Lori Foresz

Hi, Just wondering if anyone has experience with a terminated DB plan that hasn't filed premiums in a very long time. We have been advised to terminate through the PBGC and not risk the plan being treated as an on-going plan. I was thinking about just filing the Form 500 package normally, check the box "no" that asks if all PBGC premium have been paid to date and wait for an inquiry from the PBGC. Since I'm not aware of a voluntary compliance program for unpaid PBGC premiums I'm not sure the best way to proceed. The plan has only had 2 or 4 participants since it's inception and many years just one. Assets are sufficient to pay all benefits for employees. The owner is waiving unfunded amounts. If anyone has encountered this or can offer some insight, it would be greatly appreciated. Thanks

Hi, Thanks Tom. The owner will not be eligible to participate in the non-safe harbor plan. The way I'm thinking about this (and this may be wrong) is that he doesn't work for the company that sponsors the non-safe harbor plan (although he owns it)so we wouldn't need to specifically exclude him (but maybe we do, not sure). Thanks for your help.

Hi, I meant to say that the HCEs deferrals would NOT be included in the ADP test for the non-safe harbor plan. This is because he would not participate in multiple plans of the controlled group, so no aggregation would be required. Sorry for the typo.

Hi, Can two members of a controlled group have two 401(k) plans, one safe harbor and the other not? There is only one HCE (the 100% owner) and he will not participate in the non-safe harbor plan, so logic would say that his deferrals under the safe harbor plan would need to be aggregated/included in the ADP test for the non-safe harbor plan and top heavy aggregation would not apply. The safe harbor plan would satisfy coverage including the other group (it is much smaller). The non-safe harbor plan would have an exception to coverage since no HCE would benefit under the plan. Am I missing a critical issue here? It seems too good to be true. Thanks for the help!

To clarify, the filing would be required for the medical reimbursement portion of the plan that is a welfare feature. I do understand now (after reading) that this part of the plan may still be required to file Form 5500s (just not a Schedule F anymore for years after 2001). So, it is treated like any other welfare plan. If no separate trust exists (i.e. general assets of the employer) AND less than 100 participants "use" the medical reimbursement feature, then I'm thinking the plan would be exempt from filing like any other unfunded welfare benefit plan with less than 100 parts. I'm questioning why the administrator would say the plan has a trust and I need to look into that. Do 125 plans usually establish trusts? Any experience? Thanks for any help!

Hi, I was under the belief (apparently wrong) that the filing requirements for 125 plans were suspended in 2001. We just received a letter from a 125 administrator telling us that we need to file a form 5500 for the fring plan and that because assets are held in trust, a Schedule H needs to be completed (and I suppose an audit?) as well. I am trying to find clear guidance, but coming up short. Can anyone help? Many thanks. P.S. We do file a Form 5500 for their fully-insured welfare plan because it has greater than 100 parts. How would (or could) we combine that filing with the medical reimbursement filing if required?

Hi, I am struggling to comprehend what type of filing is required for a medical reimbursement portion of a 125 plan. I was under the belief that 125 plans no longer had to file Forms 5500, but now I understand that a medical reimbursement portion of the plan (as a welfare benefit feature) still needs to file The 125 plan admnistrator is saying that since contributions are held in trust, we need to complete Schedule H, which then requires an audit. Can someone help clarify why we need the filing and the audit? P.S. The company also has a fully-insured welfare plan that a Form 5500 is filed for because of the >100 participant rule. Is is possible to combine this as part of that filing, but what about the Schedule H?? Help is greatly appreciated. Thanks!

Hi, Help! I need my ERISA outline book and it hasn't arrived yet. Employer is a member of a controlled group. PS allocation is based on compensation, EXCLUDING compensation paid from the other CG member. Do I have to test the definition for discrimination with the denominator being all compensation from the CG? Help is greatly appreciated. Thanks Lori

Hi, Trying to find the answer, but struggling. Doctor participates in medical corps PS plan and is a 14% owner. Also receives directors fees for a nursing home and established a SEP for his Schedule C income. Doctor received $40k in the corps PS plan and is told he can't made a SEP contribution because he has already maxed his 415. I'm thinking that would be a separate 415 limit since the two businesses are not in a controlled or affiliated group. I know the SE rules get kind of tricky. Can anyone help? Thanks so much.

I think I know the answer, but would like to confirm. Employer who sponsors a top heavy plan is a member of a controlled group with another company. Some employees work for both entitities. For the top heavy plan, is the 3% based only on 415 compensation from the employer who sponsors the plan and not on combined comp from both members? P.S. The plan passes coverage including the the other members employees and the document excludes compensation from the other controlled group member in the regular definition of plan compensation. If anyone can confirm, I would great appreciate it! Thanks

Hi, I can't find any regulations that require an ESOP to actually hold ER stock, although not holding stock in an ESOP seems strange. A company set up an ESOP in 2001, but hasn't yet bought stock so no participants actually hold stock in the ESOP. Currently, participants own shares of mutual funds pending the purchase of a large block of stock from the owner. Currently, the plan is building up cash through contributions and then plans to purchase the block without an acquisition loan. Do we need to be worried that for 3 years the ESOP has actually held no stock? I'm thinking no, but any thoughts would be greatly appreciated. Thanks

Hi, If a plan passes coverage on the ratio percentage test, can it exclude people by name? I am thinking the answer is yes since the reasonable classification test that requires the classification of employees covered be based on objective business criteria is not a requirement for the plans that can pass on the ratio percentage test. As a second question. Could a plan exlude a class of employees that contains two of the oldest workers in the company, pass on the ratio test, and still be considered nondiscriminatory? I can't find anything that says a plan can't do this unless somehow age discrimination comes into play and preempts the coverage rules. Can anyone offer any insight or experience in this regards? Many thanks

Hi, Thanks for confirming what I thought. Do you know, did EGTRRA change this or have SIMPLE IRA contributions always counted towards 402(g)? P.S. I will bring up EGTRRA and research myself, but I am just trying to save some valuable time. Thanks!!

Thanks. The otherwise excludable rule is not being used but that is an interesting point. If that rule is used and otherwise excludables do not get the safe harbor, then the plan doesn't consist solely of SH contributions and the plan is top heavy. Then, the otherwise excludable group would have to get 3% of full comp (plus any not otherwise excludables with DOP comp less than full year comp) since the SHNEC would not need the top heavy contrib reqs. But to satisy top heavy, would only those employed at EOY have to receive full 3%? If yes, then it may still save money for a SH top heavy plan to use the otherwise excludable rule and DOP comp. Does that sound right?

I just want to confirm what I believe to be true. A plan is a SH 401(k) plan that is top heavy. For the plan year, the only contribution made is the 3% NEC, however, DOP compensation is used so that several participants do not get 3% of full-year pay (required if the plan were considered for top heavy). I presume this is okay since the plan is treated as not top heavy. However, if additional contribuitons were made, then the new entrants would need to get the 3% full top heavy contribution. Can someone please confirm that this is how they understand it as well. Many thank

Thanks Andy. Then would the pending legisation just change the interest rate for funding purposes not for determining present values? I need to be sure before I ask the ERISA attorney. He tends to dislike anyone questioning him. I will try to research some more. Thanks again.

We have a client with a terminated DB plan for which their ERISA attorney has advised us to delay paying out LSs because pending legislation may allow us to pay lower lump sums. The plan just recently terminated, so we still have time to wait (up to a year following the termination date). The plan is underfunded, so any money that can be saved on EE costs will decrease the amount of benefits the owner has to waive. I have been researching and is the pending legislation the July 2003 bill to replace the 30 year T-Bill rate with a conservative long term bond rate? Is there a phase- in or will we be able to use the new rate immediately. I am trying to find a commentary on the proposed bill. Does anyone know where I can find it? Many thanks

I am trying to figure out a non-spouse beneficiary's options regarding an inherited IRA. It looks like the beneficiary can defer distributions under December 31 of the year following death and then may be able to (if the document allows) take periodic distributions over his/her own life expectancy to avoid a one-time taxable distribution of the full IRA amount. Also, I understand the IRA document may not allow this and could require the entire amount be distributed to the beneficiary within 5 years of death. But, in any event, the beneficiary could have done nothing for at least a year following death. Can someone confirm my understanding is correct? Many thanks

Hi, I was under the impression that non-spouse beneficiaries could not transfer inherited amounts to their own IRAs without the entire amount being treated as a taxable distribution at the time of the transfer. Has this changed? Please let me know as I have a non-spouse beneficiary who wants to roll over an inherited IRA and I believe I need to tell her no. Thanks for your help.

Hi, I have read the instructions to the Form 5500, but still need some help (if possible) in understanding the increased bonding/audit requirement for small plans. An individually directed account plan has a participant who wants to invest in rental real estate. Despite the problems with UBTI (of which I still need to research) would this type of holding require an increased bond if more than 5% of assets? I think yes, but item 4 of the definition of Qualifying assets on the Form 5500 confuses me. It defines qualifying assets as assets held in participant directed accounts for which a regulated financial institution (as described in #1) provides annual statements to the participant. Does this basically mean that even if the account is participant directed, qualifying assets must still be held by one of the institutions described in item 1? If so, then why even have item #4? Any help in deciphering this is greatly appreciated? Thanks

Hi, I've spent time on several occasions reading and researching and still don't quite understand the plan document requirements for SIMPLE IRAs. It looks like the plan may use an IRS model form, a prototype, or a custom plan. I then read that each participant may establish a SIMPLE IRA account by using the 5305-S. What exactly does this mean. Does the plan need to have a document for the plan as a whole and then each participant uses the 5305-S as a type of account application? I know that a lot of the SIMPLE provisions cannot be altererd (distribution, vesting, etc) but it would seem that a document would need to exist to select things that can be elected by the employer such as who is eligible (i.e. not non-resident, union) and things like when deferral elections can be changed, etc. It anyone can shed some light on how these things interact in the real world, I would greatly appreciate it. Many thanks Lori!

Hi, I have had to research church plans for the first time and I have read through every thread since 1999. I was hoping to get clarification on these items. 1. Do the nondiscrimination rules apply to church 401(k) plans? I see a thread that says, yes, now these rules do apply (maybe after SBJPA??). 2. It looks like there is no submission required to be a nonelecting church plan. So, if you're relatively confident you're a church (i.e. a jewish temple) then you don't need to file for church status. 3. Non-electing church plans have no Form 5500 requirements. 4. Can a non-electing church plan use a prototype document that has ERISA language and still not be considered an ERISA plan. I think this is yes, but want to confirm. Any help is greatly appreciated!!

Hi, I think your question is almost identical to mine posted on Monday to which no one has responded. From what I have read an employer cannot make contributions under a SIMPLE plan for any year in which the employer also maintains a qualified plan under which any of its employees receives an allocation of contributions for a plan year beginning or ending within that calendar year. So, presumably, an active SIMPLE plan cannot co-exist in any calendar year with an active 401(k) plan or else the simple contributions will all be treated as excess contributions. As far as if the 25% penalty would apply I can't find any exception to that rule when a plan terminates and a participant has less than 2 YOP at the DOT. Maybe the SIMPLE could be frozen and then once everyone has two YOP it could be terminated. That way all participants could roll into the 401(k) plan. Just a thought. Hope this helps. Maybe some one else will respond. Good Luck!

Hi, I am new to the SIMPLE world, so any help is greatly appreciated. An employer is aniticpating selling the assets of his business sometime during 2004 and all employees (except of the owner and wife) will become employees of the buyer. After the sale, the owner hopes to set up a DB plan and accrue a contribution for 2004 for both him and his wife. Problem. The corporation currently has a SIMPLE IRA. So, since a SIMPLE IRA and a DB plan cannot exist in the same calendar year, the SIMPLE must be terminated before any 2004 contributions are made (i.e ASAP) and a 401(k) plan put in immediately to accomodate the former SIMPLE IRA deferrals and match for participants. Question. Will this logic work? It seems that it will but I may be missing something basic. Second. Is the termination of the SIMPLE the same as a QP? Just adopt a resolution to terminate and require distribuitions or rollovers within 12 months of the termination date. Third. Will employees with less than 2 YOP in the SIMPLE be hit with the 25% pre-mature W/D penalty and be precluded form rolling the assets over? This might not sit well with the employees. Thanks for all the help!!

Hi, Yes, it does. However, the conclusion seems to be that it is a gray area. I still need to read 1.401(a)(4)-11(d)(3)(i) to see if that helps as well. Thanks for the link!