Dawn Hafner

Is this form subject to public disclosure? I don't see anything to indicate it would not be, but what about when individual participant loans are reported on this schedule? It hardly seems logical that other participants should be privy to that information. Under the instructions for 27a (assets held for investment purposes) it states that participant loans secured soley by participant account balances may be aggregated as "participant loans" rather than listed individually, but the instructions for 27b don't indicate this. The auditor prepared the schedule listing each participant. Would it be acceptable to prepare a schedule for participant disclosure that aggregated these loans into one participant loan number? Any thoughts are apprecited?

Similar issue, but concerning terminating an ESOP. Can the employer simply buy all of the stock from the ESOP at termination by having a separate appraisal done? Or are ESOP terminations completed by issuing stock as the distribution and then participants sell back through a put option if they wish? Does the first situation violate the ESOP rule that employees must be able to demand their distribution in the form of stock?

Thankfully, this was just in process and was stopped in time, but it has come up in the past. It seems there are administrators that forget their client is an S corporation. I did work on a VCR request for a client a few years ago and the IRS did view it as a taxable event at the time of the loan withdrawal unless their view has changed since then.

Does your 401(k) plan state whether 401(k) deferrals are calculated before or after other elective deferrals? Sometimes plans do this to define whether salary deferral comp is comp prior to 125 plan (normally) or comp after 125. Even though you are not calculating a percentage for this individual, if your plan said after 401(k) deferrals are calculated after other elective deferrals then the full 125 amount should be taken and remainder 401(k).

No, they were never eligible under the 401(k) portion of the plan since they terminated before the CODA was part of the plan.

If an S corp shareholder takes a participant loan, what is the correction? At the time the loan was taken it was not a loan due to not meeting the participant loan exemption rules, so it was a distribution at that time. This is also a prohibited transaction. The fact that the transaction was taxable does not fix the prohibited transaction. The "loan" should also be repaid to the plan, creating basis for the taxpayer. Each year the "loan" is outstanding the 15% exise tax applies to the interest. Comments on my short anaysis? Anyone dealt with fixing this type of transaction?

Has anyone built a successful consulting practice in self-audit services? How are your fees structured? Do you follow the IRS audit guidlines when reviewing the plan? Typically how long does a review take? Do you do a management letter? What percentage of the plans require a self-correction procedure and how many clients opt to do this? How do you market your services? What term do you use when referring to this service - (audit vs compliance review)? What kind of engagement letter do you use? Also has anyone found a demand for clients that want a simplified training program to train their staff responsible for the plan on their plan and procedures to follow?

Any plan document I have seen provides for separate accounting of elective deferrals. This doesn't mean on a year by year basis, but throughout the life of the plan. What would this employer do if they wanted to implement hardship withdrawals? How would they track elective deferrals? Also, how would you know if the special 401(k) distribution rules were met if there was no separate tracking. Vesting is not the only issue in tracking the sources separate.

If this was an asset sale then Company B still exists, unless it has also been disolved. Company B even as a shell company is still the plan sponsor. Company B is still the plan sponsor for all periods of time that the plan of Company B is in existence. Have they looked at the "same desk rule" implications relating to employees that work for Company A in their same capacity as under Company B?

Is is possible for the trustee and lender to be the same bank? I have seen this arrangement before. Is this a prohibited transaction, or because the loan meets the exempt loan definition is it exempt? I realize there are other reasons not to recommend this situation due to the potential conflict of interst issue should the loan go into default, but also wanted to know if it is otherwise prohibited for any other reason.

Why even do the spin off to two plans? Why not restate the 401(k) plan to be an ESOP with 401(k) provisions with the same vesting schedule? How are participants being given the opportunity to invest in employer stock? What kind of formula? Could the formula be discriminatory? Securities law issues are a biggie here. The SEC views allowing employees to invest in employer stock on a volutary basis as purchasing a security that must be registerd, absent an exemption. Given that, an exemption can often be found. Even if an exemption is found, anti-fraud provisions of securities law would require a detailed disclosure statement to participants so that they have the information necessary to make an informed investment decision.

Kelly, Question 1: Only one Sch F and Form 5500 filing is necessary if all benefits are included under one plan. Just add up all employee pretax premiums for the insurance and the FSA amounts for Sch F. Question 2: I agree that separate Form 5500s would need to be filed if they were indeed separate cafeteria plans. Question 3: I disagree. Yes, A Schedule A will be produced for health plans with greater than 100 participants, but this represents premiums paid and fees for the entire health plan. Cafeteria plan filings should only be reporting the employee pre-tax portion of the premiums, not the employer paid portion. That part has nothing to do with the cafeteria plan. The health plan would need to file its own Form 5500 though as over 100 particpants.

The match should be forfeited. To allow the HCE to receive the match as a distribution would be providing a higher rate of matching contributions than available to other employees. Not sure what the right answer is though on what to do with the forfeitures since your plan in silent. You could amend the plan currently to provide for a use for forfeitures.

Existing unfunded NQ deferred com plan provides that at age 65 the executive is fully vested and that within 30 days after age 65 payments will begin either in lump sum or by purchasing an annuity contract with the plan reserve book amount. Executive turns age 65 in two weeks. He has decided to continue working and not retire yet. The client wants to: 1) extend the NQ deferred comp plan to continue to credit to the book reserve the same percent of profits as in the past while executive continues to work past age 65 2) what options are available with the payout of the current vested balance? Would this executive have had to make an election to defer payment past age 65 at least 12 months before turning age 65? Since he is within 2 weeks of being eligible for payment is he out of luck in deferring any further? What about if an annuity contract is purchased? I assume that because he could have chosen the lump sum he would be taxed as a lump sum at the time the annuity is purchased. Could an installment payment option directly from the employer be added so that executive would only be taxed as amounts are received. As he will continue working, he has no need for the income at this point. Thank you for any comments.

Does anyone else have any more information on this? Did the IRS make a mistake in their form instructions by leaving out the 125? I have a client that really wants to base the elective deferral and match on gross compensation because to do otherwise would penalize cafeteria plan participants. They just put in a cafeteria plan. I can't find any guidence to allow this though.

When reading the 5305-SIMPLE form, the definition of Compensation appears to be wages subject to wihholding plus elective deferrals under 401(k), 408, 403(B) and 457. Notably absent is 125. Does this mean that Compensation for calculating the employee deferral and the employer match is actually (Gross Compensation - Sec. 125 contribuitons)? Looks that way to me. Seems complicated for the client and not fair to cafeteria plan participants.

It depends on how your plan defines matching contributions. A matching formula that requires a "true up" after depositing on a monthly basis would read "x% of deferrals up to x% of Compensation". A formula that did not require a true-up would read "x% of deferrals up to x% of Compensation per payperiod". In the second option, there is no true-up and once a participant stops deferring the match stops, which is why in these plans participants that max out early lose out on matching dollars. In the first option it uses the plan's annual definition of Compensation to calculate the matching, so regardless of why they fell short, there would be a true-up required.

Can you direct me to the regulations that refer to this topic. How are non-selfemployed employees treated? Can an election out of the plan be made after once eligible, but prior to the plan year effective and irrevocable? Or can these only be made prior to earning eligibility? Are they always irrevocable?

Or is the holding company deemed to be the Employer due to controlled group, so it doesn't matter that they don't actually employ anyone at the holding company?

How are disability premiums handled in a cafe plan? Do employees choose between paying the premium on an after-tax vs. pre-tax benefit, therefore making an individual choice on if they want to risk being taxed should they ever need the disability income? What if the employer pays the premiums, do they need to decide on behalf of the entire employee group whether to include it in income or make it a tax free benefit?

Controlled group made of Holding Company and two wholly owned subsidiaries. The Holding Company has adopted the SIMPLE IRA and is making the 3% match for employees. Generally, with a qualified plan all three entities would adopt the same plan as participating employers and each individual subsidiary would make the contribution for their own employees. Holding Company doesn't even have any employees. Is this a problem the way they have set it up? It seems like each of the subsidiaries should have also adopted the SIMPLE IRA and that they should be paying their match on behalf of their employees. I seem to remember though that for tax deductibility purposes, a member of a controlled group may make contributions on behalf of other members. Any thoughts? [This message has been edited by Dawn Hafner (edited 01-17-2000).]

Why don't insurance companies provide all disclosures in their booklet? What if they mail them separatley to participants? I assume we wouldn't need them in the wrap plan. Is a wrap plan as simple as the minimal ERISA requirements, eligibility, rights to terminate and amend, name a fiduciary, etc.? Is all the inforamtion in the SPD booklet published by the insurance company incorporated by reference so that the wrap plan is a pretty simple document? Does anyone have a sample of this type of document?

Does anyone have a sample plan document for a fully insured health plan that meets the requirements of an ERISA plan? I realize that many employers don't actually adopt a "plan", but rather use the insurance booklet as their plan. My understanding is that this does not meet the requiremetns of an ERISA plan. Any suggestions on where I can find a sample document to review?

How are the after-tax premiums in a cafe plan used? Client currently pays all of the premium for disability, so when disability income is received it is taxable to employees. They want to give employees the choice between being taxed on the premiums or taxed on the benefit. Can this be done through the cafeteria plan by allowing employees to pay premiums with after tax dollars? Isn't this allowing them to pick from a taxable benefit (inside the cafe plan) and a pretax benefit outside of the cafe plan? Anyone encountered this issue and have any suggestions?

Has anyone ever looked at if Cancer Insurance premiums can be an included benefit in a POP? I wasn't even aware of what this was. Cancer insurance provides for reimbursement of travel, meals & lost wages associated with their cancer treatment. It does not seem like this type of coverage would be allowed, but wondered if anyone else was familiar with this. Thanks.