KJohnson

Anything from the Corbel seminar on the 12/31/01 or 1/2/02dates?

Thanks for the link Andy H--good stuff

Thinking about this some more it seems that you only disaggregate the top-heavy under 410(B) to see if you pass a safe harbor under 401(a)(4). For general 410(B) coverage they are still included as benefitting. The cross-testing regs send you back to 410(B) to see who is benefitting under the Plan. So does this mean you automatically have to "nix" a 1000 hour of service rule in a top-heavy plan in order to pass the 5% gateway?

Tom, I just got asked this exact same question. Anyone care to follow up on the following to scenarios assuming a plan has a last day/year of service requirement for the cross-tested contribution and wants to use a 5% gateway. 1) Are non-keys in a top heavy plan who don't have 1000 hours required to receive 5% or 3%. 2) If you are using a safe harbor 3% NEC in addiiton to a profit sharing contribution are those just entitled to the safe harbor NEC actually entitiled to a 5% contribution? My off the cuff response to 1) was the same as some of Tom's thoughts, if you pass 410(B) without including the non-key's entitled only to a top heavy contribution then you can give only 3%? Any thoughts.

This was from the Prudential demutualization guide. Schedule H (for plans with 100 participants or more) and Schedule I (for plans with less than 100 participants) of the ‘‘new’’ Form 5500 (effective 1999) are designed to report the Plan’s assets and liabilities, and income and expenses. The plan’s receipt of the compensation might be reported as, for example, ‘‘other income’’ on Line 2c or as ‘‘net gain on the sale of an asset’’ on Line 2b(4) of Schedule H, or ‘‘other income’’ on Line 2c of Schedule I (if appropriate). If you determine that compensation is an asset of the plan, and report the receipt of the compensation as income or a gain, you would report the investment and disposition of this asset as any other plan asset. Thus, if the compensation were not disposed of prior to year-end, it would be included in Schedule H, Part I (Assets and Liabilities), or Line 1a of Schedule I (if appropriate) as of the end of the year with the plan’s other assets. You should consult with your legal advisor on how to report demutualization compensation on your Form 5500.

kman Here is a link that discusses the 401(a)(4) issue, I am not sure whether the IRS has commented on this in subsequent ASPA conferences. http://benefitslink.com/boards/index.php?showtopic=7700

.This is from the IRS's most recent employee plan news: An M&P or volume submitter plan that has been amended in a way that would cause the plan to be treated as individually designed is still eligible for the extended GUST remedial amendment period underSection 19 of Rev. Proc. 2000-20, regardless of the nature of the modification or whether the modification was adopted subsequent to, or in conjunction with, the initial adoption of the M&P or volume submitter plan. An amendment of an M&P plan to provide for a non-uniform formula is only one example of an amendment that would cause the plan to be treated as individually designed yet not cause the plan to be ineligible for the extended GUST remedial amendment period under Section 19 of Rev. Proc. 2000-20

I think the identity of the money still matters and you could not have pre-NRA in-service distribuitons from the money purchase amounts as such. However, couldn't you simply lower normal retirement age under the meged document to age 59 1/2?

Thanks, I was referring to 2550.404©-1©(3)

QDROphile--do you have a cite so I can stick it in a research file? I thought this might be a little to cute. As to your other comment, I thought that under the 404© regs that a participant would still be judged to exercise "independent control" even if a transaction was with a fiduciary or an affiliate of a fiduciary (Dad) as long as no more than "adequate consideration" was paid. Also, my statement regarding "needing" a fiduciary was too broad. While 406 of ERISA requires action by a fiduciary for a prohibited transaction, 4975©(1)(A)-(D) of the Code does not have the same language.

I think you have a problem, because if the Dr. is solo and has no other employees who can be appointed to make the "call" of appointing dad Look at the following Examples 6 and 7 given in the DOL Regs: Example (6). F, a fiduciary of plan P with discretionary authority respecting the management of P, retains S, the son of F, to provide for a fee various kinds of administrative services necessary for the operation of the plan. F has engaged in an act described in section 406(B)(1) of the Act because S is a person in whom F has an interest which may affect the exercise of F's best judgment as a fiduciary. Such act is not exempt under section 408(B)(2) of the Act irrespective of whether the provision of the services by S is exempt. Example (7). T, one of the trustees of plan P, is president of bank B. The bank proposes to provide administrative services to P for a fee. T physically absents himself from all consideration of B's proposal and does not otherwise exercise any of the authority, control or responsibility which makes T a fiduciary to cause the plan to retain B. The other trustees decide to retain B. T has not engaged in an act described in section 406(B)(1) of the Act. Further, the other trustees have not engaged in an act described in section 406(B)(1) merely because T is on the board of trustees of P. This fact alone would not make them have an interest in the transaction which might affect the exercise of their best judgment as fiduciaries. [42 FR 32390, June 24, 1977] However, could you do something with 404©? I think the argument goes that under 404© the Doctor would no longer have fiduciary responsiblity as trustee and/or plan adminstrator and/or administrative commiteee. The question then is whether he is a fiducary as a particpant under 404©. If not, then there could be no PT because you need a "fiduciary" to act to have the PT to begin with. I haven't explored this further, but you may want to look into it. Let me know what you find.

Anything on the Corbel seminar--particularly with regard to the 12/31/01 or 1/1/02 merger effective date?

RButler You are right, I was still thinking under the "old rules" and the submission of non-standardized prototypes for a determination letter. In other words, if you put an employer on a non-standardized prototype that did not have the extended RAP in late February you would also have to be sure to get it in for a determination letter by the end of the month. Of course now, there is not that much of a reason to submit a non-standardized prototype.

Good question PAX. I believe it is perfectly permissible for a Plan to mandate distribution in the form of a QJSA and not allow any other distribution options. So wouldn't it be permissible to only allow waiver of the QJSA in the event that the spouse's signature is notarized and not allow a plan representative to witness the signature. I know that there are plans, in particular national multiemployer plans where for a number of participants the nearest "plan representative" can be 2000 miles away. In order to treat everyone equally (and to keep their staff from being "bothered") they have eliminated the "plan representative" language from their plans and limited waiver of the QJSA to situations where there are notarized signatures. These Plans have received favorable determination letters. Again, this all assumes that the 401(k) is subject to the QJSA requirements.

I think there are two distinct quesitons--1) Do you have the extended RAP and 2) Is the document you are adopting a prototype. Thus, I think the question of whether the document you are adopting is a prototype has nothing to do with whether that document has the extended RAP. I guess my question is what happens if they adopt R. Butler's Plan before 2/28/02 so they are not "on" a Plan that has the extended RAP as of the end of individually designed remedial amendment period. If she wants the extended RAP should she be careful not to restate anyone's plan over on to her document until after 2/28?

Where in 502(a)(2) or a(3) of ERISA can a Plan bring an action for fiduciary breach?

You are correct. You have the remedial amendment period of the prior protype sponsor without the need for a certification. The only place where you should have a problem is if the prior sponsor did not have a document in by 12/31/00 or the plan was previously an individually designed plan. You have to know what the extended date is for the prior sponsor (it could be beyond 12/31/02) but if you operate with a 12/31/02 date you should be fine. I think that many prototype sponsors have sent out the certifications just for "administrative ease." You don't know what the IRS is going to require to establish that you previously adopted a prototype that has the extended remedial amendment period and having the one piece of paper certification makes this "proof" much easier. Also, you have the employer at least "psychologically" locked into using your document.

MGB I don't see this as an "early amendment issue. They are getting their match without regard to what you do for top-heavy. The only time they could "accrue" the match plus the 3% is as the end of the year. So if you amend before the last day of the Plan Year have you cut back anything that they have "accrued"? (Of course if you have a plan with deferrals and a safe harbor match alone, you don't even have to worry about top heavy). I think one issue that has been raised is the change in compensation. Assume a standardized prototype profit sharing plan with a discretionary contribution so someone "accrues" an allocation of any contribution made at 500 hours and the plan specifically caps comp at $170,000. Then if you amend to incorporate the $200,000 after the "accrual" under the $170,000 formula, aren't you "cutting back" a benefit for those who earn less than $170,000 because those who earn more than $170,000 will be getting a greater allocation of the contribution for the year?

They did in early 2001--see the following link: http://www.benefitslink.com/IRS/notice2000-11.shtml I haven't reviewed it for use next year but because of EGTRRA changes (i.e. spousal rollovers to qualified plans, 401(a)/403(B) rollovers etc.) but it may already be misleading.

RButler-- I share your concern. I would not have a client sign the certification unless there is a bona fide belief that they are going to use the document. Of course if, for some reason things change (costs, confidence in the provider, a change that takes them out of the prototype etc. ) then they can go with another document or an individually designed plan and still have the extended RAP. From a practical point of view, I suppose it is something that would be "impossible" for the IRS to catch, but having people sign things that they know are false is never a good practice

Just glancing at the QJSA/QPSA examination guidelines and they state the following:Sub-Section 952: QPSA In a defined contribution plan, a QPSA is defined as an annuity that can be purchased with not less than 50% of the participant's nonforfeitable account balance on the date of the participant's death. If only 50% of the participant's account balance is used to purchase an annuity, the remaining portion of the account balance can be paid to other beneficiaries of the participant without the consent of the spouse. See IRC 417©.

I agree, but 9/30/01 is the end of the twelve month period beginning on the first day of the short plan year and some interpret the regs as that is the period for which you have to give a year of service.

Employer in October 2000 changes Plan Year from 9/30 year end to a 12/31/year thereby creating a short year of 10/1-12/31 2000 How do you count vesting-- 10/1/99-9/30/2000--! Year 1/1/2000-12/31/2000-1 Year Thereby "double counting" 1/1/2000-9/30/2000 Orw would it be 10/1/2000-9/30/2001--1 Year 1/1/2001-12/31/2001- 1 Year Thereby "double counting 1/1/2001-9/30/2001?

I would generally say, amend away--but does your plan say that anyone who dies, retires, or becomes disabled receives an allocation without regard to the last day rule. If so, you may have an issue for those folks since they have already "accrued" the benefit at the lower intergration level.

Moe, I think you do have a problem. Why don't you look at the examples that DOL gives in the following regulation regarding 408(B)(2): http://www.dol.gov/dol/allcfr/PWBA/Title_2...2550.408b-2.htm