Medusa

We are a TPA in the process of re-vamping our service agreement we use with clients. I am curious as to how many TPA's have arbitration clauses in their service agreements, and as to whether such arbitration is binding or nonbinding. (I'm not entirely sure what the purpose of nonbinding arbitration would be, but perhaps someone can enlighten me?)

I don't see directly where Tripodi is getting that from - but I also don't see where you are reading "wholly owned by an individual" to mean "wholly owned by one or more individuals".

Sal? Inaccurate? How can this be!? Larry, do you feel the answer is the same if the two owners are 99%/1%?

Thanks Larry - I had a bad feeling that was going to be the answer. Med

Earl, FWIW, this from the EOB definition of Employee:

But Lori - I know all that but how does that enable you to put the adoption date into the field for effective date?

I have a similar situation, and rather than start a new thread, I thought I'd just add on to this one. In my case, Corporation A is owned by X, who is not an employee. The sole employee, and coincidentally the trustee of the Corporation X Profit Sharing Plan, is Y. No relationship between X and Y. Y happens to own 30% of Corporation B, which is unrelated to Corporation A. The Corporation X Profit Sharing Plan enters into two transactions that are questionable. First, it buys some Corporation B stock. Secondly, it extends a series of loans to Corporation B. Do you think that either or both of these transactions is prohibited? I'm inclined to think both. Does the 50% ownership standard mentioned in Lou's post have any bearing here? I'm not sure that it does. Med

Janet - I'm not seeing where the adoption date is an option. At least not in the information you provided. Sheila - It would be possible but isn't the case here. The effective date is definitely stated as 1/1/98 in the plan document. Deferrals didn't begin until 10/1/98, but ... so what? Bird - I agree with you.

We had a plan on which from 1998-2006, we filled in the effective date on the 5500 as 01/01/98. It has now moved to a bundled provider and they are asking us to amend the 2006 return to reflect the correct effective date of 10/01/98. Does anyone know if this will be a red flag at the IRS or DOL to request amended returns for all the prior years as well? I'm not sure to what extent they match up the effective date from year to year. Med

My experience with Davis Bacon plans is that they are sponsored by a private employer, who is subject to the terms of its government contract. But the sponsoring entity has not actually been a government. Are you sure that is the situation?

We are looking at NexusTPA. It seems promising. I have also been told that LexisNexis Front Office by Time Matters is a good option and am looking into that as well.

Speaking of not wanting to give legal advice - I sure don't want to examine any international treaties. Thanks for the comments, vebaguru and QDROphile. I think we'll alert the client to the potential issues and let them make sure they are covered legally.

That is the $64,000 question. At least explicitly, the investment is the interest in the LLC - and I don't think the underlying investments of the LLC pass thru to the plan unless at least 25% of the LLC ownership is by benefit plans. Agree?

I know that this topic has been dealt with several times, and I thought I understood the rules, but am finding that further clarification might be a good idea. We are a TPA. One of our defined benefit plans has invested in a LLC (established in the U.S.) which holds real estate investments in Costa Rica. Question is, does the indicia of ownership requirement need to be met just at the LLC level or at the level of the LLC's underlying investments? The plan is not the GP. We're trying to stay out of giving legal advice here, and just want to know if this is a situation on which they should seek legal advice, or whether it is obviously okay. Any interpretations welcome.

Thank you Ak2ary. We're asking the prior actuary to amend their DL request to include a 401(a)(26) determination so that it can be corrected during the RAP. I'm not sure the client would have taken the plan with the increased accruals that I am pretty sure will be required, so this will likely not be the end of it.

That would be 5%.

Effen: The prior TPA/actuary did apply for a DL, and it's still under review at the Service. They did not request a ruling specific to 401(a)(26) compliance, although we're going to suggest they amend the application to do so. The actuary seems to think they can make the case that a .5% contribution (rather than benefit) rate can be meaningful. SoCal: There was no change in the plan or in the interest rate. From what I can tell the interest rates used for testing are just the 7.5%-8.5% corridor. I think the actuary's position that these benefits are meaningful is based on "gut", not on any actual numerical demonstration or testing. Must be nice.

We are taking over a cash balance plan where the benefits do not satisfy the Paul Shultz meaningful benefit standard for 401(a)(26). Has anyone had any success arguing with the IRS that benefits which do not meet this standard are still meaningful for purposes of 401(a)(26)? Any experience you can relate would be helpful. Medusa

A participant in our client's (we are a TPA) DC plan recently died and had a directed life insurance policy. It appears that in the past, the PS-58 costs have been reported sporadically at best by prior TPAs, and perhaps not reported at all by the participant. Does this affect the taxability of the insurance proceeds to the surviving spouse? Should PS-58 costs be recovered, to any extent? I'm not sure how far our responsibility as the TPA extends in this matter - except of course we have to prepare the tax reporting forms. Med

You are right, Janet, I think that's about all we can do. When I said the payments aren't late, I mean they're not "statutorily" late (not past the cure period). Thank you again for your assistance.

It already does permit loans. That isn't the problem.

One of our small plan clients took out a loan for himself and informed us after the fact. There was and is no documentation (the plan does permit loans). Does anyone have any thoughts about what is the best way to correct this? The payments are not yet delinquent. Med :angry:

Masteff - it's my understanding that the two "new" people don't actually get to make any election, since they have not yet entered the plan and have no rights to protect. Agree?

They do have current staff who would enter soon. As for the rest, Bird is on the money. Not allowing or disallowing, just advising of potential issues that might come up.

Actually, I seem to remember that you can't do that last thing you recommended. Your post is much appreciated. I think we will let them go ahead and do it, with the appropriate caveat. Med