Larry M

The plan sponsor would become my ex-client as quickly as the certified return receipt letter arrived at his/her office.

Does the following excerpt from PWBA answers your question? A group health plan is required to allow special enrollment for certain individuals to enroll in the plan without having to wait until the plan's next regular enrollment season. A special enrollment opportunity occurs if an individual with other health insurance loses that coverage. A special enrollment opportunity also occurs if a person has (or becomes) a new dependent through marriage, birth, adoption or placement for adoption. However, you must notify the plan of your request for special enrollment within 30 days after losing your other coverage or within 30 days of having (or becoming) a new dependent. If you enroll as a special enrollee, you may not be treated as a late enrollee for purposes of any pre-existing condition exclusion period. Therefore, the maximum preexisting condition exclusion period that may be applied is 12 months, reduced by your creditable coverage (rather than 18 months, reduced by creditable coverage). ...

Okay - an expansion...by going back to the bsics. retirement security is a three legged stool: first: social security - where almost all of us contribute to a plan which subsidizes (read "takes some of our money and gives to those less fortunate") some and provides a floor for all - and adds benefits for disability and death. Social security is not and never was intended to be a plan of "equity" between individual contributions and individual benefits. It is a social plan to provide benefits to those who are not working paid for by those who are working during any generation. the Second and third legs are the parts which are "privatized". They consist of the more individually equitable plans of the employer provided retirement plans (qualified and non-qualified) and the individual savings accounts. If the social security system is scheduled to pay more than its income, it must either reduce benefits or increase its income or use a combination of those items. Whatever it does, we still have the two other legs for those of us (or our employers) who can afford to put away the additional moneys needed to provide those benefits.

a. maximum individual 401(k) deferral for 1999 remains at $10,000. b. there is no change for maximum annual addition to a defined contribution plan $30,000 is the dollar limit and 25% of an employee's comp is the % limit. (

should ERISA laws and regns apply to Social Security? Short answer: No. Long answer: Absolutely no!

if you had access to Santa Claus (read Congress) what specific provisions would you want changed in order to simplify the administration of plans while maintaining "budget neutrality"?...and, perhaps, encouraging more firms to sponsor plans ... e.g., eliminate separate definitions of hce and key; get rid of either minimum funding or PBGC (my favorite)

How old is the doctor? If he is under age 65 and the reason for "retiring" is disability, you can increase his benefits above the normal 415 values (in effect, ignoring the reduction for retirement before age 65). This can increase the value of his benefits significantly and wipe out a large portion of the reversion.

I assume your message means you are using Fidelity's prototype plan and admiinstration as well as its investment portfolio. With your firm having 10,000 employees, consider unbundling all the services and buying those which meet your needs specifically. It is YOUR money and it should be doing what YOU want it to do, not what is required to fit within the limits of a prototype plana nd administration. [note: my prejudice is opposed to any prototype plans sponsored by and, worse, administered by, financial institutions - even for smaller firms. There is too much money involved to buy a plan "off the rack", which requires you to fit into its parameters. You should spend a few dollars designing one which fits your needs and which responds to your wishes - even as they change - and paying reasonable fees for the services you need. The money spent in advance should save you lots of money in the future and lots of grief.]

Beware of anecdotal increases as a basis for your own plan. Our clients have received increases which vary by type of plan, location and experience of the group. The range of rate changes is quite wide, including a rare decrease in requested renewal rate. [As an aside, our insurance company and hmo clients have been requesting rate changes which vary by those factors.] For community rated plans, the spread of rate changes is not as great. Also affecting rate increases is the effect of prior years' competitive stances taken by some carriers in order to buy business. Most of them are now trying to regain some margin of profit after having had loss leader rates.

It seems as if the W-2 wages must be counted for all plan purposes. If the employee only wants to defer 3% of wages other than the $100, the employee should calculate the dollar amount and make the deferral a dollar amount rather than a percentage. If the employee wants to defer 3% of the total, including the $100, then that dollar amount can be deducted from the rgular employee check as well.

Seems as if the document (and law) require the plan to accept deferrals from a part time employee once original participation has been met. A question is whether the document requires the employer to include that participant in the group of those who get matching contributions or ordinary profit sharing allocations. [This message has been edited by Larry M (edited 10-23-98).]

a "generic" consulting agreement is as fraught with danger as a prototype plan sponsored by a financial institution. Whenever I need an agreement, I write a memo to my attorney desribing the agreement and ask him to draft one which protects me. [As an aside, when we want to save money and time, we have the other side draft and we amend.]

yes, an individual can not receive a benefit until he or she has a vested interest in the benefit.

I am confused. When you say the Plan Document is not signed, are you talking about everything including, for example, an adoption agreement? It is possible the two are separate "documents" (small "d") where the adoption agreement has the required signature and the two together comprise the "Document" (capital "D"). I am not an attorney and do not know whether a separate Board Resolution adopting the Plan Document is sufficient to make this a written plan and contract as required by law. For qualified pension plans, the Internal Revenue Code requires a plan (and trust) to be in existence in a particular year in order for it to be qualified. Code Section 401(a) and its related regulations require the plan to be a written plan. [This requirement predates ERISA.] Consider asking a knowledgable ERISA attorney whether there are sufficient documents to enable the plan to meet the requirements for qualification. For health plans, it is my lay opinion the rules are much looser. An "accident and health plan" does not have to be written (code section 105 and its regulations). [This message has been edited by Larry M (edited 09-25-98).]

"Actuarial Equivalence" is a term which is defined uniquely for each plan. In some situation, it is defined as the result of using specific assumptions for the equivalence (e.g., 6% interest and the 83 group annuity mortality table) or perhaps establishing a table which might reduce the monthly benefit for those retiring before the normal retirement age by 1/4% per month. Theoretically, the value of optional benefits can be determined on an arbitrary basis for each option within a plan. From a practical standpoint this is not the case - (a) because the federal government has imposed certain limits for many of the options if the plan is to remain "qualified" and (B) because it is too burdensome to have too many "equivalents" within one plan. For some practical discussions of optional benefits and their derivation, consider a review of the PROCEEDINGS of the Conference of Consulting Actuaries. These are produced annually and include the papers and discussions presented at their annual meetings. [This message has been edited by Larry M (edited 09-22-98).]

from RIA: Under the constructive ownership rules, an interest in an organization owned, directly or indirectly, by or for parents and children, grandparents and grandchildren is attributed from: ...minor children (under 21) to parents; ...parents to minor children (under 21); [40] ...adult children and grandchildren (regardless of age) to a parent or grandparent who is in effective control of the organization; ...parents and grandparents to adult children or grandchildren (regardless of age) if the adult child or grandchild is in effective control, either directly or indirectly of the organization. [41] [40]. Reg § 1.414©-4(B)(6)(i). [41]. Reg § 1.414©-4(B)(6)(ii). A legally adopted child of a person is treated as a child of that person. [42] [42]. Reg § 1.414©-4(B)(6)(iii). In determining whether a parent, grandparent, adult child, or grandchild is in effective control of the organization, the constructive ownership rules apply. [43] RIA illustration: B owns directly 40% of the profits interest of DEF Partnership. His son, M (20 years old) owns directly 30% of the profits interest of DEF, and his son A (30 years old), owns directly 20% of the profits interest of DEF. The 10% remaining of the profits interest and 100% of the capital interest of DEF is owned by an unrelated person. [44] [43]. Reg § 1.414©-4(B)(6)(ii). [44]. Reg § .414©-4(B)(6)(iv)(A). B owns 40% of the profits interest in DEF directly and is considered to own the 30% of the profits interest owned directly by minor son M. Since, for purposes of the effective control test, B is treated to own 70% of the profits interest of DEF, B is also considered under the attribution rules between adult children and parents to own the 20% profits interest of DEF owned by his adult son A. Accordingly, B is considered to own a total of 90% of the profits interest in DEF. [45] [45]. Reg § 1.414©-4(B)(6)(iv)(B). M owns 30% of the profits interest in DEF directly, and is considered to own the 40% profits interest owned directly by his father, B. However, M is not considered to own the 20% profits interest of DEF owned directly by his brother, A, and constructively by his father, because an interest constructively owned by B by reason of family attribution is not considered to be owned by him for purposes of making another member of his family the constructive owner of that interest. Accordingly, M is considered to own a total of 70% of the profits interest of DEF. [46] [46]. Reg § 1.414©-4(B)(6)(iv)©. A owns 20% of the profits interest in DEF directly. Since, for purposes of determining whether A effectively controls DEF, he is treated to own only the percentage of profits interest he owns directly, he does not effectively control DEF, and thus does not satisfy the requirement for the attribution of the DEF profits interest from his father, B. Accordingly, A is considered to own only the 20% profits interest in DEF that he owns directly. [47] [47]. Reg § 1.414©-4(B)(6)(iv)(D).

"Let me make myself perfectly clear." When we submit for an initial determination, we do not request approval for the 401(a)(4) test. Rather we submit the plan document and get approval "subject to its passing the 401(a)(4) tests each year". The IRS fee is $125. Then we perform the tests annually and maintain the results in a file in case of subsequent audit. If we were to file the initial request with a request for a determination of THAT year's 401(a)(4) test qualifying, we would pay $1,000; get an approval for THAT year; and then what would you do for subsequent years? Refile each year? Not me. Not if it is going to cost the client and me both time and money, including another $1,000 IRS fee.

initial reaction: "if it looks like a fish, swims like a fish, smells like a fish ... do I want it in my house - especially as it gets older?" on subsequent thoughts: Assuming there is NO chance of these being considered part of a controlled group or part of an affiliated service group, let's look at the overall picture. In order to get a larger contribution for herself, this individual has created 5 or 6 separate corporations - each of which is subject to separate corporate income taxes and fees beginning at lowest levels for state (in California, there is a minimum $800 tax even if there is no net income)and federal purposes; in each of the corporatons, the corporation and the individual pay full bore on the social security taxes (12.4%)up to the wage base (albeit she can get a refund - of a portion of the employee portion of the tax - if she waits long enough); the companies maintain four additional sets of plans, with their related expenses; and when she wants to withdraw the monies, she will be faced with an excise tax on the large acumulation. in addition to which, this is surely going to attract an IRS audit on a regular basis. Does it really make sense? [This message has been edited by Larry M (edited 09-20-98).] [This message has been edited by Larry M (edited 09-20-98).]

1. With respect to the filing fee, I understand the class profit sharing plans (e.g., 3% for all, extra 2% to those in classes 2 and 3 and extra 15% to those in class 3) are now to be submitted as volume practitioner plans subject to only the $125 fee. 2. with respect to having two documents: in order to save an initial fee which may be higher, you will incur the expense of maintaining two plans instead of one. Doesn't seem appropriate.

Be careful. The plan may not allow a lump sum benefit payable at any time to any individual; My guess is she needs to know a number of things, at least with respect to her husband's plan's benefits - the first being what the accrued benefit is (monthly at reitrement, early retirement, with or w/o cola, etc.; second: what is the community interest - note in many states this differs from the normal benefit in a number of ways - may not be the entire benefit; may be based upon a projection of benefit at retirement; may have to be calculated using state mandated assumptions, etc. third - what is the equivalent value (or market place lump sum value of the monthly benefits). In order to protect yourself from providing answers which may be inaccurate, you should, as a minimum, get the spd and other specific information from the plan administrator. And, beware of reactions to favors given to soon-to-be-ex-wives.

A separate question you should ask yourself is whether this is the sort of investment you want to make with your retirement funds. Consider the effects of a. a steep decline in the value of the investment (and your potential loss of retirement income - with no offsetting tax deduction. b. a steep increase in the value (and whether you would be better off, in such a case, if it were taxed as a capital gain - outside the IRA - as opposed to ordinary income when distributed from the IRA.

Try to get a copy of CCH Pension Plan Guide 159, dated April 14, 1978. Title "Vesting Under ERISA" by Isidore Goodman. [aside for those who, like me, are long in tooth - one moment of silent reverence as we face East ] Generally, prior to ERISA, vesting (in qualified plans) was required only upon attainment of nra in a pension plan or some triggering event in a profit sharing plan, and upon termination of a plan or the complete discontinuance of contributions. Keogh plans (HR10) had a 100% requirement for employees. Companies had a wide range of vesting schedules which were completely voluntary on their part. Sometimes plans voided vested benefits under "bad boy" provisions. Before ERISA and its related changes, retirement plans were meant to reward employees who stayed with a company until retirement. There was no real attempt to provide a severance benefit in a retirement plan - which, unfortunately, is where most defined contribution plans find themselves now - severance plans and not retirement plans. [once in a while, a political thought envelops my comments .. my hope is these are not considered "high crimes and misdemenaors.."]

Some sources are: EBRI, Spencer's, and the major consulting firms Hewitt, Mercer, Towers Perrin, Wyatt. the dol may have a count of types of plans on its web site. On the other hand, if there is a top paid employee who is unhappy with the change, some hand holding may be better than supplying statistics which show other top paid people were treated as badly (his/her perception). and remember, a 401(k) plan IS a profit sharing plan with the added featur of allowing the employee to contribute additional funds.

If memory serves me correctly, there is some question as to whether this type of insurance policy (last to die) is permitted in a qualified plan. Another issue is whether, if it is permissible, this is an appropriate investment of the trust. the option to purchase insurance will need to be made available to all participants - and the same estate tax results may be better achieved by placing the insurance outside the plan. [more control on the amount of coverage, the persons who can buy it, the beneficiary designations, etc.] [This message has been edited by Larry M (edited 09-15-98).]

What does the plan document require? If all eligible particpants get 18.75%, then this individual gets 18.75%. If the plan is one which allows contributions to vary by class, then the individual gets the contribution required of that class. ...or the plan could be modified to allow part time employees to get a benefit.