KJohnson

1999 is there, but they hide them. I just fooled with the URL they used for 2000 and came up with the 1999. However, I don't think 1998 are on the site: http://www.abanet.org/jceb/1999/jcebirs99.html

In a number of professional practices that are P.A.'s (C corporations) employment contracts often provide that the individual will receive a specified percentage of any amounts that are collected for that employee's services after the employee terminates employment. Identical provisions will be in the contracts of all professionals. Does anyone treat these provisions as ERISA severance plans?

From my experience the most common practice in stock deals is for the acquired company to terminate its plan prior to the close of the deal. The IRS has stated time and again that this works. Here is an IRS Q&A from the 2000 conference Q.25. Company A buys Company B in a stock transaction. Each Company maintains a 401(k) plan. Company A requires Company B to terminate its plan the day before the purchase of B closes. B employees will become participants in A’s plan within 12 months of the date of termination of the B plan. Is A’s plana “successor plan” under 1.401(k)-1(d)(3) such that distributions cannot occur to B employees that will participate in A’s plan? The second sentence of 1.401(k)-1(d)(3) says that “… the definition of the term "employer" contained in paragraph (g)(6) of this section is applied as of the date of plan termination, and a successor plan is any other defined contribution plan maintained by the same employer.” Since A becomes part of a controlled group with B on the date of acquisition is the B plan “maintained by the same employer?” Answer The controlled group/employer is determined the day before the transaction takes place. After the transaction takes place a new controlled group/employer exists. Accordingly the distributions may be made. I thought I remembered seing some "soft guidance" that the termination could actually take place at the time of the transaction. but if this guidance does exist I can't put my finger on it. The one aspect that has always troubled me is not a stock deal where the controlled group changes but there remains two separate corporations but the case of a statutory merger where two corporations actually become one. In that instance the merged enity "is" each of the predecessors from a legal standpoint. I have asked the IRS and treasury representatives this question at the last Mid-Atlantic Benefits conference and they have said that this should not change the typical "stock deal" analysis. I have also flagged this issue in my cover letter for 5310 submission for a plan terminating prior to the merger and have gotten a favorable letter. You may want to look at this: http://benefitslink.com/modperl/qa.cgi?db=...ributions&id=78

In my experience, this is an area where the IRS does not have all that much expertise. In a right to work state, whether you are a "collectively bargained" employee is not contingent upon union membership. The collective bargaining agreement can cover employees who refuse to join the union. You need to look at the language of the CBA to see who it covers. Those are the indivduals who are in the collective bargaining "unit". Also, in rare instances there may be people who may appear covered by the CBA and who are union members but may not be in the "bargaining unit" because they do not have a "community of interest" with the other employees. The classic example is the son of a corporate owner who "works with the tools". Finally (although it does not seem applicable to your situation) there are "bargaining unit alumni" rules in the regulations for multiemployer plans.

No

Example (3). A plan which requires 1 year of service as a condition of participation also excludes a part-time or seasonal employee if his customary employment is for not more than 20 hours per week or 5 months in any plan year. The plan does not qualify because the provision could result in the exclusion by reason of a minimum service requirement of an employee who has completed a year of service. The plan would not qualify even though after excluding all such employees, the plan satisfied the coverage requirements of section 410(b). http://frwebgate.access.gpo.gov/cgi-bin/ge...=2000&TYPE=TEXT

I agree with Bill about the distinction between participants and plan fiduciaries/employees. I also agree that the DOL takes a very hard line regarding expenses for Trustees. I know of one case where DOL went through every long distance phone call charged to the hotel bill for every trustee and disallowed reimbursement for any call that was not about "fund business."

"Per diems for meals are an approved alternative ..." Personally, I agree that per diems should be considered a reasonable alternative in most instances. The fact that the IRS recognizes this does not mean the DOL agrees. I am not aware that per diems have been "approved" by the DOL in any published guidance. If anything the regs seem to imply that at least with regard to plan fiduciaries and employees per diems are not allowed and that the fiduciary and or employee must "account to the plan" that the expenses were reasonably and actually incurred.

I thought that you could advance expenses as long as backup/receipts were provided that the advance was actually spent on legitimate plan business. I did not think that you could have a per diem in the traditional sense in that you get to keep anything you don't spend.

I guess I would look at it as follows: 1) Go through all of the steps of 4044 2) Compare the percentage of benefit that each HCE and each NHCE would receive. 3) In the unlikely event that each NHCE is getting a percentage that is greater than or equal to each HCE then go ahead and distribute per 4044. This would result in NHCE's receiving a greater percentage than HCE's. (Example 3). No reallocation is needed to prevent discrimination. 4) If the HCE percentages are greater, then see what benefits of the HCE's are in categories 4044(a)(4)(B) or below. If there are no benefits (or only a small amount of benefits) in these categories, then HCE's will actually be receiving a greater percentage benefit than NHCE's because only those benefits at 4044(a)(4)(B) or below can be reallocated to cure discrimination (Example 1) 5) In most instances all benefits are going to be in 4044(a)(4)(B) or below and the HCE percentage is going to be higher than the NHCE percentage. I would think that in many of those instances you are going to end up with a pro-rata allocaiton to prevent discrimination.

S Luskin, I would like to think that your interpretation is correct, but I am not sure it tracks the statutory langauge. If "benefitting" means eligible to benefit then the second test under (i) makes no sense. I know that the EBIA manual says that benefitting means actually benefitting not just being eligible to elect the benefit. A self-insured medical reimbursement plan does not satisfy the requirements of subparagraph (A) of paragraph (2) unless such plan benefits-- (i) 70 percent or more of all employees, or 80 percent or more of all the employees who are eligible to benefit under the plan if 70 percent or more of all employees are eligible to benefit under the plan; or (ii) such employees as qualify under a classification set up by the employer and found by the Secretary not to be discriminatory in favor of highly compensated individuals I agree that very few plans pass either test in (i), but if you go down to (ii) and look at the mechanics of the reasonable classification test you have a much better chance of passing.

Blinky, I may be confused, but I thought you only reallocate to avoid discrimination on benefits at 4044(a)(4)(B) or below, if it is above this level you don't need to reallocate. That is why 4.02(2) begins with the phrase--"Subject to" paragraph 1... 80-229 goes on to give an example of the HCE receiving 50% and the NHCE receiving 16 2/3%. Example 1. A plan described in subsection .01 which provided benefits on an ongoing basis as of the date of termination that were not discriminatory within the meaning of section 401(a)(4) of the Code, terminates. The plan has two employees: A, an officer of the company, and B, a rank and file employee. The value of plan assets as of the date of termination is $130,000 which would, without regard to this section, be allocated to the employees under section 4044(a) of ERISA as follows: Paragraph of section 4044(a) Allocation to Allocation to of ERISA Employee A Employee B --------------- ------------- ------------- (3) $120,000 0 (4)(A) 0 0 (5) 10,000 0 (6) 0 0 ------------- $130,000 The present value of A's and B's accrued benefit on the date of termination, whether or not nonforfeitable, is $240,000 and $60,000, respectively. The limits described in section 1.401-4© of the regulations do not apply. The proposed distribution described in section 4044(a) of ERISA would not satisfy section 4.02(2) of this revenue ruling because (1) employees who are officers, shareholders or highly compensated would receive 54% ($130,000)/ ($240,000) of the present value of their accrued benefit whether or not nonforfeitable and the rank and file employees would receive 0% and (2) there are assets in paragraphs (4)(B), (4) or (6) of section 4044(a) of ERISA to be reallocated to minimize the discrimination. The $10,000 allocated in paragraph (5) to A should be reallocated to B. A would then receive $120,000 (50% of the present value of his accrued benefits whether or not nonforfeitable) and B would receive $10,000 (16 2/3% of the present value of his accrued benefits whether or not nonforfeitable). This distribution would be deemed nondiscriminatory because the assets have, in accordance with section 4.02(2) of this revenue ruling, been allocated to the extent possible to preclude discrimination

I haven't looked at this for a year or so, but I thought that under 80-229 you first allocated under categories 4044(a)1 through 4044a(4)(A) and that the non-discrimnatory allocation didn't "kick in" until you got to 4044(a)(4)(B) or below. Therefore, if your HCE's were in the higher categories, they could conceivably receive 100% of their benefit while NHCE's were only receiving a portion. Here is the language from 80-229 (1) Except as provided in paragraph (4), the assets of a plan are allocated in accordance with sections 4044(a)(1), (2), (3), and (4)(A) of ERISA. (2) Subject to the requirements of paragraph (1), the assets shall be allocated, to the extent possible, so that the rank and file employees receive from the plan at least the same proportion of the present value of their accrued benefits (whether or not nonforfeitable) as employees who are officers, shareholders, or highly compensated. (3) Notwithstanding any other paragraph, in the case of assets restricted by section 1.401-4© of the regulations, assets may be reallocated to the extent necessary to help satisfy paragraph (2). (4) In the case of a plan establishing subclasses within the meaning of section 4044(b)(6) of ERISA, the assets within any paragraph of section 4044(a) of ERISA may be reallocated within such paragraph to the extent that such reallocation helps to satisfy paragraph (2). (5) Subject to paragraphs (1), (2), (3), and (4), the assets shall be allocated in accordance with section 4044(a)(4)(B), (5), and (6) of ERISA. I agree with Blinky, I don't know how you could do a "flat" proration under this language.

Pursuant to an SAR, a participant is requesting the full annual report. Do you give them the Schedule SSA that has social security numbers and account balances of terminated participants?

The GUST RAP applies to the following in addition to everything that you would typically consider a GUST amendment All disqualifying provisions of new plans adopted or effective after December 7, 1994, and all disqualifying provisions of existing plans arising from a plan amendment adopted after December 7, 1994; In other words, you are allowed to "fix" these things during the GUST RAP. Whether you could "shoehorn" the failure to amend a plan to reflect a merger into this, I have some doubts....the disqualifying provision arose from the absence of an amendment rather than the amendment itself. The 204(h) notice is also a stumbling block as noted above.

I think that would be, at a minimum, the kind of documentation that you would need to maintain. I frankly am not sure whether DOL would agree with the $75 "de minimus" amounts for which no receipts are required.

2550.408c-2 of the DOL regs. A Per-diem is not allowed in the sense that a trustee can "pocket" what he or she does not spend. An advance is allowed as long as the amount of the advance is reasonable and there is an accounting when the trustee returns from his or her trip on plan business. I would think that at least one trustee of the plan belongs to the International Foundation of Employee Benefits. (After all the expenses in question are often assoicated with attending one or more of their conferences). I think they have some sample materials on trustee expense policies. I haven't been to one of their conferences in years, but they used to do a good job of scaring trustees on this issue.

I didn't read the attachment but it is my understanding that you would not be a timely amender if you 1) Did not restate by 2/28/02 but are entitled to the extended 9/30/03 RAP because of prototype or volume submitter status/certification. 3) You "deviate" from your volume submitter or protoype plan. 4) You do not go in for a determ letter by 9/30/03. While PAX is right that nobody has to go in for a letter, you do have to timely amend. If you deviate from the V.S. or prototype, did not amend by 2/28/02, and do not go in for a letter by 9/30/03 you will not be a timely amender.

I think the document has got to state that it is using current testing, I don't think the s/h notice would override the document provsions. I agree with the others that if you are making the s/h contribution, what does it really matter? However, 98-52 is clear on the subject. One place where it might matter is where the employer uses the "maybe" notice for the s/h NEC or decides to rescind the s/h Match mid-year. In those instances, after the RAP, I think you would be stuck with current year testing. The other place that it would matters is if you wanted to switch back to prior year. Going to s/h basically prevents you from deciding to stop the s/h contribution and then reverting back to prior year. Once you decide to go s/h you have to stick with current year for next 5 years whether or not you stay with s/h.

This is what q8r was referencing: All about premium reimbursements for individually-owned insurance (Posted February 15, 1999) Question 145: What types of insurance premiums are reimbursable through an "outside premium" provision in a flex plan? Can an outside insurance premium qualify if it is of the same type (e.g., health insurance) as that already being offered by the employer but the employee does not use the insurance offered by the employer? Is an outside insurance premium reimbursable if it is a policy of the employee's spouse but it is not insurance offered by the spouse's employer? Do you know of a good reference source for material on including an "outside premium" provision in a flex plan? Answer: Let's take your questions one at a time: What types of insurance premiums are reimbursable through an "outside premium" provision in a flex plan? Those types of insurance excludable from income under Code Section 106 - accident and health plans (including disability). Can an outside insurance premium qualify if it is of the same type (e.g., health insurance) as that already being offered by the employer but the employee does not use the insurance offered by the employer? Answer: Only if it is part of the program of the employer to allow employees to obtain their own health insurance. Is an outside insurance premium reimbursable if it is a policy of the employee's spouse but it is not insurance offered by the spouse's employer? Answer: This is tricky. I am not sure. If an employee is taking advantage of his employer's program which is, "go get your own", I am not sure if the spouse's individual policy would qualify. I can tell you that the spouse's EMPLOYER'S policy would NOT qualify. Do you know of a good reference source for material on including an "outside premium" provision in a flex plan? Yes. Almost all that you will find (in terms of official guidance) is contained in Revenue Ruling 61-146 (yes, from 1961). I have provided it here for you: Reimbursed health insurance premiums excludable from employees’ income Rev. Rul. 61-146, 1961-2 CB 25. Advice has been requested whether amounts paid by an employer, under the circumstances below, as his share of premiums for hospital and medical insurance for his employees are excludable from the gross income of the employees under section 106 of the Internal Revenue Code of 1954. In the instant case, the employer pays a share of the premiums for hospital and medical insurance for his employees. For those employees who are covered by a group policy through their employment, the employer pays his share of the premium directly to the insurance company. For those employees who are not covered by the employer's group policy but have other types of hospital and medical insurance for which they pay the premiums directly to the insurers, the employer pays a part of such premiums upon proof that the insurance is in force and is being paid for by the employees. To facilitate payment of his share of the premiums paid directly by the employees to the insurers, the employer uses the following methods: (1) reimburses each employee directly once or twice a year for the employer’s share of the insurance premiums upon proof of prior payment of the premiums by the employee; (2) issues to each employee a check payable to the particular employee's insurance company, the employee being obligated to turn over the check to the insurance company; or (3) issues a check as in method (2) except the check is made payable jointly to the insurance company and the employee. Section 106 of the Code provides that gross income does not include contributions by the employer to accident or health plans for compensation (through insurance or otherwise) to his employees for personal injuries or sickness. Section 1.106-1 of the Income Tax Regulations provides that the employer may contribute to an accident or health plan either by paying the premium (or a portion of the premium) on a policy of accident or health insurance covering one or more of his employees, or by contributing to a separate trust or fund, which provides accident or health benefits directly or through insurance to one or more of his employees. In this case it is clear that in method (2) the employer is actually paying accident or health insurance premiums directly to the insurer of the particular employee, utilizing the employee as his agent for the delivery of the checks to the insurer. Method (3) is not substantially different, inasmuch as the employee there is obligated to turn the checks over to the insurer and can in no event divert the payments to other uses. Although method (1) involves direct payment to the employee, in practical effect it does not differ from methods (2) or (3), since proof is required by the employer that hospital and medical insurance is in force for the employee and that premiums for the period involved have been paid by the employee and because the employer’s payment is stated to be in reimbursement for the employer’s share of the insurance premiums. Under the circumstances of this case, it is held that the amounts paid by the employer under methods (2) or (3) above constitute payments of premium or portions of premiums on policies of accident or health insurance covering one or more employees within the meaning of section 1.106-1 of the regulations. Similarly, the payments under method (1) constitute employer payments of accident or health insurance premiums for employees if the payments are shown to be in reimbursement of premiums actually paid by the employees to the insurers. Accordingly, amounts paid as above are excludable from the gross income of the employees under section 106 of the Code. Revenue Ruling 57-33, C.B. 1957-1, 303, holds that certain weekly payments made by employers direct to employees, pursuant to a union contract of employment, for the purpose of purchasing individual hospitalization and surgical insurance coverage, are "wages" for Federal employment tax purposes and are includible in the gross income of the employees. Under the facts in that case, the employers had no accident or health plan of their own in effect and, with respect to the payments which they made direct to the employees, did not require an accounting either by the employees or the employees' union that the funds were expended in the acquisition of insurance coverage. Revenue Ruling 57-33, accordingly, is distinguishable from the instant case."

Rule is definitely different for the Construction Industry. If you go out of business and do not "come back" you do not have a withdrawal if you are a construction industry employer-- 4203(b)(2)

I agree with RTK. How you allocate any interest and/or liquidated damages that you might subsequentlly collect on the delinquent contributions has always been an interesting issue. Are they allocated only to the accounts of the employees of the delinquent employer?

Merlin--with my volume submitter the IRS reviewer was fairly adamant that if you wanted a fail-safe addback for coverage you were stuck with the ratio percentage test. They had "definitely determinable"/employer discretion" problems with the alternative of letting you go with ABT or use the add-back. They required the document to specify that an add-back would be automatic once you failed ratio-percentage as well as specify the method of identifying the employee who were to be "added back? I guess I don't really see this issue if you put in your document that 1) ratio percentage 2) if you fail ABT 3) If you still fail add-back. This should elminate any discretion or definitely determinable problems.

As to the 401(k) (CODA) issue see the followng discussion: http://www.benefitslink.com/boards/index.p...ST&f=23&t=19772

The following is from the examination guidelines: Service with Employer Who Fails to Make Required Contributions A pension plan (including a money purchase pension plan) under which service credit or allocation of contributions is conditioned on an employer's making required contributions violates the definitely determinable benefit rule for pension plans of Reg. 1.401-1((1)(i). It does this by allowing an employer's actions, in effect, to determine the amount of benefits accrued by its employees. It also violates the requirement that all years of service with the employers maintaining the plan be taken into account for participation and vesting purposes as well. If the plan trustees are unable to collect the full amount owed, the plan may incur an accumulated funding deficiency. See DOL Reg. 2530.210 and Rev. Rul. 85-130, 1985-2 C.B. 137. In contrast, because the definitely determinable benefit rule does not apply to profit-sharing plans, multiemployer profit-sharing plans may provide that a delinquency in contributions will be allocated only to the delinquent employer's employees. This does not violate the definite allocation formula requirement of Reg. sec. 1.401-1((1)(ii). (Note that IRC 401(a)(27)( requires that a plan intended to be either a money purchase pension plan or a profit-sharing plan must be so designated in order to be a qualified plan.)