Kristina

I agree with R. Butler that there is not as much risk if you answer the question no, based on the 15th day rule. However, my reading of the plans that have been audited by the DOL would indicate that they allow very few days from the date they (the DOL) determine the contributions could be separated from the sponsor's funds until they are to show up in the plan assets. A TPA told me of a bankrupt plan sponsor who was trying to terminate a 401k plan when an employee complained to the DOL about a COBRA notice and now the DOL is going thru the 401k plan and calculating penalties and losses to the participants based on a one-day timeframe for the deferrals to be deposited into the plan. (Guess the DOL doesn't use the same postal service the rest of us use. eh?)

You have until 7/1/2001 to file any pre-1999 delinquent forms with the IRS. After that, all delinquent or amended forms must be filed with the DOL. I would refer you to the Delinquent Filer Program set up the DOL in 1995.

Remember that these questions are designed to determine if there may be issues with the fiduciaries. Are all of the plan assets in one investment?, for example. Participant directed investments are not the focus of the DOL, at least at this time. Also, most participants are investing into mutual funds either directly or under insurance contracts. These are monitored in other ways. So, yes, you will exclude participant directed investments. In fact, if you have a characteristic code of 2G for item 8a on the 5500, 4i on the Sch I would be answered no.

You'll find the instructions for the EFAST-1 form under Filing Instructions on the EFAST website. Yes, you, as the transmitter, will have to have an electronic signature as will anyone who signs any part of the 5500 series; Plan Administrator, Plan Sponsor, Trustee and Actuary. The difficulty I see is the coordination of the signatures. The plan administrator and/or sponsor can not sign before they have reviewed the forms, so you must provide them with printed forms for review before they send you their signature file. I would not recommend that you keep their signature files on your computer. Also, on your application as the transmitter, you must have a contact so that EFAST can contact you if there is a problem with the transmission. Signers can designate an address other than their own for EFAST notices and can designate a contact other than themselves. You and your clients need to decide if you will receive the notices directly or not.

KJohnson, Well said!

If you look in the upper left hand corner of the Sch H and Sch I you will see that the DOL, IRS and PBGC are listed. This means that the contents of the Sch will be reported to each agency. The DOL is now serving as the collector, compiler and disseminator(sp?)of information. The fact that you mail the 5500 series to the DOL does not mean that IRS regs are ignored for the filing. "But the mere fact that the instructions tell you to do something does not mean that there is statutory or regulatory support for it." I suggest that you review the reporting and disclosure portion of ERISA. The 5330 is required because the plan engaged in a nonexempt transaction with a party-in-interest. Allowing the deferrals to remain with corporate assets is a nonexempt transaction with the plan sponsor who is the party-in-interest. The key point here is that it is one government. The fact that there are two agencies who have different jurisdictions is not the issue. You will not be reporting to one only. You will be reporting to all interested agencies. "The fact that the Schedule H/I instructions (which rely solely on Labor regs, not Tax regs) is certainly relevant to a plan sponsor in determining its risk tolerance. Use care in "determining its risk tolerance." You will either be reporting in full what took place during the year, or you will not be reporting in full. You take your chances in not filing a full report and having the plan be audited. Not timely depositing is a participant issue, they know and they can contact the DOL directly. Also, please be aware that the 15th day of the month following the month in which deferrals were withheld may not be the appropriate timeframe for your company. The regulations state that the deferrals must be deposited to the plan as soon as they can be separated from corporate assets,but not later than the 15th day ... If your company has a separate payroll account, the deferrals were separated from the corporate assets on the payday. The DOL will assess penalties from the date they believe the funds could be separated.

"DOL may not even know that you filed a 5330." There are questions on the 5500s (Schedules H and I) which ask specifically if any deferrals were not timely deposited. If you answer yes, the IRS looks for the 5330 to have been filed and the DOL makes a note to arrange that special visit.

Sorry. I can't resist providing another side to the Group Annuity Contract issue. I will preface by saying that fees are a big, big issue and, yes, you should use much diligence in assuring that all of the fees are disclosed. (Get it in writing as to how much is being charged and how the fees are calculated. A company sponsoring a group annuity product should be forthcoming. If not, keep looking.) I will also say that any surrender charges may be directly associated to the amount of commission paid to the broker, but there are companies where you, as the plan sponsor, can go direct and eliminate those issues. On the positive side, a group annuity contract allows participants to invest in numerous fund families with a same-day-transaction. My experience with the program was that the participants received much more investment information than would have been possible without the contract. They also had telephone transfer capability. These features would be very expensive for a small employer to provide for their participants. Because of the recordkeeping under the group annuity contract, the annual administration performed by the TPA was limited. Unfortunately, in the past the greatest transgressions had to do with the broker being greedy and wanting a large front end commission. Be aware that not all mutual fund families are free of this problem. I was able to compare the fees and expenses paid under the GA contracts my clients used in the past and determined that they were comparable to some mutual fund companies and less than others.

Be aware that the Daily Valuation Course covers a very small amount of the Qualified Plan knowledge you will be required to master to achieve your designation. AndyH is correct in that the Plan Administrators Course is the minimum you need to know to be truly useful to your employer.

Would the employee portion of the contribution be deductible even though it would generate a larger loss? And is this even a possibility for DB plans.

The form 5558 is not an EFAST form so it is still filed with the appropriate IRS office.

I agree with you. I believe the information pertaining to the plan sponsor and the plan was provided in the SPD, which will again be provided to the terminated participant with a deferred vested benefit anytime the plan is restated. Also, the current address of the plan sponsor is on the envelope when you mail the annual benefit statement to the terminee. I would recommend that the first required statement have a cover letter which refers to the SPD and how important it is for the terminee to keep the plan sponsor informed of their current address.

In this case, that administrative procedure makes the difference. Under this administrative procedure of terminating them at year end, I, too, would probably not count them if there were no vested account balance.

I assume you changed from: "The course considers them still employed on 12-31, since most will be coming back to work in the spring."

Perhaps you are missing that any match over an above the 4% you reference would be still be subject to ACP testing.

The key is "former employees". When do seasonal employees become "former employees"?

You realize there is something in the regs that in the first year of the 401k, the adp for the non-hce's is assumed to be 3%, so that the hce's could do 5%? Many plans find this to be preferable to the 3% safe harbor. I am uncertain if the effect of a short year on the 3% I am not sure of Allen Clarke' reasoning for you not having a safe harbor plan. If you provided employees with the notice in a timely manner (like as soon as the 401k amendment was adopted) you would have safe harbor. Am I missing something?

QDROphile! I wondered when you would shine your light of reason on this discussion. My problem is that I, as a divorcing spouse, would try like the dickens to split only my vested account balance with my soon to be ex spouse. After all, they are only my spouse up to that point in time and I would not want them benefitting from my future labors, or lack thereof. Its a personal issue, I guess. As a divorcee I would be willing to go halfsies on what I own, but that's my line. Of course, now that I think of it from the other side, i.e., his account balance, I would want every cent I could get my hands on, especially if there are kids and I have custody. Your point is well taken.

Yeah. What MWendell said.

Based on the instructions to the 1099R for 2000 (page R-4) a fair argument could be made that you returned too much and must correct.

"If the participant further vests in his account, so will the alternate payee in his or her account." On what basis was this determined? Shouldn't the QDRO state the % as being applied to a given account balance on a given date? If it does not, is it a QDRO? Shouldn't the QDRO be specific without requiring something the plan does not allow? In other words, if you have to ask how to calculate the payment to the alt. payee, do you really have a QDRO? Practically speaking, I would be really honked off if at the time of my divorce and the QDRO I was only 20% vested, my total balance was split with my Ex and every year that I increased on the vesting schedule, my ex got more money. I think I would challenge the DRO, first, of course.

1. IRC 410(a)(1)(A)(ii)and ERISA 202(a)(1)(A(ii) provide that you may not require more than 1 year of service to enter the plan. The Plan in question requires 3 months. Therefore, any employee who works three months is eligible to become a participant in the plan. 2. Part time or seasonal employees can not be excluded by category as this would be an impermissible service condition per Treas Reg 1.410(a)-3(e)(2)m, Example 3. 3. Under IRC 410(a)(4) and ERISA 202(a)(4) once an employee has met his eligibility requirements (3 Months in our example plan), he must enter the plan on the earlier of: the first day of the plan year; or 6 months following such date. Therefore a seasonal employee, hired on March 1, 1999, still working on 6/1/99, would enter the plan on 12/1/99, unless the plan provides for an earlier entry date. 4. Because this employer has the following procedure "The course considers them still employed on 12-31, since most will be coming back to work in the spring", our sample employee is a participant in the plan on 12/31/99. 5. Vesting credit. IRC 401(a)7, 411 & 416(B) make compliance with minimum vesting a condition of plan qualification. The plan must define the vesting computation period. Let's say our employee worked 1,000 in 1999 and 1,000 hours in 2000, and our employee is over the age of 18. Our employee has earned 2 vesting years. There is no requirement that his service be consecutive. Note that even though he may not be working in December, January and February, he has not incurred a break-in-service. Let's say the plan is using elapsed time to credit vesting service. The severence from service date is the first anniversary of the date an absence from employment for reasons other than quit, retirement, discharge or death began. Period of service continues per Treas. Reg 1.410(a)-7(B)(2). 6. No where in the 5500 instructions does it say that in order to be included in the participant count that one has to have an account balance. 7. The 5500 instructions state that "This category (active participants) includes any individuals who are eligible to elect to have the employer make payments to a code section 401(k) qualified cash or deferred arrangement." Being eligible to elect does not mean that one had to elect. Consider, for example, who would receive a safe harbor contribution if the plan had elected the non-elective 3% safe harbor.

As noted in the upper left corner of the 5330, this is strictly an IRS form. Therefore, no filing will be done with the DOL. By the way, the EFAST address is only used for scannable forms. The 5558 is not scannable, therefore, it is filed with the IRS office shown in the 5558 instructions.

The Summary Annual Report is a summary of the 5500 series as filed with the DOL. (First paragraph of the SAR.) Therefore, if any of the information changes on the SAR because of the revised filing, a revised SAR should be distributed.

When you say the brokerage firm is putting the distribution into an ira and then making the lump sum distributions from there, do you mean that the participant elected a lump sum distribution from the plan and the broker decided to open an ira for them and then make the distribution. The plan is making the distributions when the money leaves the plan. Unless the IRA is owned by the trustee of the plan, the money left the plan as soon as it was deposited into the IRA. If the IRA is not owned by the trustee of the plan, the plan is responsible for providing 1099s for the distribution out of the plan. You would only report the brokerage firm EIN on the Sch R, if they prepared 1099s in the plan's behalf. Filing 1099s as the IRA custodian does not count. Only if there is an agreement with the brokerage firm that they provide the 1099s on the plans behalf as the payer would the plan not have to file 1099s under the trust TIN. If there is no such agreement, then the plan is still responsible.