FJR

The question still remains. Do we have a violation of fiduciary responsibility by having the remaining 5 participants in a non-interest bearing paying account?

It is a 401(k) Plan. It was a self-directed plan but without particpant access. In other words, a balance forward quarterly valuation. The participants would not have the ability to direct to the trustee the written instructions to make changes. With not being able to locate the few participants, the only choice was to liquidate the assets and deposit in the trusts paying account which does not pay interest. Had the assets remained in the participants allocated account prior to termination, then they would have lost approximately 35 to 40 percent of the value over the last 2 1/2 years. So tell me what is prudent. perserving the value of the accounts or subjecting them to risk that they have no control over. If prudent is having it in a money market, then it would just about be no better off where it is given the low rates that they paying.

Can anyone comment on a plan termination (IRS approved) where the plan assets were placed in a non-interest paying account for the purpose of paying out participants. Where most of the assets were paid within a reasonable time, there are still remaining a few that have not responded or can't locate. There balances are being held in the paying account under the name of the plan, but it does not pay any interest. Any problems here?

The fail safe according to this plan shall be those who have not separated from service prior the the last day and have completed the greatest number of hours of service. Again, by bringing in a few people to pass coverage, it has helped the allocations to the partners and we were able to bring 3 of the partners up a few % points. Seems like a small trade off. I have to admit that I am a little fuzzy when you talk about class exclusion for eligibility vs. allocation. As I started this thread, this plan breaks up the allocation into Groups when it talks about the non-elective contribution. Furthermore it names group A,B,C and D specifically by the name of the partner. The fifth group is all others and there are no HCE's in this group. I'm still stuck on this? Partner 1 gets 12% Partner 2 gets 10.3% Partner 3 gets 6.8% Partner 4 gets 6.5% All others get 4% 9 out of 12 NHCE's benefit - orignally 7 out of 12 so it failed. Bring 2 people in who had less <1000 but were employed on last day. (Non-top heavy) My gateway passes My cross test passes(non-discrimination class test) However my ratio % test fails for each rate group ( 4 in all) My mid-point is 33.75% Do I move on?

Thanks Tom that was a good explaination. The document does seem to have that fail safe language, so to be on the safe side we should bring in enough people to pass 410(b)(1)(B). I think the result of doing this will help for cross-testing and will allow us to bump up the partners allocations. There was another person who was re-hired and according to the doc. he becomes immediately eligible for the plan but based on the hire date he is under 500 hrs. of service, so we didn't give him a contribution and kept him out of the testing. I hope that was OK. I still wonder about each of the 5 groups getting a different rate % of the allocation is in some way a CODA issue as kjohnson is suggeting. Thanks for all your help. By the way, I assume you have plans written this way. If so, what type of notice do you provide regarding the allocation.

Tom, this is a volume submitter document from corbel. Yes there are 5 groups or classes being allocated comp to comp and Yes there are 4 rate groups as there are no other HCE's. So, do I need to pass the ratio % test? My 410(b) coverage fails and my 410(B) average benefits passes. I have a total of 17 in my coverage, 13 are NHCE and 8 are benefiting. The ebars for the HCE's are 2.654%,4.787%,5.968% and 3.807%. The plan is not top-heavy and the 5 participants that are not getting an allocation are all terminated. I was able to pass the gateway and cross-testing with an allocation of 12%,9%,6.4%,6.4% and 4% to the rest. Can someone also comment on when you can use EBAR banding and when you cannot or shouldn't

For most, this will be a basic question, but appreciate any comments. As we dabble more and more into cross-testing, we have the following take over case. Non top heavy cross-tested plan with 5 rate groups. Group 1, 2, 3, and 4 represents the 4 different partners. Group 5 represents all others. By the way the 4 partner groups define them with their actual names (thought that was a no no.). What the prior TPA did was to allocate a different % to each rate group. Example - 29k to #1, 18k to #2, 12k to #3 & #4 and 4% to all the rest. Assuming this passes, I thought the IRS does not allow this as it would be deamed as having 401(k) features. This plan is a 401(k) and all partners max out their deferral. Any comments would be helpful...

Just want to verify this. Participant in 401(k) is deceased. Never married and has his elderly mother as beneficiary. Plan uses lump sum option. Elderly Mother appoints daughter as power of attorney(probably not relevent). check gets issued Payable to elderly mother(not rolled over) and uses social security number of elderly mother? 20% witholding using SS# of mother? Something is making me question this. Thanks

Just want to confirm this. Plan year is 4/1/02 - 3/31/03. In doing the ADP testing, the HCE compensation threshold is ee's with comp. of 85K in the prior plan year. The 90k threshold will not be until 3/31/04? Thanks

Surely he can use the catch-up under the 401(k)?

mbozek, thanks for the response. Why no Catch-up if the employee over 50? Why not an additional 2,000?

With a 501© organization that sponsors a 401(k), can the HCE contribute to a 457 as well. And do the same limits apply?

Here is a twist to your question. Lets say you approve it and then this free loader comes back with requesting another hardship to avoid forclosure. Doesn't own the property, Would you allow it?

I think the premise is in the "purchase" of a primary residence. If it is not in the persons name then is he actually purchasing. Seems to me an incredible waste of a clients time and money

Is there a formal termination process like a qualified plan when dealing with these individual annuity contracts? Just doesn't seem right that there is no provision to rollover to a qualified plan. Written poorly in my opinion.

Mike, so what you are saying it that the termination process is just a formality to not deposit future deferrals into the annuity plan. So no matter how bad the situation is, the Insurance company gets to keep the money. Typical.

mbozek, Is it possible for the employer to terminate the plan? Again this is listed as a Tax Deferred Annuity Plan. If they can terminate it, then what would prohibit the assets from being liquidated and rolled over to let say a 401(k) plan. Just from the Investment arrangement alone, would I feel strongly that 401(k) plans are better than most 403(B) arrangements.

What I mean by takeover, is the client wants to make a change. They are tired of poor service, hidden fees and charges, doing to much of the work themselves, etc. etc. But, because they have been with this insurance company for many years, they make it difficult to change. They would like to have regular mutual fund investments. The current arrangement seems to indicate that there are two plans. One simply reads Defined contribution pension plan. Employer puts in a fixed percent of pay and asset are invested in units of variable annuities. Looks like they mantain the participant accounts. The other is a tax deferred annuity plan. Employee puts there pay directly into seperate account issued by the insurance company. The difficulty seems to be in the tax deferred annuity plan. Doesn't seem like you can do anything with that money, other than leaving it where it is. So if the client wants to rid themselves of this Insurance co. They can't We administer plans that want to invest in mutual funds. We recordkeep with an ominibus account. So if we want to park the money with Schwab as an example, 403(B) accounts don't work. They have to be set up individually. So if they want to leave, they need to find some other company that will set up individual custodial accounts and it would have to be someone who excepts little tiny balances per individual. Not to many out there that will and they don't want to go back to Annuity accounts. Doesn't seem right?

Is it me or is taking over a 403(B) nearly impossible? I am not an expert in the 403(B) arena, but have taken over 100's of 401(k) plans and have never found any problems like we are having with this plan. In my opinion, 403(B) plans were designed to never give participants the freedom of investment choices. The only one who benefits from these arrangements are the insurance companies who service them. You can't get answers, they most don't know a thing about the product, they are extremely expensive from all the crap they put into these annuity contracts and more importantly they prohibit you from leaving. Is there anyone out there who knows how to actually go about taking over a 403(B) plan? My conclusion is to start a 401(k) and avoid all these pitfalls. I would like to be able to speak directly if possible. Thanks.

If the original plan is amended to exclude all the non-factory workers, then they are not eligble under the prior plan. So is it still considered a successor plan even though they are no longer eligible or am I reaching to far? I thought this idea would work as a new Safe Harbor Plan.

Thanks Mike, I will check it out. If testing seperately, we were inclined to use comp. and deferrals only during the time period the participants were in the plan. So eventually, there would be HCE's in the original plan during the first 3 months only. So we would use Comp for only that period. Then test the other plan using comp and deferrals in the other plan for the remaining 9 months?

Here is what we are trying to accomplish. Company sponsors a k plan and matches eligible participants. Company wants to carve out most of the employees and start a new SH k plan. Original plan will amended to exclude everyone but factory workers. New Safe Harbor will exclude factory workers and be available to all others. Assets from original plan will be merged to new SH plan for the non factory workers. If new SH plan goes into effect 4/1/03, but some the deferrals went into the original plan for the first 3 months, how do you do the ADP test for the 2003 plan year assuming both are a calendar year end.

Tom, just out of curiosity, how many plans do you handle? I am amazed at your ability to respond to so many questions, so well, and also have time to handle your own plans. Anyone ever tell you that you must of been born a saint? Keep up the good work

I agree, but don't you have the choice of aggregating or not aggregating for coverage. Also, you don't want to overlook anything. We had a situation where an administrator didn't take out othewise excludeble employees, as they let people in after 6 months. In that case you would probably help the situation on passing.

What is the best way to run on 8.0 a basic safe harbor match, a fixed match and a discretionary match all under one plan. # different transactions? Also, what are others doing with safe harbor match? Safe harbor match account and a regular match account? thanks