Christine Roberts

Where is it specified that a plan must satisfy cross-testing requirements as of a certain day in the plan year (other than the methods available under Treas. Reg. 1.410(B)-8(a), for minimum coverage rules)? Is L/D of plan year always acceptable? And can cross-testing (new comparability) be performed based on a short plan year, including a short year of compensation?

Can a 457(f) deferred compensation plan condition reciept of plan benefits upon a participant's agreement to render consulting services to the employer, after benefits have vested? If the participant refuses to do so, can the plan call for "forfeiture" of already vested benefits? This doesn't sound right to me.

The "prototype" (used loosely) plan document checklist requests initial effective date, and restatement date. My first instinct was to use the date the employer first allowed deferrals to a TSA, as the initial effective date, but no one seems to remember when that was. Since there wasn't a "plan" per se under the old regime, and no 5500 filings, it is still the best approach to use that date as the original "effective" date of the plan and treat the transition to ERISA status as a "restatement"?

A private nonprofit has had a non-ERISA 403(B) arrangement for its employees for some considerable time. Employer now wants to add matching contributions and is establishing an ERISA plan in order to do so. Is the initial effective date for the plan: (A) the date the new plan is established or (B) the date the non-ERISA 403(B) arrangement first came into existence? Does it make any difference that the employer "memorialized" the terms of the non-ERISA plan, in writing, sometime in 2000? The written summary of terms does not contain all info. required under ERISA.

....and here I was hoping for some "pearls of wisdom" from Mr. Maldonado on the situation I describe!

Thanks for all of the input; I received good advice off-board to simply treat the plan as terminated in 1997, and treat the loan as a distribution of 100% of plan assets as of that time. Still has a potential for DQ but given that we will be terminating the plan and including all assets in taxable income, and that no rank and file participants are involved, I would hope that the IRS would not pursue the matter further.

Thank you for your response. I am trying to rule out specific voluntary disclosure/compliance programs, so any further comments from any source would be appreciated. Presuming (however unlikely) that a voluntary disclosure/compliance program were available, could any advantage be taken of the fact that EGTRRA would now permit a plan loan to a sole proprietor (albeit not a loan of that size)?

Sole practitioner sponsors Keogh/PSP for himself and spouse. Due to financial problems, takes a loan of 100% of plan assets in 1997, to use for living expenses. Does not file 5500 EZ for 1997 or subsequent. Now has letter from IRS requesting filings from 1997 on. Cannot restore 100% of plan assets but could probably restore 50% of borrowed assets. Is there a voluntary disclosure program that offers a way to ameliorate or possibly resolve this situation?

Thank you for the useful comments. I am wondering if, presuming the contribution percentages are specified in an annual board resolution (or the equivalent for a non-corporate entity), would it also be possible to specify the interest rate assumption and mortality table, applicable for that year? Is it even likely that typical changes in plan demographics would require use of different assumptions, in order to pass nondiscrimination testing?

Must a plan document specify the percentage allocation for each rate group, or a maximum which the allocation does not exceed, in order to satisfy the "definitely determinable" benefit formula rule? Is the answer to this question changed in any way by the introduction of the gateway testing rules?

The IRS Cincinnati office distributed a tack-on GUST amendment for terminating plans, some time back. Is it still an acceptable way to update a plan terminating in 2001? Would the answer be different depending on whether or not the plan intends to file a Form 5310?

Is it 12/31/01 (for calendar year plans), or the 2001 tax return deadline for employer sponsoring the plan?

Must a provision allowing for 100% vesting upon disability be retained in a plan restatement for all participants in the plan as of the restatement date? Or only those participants who have 3 years of service at time of restatement and who elect to retain the old vesting schedule? Presume the following: Paired MPP Plan and PSP provide for 100% vesting upon disability. MPP plan is merged into PSP, and PSP restated, effective January 1, 2000. Disabiliity vesting provision is NOT carried over to restated PSP. Participant with fewer than 3 years of service at time of merger and restatement is injured in 1999 and injury results in disabiility during 2000, after effective date of restatement eliminating 100% vesting upon disability. Participant terminates in 2000 and demands 100% vesting due to disability. Any comments appreciated.

Thank you for the further input. Is there a Blue Book citation or other reference to the Congressional record addressing the intentions behind the 401(a)(5)(G) exemption?

Kip, sorry for the confusion. The client had three years of claims (loss) data for individual participants. The data was divided into "soft" costs (i.e. medical care provided in-house) which was based on Medicare rates, and "hard" costs that required service by an outside provider. Evidently they did not have claims data for dependents.

Would an employer's in-house administration of a medical expense reimbursement component of a Sec. 125 plan be subject to HIPAA privacy regulations, when (and if) they go into effect??

Kip, you stated: "I’m not sure I would agree that having an insurer giving a premium rate related to another group would be acceptable, except that in the event that the plan was going into its first year without previous claims experience. " Here, the insurer's quote was based on three years of the client's actual claims experience. Presuming we can confirm that the insurer's methodology was consistent with the COBRA regulations (e.g., the calculations took COLAs into account), hasn't the employer made a good faith effort to meet the regulations' requirements for self-insured COBRA premiums? Does it matter that the insurer, rather than the employer, did the calculations based on actual claims history?

So is there anything stopping a governmental entity from establishing a trust that is tax-qualified under IRC 401(a), in connection with a deferred compensation plan limited to a "top-hat" group; i.e., the plan would not need to be extended to non-top-hat employees?

Does anyone out there have any experience drafting a partial retirement overlay for a nonqualified deferred compensation (top-hat) plan - i.e., participants receive a set amount over a ten year period following death, disability, or retirement, or alternatively they draw on a portion of the same amount during a partial retirement phase, with the balance payable upon death, disability, or full retirement.

I have confirmed that the quote my client received from an insurer was based on three years of the client's own claims experience for employee/participants. If I correctly understand Kip's first post, therefore, the quote should be acceptable as a basis for a self-insured COBRA premium.

In this case the employer is a medical care provider. All care is provided "in house" and tracking of claims/expenses is not as discrete a function as it would be for a different type of entity.

I know for a fact that Kirk is a gentleman OTP - over the phone. I extrapolated from that . . . Seriously, though, if due to periodic repurchases of stock by the employer the frozen plan's percentage of employer stock goes below, say, 50% (i.e. is no longer the "primary" plan investment), but is not below 10% (permissible threshhold for non-ESOP), is the plan in disqualified status, or is there a fiduciary breach by virtue of plan asset allocation? Just wondering . . .

Thank you gentlemen, for the helpful comments.

Can the employer "freeze" the ESOP and periodically buy stock back from the plan in annual increments? This presumes another qualified plan would be established for ongoing contributions (cash).

Just to confirm, it is NOT an acceptable shortcut around COBRA regulations re: deriving premiums for a self-insured plan, for the plan to get a COBRA premium quote from an insurer applicable to plans of comparable size/claims experience? I have a client whose ins. broker is insisting that this is a widely-accepted methodology.