FJR

The disability premiums are paid by the employer. The contribution is being paid by the insurance co. and is paid to the employer as an extra benefit to be paid into the plan on behalf of the participant

Does anyone know how to advise the following: Employer has a long term disability policy where an employee is receiving disability payments. The employee is a participant in the 401(k). The LTD plan states that they will pay the employer an extra benefi to be deposited into the plan. The amount is 4% of monthly earnings. 1. How can this be put into the plan as a salary reduction - pre tax contribution? 2. How is it reported? 3. Does this violate any ERISA laws. Again this amount is paid by the insurance co. in addition to the LTD payments It doesn't seem to be reported on his W-2 as a deferred payment. Should it? Any help would be appreciated

I have seen this happen to some of our clients as well. Often times the insurance agent doesn't understand the requirement for a fidelity bond which is 10% of the plan assets upto a max of 500k. They will sell them more than is necessary and will cover things outside the plan. You should ask how the bond is registered. Sometimes they cover the company against theft and it sometimes will also cover the plan. If it is registered in the name of the company and not the name of the plan, then you probably have a policy that is covering more than just the plan assets. If you want to see the motive of the Insurance agent, ask what the premium per year is on the bond. I bet the agent is making a pretty penny....As you probably know, a three year prepaid fidelity bond for a min. of 250k, usually runs around 100.00 a year. I bet your client is paying in the thousands per year.... Good luck.

I know there has been considerable debate on the best way to eliminate the money purchase plan now that egtrra allows for the increased deduction limit for Profit Sharing plans. Does anyone see a problem with amending a Money Purchase plan formula down to 0% effective 1-1-02. That way it will at least buy some time to figure out whether to Term, merge or freeze. What needs to be done other than an amendment?

The increased deduction limits, effective in 2002 for Profit Sharing plans equal to 25% of compensation, when does it apply for to an off calender plan year. If the plan year is 10-01-01 through 9-30-2002, What deduction limit do you use? Is there anything out there that spells out what other changes under EGTRRA applies to plans that are not calender year? Thanks.

If you use the deemed 3% for 2001, can you use current year testing in 2002? I thought we were too late for safe harbor for 2001 if we make the effective date 1-1-01

Tom - does that mean if your plan was top heavy, then you would owe those people a top heavy min. regardless of stat. exclusion. If so, it seem like the changes in 2002 under safe harbor match will solve this problem

I'm sure this has been discussed before, but would appreciate any comments. Starting a 401(k) plan mid year(2001) and making the effective date 1-1-2001. This is a small group consisting of husband & wife with 3 ee's. The Husband makes well over the 170K limit. If the enrollment does not get done until late in year and lets assume none of the ee's participate, we can assume a 3% for the NHCE and therfore the husband & wife can contribute an average of 5%. Assume no Match. My question is, can we use current year testing in 2002 or do we use prior year testing? Does the assumption of using the 3% average constitute prior year? Thanks!