jaemmons

Because life insurance is seen by the DOL as a welfare benefit, they are not reported as plan assets on the Schedule I or H. Now, I know that other practioners may disagree, but the logic seems to place consistency with how welfare benefit plan assets are reported. In a fully insured welfare plan, no Schedule I or H is necessary, since the plans benefits are being guaranteed by an insurance carrier. Also, keep in mind that benefits provided by an insurance carrier (ERISA 412(a)) don't need to be covered under a fidelity bond.

Keep in mind that these plans are looked upon as multiple ER plans. The participating employers are "co-sponsors" to the plan when they sign and execute a participation agreement, and as such if a participating er goes bankrupt, I believe you have a partial plan termination with respect to that er and would fully vest all plan participants. Since the employees of each employer are recognized individually for most plan purposes, a partial plan termination determination would need to be done on an employer by employer basis.

Plans may restrict distribution of benefits until a participant has attained NRA. This is a good way to ensure that a participant has some retirement benefits when they are 65 (or whatever NRA is), since most younger participants take taxable lump sum payments. However, unless the plan has a solid investment policy, which allows for participant investment direction, it may be best to change the timing of benefits when you restate, in order to appeal to the masses. Keep in mind that distribution restrictions are sometimes looked upon as a negative for a participants.

UKH - Your conservative approach may violate plan document terms. You cannot just vest these rehires at 100% on future contributions because they were an affected participant under the partial plan termination. The only benefits which require full vesting are those which were in their accounts when they were laid off. Any future benefits will need to vest according to the document's vesting schedule for that specific money type. However, if the document contains language which would allow the continuance of the full vesting then I guess my previous statement is a moot point.

No. Insured welfare plans do not file schedule H or I, as long as they meet the requirements of 29 CFR 2520.104-44.

Unfortunately, I am not an expert with H&W plans, so I am begging for a little assistance here. I have a client who supplied me with the Schedule A information from their dental insurance provider. In Part III, 8© there are listed some "retention charges". My question is this: Do the items listed as "Charges for risks or other contingencies" get reported on the Schedule C if the amount is >$5,000?? I would think that they would be, but just need some clarification.

Is there an IRS "deminimus" amount for reporting excess aggregate contribution refunds, which are paid after the 2.5 mos. deadline, on Form 5330? I thought that I heard an unofficial statement at one of the IRS seminars, but cannot find anything to support it.

That was my initial thought, but I just need clarification. thanks

Are dependent care expenses incurred during the period an employee is not eligible for participation in their companies 125 plan eligible for reimbursement?? Employer's plan has a 30 day waiting period.

Scenario: Company A - is a karate studio owned 100% by Owner 1. Has 15 separate locations which are owned 51% - Owner 1 and 49% by an employee of the individual location. No one employee owns any other studio. I don't believe that there is a stock purchase agreement for the ee owners to buy any direct stock in Company A or any other buy sell agreement for them to be able to buy Owner 1's interest over a period of time. Company A provides payroll & HR services, along with other management functions for every studio that is established. I don't know what fees/income is received by Company A from any of the studios, but I would assume that something is paid to them for the aforementioned services. Company A does not own directly any stock in any of the 15 locations. Question: I don't believe I have a controlled group, since there isn't any effective controlling interest with Owner 1 and any of the other studios (owns less than 80%). Could this be considered a Management Function Group under the ASG rules? If so, how? If I need to provide any other information, please let me know.

You are correct. There aren't any benefits being distributed under the MP that are subject to the J&S rules. The exemption under 412 is for plans in existence prior to ERISA which were frozen and did not have any benefit accruals post 1974. Since the DB benefits were already paid under the plan termination, which gave the dr's spouse the opportunity to have the benefits paid in the form of an annuity but she waived that option. Therefore, since the only assets of the MP consist of rolled over DB money, no spousal consent is required. Grant it that this is my professional (not legal) opinion and I believe that it would be difficult for the IRS to see it otherwise, taking into account my logic.

Under Reg 1.401(k)-1(a)(6)(ii), specifically states that a CODA is created when "an arrangement directly or indirectly permits individual partners to vary the amount of contributions made on their behalf." Since the underlying members of this LLC are partners, they are subject to the applicability of this Reg section. Even if non-partners are allowed to "opt-out" from year to year, this may be looked upon as an indirect CODA to the partner since the non-partners cost would increase thier K-1 allocation. For the partners, the irrevocable waiver would not be deemed a CODA if it is executed prior to the partner ever being eligible for ANY plan the LLC has or had sponsored. (See Reg 1.401(k)-1(a)(6)(ii)©). The downside is the you now would have a CODA with a plan document that does not contain CODA language which is now an operational issue, since the plan is not being operated the way it is written. The good thing is that they are sponsoring a PS plan so adding the CODA language would not be a problem. However, if you had a pension plan (DB, TBP or MPP) you may have a disqualification issue.

Yes. All contributions made to the plan on behalf of each partner are individual deductions for tax purposes, which included "deferrals", match, and non-elective contributions, and as such are treated as having been made by the partner personally. This is why they are taken as 1040 deductions and not 1065 adjustments. All other plan costs (non-partner) are allocated according to their partnership agreement, irrespective of their individual partnership interest.

I may be missing something, but there was a waiver of the QJSA from the DB assets when they were terminated and rolled over into the MP. Since no benefits have accrued under the MP, I don't see any problem with the owner taking the rollover assets from his previously terminated DB plan and putting them into his IRA. The J&S rules I feel would only be applicable to any benefits accrued under the MP. Since there aren't any, no spousal consent would need to be required.

Sounds to me that you have a Group Insurance Arrangement (GIA). If the participating employers are unaffiliated (not a controlled group or ASG) as I believe the case to be here, even though there is a management function of "A" to B & C, a consolidate 5500 is filed by the sponsor of the arrangment, along with respective schedules. Take a look at the 2001 Form 5500 instructions on page 11. Also, all GIA's are required to complete a schedule H and obtain an independent auditor's opinion on the plan financials.

I have always used the basis for an audit of the 5500. Therefore, as long as schedule P has been filed, the statute of limitations starts for three years. If the data is wrong from more than three years, I wouldn't worry about it.

Refinancing loan #1 violates the maximum repayment period under 72(p). Therefore, I would have the participant repay the loan #1 amount by its original due date 2/03 or they may have to deal with potential excise taxes on the amount involved.

Frank, Is this a defaulted loan (one which is deemed uncollectible) or a deemed distribution for failure to repay? If it is a defaulted loan, then the participant cannot repay the loan since it has been determined to be uncollectible. In this case, the account balance is offset by the outstanding loan balance. If however, it is a deemed distribution, since the plan does not allow for after-tax contributions, the participant cannot repay the loan. Normally, plans which do not permit after-tax monies to be contributed but offer loans, establish in administrative procedures that the loan is deemed and offset with the secured account balance simultaneously. This helps the administrator, since they don't need to track outstanding loans for distribution purposes that have been deemed in a prior plan year. Bottom line is that I don't feel that they can repay the loan.

Sounds like you are a regional prototype sponsor. I am assuming that you have filed with the IRS to attain this status. If so, you have an obligation to notify the employers who have adopted your prototype that you are no longer sponsoring their document. Are you going to sponsor another document, or is a name change the only modification to the sponsorship?

You must first satisfy any top heavy minimum based upon full compensation. If it is greater than the allocation for their class, it is still used for general testing purposes. Problems arise when, and this doesn't happen too often in the small business market where top heavy is more visible, you have a nonkey HCE who has to receive a th min, since their EBAR is increased. As far as compensation for general testing, you can use the participation comp, even with the new cross testing regulations.

I concur. I overlooked the "safe harbor" in the original post.

I agree with Tom. However, if you are restating the plan document, you might want to go to the IRS and get their blessing on this. Anyone out there can correct me if I am wrong, but I don't know of any automatic reliance letters issued on this type of plan language option. It doesn't qualify as a "safe harbor" allocation to the match, which would be a requirement under the LRM's for prototype sponsors, and I don't know of any volume submitter docs that have an opinion letter on this type of match formula language. Therefore, I would view it as an IDP and submit to the IRS. (You may want to also do a little due diligency and review the prior year for effective avail)

The adoption date of the plan may be used as an "x" date for waiving eligibility requirements, in your plan document. This would not constitute an entry date, because the plan isn't effective until 1/1/02. Since all employees of the employer as of the adoption date are ALL able to participate, I don't see any problem with bringing them in and making any new hires meet the plan's normal eligibility requirements. You aren't discriminating in favor of the HCE's, since all employees were given this opportunity.

You need to look at the number of NHCE's and HCE's who defer 3% or more. It may be discriminatory if less than 70% of all eligible NHCE's defer at least 3%. Without having all of the facts and circumstances, I would say look at the current availability of the increase, based upon current deferral rates.

Yes. The catchup contribution can be elected to be put into the plan because of a plan limitation, either due to document terms or compliance testing, or an IRS mandated limit (402(g)).