alanm

The IRS requires the employer report at least 8% of ticket sales as tips on the servers W2. Usually half of the food checks are paid by credit card and the employer gives the tips on the card receipts to the server either daily or weekly. The employer must withold enough of that tip income and run it through payroll in order to get the deferral amount. Otherwise, there is no other way to accomplish this.

I think GBurns is primarily right; except the payment of the fees by the company for the doctor is deductible by the company as a wage under section 162. The Doc should get the fees added to his W2 and pay income taxes. He could possibly get a deduction on his 1040 under misc. deductions subject to the 2% floor, as an investment related expense. However, the plan's issue would be the BRF; since the Doc did not deduct fees from his plan account, it grows at a faster rate tax deferred: a benefit that must be extented to the others subject to 410b. The Doctor in essence negotiated a raise from the employer and the others may not be so lucky; which would mean at the participant's descretion, fees would be paid by the company and deducted from the employees paycheck, after tax.

Probably, the five attorney entities and the PLC is one affiliated service group. Whether they sign or not, all plans should be aggregated for testing. The problem will be that some of those attorneys have probably been maintaining individual sep plans without including the PLC employees. I would find out about the other plans first.

The CO can participate in both plans; however to offer a 401k to the leased employees and not to the nonleased employees probably will not work unless the CO, when adopting the Leasing company MEP, excludes high comps and Keys from being eligible, then discrimination goes away because no High comps, either leased or not, have a 401k plan. the top heavy issue remains because both plans must be aggregated for testing. Assuming the PS is at least 3% that should be no problem.

I think both are a control group; 80% owned by father and son. That is one issue; the other is the conversion of passive rental income to earned income by calling it a real estate business, when no work is performed for other non-owned properties. Passive rental income is not a basis for contributions to a plan. He would also be paying fica or self employment taxes on rental income which is expensive--- in order to use it as a basis for plan contributions. The rules concerning "passive activity" or "active participation" or "in the real estate business" are complex and should be dealt with first But, without other information, I don't think they can exclude employees from the widget company.

the definition of leased employees in 414(n) was revised to drop the “historically performed” test and replace with a “primary direction and control” test. Therefore, if the employees remain under the “primary direction and control” of the hospital and Company A does not have “primary direction and control” the “leased” employees will not be considered employees of company A and the hire date is moot because they belong in the hospital's plan. Otherwise, if they came under the control of company A when they were so-called leased, then that hire date applies--not the one that predates the arrangement. I don't think it matters who pays them because the hospital could just be providing PEO type payroll services. Typically, hospital's setup several doctors in practice by providing a staff for them, in which case the hospital retains control; but this is a functional test and the two owners should know if they have the power to hire and fire and direct the personnel or not.

The answer lies in: DOL op. 94-31A; DOL op. 92-24A; CFR 2510.3-101(g); CFR 2509.75-8

excuse me 12/31/05. The rule says by the end of the year following the year of purchase.

I think IRC section 410(b)(6)©(i) gives them until 12/31/06.

I am not speaking for all MEPs. For those drafted as I outlined, one 5500 filed by the sponsor with schedule Ts attached--- one T per adopting employer. Many MEP documents were originally single employer plan docs that were amended to be a MEP when revenue procedure 2002-21 was issued mandating a MEP for PEOs. It could be an oversight to not allow assets to be transferred between adopting employers at the discretion of the trustee. If the oversite occured, you will have a lot more problems to deal with than which way to file the 5500. In the end, if you file 5500s individually, nothing bad is going to happen; you just went to more trouble that it was worth. The IRS agent that audits the plan will be confused for 10 miniutes and that will be the end of it.

Speaking as a TPA of 50 multiple employer plans and with 80% of my business from PEOs and after having addressed the National Association of PEOs last month on the subject and having been through two dozen audits and filed at least 500 5500s using a schedule T, I can honestly say I have never seen A MEP document that allowed you to check block A2; A3 is the correct block. All the MEP plans I administrate allow the administrator/trustee to use assets of one adopting employer to be used to provide benefits of another or pay plan expenses at the discretion of the trustee. Without that right, you are in a liability box. For example, what if one adopting employer elects safe harbor and then leaves the PEO before funding it; the whole plan, including all adopting employers are liable for the consequence and the trustee must assess them for the contribution to keep the plan qualified. There are many instances why this provision is necessary and no attorney in their right mind would draft a MEP document putting the Sponsor/Administrator/Trustee in such a predicament. If you check the document, I'll bet it will say in the trust agreement that the trustee has the right to use all plan assets to provide benefits to all employees regardless of adopting employer.

The TPA simply made a mistake in filing 5500s for each worksite. The question is how to get back on track and I would say file a final 5500 for each worksite this year and show assets merged out into the sponsors 5500 and begin sending schedule Ts for the 2005 plan year. We have taken over mutiple employer plans in the past that have this problem and that has been the solution.

Probably can under the section 408 exemption to section 406(b) transactions. This is from DOL opinion 2002-08A ' The Department does not believe that, in and of themselves, most limitation of liability and indemnification provisions in a service provider contract are either per se imprudent under ERISA section 404(a)(1)(B) or per se unreasonable under ERISA section 408(b)(2). The Department believes, however, that provisions that purport to apply to fraud or willful misconduct by the service provider are void as against public policy and that it would not be prudent or reasonable to agree to such provisions. Other limitations of liability and indemnification provisions, applying to negligence and unintentional malpractice, may be consistent with sections 404(a)(1) and 408(b)(2) of ERISA when considered in connection with the reasonableness of the arrangement as a whole and the potential risks to participants and beneficiaries. At a minimum, compliance with these standards would require that a fiduciary assess the plan’s ability to obtain comparable services at comparable costs either from service providers without having to agree to such provisions, or from service providers who have provisions that provide greater protection to the plan.' Since you can't buy insurance, I assume, to cover willful misconduct of a fiduciary, the policy would be a prudent step taken by a fiduciary and a reasonable expense that could be paid for by the plan. Of course cost of employing a trustee must be reasonable and there is no dfinitive answer to that.

very expensive

This is nice. Keep it going and the benefits board will have its first book published. How about Iraq next? In any case, I don't want to be left out, so I will add a chapter that has nothing to do with all this. A city boy named Kenny moved to the country, and bought a donkey from an old Texas farmer for $100. The farmer agreed to deliver the donkey the next week. A week later, the farmer drove up and said, "Sorry son, but I have some bad news. The donkey died on the way over here." So Kenny said, "Well then, just give me my money back." The farmer groaned, "Can't do that. I spent it already." Kenny said, "OK then, just unload the donkey." The farmer, puzzled, asked, "What ya gonna do with him?" Kenny replied, "I'm going to raffle him off." The farmer said, " You can't raffle off a dead donkey!" Kenny said, "Sure I can. I just won't tell anybody he's dead." A month later the farmer met up with Kenny and asked, "What happened with that dead donkey?" Kenny said, "I raffled him off. I sold 500 tickets at two dollars each and made a tidy profit of $898." The farmer, amazed, asked "Didn't anyone complain?" Kenny replied, "Just the guy who won. So I gave him his two dollars back." Well, Kenny grew up and prospered, eventually becoming the chairman of Enron. I am speaking of course of Ken Lay and he goes on trial next month; now all can continue the discussion on economic and political history and finish this book.

As under Rev Proc 2003-43, the correction is specified to be the 6621 interest rate which has never been 1%; over the last two years it has averaged 5%. And I quote from the DOLs code of federal regulations: EBSA (formerly PWBA) Final Rule Regulation Relating to Definition of ``Plan Assets' --Participant Contributions; Final Rule [08/07/1996] [PDF Version] Volume 61, Number 153, Page 41219-41235 [[Page 41219]] The interest amount is to be measured by the greater of (1) the amount that the participant contributions would otherwise have earned from the date of withholding or receipt by the employer until the date of transmission to the plan if the contributions had been invested during such period in the investment alternative available under the plan which had the highest rate of return, or (2) the underpayment rate defined in section 6621(a)(2) of the Internal Revenue Code applied to such period. IRC 6621(a)(2) (the Federal short-term rate, determined quarterly), plus 3 percentage points. [iRC 6621(a)(1)(A) and (B)].

There is no way short of quiting. The new plan would be deemed a successor plan of the worksite employer and a spinoff from the leasing company plan would take place with all assets being moved to the new plan. Unfortunately the worksite company cannot terminate the leasing company plan, only its participation in that plan; plan termination is one way of getting IRA rollovers for everyone, but that is not an option in your case.

You cannot roll to an IRA. See revenue procedure 2002-21. Under that procedure you are "technically" the employee of your worksite employer and never where the employee of the leasing company despite what you have been told.

This is not a new trend, it is just a fickle auditor.

Also, the DOL does not have the power to force you to do anything. They must go through civil court to effect any remedy they promote. If you say you are going to court, they will settle-- they don't have the staff to pursue it. In most cases, if you ask for a review with the regional director and voice your side effectively, the DOL will change their tune. Also, if you file a 5330 with the IRS, the IRS does not tell the DOL you did it, there is no communication between the DOL and IRS, you must give the DOL a copy.

Amen

The revenue procedure dictates that first you must determine whether the employee is a common law employee under the IRS test. Most times the receipient is the common law employer and the employee must be included in the receipient company's plan. 414 only applies after it is determined the employee is a common law employee of the leasing company; it was written to address the situation like the old Kelley Girl company. I deal with fifty Leasing company plans and have been audited a dozen times on this arrangement. Just calling an employee a leased employee in a contract has nothing to do with their real status. In most cases, the leasing company gets hired, then takes over existing employees of the receipient and calls them leased employees; RP 2002-21 states that they are still the common law employees of the receipient and must be included in the receipient's plan and cannot be included in the leasing company's single employer plan. The leasing company can only offer a multiple employer plan in which each receipient can adopt. The Microsoft case in the 90s is another example where Microsoft(the receipient) tried to call their programmers contractors and exclude them, they were found common law employees of Microsoft. In the above case, I think you are going to find they must be included in the receipients plan, the leasing company is not relevant unless they are a true temp company like Kelly Girl; from the description, it doesn't sound like they are.

There is a court case dealing with this issue. A case brought by Chase bank against some participants they paid out by mistake and the court refunded the money to Chase Manhattan Bank. It was in the Second Circuit court I believe, the judges name was District Judge Charles Siragusa, if that helps.

The new fee changes should be in the Sarbarnes Oxley notice given to participants 30 days before the transfer if the participants are going to be blacked out more than 3 days. A material change in fees or the plan should be reflected in the SPD and given to the participants no later than six months after the event.

Look at the DOL website under a 1998 study submitted by Economic Systems, Inc.