Carol V. Calhoun

You are correct. However, the recently passed (but vetoed) tax bill would have changed this result. And the consensus among practitioners is that the benefits provisions of that bill are noncontroversial enough so that they will show up in whatever tax bill passes. So when is one going to pass? Sorry, but I'd need a crystal ball to predict that one! -------------------------------------- Employee benefits legal resource site

The Title II requirements are basically the I.R.C. requirements for the contracts under the arrangement to qualify as a 403(B) contracts. They are found in I.R.C. § 403(B) itself, 401(f), 402(g), and 415. As for the Department of Labor, you might write them a note, or just wait for them to ask and then explain what is going on. There is not a formalized procedure for notifying them that your plan never was subject to Form 5500 requirements in the first place. --------------------------------------- Employee benefits legal resource site

There is absolutely no authority out there on this one. However, it would be hard to argue that an employer is maintaining a plan if it makes no contributions to the plan, if all of the assets of the plan are owned by participants directly with no employer involvement, and if the employer has no other involvement. --------------------------------------- Employee benefits legal resource site

Sounds like you need a divorce lawyer ASAP. A governmental plan is not required to comply with federal rules concerning division of assets in divorce. On the other hand, a governmental plan is required to comply with applicable state and local laws (both those governing division of assets generally, and those governing treatment of pension assets). Someone with experience in the local law of that municipality could advise you on your rights. The mere fact that benefits under the plan are not vested if he leaves does not cause his plan benefit to have no value. In the first place, even when employer-provided benefits are not vested, a plan may well provide for a lump sum payout of employee contributions plus interest. In the second place, even if you cannot get an immediate cash settlement on the plan, you may (depending on state and local law) be able to arrange to get a percentage of the benefit if and when it is paid out. Obviously, I cannot provide you with legal advice outside of an attorney-client relationship. And since I'm not in Pennsylvania, I probably wouldn't be the best person to provide you with advice anyway. But as someone who has been through a divorce, complete with division of pension assets, I can strongly advise you to consult a divorce lawyer with experience in your jurisdiction right away. -------------------------------------- Employee benefits legal resource site

For anyone who wants a complete list of the year 2000 limits, a chart is available by clicking here. ---------------------------------- Employee benefits legal resource site

I would agree with Everett on this one. Because the private letter rulings are inconsistent with the statute and regulations, and because a private letter ruling is not binding on the IRS with respect to any taxpayer other than the one which requested it, I advise clients to be extremely cautious about relying on the rulings you mention, even if the facts are identical. And to the extent that you are not dealing with a purchased service credit situation, the IRS might well see multiple elections are undercutting the prohibition on governmental plans (other than grandfathered ones) including 401(k) features. ---------------------------------- Employee benefits legal resource site

It seems to me that all you are doing here is imposing an upper limit on the amount employees can contribute, not requiring them to actually make the election, so you should be okay. Of course, this would not completely eliminate the risk of an overcontribution, although it would minimize it. The reason is that some people (those who have made A and B elections in the past) are not eligible to make C elections. Of course, we are all looking forward to the abolition of the maximum exclusion allowance. That provision was in the vetoed tax bill, and speculation is that it will also be included in whatever tax bill DOES pass this year. --------------------------------------- Employee benefits legal resource site

Well, the good news is that if you are a governmental employer, you don't have to worry about the Form 5500 requirements. And if the contracts are excluded from being an "employer plan" under DOL regulations (because they are salary reduction only and meet certain other requirements), you also have no Form 5500 requirement. The bad news is that if you do not fall within one of these exemptions, there is simply no clear guidance as to how to proceed, unless all of the purchased 403(B) contracts are individual contracts (or are group contracts which can be split up into individual contracts). The problem is that all the rules governing Forms 5500 call for them to be filed until the trust under the plan has been completely distributed. This is a difficult rule to apply in a situation in which the assets are in annuity contracts or custodial accounts (over which the employer may not have much control) instead of a trust. Presumably, distributing individual annuity contracts or custodial accounts to each participant would work. However, we have run across situations in which an insurance company which has provided a group 403(B) annuity simply has no way to divide it up, or provides a mechanism only at a prohibitive cost. No guidance is available on how long one must go on filing Forms 5500 under such circumstances. -------------------------------------- Employee benefits legal resource site

Any barriers to this arrangement would be matters of state law. If your state permits a municipality to adopt such a plan, nothing in federal law would prohibit it. Indeed, it is a fairly common plan design. --------------------------------------- Employee benefits legal resource site

Nothing prevents a governmental agency from having a 125 plan; indeed, many of them do. However, unlike governmental retirement plans, which are exempt from Form 5500 requirements, governmental 125 plans are subject to IRS (but not Department of Labor) Form 5500 filing requirements. --------------------------------- Employee benefits legal resource site

slt, the answer to your question is yes. In both 401(a) and 403(B) plans, only elective contributions apply toward the 402(g) limit. You can click here to see other similarities and differences among 401(k), 403(B), and 457 plans. ------------------------------------------- Employee benefits legal resource site [This message has been edited by CVCalhoun (edited 10-28-1999).]

Good question! No one quite knows how closely two nonprofit organizations have to be before they are treated as a single employer for section 415 purposes. But Notice 89-23 at least contains some general guidance; you might want to check that out. ------------------------------------------ Employee benefits legal resource site

Yep, so long as applicable state law allows it. Of course, I won't comment on the political aspects, just the legal ones. --------------------------------------- Employee benefits legal resource site

Sorry, my original wording was confusing. I hope that the edits make it clearer. ---------------------------------------- Employee benefits legal resource site

With the IRS and Social Security just having announced the new year 2000 limits on everything from section 403(B) plans to the Social Security wage base, here's a handy chart showing the limits from 1996 through 2000. -------------------------------------- Employee benefits legal resource site

With the IRS and Social Security just having announced the new year 2000 limits on everything from section 403(B) plans to the Social Security wage base, here's a handy chart showing the limits from 1996 through 2000. -------------------------------------- Employee benefits legal resource site

Well, we don't have to estimate any more; you can click here to see what all the new limits are. ------------------------------------- Employee benefits legal resource site

Yes, so long as the plan making the distribution is also a 401(a) plan, and if the written plan document allows for it. This is in I.R.C. § 402, which is the same for governmental and private plans. --------------------------------- Employee benefits legal resource site

Currently, it would. However, there was a proposal in this year's tax bill which would have changed that rule. And while the tax bill got vetoed, it is expected that future legislation will include most or all of the benefits provisions of the bill that was vetoed. --------------------------------- Employee benefits legal resource site

The problem is that I.R.C. § 415(e)(5) is the source of the rule that a 403(B) plan is not to be treated as a plan of the employer which actually sponsors it, but only of any business controlled by the participant. Although you are right that the first part of that rule is not explicit (since the statute by its terms mentions only the second part), it is the only part of 415 which could be construed to cause a 403(B) plan sponsored by an employer not to be treated as a plan of that employer for purposes of I.R.C. § 415(f), which calls for all plans of an employer to be combined in applying the 415 limits. The question may soon be moot, however. TRA '99 would have corrected the problem. While of course TRA '99 was vetoed (isn't that an annual tradition by now?), the general expectation seems to be that the pension plan provisions will eventually turn up in whatever tax bill is passed. -------------------------------- Employee benefits legal resource site [This message has been edited by CVCalhoun (edited 10-08-1999).]

Gee, Peter, looks like I forgot to play my "consult your state law" broken record this time--thanks for the catch! Seriously, you're right that while ERISA would not preclude employer involvement in a governmental plan, state law should be consulted to see whether it either requires or forbids a particular kind of employer involvement. -------------------------------------- Employee benefits legal resource site

Danwitz-- Further to our original discussion, the National Council on Teacher Retirement's program for its annual meeting, page 12, indicates that the National Retired Teachers Assocation has performed a study which showed the 31 out of the 50 states had constitutional pension protections. (The program requires the Adobe Acrobat reader, a free download, to view.) Is that close enough to 2/3 for you? ---------------------------------------- Employee benefits legal resource site

And just to make your life more complicated, the tax bill recently vetoed by the President, but expected to come back in some form, would modify the limits. However, these changes are typically not effective until 2001, so at least you have a little advance warning. ---------------------------------- Employee benefits legal resource site

Well, I'm not sure I'm the one to answer this. However, I modified your subject line, in hopes that perhaps someone else will see and answer it. ----------------------------------------- Employee benefits legal resource site

Yes and no. (Is that clear?) No annuity product issued to a governmental 457 plan before the new law would comply with the new law. However, minor amendments to the annuity contracts could bring them into compliance. The reason for this is that before I.R.C. § 457(g), a 457 plan was required to be UNfunded. (This rule still applies to 457 plans of tax-exempt employers other than governmental employers.) Thus, any annuity contract used to pay plan benefits had to be owned by the employer, or by a trust which was subject to the claims of the employer's creditors. Although the performance of the contract could be used to measure the ultimate benefit under the 457 plan, the plan participants could not have any kind of security interest in the contract itself. Under the new rules (click here for gory details), an annuity contract undera governmental plan must be used solely for the payment of benefits to employees, and must not be subject to the claims of the employer's creditors. Thus, none of the old contracts would meet the terms of the new law. However, if the contract is amended to state that amounts set aside under the contract are to be used solely for the benefit of plan participants and beneficiaries, and not used for the benefit of the employer or its creditors, it can comply with the new law. The rules on withholding may, however, be a stumbling block. Essentially, the entity which pays amounts from the contract is responsible for reporting on and withholding from such amounts. Thus, unless you can find a way to contract out the job of reporting and withholding, an inability to do that job yourself would be a problem if you decided to stay in (or go back to) that business. ------------------------------------ Employee benefits legal resource site