Larry Starr

An audit could cost $7,000 to $10,000 or more. We can split the plan for a one time cost of about $1500 plus an annual cost of substantially under $1000. Effectively, we are billing for an extra 5500 each year. Now that we know this is actually a controlled group of two companies owned by the same individual and that the plans are identical, I would do the following two moves all at one time: 1) Merge the two plans into one; 2) Split the single plan into two by A-L, M-Z process to avoid the audit. You still end up with two plans, but now covering both companies, and with ALL the employees split of both split between the two and avoiding an audit for many more years. It is the most practical answer.

I'm sure you know every plan in a MEP has to file its own 5500, so have you seen the 5500's filed by your client in the past? Since those are "plans" and probably do use 001, then using 001 when they move out of the MEP is appropriate if it is the same plan as it was before. You use the words "new plan", but I'm going to bet you are using those words incorrectly and it is NOT a new plan but a restatement of the existing plan as a non-MEP and therefore, you were correct to use 001. Now, the question becomes did you properly complete the new plan document (not "new plan" ) to show it was a restatement and not a new plan? The non-MEP is NOT the first plan to be sponsored by the client since the MEP is a plan sponsored by the client. So it sounds like you got the right answer but for the wrong reasons. Do I have that right?

Without getting into the issue of controlled groups which you left out (you didn't tell us the relationship between the companies, something that is probably an important thing to include......) consider splitting the plan that is getting close to 120 people into TWO identical plans except for eligibility. For example, plan A includes those employees with last names when first eligible beginning with A-L and plan B includes employees with last names when first eligible (avoids having to change if folks change their last name) of M - Z. The plan can actually be administered as a single plan on most systems showing two different "divisions" (careful about dealing with forfeitures depending on provisions); besides having a separate document, you have a separate 5500. The cost for doing this (in our house) is trivial; WAY less than the cost of dealing with an audit.

Maybe you can do it (but I think there may be some disclosure issues there - plan sponsors have to be listed by name in the SPD) but I just think it is a terrible idea. I don't like anything that can result in unintended consequences, and that can easily happen when something is "automatic". Larry.

Of course you can; just think what the results would be if you could not!

Just FWIW; there is no such thing as a 1099 employee. There are 1099 independent contractors, and there are W-2 employees. Never the twain shall meet. Peter's response is spot on. This is a facts and circumstances situation; if you want counsel to provide an opinion, hire Derrin.

No, I think it is NOT a fund. It is an account. OR a "stable value fund". The modifier is important. How many legs would an elephant have if you called its tail a leg? FOUR!

I do a lot of PW/David Bacon work and wrote outlines for ASPPA annual on this subject. I have to say I don't understand much of what you are saying. Prevailing wage goes to everyone? No, PW goes to those who work on PW jobs. Not sure how that could be "stupid". Explain what you are talking about here. 410(b) fails? How? You need to explain how you determined that. I have no idea what an "older style new comp plan" is. With some more explanation of what the issues are, we might be able to give you a cogent response.

There is not a requirement for an actual SPD in the foreign language (but in the mid '70s I was involved in getting the SPD written in both Spanish and Chinese; luckily, we had a Chinese actuary at the insurance company who did the job for that language). The following should help you understand the requirements: Background: An ERISA plan must provide an SPD to enrollees within 90 days of enrollment. If there is a material modification to the terms of the plan as described in the SPD, the plan must provide a new SPD or an SMM. If the material modification is a reduction of benefits in a health plan, the new SPD or SMM must be provided within 60 days after the effective date of the change. ERISA plans generally must provide an SAR annually to all participants and beneficiaries, though certain plans are exempt from the SAR requirement.When are the Non-English Language Requirements applicable? The requirements apply if the ERISA plan is in any one of the following categories: The plan has fewer than 100 participants at the beginning of the plan year and 25% or more of the participants are literate only in the same non-English language. The plan has 100 to 4,999 participants at the beginning of the plan year and 10% or more of the participants are literate only in the same non-English language. The plan has 5,000 or more participants at the beginning of the plan year and 500 or more of the participants are literate only in the same non-English language. What are the Non-English Language Requirements? The SPD, SMM, or SAR must include a statement, prominently displayed in the applicable non-English language, explaining how to access the non-English assistance described below. The plan must assist the non-English speakers in a manner that provides them with a reasonable opportunity to become informed as to their rights and obligations under the plan. However, the plan is not required to provide anything specific in writing.

Total death benefit and fair market value are definitely NOT the same thing. Death benefit includes the net amount at risk (the real insurance amount at this time). If you surrendered the contract, you give up the net amount at risk. Also, your statement of TDB being greater than face value (logical) but LESS than current cash value is not logical. That means that upon death, the payout would be LESS than the current surrender value (assuming no surrender penalty, but even worse if there is a penalty). Did you misstate or misread that?

The question about the allocation of the PS cost to the individual partners is a function of the partnership agreement. The question must be asked of the accountant: "how will the PS cost be shared among the partners?" It can be done any number of ways.

Absolutely possible and normal in many situations. Think of a law firm where you "eat what you kill". The partnership agreement provides who the income (and expenses) are allocated.

WHICH same answer! Yours (which supposed you couldn't do it) or ours (which says you could)? I assume "ours"?

Having been significantly involved with Paul Schultz when he developed and wrote that 1/2% rule (I was heading the IRS Q&A sessions for ASPPA and Paul would attend our prep meetings), I know from our discussions that he did not intend the rule to be used in this manner of calculation. That doesn't mean the IRS can't change their approach, but this is apples and oranges. Using current comp vs average accrual (the "divide by years" piece) is nonsensical. Push back hard. If you have to, tell the actuary you disagree and that you have to ask her to seek "technical advice". They hate that because they then have to justify their position to higher ups; just the request alone often gets them to back down.

You're not changing the plan to add a safe harbor; you are simply changing the definition of who is a participant. I would want to look at those examples of mid-year safe harbor changes, but as I recall, you do not have a problem with this modification.

Changing recordkeeper does not require modifications to the plan document; changing trustees does. That means you need a corporate resolution showing the removal of the old trustees and the appointing of the new ones. We also have the new ones sign the resolution to show that they have accepted the role of trustee. You also need a SMM (Summary of Material Modification) that notifies the participants about the change. The participants have no say in this matter; their "permission" is not ever required. You say you have a VERY LARGE ACCOUNT; I assume you mean many participants. Could you imagine the chaos that would result if participant approval was required?

"There's no such thing as a Solo K; it's a marketing gimmick to sell you a crippled plan". That has more power than NOT telling the client. Plus, the client (at least my clients) NEED to know that they are not getting what they have been told. Of course, we don't have "customers"; we have clients. Long ago I wrote an article in the Journal of Pension Benefits called "Clients Or Customers: Never the Twain Shall Meet". I've attached it here. If you want an idea of what I'm about, go ahead and read it. Clients or Customers.pdf

There is absolutely no difference between the individual and Acme Sports. They are one and the same legally so it makes no difference how the check is issued. My first thought is that there is NO 1099; the amount contributed is not deducted anywhere, but this is just a first impression without doing any research and maybe the answer is different.

Absolutely there are such systems. We have a very large payroll operation (that is also our client) and we have worked with them for years to make sure their system does everything it should, including the tracking of max deferral limits based on the date of birth keying the catch up increase allowance.

Ask (respectively) in writing to the agent that he provide the chapter and verse that requires such an action. He won't be able to and it will go away.

When we run the 12/31 year end work, we also have a routine that prints out the individuals who MIGHT be eligible on 7/1 if they continue working until that time. We also send a second Safe Harbor Notice in June to all those clients with a note to ask us if they aren't sure who will be entering on 7/1. I would NOT change the plan; all his part timers now come into the plan and that's got to be much more expensive than the occasional flub on entry. FWIW.

I frankly don't believe what you are being told. No payroll system would have a crippled ability to process bi-weekly deductions vs. semi-monthly deductions. Someone doesn't know what they are doing. And, after asking someone to prove it to me and if they do, the answer is simple. The client needs to get a payroll system that does what a payroll system is supposed to do. This answer is NOT justifiable.

It's Derrin Watson, not Darrin (just FWIW). Otherwise, endorse 100%.

While I understand your frustration, we would absolutely set this plan up as a 401(k), only because there is no extra cost in our operation to do so and there might be a year where his income drops significantly so the ability to defer up to the max instead of treating it as a employer contribution and the limits attached to that might be helpful. That is the essence of flexibility of design that organizations that know what they are doing bring to the game. I agree if there was a significant "upcharge" for such a plan that it becomes questionable, but I find it hard to justify any additional cost for a one man 401(k) where the individual defers. It's even easier if the entity is not incorporated because then we can split the contribution (made during the year) any way we want (as employer contribution or 401(k) deferral) that best meets the client needs. We do this all the time.

We do it all the time. Our documents have a provision for predecessor entity and exactly which provisions (eligibility, vesting, contributions) the credit is to be given. Happens all the time with reorganization of medical practices.