants to make such amounts non-cumulative. E/er proposes to tell all plan participants that as of Jan. 1 next year, amounts will no longer be cumulative and that prior accumulated amounts will be lost unless reimbursements submitted before that date. Employer has had no written plan in place, but plans to get one in place setting forth the "new" rules as of Jan 1. Issues??? Thanks.

If he had a Will, then the person named as the Executor should have the authority to deal with the plan on all fronts. If no Will, then whomever qualified as the administrator/rix of the estate should be in the same position. As WDIK points out, follow the plan doc. re appointing trustees, plan administrator, etc..... If it's a prototype document, most prototype sponsors have dealt with this situation before.....

Tom: You mean that a safe harbor discretionary match (limited to 4% of participant's comp,....) will have to be tested going forward if the proposed regs. stay as they are?

We had a professional association that dissolved in 1987. PSP and MPPP hung around until 2001 when Nationsbank real estate issue got resolved. Plans happened to get audited in 2001 as well. NC statute allowed for authority of corporate officers to wind up the affairs of the corporation. Thus individual (former Pres.) was able to sign off on final 5500 as Pres. of XYZ INc.