jaemmons

Kirk/QDROphile, I truthfully respect your opinions, but the plans my office primarily handle are those of small employers, whereby the person signing "on behalf" of the employer, as Plan Administrator is normally an executive officer or principal shareholder, not a "Director of HR" (not meant to disrespect anyone who may be one) for a large corporation. These are the "key" individuals who make ALL decisions concerning their companies, and since most, if not all, of our employers are either corps or LLC's, I don't see how the employer, whether named as plan administrator or not, can side step becoming a fiduciary, since the liability of decisions made on its behalf is borne by the employer and not the individuals severally. This is one of the reasons they incorporate or become an LLC, so they cannot be held severally liable for their decisions made on behalf of the company. That's not to say that the employer does not have legal recourse against the individual(s), but it doesn't matter whether they name someone as plan administrator or not, the employer is generally the one who is going to be sued.

Is the participant's vested account balance inclusive of the outstanding loan balance on June 30? Also, does the loan policy allow for outside collateral, in order to allow for the $10,000 minimum loan?

According to the 5500-EZ instructions you will need to file a final for the MPP. Under "Who May Not Have To File" there is a note which indicates that "all one-participant plans must (bold-type) file a Form 5500-EZ for their final (bold-type) plan year even if the total plan assets have always been less than $100,000..." That's pretty direct statement, so I would file a final EZ for the year of merger.

According to the 5500-EZ instructions you will need to file a final for the MPP. Under "Who May Not Have To File" there is a note which indicates that "all one-participant plans must (bold-type) file a Form 5500-EZ for their final (bold-type) plan year even if the total plan assets have always been less than $100,000..." That's pretty direct statement, so I would file a final EZ for the year of merger.

Instructions to 2001 Form 5500: Section 1: Who Must File Do Not File A Form 5500 For A Pension Benefit Plan That Is One Of The Following: (paraphrasing) 3) SIMPLE IRA under Code Section 408(p) 4) A simplified employee pension (SEP) or a salary reduction SEP described in Code Section 408(k)....

The participant doesn't decide if administrative or processing fees are to be charged to their account. The plan document dictates whether or not expenses incurred in connection with the plan are to be paid for out of plan assets or charged to the employer. Ultimately, it is the plan administrator's decision which is put in writing in the plan document. Although the amount of the expense is relatively small, it seems to me that it is an assignment of the participant's assets for an unnecessary and personal (not plan) fee associated with their plan account which must either be paid for by the plan sponsor or absorbed by the participant and paid out of their own pocket.

QDROphile, I would think that inherently the plan sponsor (employer) is a fiduciary, even though an employee may be appointed in writing to act on the employer's behalf. Therefore, I don't understand how they can indemnify themselves from becoming a fiduciary to the plan, since a named plan administrator is acting on behalf of the employer(s) sponsoring the plan.

Yes, but normally the Trustees sign this paperwork since they have the authority to "controll" the plan's assets. In the current environment we live in (individual accounts), why is it such a concern by the DOL for 2 individuals to consent to a distribution from a participant's individual account. Personally, I feel it is unwarranted, not to mention a little cumbersome, especially if one Trustee is out of the office. I agree that a Trustee cannot authorize their own distribution/loan, and would require the other to sign off on it, for quality control purposes. Aside from this, I don't feel your client needs to follow their direction, unless it becomes a fiduciary issue which the DOL is going to acknowledge in writing. I just love how the DOL can make things up as they go along during audit. Maybe if this, as well as other issues (e.g.-15 day funding for ee $'s), were a STANDARD put in writing and not a "shoot by the hip" issue, based upon an individual auditor's opinion, I would feel otherwise.

Yes, plans which cover both union(as defined in the Treasury Regulations) and non-union ee's is deemed to have separate plans for testing purposes. Therefore, they are mandatorily dissagregated into component plans and tested as such. The only test to perform for the union is the adp, no acp is required as the IRS deems the "union part" to automatically pass 401m testing. Keep in mind that the documents language to not exclude them from participation pertains ONLY to initial participation. The disaggregated testing is a requirement under Treas Reg 1.401(k)-1(g)(11)(ii)(B).

The plans you describe are not required to file a 5500, and therefore, are not subject to any audit requirements.

However, the 125 contributions may need to be taken out of 415©(3) compensation if they are part of an automatic enrollment (negative election) in which an employee can opt out ONLY with certification of alternative health coverage. Rev Ruling 2002-27 allowed for the use of negative elections within 125 plans but there may need to be an adjustment to 415 comp.

A prerequisite to attend a post-secondary school is that the individual must have completed "primary" education (HS diploma). Last time I checked, you don't need a HS diploma to attend beauty or any related trade school, which would disqualify it as a "post secondary" educational institution. Therefore, the participant would not meet the "financial needs" test of the safe harbor hardship requirements. However, if the plan allows for "facts and circumstances" the plan administrator may allow for this.

Under community property law, each spouse has an equal share of the stock. Therefore, they would be deemed to be 41% owners, respectively, in both companies and, thus, forming a controlled group of companies. However, I do want to caveat this statement as a general determination based upon general information. The only way I know of circumventing these ridiculous rules, is if the spouses had entered into an agreement to treat their property separately. Therefore, generally, property acquired during or before the marriage would be treated as separate property and the stock wouldn't be attributed to the other spouse.

Stock is attributed to the spouse unless an exception exists under IRC 1563(e)(5). One of the 4 conditions becomes a little clouded when you are in a community property state. Under community property law, the spouse becomes a direct owner of the stock by operation of state law, as supported by various court cases. Therefore, they cannot meet the first condition of the spousal exception where they do not own any stock in the corporation directly (IRC 1563(e)(5)(A)).

Yes you are correct. First you look at the anniversary of their date of hire and if they don't meet the 1,000 hours requirement during this period, then you switch to look at the plan year hours which contains their anniversary date of employment: Eg-Assume calendar year plan Hire 9-1-01 Work 890 from 9-1-01 to 9-1-02, but 1100 hours from 1-1-02 thru 12-31-02. Enter the first entry date in 2003. I hope this helps.

The employee contributions are (should be) after-tax. Therefore, you would run the match and employee contributions in an ACP test. Generally, only MPP established before ERISA can contain a CODA. If you have a CODA and its effective date is not before 1974, you have don't have a qualified MPP.

Well at least I now know who I can count on for spelling corrections

Explain to me how a MPP has a deferral feature??

Then you wouldn't have a controlled group.

In company A, the son is NOT attributed the stock of his mother, assuming he is over the age of 21 and doesn't own 50% of stock in company A directly. Therefore, the mother is the only shareholder for IRC 1563 purposes. In company B, only stock attribution is to the son from his spouse (21 % owner). NO attribution of stock from the mother to the son because of the same reason given above (over age 21 and does not own 50% of company B stock on directly or indirectly (he owns only 21% indirectly)). The community property rules are relevant in this case for the mother and father. Assuming the father is alive and still married to the mother, he would be attributed the stock of the mother, irrespective of the spousal exception rules. Therefore, you would have a controlled group of corps. because of the following: CompanyA: Mother -100% Father (1563 attribution) - 100% Total ownership = 200% (IRS math) Company B Mother 79% Father 79% (dont count son or daughter-in-law ownership because they don't own anything in Company A directly or indirectly) Total ownership = 158%(IRS math) 80% common ownership is satsfied since they own over 80% of each company. more than 50% identical ownership is met, since they own collectively a similar 79% interest or 158% together.

Interesting point in the "Ask the Experts" session of the Mid-Atlantic Area Employee Benefits Conference (Phila,PA May 2002). Question 32. "Does a money purchase needs to be updated for GUST before it is merged into a profit sharing 401(k) plan? NO Seems pretty emphatic to me, since this was the same answer given at the ASPA conference the previous October. Some practitioners feel that you should at least have the GUST I/II amendments but I have consistently been informed that as long as the plan into which the MPP is being merged is amended and restated for GUST, there will be no qualification problems with the old MP plan. If the plan were terminating then it would need to be updated for GUST I/II since there will be no continuance of plan benefits after the termination date. All of your other steps I feel are in line with normal practice procedures.

You may want to take a look at John Canary's (DOL) letter to Richard Steinberg (DOL Liason Task Force for the AICPA). It is concerning the DOL's guidance for reliance on certification for limited scope audits. http://www.aicpa.org/belt/ltdscope1_dol.htm Good Luck

I use Corbel and they have a DC Volume Submitter document which allows for multiple er plans. However, you are correct that these cannot be supported by prototypes (ns or standardized).

Just need clarification... I have an employee who turned 70.5 in june of 2002. He retired in August and requested a rollover distribution. I understand that he must take his MRD before he can roll his money over, since he is required to take it by 4-1-03. However, the amount is less than $100 and I was wondering if anyone knows of a "diminimus" amount which doesn't need to be paid??? I don't think there is one, but I am curious.

Under Rev Proc 2002-47, Section 6.07 (Matters subject to excise taxes) in general stipulates that an event for which there would be imposed other taxes aside from those which arise from disqualification (e.g.-excise taxes for failure to meet 412 funding), the error can be corrected under the EPCRS but, generally, any excise taxes or income taxes associated with the correction will still apply. Therefore, I would have the client file a Form 5330 and pay the appropriate excise tax. As far as late filing penalties go, I am not sure whether they would waive them or not.