Dave Baker

Of course, once an individual has performed the required service, he or she is eligible to participate right away -- though the plan usually has an entry date provision as well, so that the individual climbs on board on the next entry date. I think that a reemployed individual generally is eligible to be a full-blooded participant on the day he or she returns to work, on the "why not" theory ... he or she already has performed the plan's service requirement, and already has passed the entry date that next followed the date on which the service requirement was first met. The break in service rules are an exception, because they basically wipe out the prior service meaning that the individual again has to perform the service requirement in order to be eligible to participate. So I think you're on the right track ... is there anything in the terms of the plan that expressly wipes out prior service if a "break in service" has occurred? If not, then the individual oughta be a full-blooded participant as of the date of reemployment.

Here's a link to the DOL opinion letter JB2 described: http://www.dol.gov/dol/pwba/public/program...advisory94/94-3 2a.htm (click)

Does your company sponsor any other plan? If so, maybe it's already providing contributions of at least 3% of pay and maybe the top-heavy rules have been satisfied.

Gosh Frank, that rings a bell ... it comes from somewhere. Was it the old Revenue Ruling that provided rules for integration, before the 401(l) regs became effective for 1989 and later plan years ... Rev Rul 71-446, I think?

Pub 502 re Medical Expenses is now online in HTML format (can be read with a browser; doesn't require Adobe Acrobat reader) -- http://www.irs.ustreas.gov/prod/forms_pubs/pubs/p502toc.htm (click)

There ya go, Ray! Thanks for all your good work.

See also BenefitsLink, in particular the "Links by Topic" page at http://www.benefitslink.com/topics.shtml (click) ... click on 401(k) Plans and also try clicking on Surveys. Another resource that might turn up something on point is the Search feature on BenefitsLink: http://www.benefitslink.com/search (click) Anybody have particular comments or ideas about increasing 401(k) participation? Feel free to post a message onto this topic. [This message has been edited by Dave Baker (edited 02-16-99).]

Dunno about notice re plan mergers in general, but your plan's rights as a lender would seem to me to be governed by the terms of the contract between the two of you: the promissory note and security agreement. If there's nothing in there giving the lender the right to accelerate the note, I'm not sure they're legally allowed to!

I am designing a 20 hour retirement planning workshop. Included will be: 1. asset accumulation and investing 2. retiree health care, long term care 3. psycological impact of retiring 4. places to live 5. trust and wills Any graphs, color pictures, data or ideas would be appreciated. WalshCEBS@AOL.Com ------------------ WalshCEBS@AOL.Com Barney Walsh

What are the various course names? I'd be happy to set up a separate message board for each one.

Try my shareware program -- the Inte-greater -- and see how an integration formula affects the employees' accounts as you vary the contribution level (for a corporate-sponsored profit sharing plan). The program runs through 102 possibilities for an integration level (0 to 100% of the social security taxable wage base, and 80% plus $1) to determine which level is best for the favored employee(s) (typically the owner of the sponsoring business). It's $25 shareware. A couple of hundred people have registered it. (Heck, four or five have even paid for it. http://www.benefitslink.com/gif/smile.gif) See https://benefitslink.com/cgi-bin/inte-greater/

The trouble is see is that, while the partner might not be a "party in interest" or "disqualified person" for purposes of the prohibited transaction rules, the trustee certainly is a fiduciary and therefore is responsible for refraining from using plan assets for his own benefit. Arguably the decision of the trustee to use his own firm for the brokerage and advisory services is such a use of plan assets, even though it's the trustee's partner who's actually getting the commission. It would be better if the trustee were wholly unrelated to the plan sponsor (rare, but possible).

I am looking for information relating to Vacation Policy. Can an employer offer the choice of payout or roll-over? Can the employer deny pay-out if employees were not REQUIRED to work through the vacation?

Say you have a 401(k) that is 59% top heavy on 12/31/97. You add a DB on 1/1/98. The DB has no accrued benefits as of 1/1/98, but would definitely be TH on its own on 12/31/98. Since you have to calculate the top heavy percentage using both plans, what date do you use for the DB? Related question - say this combo is TH now or eventually, and there are people in the 401(k) who are not covered by the DB (both key and nonkey). Say you'd prefer to use the DB minimum for those in the DB. Can you provide the TH for the nonkeys who are only in the 401(k), without running into other problems? Thanks. I saw a similar question on PIX, although the situation was reversed. I'd like opinions (or facts) from others.

The IRS today issued final Roth IRA regulations. Here's a link to their full text, in hypertext format, provided by BenefitsLink: http://www.benefitslink.com/taxregs/1.408A-final.shtml (click) This topic is "locked," which means you can't post a message in this topic. This message is only intended to serve as an anchor to the full text of the final regs. To post a message about the final regs or any other Roth IRA topic, just click on "Start a New Topic" below. [This message has been edited by Dave Baker (edited 02-04-99).]

The long-proposed COBRA regulations have gone final. IRS issued them today. Hypertext version is online at http://www.benefitslink.com/taxregs/54.4980B-final.shtml (click) An overview, from the preamble to the new final regs: The regulations are intended to provide clear, administrable rules regarding COBRA continuation coverage. The regulations give comprehensive guidance on many questions under COBRA, with a view to enhancing the certainty and reliance available to all parties -- including employees, qualified beneficiaries, employers, employee organizations, and group health plans -- in determining their COBRA rights and obligations. The guidance is designed to further the protective purposes of COBRA without undue administrative burdens or costs on employers, employee organizations, or group health plans. For example, the regulations: * Prevent group health plans from terminating COBRA continuation coverage on the basis of other coverage that a qualified beneficiary had prior to electing COBRA continuation coverage, in accordance with the Supreme Court's decision in Geissal v. Moore Medical Corp. * Give employers and employee organizations significant flexibility in determining, for purposes of COBRA, the number of group health plans they maintain. This will reduce burdens on employers and employee organizations by permitting them to structure their group health plans in an efficient and cost- effective manner and to satisfy their COBRA obligations based upon that structure. * Provide baseline rules for determining the COBRA liabilities of buyers and sellers of corporate stock and corporate assets and permit buyers and sellers to reallocate and carry out those liabilities by agreement. This will significantly enhance employers' ability to negotiate and to plan appropriately for the treatment of qualified beneficiaries in connection with mergers and acquisitions, while protecting the rights of qualified beneficiaries affected by the transactions. * Limit the application of COBRA for most health flexible spending arrangements. This will ensure that COBRA continuation coverage under health flexible spending arrangements is available in appropriate cases without requiring continuation coverage where that would not serve the statutory purposes. * Eliminate the requirement that group health plans offer qualified beneficiaries the option to elect only core (health) coverage under a group health plan that otherwise provides both core and noncore (vision and dental) coverage. * Give employers, in determining whether the small-employer plan exception applies, the option of counting by pay period rather than by every business day, and provide, for that exception, for the consistent treatment of part-time employees through the use of full-time equivalents. This topic is "closed," which means that messages cannot be added to it, because it is only intended to provide an anchor to the full text of the final regulations; to post a message about the final regulations please click on "Start a new topic" below. [This message has been edited by Dave Baker (edited 02-03-99).]

The IRS issued today a set of proposed regulations -- in addition to today's new final regulations -- on COBRA. Hypertext version is online at http://www.benefitslink.com/taxregs/54.4980B-proposed.shtml (click) An overview, from the preamble to the proposed regs: The new set of proposed regulations addresses how the COBRA continuation coverage requirements apply in business reorganizations. Also proposed are rules relating to the interaction of the COBRA continuation coverage requirements and the Family and Medical Leave Act of 1993, which were previously published as Notice 94-103 (1994-2 C.B. 569), and certain other issues. * * * The new proposed regulations would make a number of changes to the section in the final regulations that addresses which plans must comply with the COBRA continuation coverage requirements. The principal changes being proposed are to add rules simplifying the determination of whether the small-employer plan exception applies, giving employers and employee organizations broad discretion to determine the number of group health plans that they maintain, and providing an exception for certain health flexible spending accounts. * * * Business Reorganizations The 1987 proposed regulations provide little direct guidance on the allocation of responsibility for COBRA continuation coverage in the event of corporate transactions, such as a sale of stock of a subsidiary or a sale of substantial assets. Commenters on the 1987 proposed regulations requested further guidance on corporate transactions, pointing out that the existing degree of uncertainty tends to drive up the costs and risks of a transaction to both buyers and sellers. The IRS and Treasury share this view and believe also that greater certainty helps to protect the rights of qualified beneficiaries in these transactions. The IRS has been contacted by many qualified beneficiaries whose COBRA continuation coverage has been dropped or denied in the context of a corporate transaction. In many cases, these qualified beneficiaries have been told by each of the buyer and the seller that the other party is the one responsible for providing them with COBRA continuation coverage. The preamble to the 1998 proposed regulations requested comments on a possible approach to allocating responsibility for COBRA continuation coverage in corporate transactions. Commenters suggested that, in a stock sale, as in an asset sale, it would be consistent with standard commercial practice to provide that the seller retains liability for all existing qualified beneficiaries, including those formerly associated with the subsidiary being sold. The IRS and Treasury have studied the comments and given consideration to several alternatives with a view to establishing rules that will minimize the administrative burden and transaction costs for the parties to transactions while protecting the rights of qualified beneficiaries and maintaining consistency with the statute. Accordingly, the new proposed regulations make clear that the parties to a transaction are free to allocate the responsibility for providing COBRA continuation coverage by contract, even if the contract imposes responsibility on a different party than would the new proposed regulations. So long as the party to whom the contract allocates responsibility performs its obligations, the other party will have no responsibility for providing COBRA continuation coverage. If, however, the party allocated responsibility under the contract defaults on its obligation, and if, under the new proposed regulations, the other party would have the obligation to provide COBRA continuation coverage in the absence of a contractual provision, then the other party would retain that obligation. This approach would avoid prejudicing the rights of qualified beneficiaries to COBRA continuation coverage based upon the provisions of a contract to which they were not a party and under which the employer with the underlying obligation under the regulations to provide COBRA continuation coverage could otherwise contract away that obligation to a party that fails to perform. Moreover, the party with the underlying responsibility under the regulations can insist on appropriate security and, of course, could pursue contractual remedies against the defaulting party. The new proposed regulations provide, for both sales of stock and sales of substantial assets, such as a division or plant or substantially all the assets of a trade or business, that the seller retains the obligation to make COBRA continuation coverage available to existing qualified beneficiaries. In addition, in situations in which the seller ceases to provide any group health plan to any employee in connection with the sale -- whether such a cessation is in connection with the sale is determined on the basis of the facts and circumstances of each case -- and thus is not responsible for providing COBRA continuation coverage, the new proposed regulations provide that the buyer is responsible for providing COBRA continuation coverage to existing qualified beneficiaries. This secondary liability for the buyer applies in all stock sales and in all sales of substantial assets in which the buyer continues the business operations associated with the assets without interruption or substantial change. A particular type of asset sale raises issues for which the new proposed regulations do not provide any special rules. (Thus, the general rules in the new proposed regulations for business reorganizations would apply to this type of transaction.) This type of asset sale is one in which, after purchasing a business as a going concern, the buyer continues to employ the employees of that business and continues to provide those employees exactly the same health coverage that they had before the sale (either by providing coverage through the same insurance contract or by establishing a plan that mirrors the one that provided benefits before the sale). The application of the rules in the new proposed regulations to this type of asset sale would require the seller to make COBRA continuation coverage available to the employees continuing in employment with the buyer (and to other family members who are qualified beneficiaries). Ordinarily, the continuing employees (or their family members) would be very unlikely to elect COBRA continuation coverage from the seller when they can receive the same coverage (usually at much lower cost) as active employees of the buyer. Consideration is being given to whether, under appropriate circumstances, such an asset sale would be considered not to result in a loss of coverage for those employees who continue in employment with the buyer after the sale. A countervailing concern, however, relates to those qualified beneficiaries who might have a reason to elect COBRA continuation coverage from the seller. An example of such a qualified beneficiary would be an employee who continues in employment with the buyer, whose family is likely to have medical expenses that exceed the cost of COBRA coverage, and who has significant questions about the solvency of the buyer or other concerns about how long the buyer might continue to provide the same health coverage. Under one possible approach, a loss of coverage would be considered not to have occurred so long as the purchasing employer in an asset sale continued to maintain the same group health plan coverage that the seller maintained before the sale without charging the employees any greater percentage of the total cost of coverage than the seller had charged before the sale.

Ray -- what do you (or others) think of this idea? This was suggested to me by a very bright lady via email. We could make "Continuing Professional Association" be a "category" of message boards; turn this one into "General" and then create others for each ASPA certification course, and maybe other courses from other programs. Quoting: "Exams are structured as a self-study program. Every exam has a study-guide that states the required reading (usually Pension Answer Book and the ERISA Outline Book). Outlines the topic, reviews key concepts, and has review questions / examples. However, the answers provided are not always that easy to understand. Also, there are old exams available with answer key and the study guide chapter that it pertains to, but again the answers are not explained and may not be easy to understand if a calculation is required. So maybe what would be a good approach is a message board by exam name (ie, ASPA C4, ASPA C1, etc.) Then the posted topic could be each study guide chapter (ie, Chap 1, IRC 414). This way you would not have to read all the questions for each exam. ASPA C1 - Administrative & Qualification Issues ASPA C2 (DB) - Administrative Issues of Defined Benefit Plans ASPA C2 (DC) - Administrative Issues of Defined Contribution Plans ASPA C3 - Financial and Fiduciary Aspects of Qualified Plans ASPA C4 - Advanced Retirement Plan Consulting"

The Health Insurance Association of America says, in a press release: . The full report (click), in Adobe Acrobat Reader (pdf) format. Do you agree with the conclusions?

The IRS has released final regulations under section 3121(v)(2) of the Internal Revenue Code that provide guidance as to when amounts deferred under or paid from a nonqualified deferred compensation plan are taken into account as wages for purposes of the employment taxes imposed by the Federal Insurance Contributions Act (FICA). Section 3121(v)(2), relating to treatment of certain nonqualified deferred compensation, was added to the Code by section 324 of the Social Security Amendments of 1983. The final regs are quite similar to the proposed regs, but appear to reflect many helpful tweaks that had been suggested by employers and practitioners in comments to the proposed version. The final regs are online at http://www.benefitslink.com/taxregs/31.3121v2.shtml (click)

Will the trust be a QTIP trust for a surviving spouse?

I suppose an amendment eliminating plan loan provisions ideally would say "effective X/X/XXXX, except for loans outstanding on that date" -- but arguably that's not needed because the promissory note is basically a contract, setting forth the lender's rights and the borrower's obligations. That contract isn't affected merely because one party decides to change it without the consent of the other party; no amendment to the plan could expressly force the borrower to repay the loan immediately, so I don't think an amendment that merely removes loan provisions would have that effect.

The IRS National Office has published a : IRS Revenue Procedure 99-13. Excerpt: This revenue procedure provides a comprehensive system of correction programs and procedures for an employer that offers a plan that is intended to satisfy the requirements of section 403(B) of the Internal Revenue Code (the "Code"), but that has failed to satisfy those requirements because of Operational, Demographic, or Eligibility Failures. This system permits an employer to correct these failures, and thereby provide its employees with retirement benefits on a tax-favored basis. This revenue procedure modifies and amplifies the Employee Plans Compliance Resolution System (EPCRS), set forth in Rev. Proc. 98-22, 1998-12 I.R.B. 11, to include specific programs and procedures relating to 403(B) Plans. In addition, this revenue procedure replaces the program described in Rev. Proc. 95-24, 1995-1 C.B. 694, which established the Tax Sheltered Annuity Voluntary Correction (TVC) program, and which was extended by Rev. Proc. 96-50, 1996-2 C.B. 370. Except as otherwise indicated in this revenue procedure, the specific provisions of EPCRS apply to 403(B) Plans. Here's a link: http://www.benefitslink.com/IRS/revproc99-13.shtml (click)

Please list names, phone numbers and prices! This is great info for sharing. Thanks!

Basically you just have to avoid causing the IRA to engage in a "prohibited transaction" -- can't purchase the investment from the IRA owner, a company controlled by the IRA owner, etc. -- the tax code doesn't really prohibit any particular kind of investment at all (other than so-called "collectibles"). So a security issued by a start-up company generally would be fine. Sometimes prohibited transaction problems crop up when the IRA owner is involved in starting the company that issues the securities, or will be an employee of that company. Generally it's OK for the IRA owner to invest in the company at the same time that the IRA makes the investment, or even to serve as a director of the company. One of the prohibited transactions, you see, is where an IRA owner "uses" the IRA's investments for his or her own benefit ... it's a squishy concept.