alanm

I think you will be ok if you endorse the check on the back and deposit it into the plan account. Funds will be transfered from the old plan account directly to the new plan account. I wouldn't have ABC Inc deposit the check into their operating account and then issue another check to the plan.

I don't think so. The rules cover the Broker-dealer and brokers who are supervised by the broker dealer. My firm is a TPA and broker dealer and we have been over this issue numerous times in audits by the NASD. Essentially, brokers can't buy the business by paying the CDSCs, however insurance companies can because they are not subject to the NASD rules on this issue. The only way a broker dealer can do it is to call it restoration made to avoid litigation. That is very difficult to argue unless the client has filed a complaint with the SEC or NASD or filed suit. So you get over that hurdle and now you are back to the IRS opinion that such payments should be tested for discrimination because they mainly benefit those with large balances, which usually mean high comps and owners. In fact, the insurance companies aren't free of the IRS position just because they don't have a problem with the NASD. The end result of an insurance company buy down of CDSCs is that they increase the internal expense ratios of the annuity products to get their money back over time. When they get their money back, they still don't reduce the expense ratios. Participants end up paying for the CDSC and more.

Rebating commissions is a violation of NASD regulations. Only insurance companies are exempt from the regulation. this doesn't have anything to do with ERISA which what this discussion is concentrated on.

I might add, the only problem is how to account for the contribution. Technically, part of the year's contribution belongs in the first plan but will actually be made into the new PEO plan based upon aggregate testing. You will have to provide the aggregate test to the new PEO TPA in order to pass the plan audit and justify your deduction. You should also provide evidence to the old TPA that the 3% safe harbor contribution was made in the other plan.

I think you are missing something. Skipping from PEO to PEO and adopting plans is nothing more than restatement of an on going plan as far as the client company is concerned. Full years comp should be used and both plans aggregated when testing is done and profit sharing is allocated.

I don't think you are missing anything, the PEO is. The Doctor will probably be deemed an employee of the practice and must aggregate his plan with the PEO plan for testing-if audited. Typically, Doctors try to 1099 their own corporations and isolate the staff in another plan so they don't have to contribute as much to them. The affiliated service rules are used to prevent this situation.

What if you elect a safe habor 4% match 30 days before the beginning of the year but you give participants notice of a 3% PS election by mistake. Then a month after the plan year starts you give another notice saying the 3% notice was a mistake it is really 4%. Does that invalidate the 4% election? Or can the mistake be corrected even though it wasn't timely?

I think you are stuck with opening up different accounts at the fund companies per adopting employer. Only the multiple employer plan allows a co-mingled trust for unrelated employers. How the accounts are titled at the fund companies is the important issue not whether on not your software can do the sub-accounting.

A distribution is a mandated ERISA right and a fee charged directly to the participant is not allowed. However, daily valued accounts, 404c self directed investment features, expanded investment options greater than the three required by EIRSA are not mandated benefits and a fee can be charged to the participant's account when extra work is incurred posting residual dividends and removing the account from the system and web. Therefore, if your plan has daily valued accounts, I would change the fee to be a "404c account closing fee" and not charge for the mandated rights of calculationg vesting and writing the check.

You need more detail to be exact. But, if last year was the first year of the plan for the worksite, 3% on last years payroll is due by September 15th. 3% on this years payroll is also due at least through the period the client terminated and maybe whole years pay if another plan was adopted at another PEO or elsewhere. Participants should not be allowed to get distributions unless the worksite company certifies termination of service at the worksite. The way to dance around collecting this years contribution, which doesn't have to be funded until next year, is to merge out the balances to a successor plan and give the new administrator notice of the top heavy situation. Otherwise, if you don't collect the money the PEO becomes liable to make the contribution.

That works

kjohnson got it right. The IRS has spoken on this issue. Take a look at PLR 200137064. Also they expressed an opinion at the 1999 National Conference of ASPA, see Q&A-79. Restoration of a backend load is a contribution to be tested for discrimination.

there is no regulation or guidance that refers to a "sub plan" in section 413. Read the plan, most mulitple employer plans say that if a CO leaves the PEO it constitutes a termination of participation or discontinuance of contributions. There is no way to terminate part of a multiple employer plan by a CO and get distributions- that plan is on-going. The money is frozen in the plan until the participant terminates at the CO or the CO sets up another plan and transfers(spins off) all the money to that new plan. The new plan treats it as a merger, the old multiple plan treats it as a spin off.

Probably can't be done. It will probably be deemed affiliated. All should get the same benefits. Making the employees do deferrals while the owners get a profit sharing contribution is discriminatory.

My company has been using Relius for six years and I have found, generally, the people to be reliable and straight foward. It does take a lot of inhouse expertise to get a daily valued sytem working no matter which software you select and salesmen do tend to gloss over the work involved. But, I think if you stick it out Relius will do the job for you. By the way, we unplugged the VRU system because few participants wanted to use it. The web is where everyone is going to trade and get their balance.

I don't think the new entity is a new employer and they would be caught by the sucessor plan rule. In Treas REg 1.401k(1)(d)(3), reorganizations whereby the same owners end up with the new entity do not constitute a new employer.

It has to be that way because only a common law employer can make contributions for their employees. A could not contribute to B's employees. However, if the multiple employer plan gives the trustee the power to pay benefits to B's employees from assets of A's, only one 5500 has to be filed. If not, two separate 5500s must be filed. See the 5500 instruction booklet under "multiple employer plan other". Most of the multple employer plans have the language giving the trustee the power just to avoid filing a multitude of 5500s. As a practical matter shifting assets to pay benefits is never done because the fiduciary must still have a good reason to do it and I can't think of one. The real advantage to the multiple is that there is only one trust to deal with, benefits and methods of contributions can be modified in the adoption agreement employer by employer.

You would have to give participants notice of the amended loan policy. Those with two loans would be grandfathered.

Look at the new REv PROC 2002-21. PEO single plans are not multiple employer plans. Therefore, the client could not merge into the single because the PEO is a different employer- only rollovers or voluntary direct transfers should have been allowed. This means all the money transfered into the PEO plan should have been 100% vested. Employer contributions after becoming participants in the peo plan could possibly be under the 3 yr cliff. The plan document may deal termination of service due to a client company going bankrupt requiring 100% vesting.

It depends on the type of PEO plan. IF PEO 1 and 2 are multiple employer plans, I don't think you have a plan termination from PEO 1 dispite the contract or participation agreement. You have a discontinuance of contributions and a spin off from PEO 1 and a merger into PEO 2. In that case, you may have to 100% vest and mandate a Trust to Trust transfer with no distributions or IRA rollovers allowed because no separation of service has occured from the worksite employer. If you are dealing with PEO single employer plans, leaving PEO 1 would give participants the right to an IRA rollover as the PEO is the employer in that plan format. see revenue PRoc 2002-21

I don't think you can because a trust can benefit other people other than the owner of the account, which in this case is a spouse. This could be a disguised gift or tranfer. You can name a trust as a beneficiary however and this should accomplish what the spouse wants.

There are too many quirks to discuss here. I run a PEO, multiple employer, plan crash course to train administrators. The next one is July 11- see slavic401k.com for the details.

This is true assuming the PEO is currently running a single employer plan and not a multiple.

There is no separation from service by hiring a PEO. The employees will probably still be common law to the worksite employer not the PEO. It may be possible for A to terminate the plan and give distributions, however- that is if A does not sponsor another plan with 12 months nor allow their employees to participate in a PEO plan. Under the REv Proc. 2002-21, only the PEO, multiple employer plan is acceptable to the IRS, meaning the worksite must adopt it.

I suggest you jump, congress is not going to superceed.