KJohnson

Is there any official guidance on whether a five year or one year look back applies to distributions from a terminated plan in determining top-heavy status? It would seem that the last sentence of IRC §416(g)(3)(A), which provides for a 1-year add-back rule, implies that the 5-year add-back rule in §416(g)(3)(B) for "in-service" distributions should not apply. Why would they have the reference to termination in (g)(3)(A), if they were just going to take it away with the exception in (g)(3)(B)? On the other hand, a distribuiton due to terminatio of the plan is not a distribution on account of "death, disability or separation from service".

Here's a link to the announcement: http://www.benefitslink.com/IRS/ann2001-12.shtml

Read announcement 2001-12 (I believe it was originally published as 2001-6). I believe you have until one year from the DB letter. Here is the example given in the announcement: Example 3. Practitioner C sponsors three volume submitter specimen plans, Plans 1, 2 and 3. Practitioner C files applications for complete GUST advisory letters for each of the plans on June 1, 2000. Favorable advisory letters for Plans 1 and 2 are issued on November 30, 2000. A favorable advisory letter for Plan 3 is issued on March 15, 2001. Each employer who adopted (or certified its intent to adopt) Plan 1 or Plan 2 before the end of the regular GUST remedial amendment period is also deemed to have adopted (or certified its intent to adopt) Plan 3. Therefore, the GUST remedial amendment period for each employer who adopted (or certified its intent to adopt) any of Practitioner C's volume submitter specimen plans by the end of the regular GUST remedial amendment period is extended to March 31, 2002, provided the employer adopts one of Practitioner C's GUST-approved plans, another GUST-approved volume submitter specimen or M&P plan or individually-designed GUST amendments, and requests a determination letter (if required for reliance) by this date.

Just as an aside, with regard to changing discretionary matching contributions mid year, I received the following from a prototype sponsor when we were discussiing whether such a change was permissible: Two IRS agents from the Cincinnati Key District Office verified that a "discretionary" match CANNOT be changed during the plan year. The reason is because changing a discretionary match violates Treasury Regulation 1.401-1(B)(1)(ii) that states a profit sharing plan must provide a definite "predetermined" formula for allocating the contributions made to the plan. Thus, a "discretionary" match must be the same percentage for the WHOLE plan year. They made it very clear that if the employer intends to change his matching percentage during a plan year, the matching formulas MUST be stated in the plan and the plan amended each time the formula is changed

Kirk I think to meet a safe harbor it must be on a plan year basis 1.401(a)(4)-2(B)

With a merger I think you still have the issue. Although there would not be an ongoing profit sharing contributions allowed under the plan, the "old" profit sharing contributions would still be in the plan--So you are back to the same question--Does the plan consist "solely" of a CODA and matching contributions. If the the term "plan" means the document as opposed to the assets of the plan, I am not sure that you could draft a new document that eliminates all reference to the profit sharing contributions that remain in the plan. That said, I think it is only logical that it should be a year by year test based on whether the employer actually makes a profit sharing contribution. However, I guess we have to wait for the guidance.

I have an employer considering the same thing as BTH. As to amending the plan, has anyone heard anything more (formally or informally) on the the "consisting solely of" language for satisfiaction of top-heavy for a safe harbor matching plan. As an alternative, does termination of the prior top-heavy plan and implementation of a matching 401(k) safe harbor work? While the plans would be in a required aggregation group, there would be no top-heavy obligation for the terminated plan and the newly established plan would satisfy top heavy through the matching safe harbor?

You cannot consider the 3% Safe Habor NEC in your integrated profit sharing plan formula. The additional contribution must be allocated "across the board" based on your integrated formula.

To further expound on jaemmons point-- Even if the same union organized both employers, you still may still have the aggregate/disaggregate option if the employees of the two employers are not in the same "bargaining unit". Thus, for example, if the employers were in different locations and negotiated with different locals of an International, it is likely that the employees would not be in the same bargaining unit.

I echo Kirk's comment. However, if you want to get some general background on multiemployer plans the International Foundation of Employee Benefit Plans has a multiemployer plan "bookstore" on line. You can find it here: http://www.ifebp.org/bookstore/pbmultpl.asp

Look here for DOL's 2001 advisory letter and hypos on plan fees. This backed away from some of the positions taken in the Kansas City initiative. http://www.dol.gov/pwba/media/press/pr011901.htm

You need an ERISA attorney. In "ordinary" industries the permanent cessation of operations would be an event to trigger a complete withdrawal and withdrawal liability. However, there are special exceptions for the construction industry where simply ceasing operations would not be a complete withdrawal. However, the question of whether you are really in what is defined as the construction industry, what the employer will do after bankrtuptcy and possible other issues with a "mass withdrawal" or a partial withdrawal are things that you need to explore with an attorney.

Assuming the profit sharing plan does not contain any "merged money purchase pensoin plan assets, one of the reasons I could think of for terminating rather than amending has gone away. Under the 411(d)(6) regs you can now strip the plan of distribution options as long as you have a lump sum otpion at the same time.

From my recollection, in a "facility" partial withdrawal, the employer must either continue to perform work in the jurisdiction of the local's CBA or transfer the work to another location. Thus, a facility shutdown, without more, will not trigger a "facility partial." (although it may trigger a 70% decline partial). For a facility partial, there must generally be a "run away shop (i.e. work transferred to a facility that does not contribution to the plan) " a decertification of the union, the union agreeing to "bargain out" of the plan at that facility, the employer implementing its last offer that does not include contributions to the plan or some other similar event. I agree you should get the attorneys to address both criteria under 4205(B). I also agree that a 70% decline partial would be on a controlled group basis.

1) I think it would have to be treated as a contribution and tested under 401(a)(4). 2) I don't think a wrap gets you around this because I think you will still need to treat the portion of the wrap attributable to commissions as a contribution under 401(a)(4). You may want to look at PLR 8941010. Please note that the portion of this PLR regarding reimbursement to the plan of the wrap (as opposed to the wrap being paid by the employer directly) was withdrawn in PLR 9124034.

brokerage fees could not be reimbursed without them being a contribution. There is some discussion of this in this thread: http://benefitslink.com/boards/index.php?showtopic=16129

I just checked two adoption agreements for 401(k) prototypes. Both mandate the one year rule for non-QJSA Plans. In other words these plan state that for the "profit sharing plan exception" to the QJSA /QPSA rules the spousal consent requirement to designation of an alternat beneficiary does not apply if the spouse and the participant have been married less than one year prior to death. Also looked at the volume submitter for a 401(k) and the one year rule is an option (even for non-QJSA plans).

Be sure to look at the link in Pax's post. You need to see if your plan has the "one year rule" with regard to who is a spouse. It looks lilke the spouse here does not meet the rule if it is in your plan.

Should participants have to pay brokerage fees when a fiduciary makes a decision to sell stock? My understanding is that a surrender charge is simply a method of an insurance company making sure it "gets back" the commission it paid to a broker if the plan decides not to stick with the insurer. In some ways it is a sales charge just like brokerage. For those interested, here is the link to the PLR cited by Katherine. http://www.benefitslink.com/IRS/plr200137064.shtml

I think that's correct (unless the employer treats the payment of the surrender charge as a contribution). The distinction is whether a charge is an "overhead expense incurred in connection wth the maintenance of the trust" or whether it is "intrinsic to the value of the asset." If it is an overhead expense of the plan, the employer can pay it directly, not treat it as a contribution, an also deduct it as an ordinary business expense. If, on the other hand, the charge is part of the "intrinsic value of the asset" then if the employer pays it directly it must be treated as a contribution and cannot be deducted as a business expense. I believe that the IRS would view the employer paying the surrnender charge as an "intrinsic" part of the investment. The analogy might be placing money with an investment manager who has a loss for the year. The employer says--I don't want my employees to lose money in their accounts" and then pays the investment manager the amount of the loss so he will not show negative results. The IRS woudl say that is actually an employer contribution (absent meeting the qualifications for a restoration payment).

ARCHIMAGE--I think JPOD's point is that even if the insurance company billed the employer directly, it will still be considered a contribution. Employers cannot pay things like brokerage commissions and call them administrative expenses under Rev. Rul. 86-142. I agree that the surrender fees are probably more akin to brokerage fees (can't be paid by the employer unless treated as a contribution) than they are to quarterly fees for an investment manager (can be paid by the employer directly and will not be treated as a contribution). Thus a restoration payment would be the only method to make this work. And I think this is a tough call without further allegations of fiducairy breach.

I haven't looked at it lately, but you might want to look at PTE 76-1 which speaks about the failure of a multiemployer plan to collect contribuitons from a delinquent employer and the PT "extension of credit" rammifications. Outside the multi context, I think the analysis may turn on what are plan assets. In the 401(k) context you know you have plan assets as soon as amounts can be reasonably segregated and this gives rise to an "extension of credit" pt if they are not timely remitted. For a plan without participant contribuitons where 412 applies, I don't think you would have "plan assets" until they were actually contributed by the employer. If the plan does not have title or claim to the assets, then it can't be extending credit. I guess language in your document could change this giving the plan "title" to the assets on the date the contributions were due for funding purposes.

My experience is that the DOL does not give extensions with regard to this initial letter. You might, however, get one or more additional demands prior to a formal rejection of the 5500. Once rejected I believe that the regulations still allow you 45 days to "cure"

You have three "interest rate" issues. Self-correction in the IRS's view, volunatry correction in DOL's view, and the interest rate to be used to calculate the amount of a prohibited transaction in any 4975 excise tax. I believe that the IRS says you must look to the investments of each participant. Or, if the contributions are going primarily to NHCE's you can use the best performing investment. The IRS says that you can, but don't have to, adjust for losses. DOL has a slightly different view. You have to give "interest" even if the accounts would have had negative earngs. Although it is a Code Section, the "obligation" to credit accounts based on the 6621 rate (even if the accounts would have had negative earnings) comes from the DOL's Voluntary Fiduciary Correction Program that was made permanent in late March of this year. Try this link-- http://www.benefitslink.com/DOL/volfiductext.pdf Also, if you actually use the VFC program (and the deferrals are not more than 180 days late), there is a prohiibted transaciton exemption so that the 4975 tax (reported on the 5330) would not actually be due. Use of this PTE actually requires some disclosure. However some people find actual use of the VFC program to be more trouble than it is worth. And, since the 4975 tax is often very small in these situations they just go ahead and pay the excise tax under 4975 and use the VFC program as a "guideline" of how DOL wants things corrected but do not go through all of the paperwork and documentation that DOL requires for a VFC filing. I have typically gone ahead and used the 6621 rate as the interest rate to use in calculating the prohibited transaction amount used to calculate the excise tax.

It's tough to generalize, but the Board of Trustees of a Taft-Hartley Fund (which must be jointly trusted by management and union representatives) are the fiduciaries of the fund and also the plan sponsor and "defualt" plan administrator. I am not sure that the union, as a union, would have fiduciary duties other than the appointment and removal of its members of the Board. Of course, the union-appointed members of the Board of Trustees would have fiduciary duties.