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Complete Guide to Retirement Plans for Small Business: Tax Law, ERISA Requirements, Planning and Compliance Guidance

  • ID: 997750
  • September 2008
  • Region: United States
  • 540 Pages
  • Civic Research Institute, Inc
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Small business owners can afford to offer their employees and themselves wealth preserving retirement plans. This comprehensive guide shows how.

Current law and changes in the skilled labor marketplace have made qualified retirement plans an increasingly affordable employee benefit and a valuable personnel-management tool.

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CHAPTER 1: Why Small Businesses Should Consider Providing a Qualified Retirement Plan
Mark S. Weisberg, J.D.
1.1 Introduction
1.2 Competition for Top Talent
1.3 Employee Retention
1.4 Employee Motivation
1.5 Three-Legged Stool
1.6 Favorable Tax Benefits
1.7 Economies of Scale
1.8 Full Coverage for Increased Life Expectancies
1.9 Special Situation: Sale of All or Part of Business to an ESOP
[1] What Are Tax Benefits of an ESOP Sale?
[2] What Are Management Benefits to an ESOP Sale: Departing Owner’s Perspective?
[3] How Does an ESOP Work?
[a] Taking Out a Loan
[b] Repaying the Loan
[c] Releasing Shares to Employee Accounts
[4] What Should an Owner Do When Considering Selling to an ESOP?
[a] Feasibility Study
[b] Valuation
[c] Hiring an Attorney
[d] Securing Funding
[e] Establishing a Committee and Trustee
[5] Conclusion
1.10 Severance Arrangements
[1] ERISA Governance of Severance Arrangements
[2] ERISA Requirements for Welfare Benefit Plans
[3] Tax Consequences of Severance Arrangements
1.11 Salary Continuation Arrangements
1.12 Other
[1] IRAs
[2] Life Insurance Plans
[3] Health Insurance
[4] Disability Insurance Plans
[5] Cafeteria Plans
[6] College Savings Plans

CHAPTER 2: Retirement Plan Options for Smaller Businesses–—Contribution-Benefit Design
Michael G. Falk, J.D.
2.1 Types of 401(a) Plans
[1] Defined Benefit Plans
[a] Investment Risk
[b] Single Asset Pool
[c] Funding
[d] Forms of Distribution
[e] Benefits Are Insured
[f] Lack of Portability
[g] Lack of Appreciation
[2] Defined Contribution Plans
[a] Individual Accounts
[b] Investment Risk
[c] Funding
[d] Form of Distribution
[e] Portability
[f] Appreciation
2.2 Types of Defined Contribution Plans
[1] Profit-Sharing Plans
[a] Amount of Contributions
[b] Allocation of Contributions
[2] Money Purchase Plans
[3] Target Benefit Plans
[4] Stock Bonus Plans and Employee Stock Ownership Plans
[5] Employee Contributions and Cash-or-Deferred Arrangements or 401(k) Plans
[a] 401(k) Contributions
[b] Catch-Up Contributions
[c] Roth Contributions
[d] After-Tax Contributions
2.3 Plan Design
[1] Expense .
[2] Section 401(a)(17) Limit
[3] Section 404 Deduction Limits
[a] Defined Benefit Plans
[b] Defined Contribution Plans
[i] Percentage Limitation
[ii] Compensation Determination
[4] Section 415 Limits
[5] Nondiscrimination Testing
[a] Actual Deferral Percentage (ADP) Test
[b] Actual Contribution Percentage
(ACP) Test
[6] Prototype Plans Versus Individually Designed Plans

CHAPTER 3: Plan Distribution Issues
Erin A. Kartheiser, J.D.
3.1 Introduction
3.2 Timing of Distributions
3.3 Forms of Distribution
[1] QJSAs and QPSAs
[2] Alternate Forms of Benefit
3.4 Distribution on Vested Termination or Retirement
[1] Severance From Employment
[2] Disability
[3] Involuntary Cash Out of Small Balances
3.5 Posttermination Distribution Alternatives
[1] Required Beginning Date
[2] Minimum Required Distributions
3.6 In-Service Withdrawals
[1] Hardship Withdrawals
[a] Immediate and Heavy Need
[b] Amount of Hardship Distributions
[2] Loans
[3] QDROs
[4] Age 59½
3.7 Other Issues
[1] Roth Accounts
[2] Rollovers
[3] Anticutback Implications

CHAPTER 4: Compliance With IRS and DOL Rules
Deborah K. Boling, J.D.
4.1 Introduction .
4.2 Minimum Participation Requirements
[1] All Participants Must Be Employees
[2] Minimum Age and Service Conditions Permitted
[3] Certain Classifications May Be Excluded
[4] Year of Service
[5] Methods of Crediting Service
[a] Hours Counting Method
[b] Equivalency Method
[c] Elapsed Time Method
[6] Break in Service Rules
[7] Minimum Number of Participants in Defined Benefit Plans
4.3 Minimum Coverage Testing
[1] Plans Excluded From Coverage Testing
[2] Transitional Rule for Mergers and Acquisitions
[3] Coverage Testing Generally
[a] Total Employees
[b] Excludable Employees
[c] Other Employees Who May Be Excluded
[d] Employees Benefiting Under the Plan
[e] Highly Compensated Employees
[f] Required Disaggregation
[g] Permissive Aggregation
[4] Ratio Percentage Test
[5] Average Benefit Test
[a] Nondiscriminatory Classification Test
[b] Average Benefit Percentage Test
4.4 Permitted Disparity
[1] Plans Not Eligible for Permitted Disparity
[2] Defined Contribution Plan Requirements
[3] Defined Benefit Plan Requirements
[a] Excess Plan
[b] Offset Plan
4.5 Top-Heavy Rules
[1] Top-Heavy Test
[a] Required Aggregation Group
[b] Permissive Aggregation Group
[2] Key Employees and Non-Key Employees
[3] Minimum Top-Heavy Benefits
[a] Defined Benefit Plans
[b] Defined Contribution Plans
[c] 401(k) Plans
[d] Employers With Multiple Plans
[4] Minimum Top-Heavy Vesting

CHAPTER 5: Fiduciary Compliance
Mayer Naiman, J.D.
5.1 Introduction .
5.2 Fiduciary Status Under ERISA
[1] General .
[2] Service Providers
[3] Ministerial Functions
[4] Investment Advice for a Fee
[5] Settlor Functions
[6] Plan Expenses
[7] Delegation of Fiduciary Responsibilities
[8] Individuals Who May Not Serve as Fiduciaries
5.3 Fiduciary Duties Under ERISA
[1] Exclusive Purpose of Providing Benefits
[2] Prudence
[3] Diversification
[4] Following the Plan Documents
5.4 Prohibited Transactions
[1] Introduction
[2] Party-in-Interest Prohibited Transactions
[3] Self-Dealing Prohibited Transactions
[4] Prohibited Transaction Exemptions
[a] Statutory Exemptions
[b] Administrative Exemptions
[5] Prohibited Transaction Penalties
5.5 Liability for Breach of Fiduciary Duties
[1] Civil Actions
[2] Penalties .
[3] Limiting Liabilities

CHAPTER 6: Plan Administration Issues
Barry L. Salkin, J.D.
6.1 Professional Employer Organizations
6.2 Employee Benefits Law
6.3 Plan Fees .
6.4 Plan Administration
[1] Indemnity
[2] Fiduciary Liability Policy
[3] Policy Exclusions
[4] Investment Options
6.5 Mutual Fund Scandals
6.6 Investment Advice/Investment Education
[1] Information
[2] General Financial and Investment Information
[3] Asset Allocation Model
[4] Questionnaires, Worksheets, Software, Etc
6.7 Proxy Voting .
6.8 Funding Policy/Investment Guidelines
6.9 ERISA Section 404(c) Defense
[1] Introduction
[2] Background
[3] General Considerations
[4] 404(c) Defense

CHAPTER 7: Reporting and Disclosure
Barry L. Salkin, J.D.
7.1 Introduction .
7.2 SPD .
7.3 Electronic Disclosure and Record Keeping
7.4 Content of SPD
7.5 Documents to Be Provided Upon Request
7.6 Sanctions
7.7 Form 5500 .
[1] Electronic Display of Form 5500 Information
[2] Form 5500 Additional Reporting Requirements
7.8 Schedule SSA
7.9 SAR
7.10 Blackout Notice
7.11 Benefit Statements
7.12 Miscellaneous
7.13 Notice Regarding Freedom to Diversify Securities
7.14 Access to Multiemployer Plan Information
7.15 Reporting and Disclosure to PBGC
7.16 ERISA Section 4065—Annual Notice
7.17 ERISA Section 4063—Withdrawal of Substantial Employer
7.18 Premium Payments
7.19 Types of Premium
7.20 Filing Dates
7.21 Where to File
7.22 How to Pay
7.23 Definition of Participant
7.24 Notice to Participants
7.25 Defined Benefit Plan Funding Notice
7.26 Special Filings With PBGC—ERISA Section 4010
7.27 Notice of Benefit Limitations
7.28 Missing Participants
7.29 Methods of Filing
7.30 Extensions .
7.31 Reportable Event
[1] General Information
[2] PBGC Form 10
[3] Active Participant Reduction
[4] Exception
[5] Inability to Pay Benefits When Due
[6] Distribution to Substantial Owner
[7] Waivers
[8] Changes in Contributing Sponsor or Controlled Group
[9] Bankruptcy or Similar Settlement
[10] Liquidation
[11] Failure to Make Required Minimum Funding Payment
[12] Use Form 200 to Notify PBGC of Failure to Make Required Contributions
[13] Transfer of Benefit Liabilities
[14] Application for Minimum Funding Waiver
[15] Loan Default
[16] Extraordinary Dividend or Stock Redemption
[a] Cash Distribution
[b] Noncash Distribution
[c] Combined Distributions
[17] Advance Reporting
[18] Effect of PPA 2006
7.32 Distress Termination Notification

CHAPTER 8: Controlled Group and Multiple Employer Issues for Retirement Plans
Linda Lemel Hoseman, J.D., LL.M.
8.1 Introduction .
8.2 Controlled Groups
8.3 Entities Under Common Control
8.4 Affiliated Service Groups
8.5 Retirement Plans and Controlled Groups
8.6 Multiple Employer Retirement Plans
[1] Participation Rules
[2] Discrimination and Termination Rules
[3] Minimum Coverage Rules
[4] Exclusive Benefit Test
[5] Vesting Rules
[6] Minimum Funding Standards
[7] Deduction Limits
8.7 Conclusion

CHAPTER 9: Thinking Ahead: Planning for Possible Future Mergers and Acquisitions
Linda Lemel Hoseman, J.D., LL.M.
9.1 Introduction .
9.2 Preliminary Determinations
9.3 Due Diligence .
[1] Identification of Existing Plans and Compensation Arrangements
[a] Qualified Plans
[b] Nonqualified Plans
[c] Severance Plans
[2] Funded Status of Plans and
Compensation Arrangements
[3] Accelerated Payments
[4] Foregoing Due Diligence
9.4 Representations and Warranties
9.5 Indemnities .
9.6 Covenants
9.7 Negotiation
9.8 Pre- and Postclosing Actions
[1] Preclosing
[2] Postclosing
9.9 Conclusion
Appendix A: List of Frequently Used IRS Employee Benefit Forms
Appendix B: List of Helpful DOL and IRS Manuals and Publications
Appendix C: Frequently Used Employee Benefit Notices and Forms
C-1: Model Notice of Plan Termination
C-2: Model Notice of COBRA Continuation Coverage Rights .
C-3: Model COBRA Continuation Coverage Election Notice
C-4: Model Notice of Blackout Periods Under Individual Account Plans
C-5: Model Notice of Pending Election of Multiemployer Plan Status
C-6: Model Participant Notice
C-7: Model Annual Funding Notice
C-8: Model Notice of Employee Rights Concerning Employer Securities
C-9: PBGC Model Shared Payment QDRO
C-10: PBGC Model Separate Interest QDRO
C-11: Sample QDRO Procedures
C-12: Advance Notice of Reportable Event—Filing Instructions and Forms
C-13: Post-Event Notice of Reportable Events—Filing Instructions and Forms
C-14: Notice of Failure to Make Required
Contributions—Filing Instructions and Forms
C-15: Standard Termination—Filing Instruction and Forms .
C-16: Distress Termination—Filing Instruction and Forms
C-17: Missing Participants—Filing Instruction and Forms
Table of Cases.
Table of Statutes, Regulations, Rulings, and Releases
Index .

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