KJohnson

I have read the Reish article and hope that is a correct interpretation because a number of employers are demanding a PBA option. However, I am still not completely convinced that the the distinction between "designated investment alternatives and other "administratively feasible" investment alternatives is that clearly set forth in the reg. It would seem that someone could argue that any investment available under the Plan would be a designated investment alternative. The following language is from the preamble to the 404© regs where it appears that DOL is stating that the information requirement applies to "each investment alternative available under the plan": "First, the Department has concluded that the obligation of an ERISA section 404© plan fiduciary to disclose information should not be limited to information conerning those investment alternatives intedned to satisfy the 'broad range' requirement of the regulation, but rather should extend to information concerning the plan itself and each investment alternative made available under the plan. The Department can find no reasonable basis for distinguishing between information concering investment alternatives which are intended to satisfy the "broad range" requirement and information concering any other investment alternattive made available under a plan in terms of value to participants and beneficiaries in evaluatiing thier investment options and making informed investment decisions" Does anyone know if DOL has formally or informally "bought off" on the distinction between designated investments and other "administratively feasible" investments?

Thought I would run this by one more time.

Thanks Pax. The issue that has the law firm "riled" is that they were not planning on making any employer contributions for Associates and had specifically excluded them from the profit sharing plan. So if the Associates are not participants in the p.s. plan and are therefore not getting the p.s. contribution of 3% or more, must they receive a top heavy contribution in the 401(k) Plan and is there any way to prospectively solve this problem?

I agree on the PT excise tax issue. I am not so sure on the income tax aspects. Since you are correcting an error under APRSC and putting the plan back to where it should be (i.e. no loan was made) could you simply have the participant repay the loan amount plus interest/earnings. Particpant would have no taxable event (and of course would have no basis in future payments received). Obviously, your method also works, but tracking the basis and then the rules on recovery of basis would seem to add a level of complexity that I am not sure the IRS would require. Any thoughts?

I'm not on board with Tim Howard's analysis. There is no longer a requirement that a rollover be a lump sum distribution. The distribution simply must not be a distribution that is one of a series of substantially equal payments over a period of ten years or more. If someone simply "cleans out" their profit sharing and matching accounts with an in-service distribution leaving their elective deferral accounts, I think that you still could "roll" this in-service distribution. See 1.402©-2 Q&A 5 and Q&A6. [This message has been edited by KJohnson (edited 05-08-2000).]

Pax, Thanks, I tried that first and while a number of people mentioned such private services there was only the name of one, PBI. If anyone has any other names and/or telephone numbers and/or web sites I would appreciate the info.

I am down to a handful of participants that we cannot locate in a plan termination. I have already used the IRS letter forwarding program. Any suggestions about a good and inexpensive private locator service?

It might depend on whether the "merger" was an asset deal or a stock deal. In certain circumstances under an asset deal 204(h) would not be triggered even if the Plans are merged. 1.411(d)-6 Q&A 15, Example 4. However, typically you think of mergers as stock "deals." In those cases, since the "employer" arguably remains the same, I do think you would have a 204(h) requirement. See examples 2 and 3 in the same Q&A.

That is the rule if you have a plan subject to joint and survivor requirements. See generally 417(B). However, in order not to be sujbect to the joint and survivor requirements, many 401(k) plans attempt to meet the "safe harbor" of 401(a)(11)(B)(iii)(I) which requires 100% of the survivor benefit to be paid to the spouse unless the spouse consents otherwise.

I think an amendment should be allowed, the benefit for the year has not "accrued" on the date of the amendment. Check out the IRS' response to a similar question at an ASPA conference here: http://www.reish.com/practice_areas/TechnicalTips/tip16.cfm Also look at--Revenue Ruling 79-237 and PLRs 8329098 and 9109067 [This message has been edited by KJohnson (edited 04-27-2000).]

My situation involved a "controlled group that wasn't" and amending the filings to reflect the actual status of the employers.

I don't think there has been a termination of employment, much less a separation from service. "Employee" is defined using controlled group provisions of 1563(a). See 414(B) I do not believe that the statute or the regs exclude foreign corporations from this controlled group provision. (Controlled group rules in other non-plan contexts do exclude foreign corporations). Therefore, your employee is still employed by the deemed single employer under the controlled group provisions. I know there is a Rev. Rul. on this, but I don't have the cite handy.

Just talked with the IRS, they said at one time they had a 777 code for multiple employer welfare plans but now you only need one 5500 return for the entire multiple employer plan using the 500 series as the plan code. There is no need for separate 5000 forms for each sponsoring employer as you do with pension plans. I am not sure how you "pick" among the employer to use for the sponsor of the plan.

Look at the 5500 instructions for multiple employer plans which, on the pre-1999 forms, appear to require the 333 numbering system for all multiple employer plans. From the instructions for the new form it looks like they are limiting the 333 numbering system only to multiple employer pension plans.

Does a multiple employer 125 Plan use the same "333" plan numbering system that you use for multiple employer pension plans? Do you use one form for the plan using the "333" numbers and then separate forms for the employers using the 500 numbers.

Can an employer pay 100% of health insurance premiums for HCEs and then design its 125 POP Plan to cover only NHCEs.

The regs do state that a 204(h) notice "may be enclosed with or combined with other notice provided by the employer or plan administrator."

I know in various VCR corrections, the IRS has always required that you tell the participant that the excess amount is not elligible for rollover. You probably sent the standard "tax notice" as well as a subsequent 1099 indicating the P could roll the amount. You may have a duty to correct this. As long as the Plan is made "whole" I do not think your duty goes any further from a fiduciary aspect.

EMPLOYER HAS 2 DIFFERENT PLANS IN WHICH KEYS PARTICIPATE-- 401(k)COVERING ALL EMPLOYEES AND PS PLAN WHICH EXCLUDES A CERTAIN CLASS OF EMPLOYEES. PS PLAN IS TOP HEAVY BUT 401(k) WOULD NOT BE TOP HEAVY IF IT WAS NOT AGGREGATED. PLANS DO NOT NEED TO BE AGGREGATED FOR 410 OR 401(a)4). EMPLOYER WANTS TO STOP MAKING THE TOP-HEAVY CONTIBUTION TO THE 401(k) FOR EMPLOYEES EXCLUDED FROM THE PS PLAN. CAN THIS BE DONE? 1) CANNOT TERMINATE 401(k) AND DISTRIBUTE ASSETS BECAUSE OF SUCCESSOR PLAN RULE. 2) IF YOU FREEZE THE 401(k) IT WOULD STILL HAVE KEYS WITH ACCOUNT BALANCES. WOULD THE 401(k) STILL BE PERPETUALLY AGGREGATED WITH THE PS PLAN SO THAT YOU WOULD CONTINUE TO HAVE TO MAKE TOP HEAVY CONTRIBUTIONS "FOREVER" FOR NON-KEYS WHO HAVE ACCOUNTS IN THE 401(k)? COULD YOU MAKE THE ARGUMENT THAT MANDATORY AGGREGATION STOPS AFTER 5 YEARS FOR FROZEN PLANS SINCE THERE IS NO ONGOING "PARTICIPATION? 3) IF YOU PROSPECTIVELY AMEND THE 401(k) PLAN FOR PARTICIPATION OF NON-KEYS ONLY YOU STILL HAVE THE PROBLEM IN 2 ABOVE. WOULD MANDATORY AGGREGATION STOP AFTER FIVE YEARS IN THIS SITUATION? 4) ANY IDEAS??--HOW ABOUT PROSPECTIVELY MAKING THE 401(k) PLAN FOR NON-KEYS ONLY AND "SPINNING OFF" THE 401(K) ACCOUNTS FOR THE KEYS OVER INTO THE PS PLAN?

Don't the 415 limits only drop to 50% for parent/sub but brother/sister remains at 80%?

Apparently there is a 1997 IRS general information letter someone obtained in a FOIA request stating that a FSA can reimburse the entire cost of orthodontic expenses paid "up front" even if all services have not been rendered. I know that the IRS can "diavow" this position, but does anyone know where I can get a copy of this letter?

The right to an investment option is a benefit right or feature that must be tested under 401(a)(4). As to the fiduciary and 404© implications, the ongoing First Union litigation may give you a framework to go by.

I agree that TPA's E&O insurance may be the way to go. You might "ask" the participant for the money back first. Technically if they were not entitled to the total distribution they could not roll that amount raising excise tax issues etc. If it is the TPA's mistake tell them that if they don't pay they will then need to reimburse plan for the attorneys fees spent going after the participant. They would then be facing more than $10,000 with no sure bet on recovery. Actions against participants for overpayments are "equitable" in nature and participants will have various defenses.

Sounds like more of a plan language/document question. I would get the actual langauge of the plan or adoption agreement granting the prior service credit as well as the SPD or SMM to see if they have placed restrictions on providing credit to only those employees employed on the day of the "deal".

I am not sure whether not sending a 402(f) notice is a violation of 401(a)(31) and therefore a disqualifying defect. However in September 1998, BNA published over 120 corrections that the IRS had accepted in VCR. One of these treated the faiulre to give a notice under 402(f) as a 401(a)(31) violation and permitted the following correction: Issue corrective notices to affected participants. The employer will also offer each participant not electing a direct rollover the opportunity to repay the distribution within three months and elect an eligible rollover distribution. I don't recall seeing anything regarding APRSC on this issue. [This message has been edited by KJohnson (edited 04-03-2000).]