KJohnson

I think I would agree with Andy H. I suppose conceptually you would meet the gateway under the 401(a)(4) regs, but they could not be treated as QNECs under the 401(k) regs. ) I don't see Tom's limitation as to (k) reg only applying to a 401(a)4) safe harbor because the (k) reg refers you back to 1.401(a)(4)-1(b)(2) in general and not to the 1.401(a)(4)-2(b) safe harbor.

If you are looking at 419A stuff, if the welfare fund was established after 7/1/85 then to be a collectively bargained welfare plan (and essentially exempt from 419A limits for the collectively bargained employees in the VEBA) 90% of your benefit eligible employees need to be collectively bargained. If you don't meet this, my understanding is that 419A "kicks in" for everyone. 1.419A-2T

The only one I know is on Monks v. Keystone Powdered Metal Co., 78 F. Supp.2d 647 (E.D. Mich. 2000) that is discussed in a link that I pasted into an earlier post in this thread.

From Derrrin Watson's "Who is the Employer" Q&A back in 1999 Counting Hours in Lease to Own (Posted 2 Mar 1999) Question 11: My business routinely leases employees for several months. If we like them, we hire them. If not, we ask the agency to send us someone else. These are the same temp employees they would use for 1 week assignments while an employee is on vacation, workers the agency has recruited. How do we count their hours of service once we hire them? Answer: The following answer is drawn from Q 4:37 of my new book, Who's the Employer? Many employers will lease an employee for several months, or possibly longer, before offering them a permanent position with the company as an employee. This can simplify bookkeeping and reduce an employer's unemployment insurance costs. If a recipient hires someone who formerly provided services to it under a leasing arrangement, the employee is credited with all hours of service earned while working under the leasing arrangement, whether or not he or she satisfied the substantially full-time requirement. (IRC 414(n)(4).) Service Credited. Sandy's Sweatshop leases Ellen from a temporary agency for three months. During those three months, Ellen works 500 hours for Sandy. Sandy then hires Ellen directly. Ellen is already credited with 500 hours of service, even though Ellen was not technically a leased employee because she did not satisfy the substantially full-time requirement. Since the employment commencement date is the first day a worker is entitled to be credited with an hour of service, Ellen's first eligibility computation period begins when she started working for Sandy under the leasing arrangement. Keep in mind that the longer a "temporary" worker stays with a company, the more likely it is that a court may find the company is the true common law employer. The importance of this issue can transcend the importance of the leased employee issues. Health Plan Coverage. Fancy Tools, Inc. has a good health plan for its employees. The plan document says all employees working more than 30 hours per week participate. Fancy Tools needs a new shipping clerk. They contact Astaire Temps, who sends over Waldo as a temporary clerk. Waldo works there three months. Waldo is just like other Fancy Tools employees, except that Astaire gives him his paycheck. After four months there, Waldo contracts cancer and demands to have his medical costs covered under the plan, on the basis that he is Fancy Tools' common law employee. While that claim might have been rejected out of hand had he worked there only one week, it becomes more credible the longer he is there. -------------------------------------------------------------------------------- Important notice: Answers are provided as general guidance on the subjects covered in the question and are not provided as legal advice to the questioner's situation. Any legal issues should be reviewed by your legal counsel to apply the law to the particular facts of your situation. The laws, regulations and court decisions in this area change frequently. Answers are believed to be correct as of the posting dates shown. The completeness or accuracy of a particular answer may be affected by changes in the laws, regulations or court decisions that occur after the date on which that Q&A is posted.

What do you know, they changed their minds.... http://www.treas.gov/press/releases/js695.htm

Attorney B is correct. 1.401(k)-1(a)(3)(B)(ii) deferrals must be after the later of the date that the employer adopts the 401(k) plan or the date the plan becomes effective. Here even if you have a 1/1/2003 effective date the employer did not adopt the plan until 9/3/2003.

I think you can use a 5307 to accomplish this purpose--but unless there are questions about a partial termination or paying employees at improper vesting percentages or there is limited access to five years of pay-out data I would be inclinded to go with a 5310 that would serve two purposes of getting you both GUST qualified and getting an opinion on a termination. I find turn around time for 5310's to be about the same as 5307's. Alternatively, if you don't want a letter regarding the termination, it may be simpler to completely restate onto a prototype (assuming you can fit without a variation) and not worry about filing at all. I guess you would just have to consider the cost/benefit of the addiitonal time it would take you to compeltely restate versus the time to add the slap ons and then have to file.

Actually it is on benefits buzz now. Glancing at it I think it is more in line with Mike Mallon's post and my first follow up. Adopt by 9/30 and you have until 1/31 to get a determ if you need one. Adopt after 9/30 but prior to 1/31 and you are o.k. as long as you file for a determ and pay $250.

I heard the same, but it might not be quite as generous as mentioned above-- we will have to wait and see. What I heard is that all plans have to be restated by 9/30 but that if you go off volume submitter or prototype you have an extended period to file for a determ letter if you pay $250. Hopefully we will know in an hour or so.

EBIA has one in its cafeteria plan publication

My reference to the 1,000 hours was not to the initial eligiblity test uner 125(g)(3)(B) but to the nondiscriminatory classification test under 125(g)(3)(A). This test refers you over to the non-discriminatory classification test under 410. In running this test, I think you can use any exclusions that exist under 410(b). For what it is worth, EBIA comes to the same conclusion in the "Green Binders" but states that to exclude them from testing you actually have to exclude them from the Plan (Even if you had a 3 Year requirement as permitted under 125(g)(3)(B) I think you would still have to include those with over a year of service for 410(b) purposes in your test under 125(g)(3)(A). I have seen certain situation where an employer may have 60 or 70 employees who work 20-25 hours a week and are never entitled to health insurance. That employer may only have 7 or 8 full time employees who are covered under the group health plan (1 or 2 who are HCEs). If you limit your eligibility under a 125 POP plan to those who are eligible for health insurance you would undoubtedly fail your non-discriminatory classification test (even after weeding out those that can be excluded for age and service under 410(b). What I was wondering is whether, in the alternative, you could simply say that everyone is eligible for the 125 POP knowing full well that the only people who would ever receive any benefit from the Plan are those working more than 30 hours a week and eligible for the group health plan. Can you consider someone "benefitting" for the non-discriminatory classification test just because they meet the Plan's eligibility criteria? However, I think that even if you could you would fail the benefits and contributions test under 1.125-1 Q&A 14 of the proposed regs.

Got To Get You Into My Life (Expectancy) Everybody's Got Something To Hide Except For Me and My Non-Spouse Beneficiary?

Code § 125(g)(3)(A) specifically refererences Code § 410(b)(2)(A)(i) and I think that the majority view is that you can use the same exclusions that exist under 410(b) in running a nondiscriminatory classification test.

Another question that has always bothered me is where an employer, such as in the restaurant business, has a number of part-time employees who will never have the 30 hour "actively at work" requirement that is typical for insured health coverage. They will, however, have 1000 hours during the year. You therefore may have a coverage issue for your 125 Plan. Can an employer with only a POP make everyone eligible for the cafeteria plan and therfore not worry about coverage while knowing that there would never be a reason for employees who are not eligilble for health insurance to actually reduce their salaries?

1) Do you have any cites that you cannot limit an FSA in this fashion ? 2) I think that your statement regarding the same COBRA rules being applicable to FSA's and HRA's is a little to broad. To have the limited COBRA FSA rule the maximum benefit under a FSA cannot exceed the larger of: (i) Two times the employee’s salary reduction election; or (ii) The amount of the employee’s salary reduction for the year plus $500. Since you cannot have employee salary reductions into an HRA, then it would appear that any HRA that offers more than a $500 benefit could not satisfy the rules regarding limited COBRA coverage for FSAs. (This would probably include most HRAs). However, in my situation I guess you could argue that a stand alone HRA with only a $500 employer contribuiton would satisfy the rule. 3) I don't understand your comment about having to set up a trust account for FSA's. DOL has a published non-enforcment policy regarding any trust requirement.

Employer wants to increase the deductible in its group health plan from $500 to $1,000. The employer, however, wants to provide employees with an additional $500 non-elective contribution in their FSA but designate that this employer contribuiton can only be used for medical expenses that are included in the deductible after an employee satisifes the first $500 of the deductible. The FSA will remain the same for employee contributions--it can be used for any Section 213 expenses. The 125 Plan TPA is saying that this cannot be done within a single FSA. Does anyone know of a reason an FSA could not be structured this way. (We considered a HRA, but it seems silly to have 2 plans rather than one especially if the employer is not going to allow a carry over from year to year of the employer contribution Also, you don't get the limited scope COBRA rule for the HRA)

I think you are stuck with 1,000 hours for eligibility and vesting, but I think that you can require more than 1,000 hours during an accrual computation period to credit the employee with a full benefit accrual unit (i.e. a full "year of participation" for benefit accrual computation purposes), so long as an employee who is credited with at least 1,000 Hours of Services is credited with a partial benefit accrual unit that is at least equal to a ratable portion of a full accrual unit. See See 2530.200b-1 and 2530.204-2c. Thus I think you must give someone with over 1,000 hours at least a "ratable" portion of a year of service for benefit accrual purposes. However, how you would determine a "ratable" potion when you are actually tying what is a "full year" to a contribution rate is beyond me. I think I am with RTK that I am not really sure this works.

The one area where DOL does have jurisdiciton is that if you have a transaction that would be a PT and you want an exemption. DOL has the power to issue exemptions that are binding under both 408 of ERISA and 4975 of the Code.

The following article has a in-depth discussion of Swanson and the related PT rules: http://www.trustsandestates.net/IRAsFLPs/I.../IceSwanson.htm The one thing about Swanson that has always made me a bit wary, is that the IRS did not assert an"I know it when I see it" self-dealing prohibited transaction under Sections 4975©(1) E or F. Here is Mr. Ice's take on that issue: On the whole, Swanson is a very supportive case. One cause for concern, however, is the statement by the court that the IRS “never suggested that petitioner, acting as a “fiduciary” or otherwise, ever dealt with the corpus of IRA #1 for his own benefit.”[76] This may have been an oversight by the IRS. Even if the taxpayer escapes the net cast by the specific litany of prohibited transactions, there is always the IRC §4975©(1)(E) and (F) catch-all provisions prohibiting a fiduciary from dealing “with the income or assets of a plan in his own interest or for his own account; or . . . [receiving] any consideration for his own personal account . . . in connection with a transaction involving the income or assets of the plan.” This attack was apparently not raised by the IRS in Swanson.

Yes I do--thanks

You only have to file by 9/30/02 if: 1) You did not amend by 2/28/02 2) You are entilted to the extended RAP under your volume submitter or prototype document 3) You deviate from the volume submittter or prototype. In such an instance you will only be considered a timely GUST amender if you file. While it is true that you don't have to file for a determination letter you do need to be a timely amender. For plans who have used the extended RAP but who do not go "word for word" with their V.S. or prototype the IRS has determined that filing is a neccessary part of being a timely amender.

I had heard essentially the same. However, I also heard that the adoption deadline could also be pushed back to 1/04 if you were wiling to pay an addtional "compliance fee" of $250. Again, this is unofficial.

Gary, I think a sole prop WITH NO COMMON LAW EMPLOYEES would have a very strong argument that the ERISA plan asset regs do not apply becuase that individual is not a participant as defined in ERISA and the plan would not be an employee benefit plan under ERISA. In that case only the Code would apply and there would be a 30 day safe harbor. However, once you get common law employees the issue becomes much murkier as to ERISA's application to whether the sole prop is a participant under ERISA. There is a long discussion in this thread: http://www.benefitslink.com/boards/index.p...e,and,401&st=15 We may get guidance from the Supreme Court which just took a case regarding whether a sole shareholder (with common law employees) can actually be considered a participant under ERISA for purposes of anti-alienaiton.

Also separate accounting is needed if you have, or will have, in-service distributions prior to normal retirement age from the psp. The participants cannot receive mppp assets (or earnings) in such a distribution.

This is from the 2000 Q&A's with the IRS at the ASPA conference: 12. Q. A question arises for a sole proprietor with no employees. When must a Simple IRA Plan be funded. CPA and I agree the 3% "employer" contribution may be deposited up to the date the tax return is due, including extensions. He believes the "employee" $6,000 must be funded by January 30 (ie within 30 day of the plan year end.) His primary source is the instructions on page 9 of the Pub 560. However it may be later than 1/31 before we know if there is ample SE income to fund such amount. A. The statute appears clear that it must be funded by 1/30.