Carol V. Calhoun

I think that the idea was that an employer can still adopt an excess plan, which could include accruals for past years in which the 415 limits would otherwise have been exceeded. Since governmental plans are not subject to the section 411 rules on cutbacks of accrued benefits, and since most state anticutback rules permit the elimination of a benefit in one plan so long as it is replaced with an equal benefit in another plan, this should work. ---------------------------------------- Employee benefits legal resource site

As far as I can make out, you are right. Only pitfall to avoid would be if you allowed the executive director (or anyone else) to make salary reduction contributions, and did not provide the same right to other nonexcludible employees. See I.R.C. § 403(B)(12). But otherwise, the plan you propose should work. --------------------------------------- Employee benefits legal resource site

As far as I can make out, the 415 definition of compensation does not apply for purposes of the maximum exclusion allowance. However, you have to remember that the period in which the compensation is measured is different for 403(B) purposes than for 415 purposes. For section 415, the period used to calculate compensation is the limitation year. For the maximum exclusion allowance, it is the most recent one-year period of service. The regulations make clear that if someone has ceased working, you would look back to the most recent period when they did work to determine includible compensation. Indeed, if the person had part-time service, e.g., 50% time, you would add the most recent two years of compensation together to calculate includible compensation. As a result, absent the 415©(3)© rule, a disabled person would have no compensation at all in any year after the year of disability. However, a disabled person would go on having includible compensation for maximum exclusion allowance purposes indefinitely. -------------------------------------- Employee benefits legal resource site

The determination letter process is only for qualified plans. Rev. Proc. 99-6, Rev. Proc. 93-10 and Rev. Proc. 93-12. However, 403(B) plans can receive private letter rulings under Rev. Proc. 99-4. And although Rev. Proc. 99-3 indicates some specific areas in which rulings under section 457 will not be issued, it provides that such rulings are otherwise obtainable. ------------------------------------ Employee benefits legal resource site

No, the revenue procedure does not permit direct investment in such funds. The revenue procedure deals with a situation in which someone has invested in a contract which constitutes an annuity contract under applicable state law. However, because the contract is a variable annuity contract, it will not be treated as an annuity for federal tax purposes unless it meets the diversification standards of Code section 817(h). (You can click here for a general description of the tax requirements for and treatment of variable annuities.) For purposes of section 817(h), if a variable annuity contract is invested in a mutual fund which has no owners other than insurance companies and their separate accounts, you look to the underlying investments of the mutual fund to determine whether the diversification standards are met. However, if a variable annuity contract is invested in a mutual fund which is available to the public, you treat the mutual fund as being a single investment. Thus, if the only investment of a variable annuity contract is a publicly available mutual fund, the contract would not meet the diversification standards. Code section 817(h) was primarily developed with commercial annuities, not annuities under 403(B) plans or IRAs, in mind. The alleged abuses it was intended to deal with are simply not normally present in a 403(B) contract or IRA. Thus, the revenue procedure in effect says the Code section 817(h) will be disregarded in examining annuities purchased under such arrangements. Hope this helps! --------------------------------------- Employee benefits legal resource site

Are we talking about a governmental 457 plan? Because no governmental retirement plan is required to file a Form 5500. Click here for the full text of the IRS announcement on the subject. ------------------------------------------ Employee benefits legal resource site

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