Alf

As I understand it, the DOL has to notify the employer of any IRS referral it makes as a result of an audit. There is probably an exception for criminal referrals. We have been involved in several DOL audits that ranged from paper only audits to complaint originated week long fishing expeditions and I have not seen any correlation between the DOL audits and IRS audits. In fact, we have been notified a few times of IRS referrals after the DOL decided not to proceed with issues and we never heard from the IRS.

They should receive the safeharbor contribution. Notice 98-52 incorporates the definitions in the regulations, which don't allow you to exclude union employees if they are eligible. That being the case, are you sure that you can exclude union employees from the ADP test?

I don't think that you can consider the benficiary designation. If it was completed while married and the spouse didn't consent, it isn't a beneficiary designation. Treat the participant as if he died without designating a participant.

Both replies are correct. The IRS will not issue its announcement until the future of the TRA'00 is certain.

Yes, the shares of one are attriubted to the other under cross references in 414(q) to the attribution rules of 416 and 318. What you can't do is use his total attributed ownership of 6% and re-attribute that to here making her a 12% owner.

It is definitely ok. The key is that the earliest retirement age provisions are an exception to the general rule that a qdro cannot require a plan to provide any type or form of benefit or any option NOT OTHERWISE PROVIDED UNDER THE PLAN. The earliest retirement age provisions aren't necessary in a plan that permits alternate payees to receive distributions at any time.

Maybe, but . . . One problem that may come up is that the IRA will not qualify as a conduit IRA that can later be rolled back into another qualified plan. Conduit IRAs must still be funded with "qualified total distributions". See IRC 408(d)(3)(A)(ii) and 402(a)(5)(F)(i) that define "rollover contribution" for purposes of IRC 408(d)(3)(A)(ii). This may not be a major concern to you.

401(k) deferrals count against the catch-up limit, just like they count against the normal $8,000 annual limit.

The original model COBRA notice is in ERISA Technical Release No. 86-2, Guidance on group health continuation coverage notification provisions, which was issued by the Department of Labor on June 22, 1986, although the language in this model notice IS VERY OUTDATED AND SHOULD NOT BE USED WITHOUT MODIFICATION. Several law changes have affected the COBRA information in the notice, so you will have to update it for things like HIPPA. I don't know of a free source for this notice if it is not on the DOL web page, but you should be able to find it at any good old-fashioned library.

As a technical matter, everything can be deductible if you follow all of the traps and have facts on your side. The classic business school example is that the cost of building a swimming pool can be deductible as a medical expense if certain very favorable facts are present. As a matter of policy, however, the administrator should reject unusual items such as health club memberships to avoid having to made these factual determinations. If a participant is adamant, make them justify the reimbursement under existing law or get a PLR.

You will eventually need to just draft a stand-alone amendment that updates the old document for all of the legislative changes that are in effect on the date of the plan's termination. My experience is that some prototype sponsors have amendment language prepared for use by terminting plans, although, of course, it hasn't been pre-approved by the IRS. All prototype sponsors have to have their plans filed with the IRS by 12/31/00, so the sponsor of your plan does have GUST language prepared by now, it may just be a matter of convincing them to let you use it before it gets approved by the IRS. There is a shortcut you can use if you end up having to draft your own amendment. Instead of doing all of the legwork yourself if you are unfamiliar with the law changes, you can just file the existing plan with the IRS as is and the IRS will send you standard amendment language that can be adopted by the plan in order to get a determination letter. It won't be the cleanest amendment, but it is a terminated plan after all.

The risk is on the accepting plan. Treasury regulations protect plans that accept invalid rollover contributions if, among other things, the plan reasonably concludes that the contribution is a valid rollover contribution. To do this the receiving plan can get evidence that the distributing plan has a determination letter, that the distributing plan satisfies Code Section 401(a), or that the plan is intended to satisfy 401(a) and the administrator of the distributing plan is not aware of any operational problems that would result in the disqualification of the distributing plan.

I agree that someone (most likely the client) has a copy of the documents somewhere. The IRS apparently can search for determination letters and let you know if the plan ever got one. You should also be able to tell from the 5500 responses. As far as prior plan document, you shouldn't need to refer to the terms for anything, so it should be enough to be able to prove that something was adopted. I would have the client dig through their board book to find the original authorization for the adoption of the plan (assuming the client hasn't lost all of its corporate records).

It makes sense to me. Under an existing 401(k) plan, the government wants the participant to know what she is eligible to get so that she can make sufficient deferrals during the year to get the maximum available match. Adding a match mid-year would be unfair to participants who didn't know that they should be deferring earlier in the year. Adding a nonelective safeharbor late in the year doesn't rip anyone off. With a new 401(k) plan, no one could defer before the (k) and the match were added, so no one is hurt by the late notice.

Section IV.A. of 98-52 provides that terms used in 98-52 that are defined in the 401(k) regulations have the same meaning as in the regulations for purposes of 98-52. Section 1.401(k)-1(g)(4) of the regulations defines eligible employee as an employee who is directly or indirectly eligible to make a cash or deferred election under the plan.

I assume that the eligible employee who was excluded did not receive the required safeharbor notice. If that is the case, I think that there is really serious question about whether or not this plan will have to pass ADP testing after the correction. I am not aware of any official guidance on what happens to a plan that does not satisfy the safeharbor requirement that each eligible employee has to receive a safeharbor notice. Just because you follow the 2000-16 correction and contribute missed deferrals and the nonelective contribution that was missed doesn't necessarily mean that you have corrected your failure to follow the safeharbor notice requirements. Until guidance on this point comes out, I would recommend a VCR filing so that the IRS can approve of the correction.

Doesn't the answer depend on whose 125 plan it is. If it is the PEO's plan, then the "owner" could participate, couldn't she??

It is MORE than 5%. For purposes of the HCE rules, IRC Section 414(q)(2) cross references the 416 definition of 5% owner. IRC Section 416(i)(1)(B) defines 5% owner as a person who owns more than 5% of the outstanding stock (or possesses more than 5% of the voting power) of a corporation. For non-corporate entities, a 5% owner is anyone who owns more than 5% of the capital or profits interests of the employer.

I have reviewed the heated thread on this board regarding Keysops (along with Brisendine's articles) and need to know if there is anything new on this topic. Are the accountants/consultants still selling variations of this product? Any hints from the IRS about what they are going to do? Any real-life experiences with the issues and problems involved in using these programs?

Has anyone heard of exchanging an employee's restricted stock for an unfunded unsecured promise to pay the same number of shares on a date farther in the future? Will it work to defer taxation? Are there any timing or second election issues involved here?

You can switch from prior to current at any time. Switching from current to prior is limited. Notice 97-1 originally said that a plan using the current method in 1997 can use prior year for 98 without receiving approval from the IRS. Notice 98-1 sets out four situations in which a plan is permitted to change from the current year method to the prior year method. One of these is if the change occurs during the plan's remedial amendment period.

Responding to the above post, there won't be a 401(a)(4) problem. Given the nature of the administrative error, I think one could conclude that the effective availability of the higher deferral limit was available to all employees. Hence, a retroactive amendment should be permissible here.

Aren't safe harbor plans required to use a 415©(3) safe harbor compensation definition? If PJK is correct about a bonus exclusion taking the definition of compensation out of the safe harbor, then I don't think a safe harbor plan could exclude bonuses.

Since it is not a cutback, couldn't you amend retroactively back to 1999 because it is within the remedial amendment period?

I'm with PJK. If no determination letter is received, I wouldn't want the rollovers in my plan. I would let the former TPA have ALL of the accounts.