sloble@crowleyfleck.com

Thanks for the replies. I agree. But I do think they would not have a COBRA obligation if they terminated the plan prior to the lay-off (ie if they no longer have any group health plan). Agree/disagree? The co is in financial straights and is trying to unwind as fast as possible

Employer terminates health plan then 2 days later lays off a bunch of people then offers a new health plan to the less than 20 remaining employees who help unwind the business. It does not offer COBRA to anyone. Problems?

Out of about 275 participants, about 25 per year were not counted--say 10% or less--but the de minimus aspect in my view is the fact that counting the participants properly would not have provided any finling exemption. The plan is unfunded so there is no SAR required either.

Client has discovered that over the years it has been mis-counting the number of participants in its self-insured health plan. (Essentially it has not been counting a small group of part-time individuals who participate by taking limited hospital discount benefits under the plan because they are not eligible for the major medical portion.) The actual number of participants is not material to the filing in the sense that the plan has always been well over 100 and has been keeping up with annual filing. My inclination is to correct the error going forward but not worry about trying to come up with correction figures and amending the returns. As anyone had any experience with discovering filing information errors that are insignificant or de minimus?

In the process of a 1/1/05 restatement, client wants to change the plan name to make it more descriptive. Can we just start using the new name for 2005 filings without further explanation (employer name, plan number, etc still all the same) I don't see anywhere on the Form 5500 to note that the name has changed.

Client is restructuring itself into two entities, they will still be in the same controlled group. My reaction is that they can still maintain and test their PS Plan as a single plan, they'll just need to amend the definition of employer and administrator, etc. to clarify who has what responsibility. Any thoughts?

Employer has been allowing pre-tax payment of premiums to supplementary voluntary policies (life, health, etc) since Dec. 2003. Employer wants to stop the practice (due to ERISA implications). Employer has had a flex plan in place but it does not list the voluntary policies as an optional benefit. QUESTION: Is BEST course to amend the plan retroactively to provide that there was a "12-month window" during which this was allowed, and to inform employees of the change? Other thoughts?

FYI DOL commentary on Form 5500 states that if PA cant get Schedule A from insurers info by filing deadline after reasonable efforts then the PA should note this and file anyway Then supplement when the info comes available This is the answer I needed. thanks.

Does anyone have any experience with a "good faith" attempt to collect difficult-to-find information for Form 5500/schedules for unfiled plans? Large LTD and Life Ins plans haven't filed for several years and have changed vendors numerous times--administrator thinks it will be nightmare to get financials for all of the lost years. My reaction is just to do our best and leave blank what we cant findout after reasonable efforts. Any thoughts?

THATs right--thanks for the reminder. Any other thoughts out there on the other questions?

I'm considering wrapping a bunch of insured (and possibly some uninsured) welfare benefits. A few questions: When do you file the 5500 if the policies have different plan years? Can the employer switch insurance carriers and not have to amend the wrap if its drafted generically enough? Could we get away with wrapping the plans in 2005 and then doing DFVCP for past years as if it were one plan? (LTD and Disability were never filed) What are the pros/cons of wrapping uninsured plans in as well? (e.g., the FSA?) THANKS

Thanks--have you read 2002-27? EBIA takes the position that such retroactivity is arguably permissible, at least with mid-year initial enrollments, under that ruling. THANKS for you input.

I'm bumping this up... anyone? Katherine, GBurms, mbozek--to name a few 125 plan gurus...

g8r: are the new regs out on this?

The plan definition of compensation for safe harbor contributions is the same as for profit sharing, as described above.

Adding the HSA is not a permissible change in status because its a change in cost/coverage which doesn't apply to health FSAs.

Thanks, Tom. I thought cross-testing only benefits age-weighted benefit allocations?? Here the partners (who get a larger slice of the compensation pie) are not necessarily older--bu they do have more years of service generally. With this information, do you think we can pass under the uniform points allocation safe harbor? Here is another basic question--do we have to test the safe harbor contributions in addition to the profit sharing contributions?

This is not my area of expertise, so forgive my ignorance. This is a partnership with a 401k PS plan with 3% safe harbor contribution and the profit sharing contribution is typically 15% (although its discretionary). Plan has 2 definitions of compensation: Partners: earned income (no exclusions); Employees: cash compensation (excludes OT and bonuses). I am told that because the Employee definitions contains pay exclusions, we have to test the definition of compensation under the very convoluted 1.414(s)-(g). (Even as a safe harbor plan, we still have to do this I believe, if I am wrong, let me know and I will thank you profusely.) I guess I'm hoping there is a cheat sheet or something out there because my head is spinning.

I think this practice is okay--but barely ok. I would like to know if you agree or disagree. Client pays all employees monthly, on the last day of the month. (Eg, Employee is paid for work done in January on January 31) Client allows employees to enroll in the 125 plan up to 5 working days before the last day of the month, effective retroactively to the first day of the month. Enrollment is not automatic--they have to affirmatively submit their forms or they get cash. I think this is ok for mid-year initial enrollment under RevRul 2002-27, does anyone disagree? What about for annual enrollment (Eg Employee can submit enrollment forms on January 20, 2005 to be effective Jan. 1 2005)? What about for midpyear election changes? Do you know of any other guidance besides Rev Rul 2002-27? THANKS! Here is the address for Rev Rul 2002-27 http://benefitslink.com/IRS/revrul2002-27.html The pertinent language I think is on p. 2: "For a new hire an election ... is efective if made when the employee is hired or within a reasonable time before compensation for the first pay period is currently available. For a current employee, an election is effective if made prior to the start of each calendar year ..."

You wouldn't have to amend a premium only plan for COBRA, but if the 125 plan has a health flexible spending account then it has to be amended because the health FSA is a group health plan subject to COBRA.

Client just had a much-needed turnover in HR Department and the new director has discovered numerous Welfare Plan Form 5500 delinquencies, and numerous missing Form 5500 records. It's very hard to tell what plans have neen filed and for what years. We are looking at 2-4 plans. QUESTION: Is it a good idea to contact the DOL to determine which plans have filed and for what years? Has anyone had experience with this? My inclination is to just assume that if we can't find it, it wasn't filed, and use the DFVCP $4,000 per plan cap instead of mucking things up with the IRS/DOL. I would want to include a cover letter explaining that we have refiled everything due to the defincient recordkeeping of prior HR personell. Any thoughts? Good idea, bad idea, other idea?

Thanks, thats what we suspected and feared.

Here are more details: I'm not sure whether partner is over age 55--let's assume he is (does that really make a difference?) He was a partner (and a key employee) prior to 2002. As of 1/1/02, he became an of-counsel W-2 employee. He still has the same account under the profit-sharing plan (he did not take a distribution, although he could have on termination I presume). I hope this helps.

Top Heavy rules provide that, for purposes of determining whether a plan is top-heavy, you must exclude the account of any non-key employee if that employee was a key employee in any prior plan year. What if an employee is a key employee (a partner), then is TERMINATED AND RE-HIRED as an of-counsel non-key employee. Can we consider the re-hired employee a non-key employee and consider their account for purposes of top-heavy testing? The ability to do this would turn our 68% top heavy plan into an under-60% non-top heavy plan!

When I read the new autorollover regs, I was actually pleased to see the DOL trying to emphasize that the employer's responsibility stops once the funds transfer to the right institution and that agreement is in place. I think so long as the agreement parrots the new regs subsection 3 I believe (including a description of the initial investment) and the transfer is made to the right institution I will feel comfortable advising clients that they do not have to worry about the funds anymore. I do not feel so comfortable with the 404c "safe harbor"-- I think the requirements there are so much more onerous and sometimes practically impossible to meet. But, you have my curiosity now and I wonder if I should not be so trusting of the new safe harbor. That being said, I am still planning to advise clients as to the benefits of scrapping the autorollover and eliminating cashouts--as you have concurred in prior posts. Finally, what is the one-year nonsafe harbor rule? I read the regs quickly and may have missed something...