The plan has an alternate payee who elected to not take his distribution out of the plan at the time of the QDRO. Since then, the plan has increased the cashout limit to $5,000 (with automatic rollovers from $1,001 - $5,000). The AP's balance is <$5,000, so the Trustee wants to pay him out. Everything I see says that the automatic rollover is triggered by the termination of a Participant (with a capital "P"), but does AP fall under that umbrella for this purpose? Thanks.

I have inherited the administration of a 401k plan that apparently has never suspended employee contributions after hardship withdrawals have been taken (going back to 1994). Was this ever legal? What is the correction method for this?

Thank you,

Of course in my 2,000 years of practicing, I've never had to determine the maximum distributable lump sum on a deferred pension. Alas, my day has come, in particular, because of the NRA=62 requirement.

So, facts are participant age 52 with NRA=62 has over 10 years of whatever and has accrued the full benefit of the high three (H3) average compensation under 415(b)(1)(B). Since lump sum is available, then presumably "annuity starting date" is at age 52 and not age 62.

So, we do as follows:

(1) Determine the lump sum for a deferred annuity to age 62 valued at age 52 using the plan factors.

(2) Convert this lump sum to an immediate life annuity at age 52 using the lesser of the Plan actuarial equivalence or the applicable mortality table and 5.5% interest. I.e., produce the greater annuity.

(3) Reduce H3 to an immediate annuity using whichever produces a lower factor -- the Plan actuarial equivalence or the applicable mortality table and 5.5% interest. I.e., use the lower amount.

(4) Assuming (3) < (2), the distributable lump sum is (1) / (2) x (3)

Any disagreement?

I have an employer who wants to reward employees who do not need to be covered by the employer's group health plan because they have coverage through a spouse's plan or retiree benefits from a former employer. The Employer would like to make a contribution to the Health FSA for each of these employees. The employees would not have the option of receiving the cash outright.

I am having a hard time figuring out if this is OK.

Reg 1.125-2(b)(2)(ii) seems to permit an employee to opt out of health coverage and receive cash:

The cafeteria plan provides for an automatic enrollment process: Each new employee and each current employee is automatically enrolled in employee-only coverage under the accident and health insurance plan, and the employee's salary is reduced to pay the employee's share of the accident and health insurance premium, unless the employee affirmatively elects cash. Alternatively, if the employee has a spouse or child, the employee can elect family coverage.

Is there any reason an employee can't opt out of health coverage and receive an employer contribution to a Flex FSA instead of cash?

I assume the employer contributions must pass nondiscrimination testing, correct?

I appreciate any assistance.

Plan sponsor has a 401(k)/Profit Sharing Plan. Plan sponsor wants to invest in real estate. I don't know the exact details of what yet. I know there a lot of caveats to having real estate in the plan, but does anyone have a good article on this? This article would talk about real estate in the plan and the step by step guide to how you do it.

Thank you and Happy Holidays!

A company purchased a company that I admin a plan for. The company is not accepting the plan but will accept the rollovers.

The exisitng company would like to keep the plan open and offer the employee the ability to roll into the new company plan, roll to an IRA or keep in exisiting plan.

There are a couple loans in the plan. Can these loans still be paid on (obvioulsy not thru payroll deduction) as to not to default? The loan policy states "MANNER OF REPAYMENT. Loan payments will be repaid by payroll deduction repayments as of each payroll withholding period (but at least quarterly). If the applicant revokes the payroll deduction election, the entire unpaid principal sum ofthe loan plus accrued interest (plus any other amounts due under the loan) will become due and payable."

Can this be changed to accept payments?

What options does the company have for keepign the plan open?

We have an alternate payee who is also a participant in a defined benefit plan. The alternate payee is eligible to receive a distribution related to the QDRO as the former spouse has reached his earliest retirement age. The alternate payee is also an active plan participant. The Plan is silent as to whether an alternate payee may receive benefits under the plan while actively employed.

Based on my review of the Code and guidance issued by the IRS and DOL, there does not appear to be any restrictions that prohibit the Plan from distributing QDRO benefits to the alternate payee. In fact, one could argue that denying benefits to the alternate payee places an encumbrance on the exercise of the alternate payee's right to benefits.

I would greatly appreciate comments on this....

One of my clients said there are new rules related the employer stock dividend election, starting in 2010... that a portion of the contributions the participant elects in the Employer Stock Fund might not be eligible for the dividend payment election. Does anyone know what this is refering to? A portion? Wonder what that means?

Kind of a basic question, but are there any employer obligations that go along with having a discretionary profit sharing component in a 401k plan? All of my research suggests that the answer is no (after all, discretionary means discretionary), but Treasury Reg. 1.401-1(b)(2) states that a profit sharing plan will be considered temporary if substantial and recurring contributions are not made.

Is this reg designed to address standalone profit sharing plans as opposed to profit sharing within a 401k plan?

Best regards,

Bob

Plan sponsor has determined it prefers to have fiscal plan year end rather than calendar plan year end. Is it possible to extend an initial plan year for a newly adopted plan (provided the plan year does not go beyond 12 months)?

Situation involves plan adopted mid-2009 with a calendar plan year end. Can plan sponsor now amend the Plan to extend the Plan Year out to 12 months after the effective date so that it has fiscal plan year end and the first Plan Year is a full 12-month plan year rather than the short plan year ending 12/31 as originally drafted?

What if the match component (or other components) have some last day of plan year requirement? If plan sponsor is willing to give match credit for anybody there on 12/31 that subsequently leaves before the end of the extended plan year, could that work?

We are searching for a company that will provide an annuity with a QJSA option without a participant signature. Is anyone aware of a company that does this?

According to the ERISA regulations, in a plan termination situation, it is permissible to force out all participants regardless of their balance. However, for plans with a joint and survivor annuity requirement (i.e. money purchase plans), an annuity must be purchased on the participants' behalf in order to be relieved of fiduciary responsibility. We have asked all of the investment advisors and insurance companies that we typcially work with and none can supply us with an annuity without a participant signature.

A plan was terminated as of the end of it's 2007 plan year (10/31/2008).

Assets were not distributed until October 2009 to the two participants (husband and wife).

The plan never adopted the 415 regulations amendment which was to be effective 11/1/2007 and required to be adopted by due date of 2007 tax return or 7/15/09 with extension. The amendment had no impact in plan operation.

The plan will not be submitted to IRS for dl for plan termination.

In considering remedies, is the only option to file with voluntary compliance program?

Just trying to determine a practical way to handle such a situation.

Thanks.

Company has a 415 Safe Harbor definition of compensation in it 401(k)/PSP. This definition ncludes all items under 1.415-2(d)(2)(i) and excluding those in 1.415-2(d)(3). I believe the company pays for some of the executives company cars. We are trading voicemails. HR manager was talking about "auto gross-ups" and asking how you treat for 401(k) and PS. Do you include this in compensation when determining 401(k) deferrals and employer contributions? I did not see where these specific sections addressed autos. Thank you!

We are in the state of Ohio and our health insurance contract will be generated in the state of Ohio; however, the PBM (prescription benefit manager) is located in Texas. When it comes to dispensing mail-order presecriptions, which state law will apply -- Ohio or Texas? This is important because some states do not allow mandatory generics, and will only dispense as written on the script. Thanks.

We have a potential new client with some issues that need to be resolved.

First, there are two companies that are owned by the same 4 individuals. Our conclusion: They are a controlled group.

There are presently two prototype plans. The plans have never been tested together.

The owners are paid by both companies, but only defer in one of the plans and the owners are the only ones deferring in that plan.

There are no other employees that work for that company (or that is what they initially indicated in their correspondence to us. We havefound out consequently, there are other employees who work for that company as well.)

There are both union and non-union employees in both companies. Both plans cover union employees.

It appears to us that the plans should have been tested together. And possibly the combined plan failed ADP Testing for the past three years. Also, if both plans are aggregated, there is a top heavy issue for the past 2 years.

I would like some guidance. What recommendations would you make regarding this situation. What can we do to fix this client?

The 401(k) does not require spousal consent to issue a loan. The plan administrator knows the participant is going through a divorce but has not been presented with a DRO. The written loan policy is silent on the matter. Should the plan administrator grant the loan without spousal consent or request in this case because of the divorce?

Our employer has a self administered 401k plan in good standing, small company, about 15 participants.

Can the employer voluntarily "stop" (for lack of a better term) the self administered plan, not contract with a TPA, and tell the participants to roll over the 401k to an IRA?

Can a participant voluntarily decide to "leave" (again, for lack of a better term), the 401k plan and have his/her funds transferred to an IRA, while still being employed with the company, and the company still offering the 401k?

Carl C

Can anyone let me know, in a 403b document is there specific language/provisions I cna look for that will help me determine whether or not a plan document has been updated for the final 403b regs, PPA provisions, etc? Specifically, I'm looking at the Corbel oducments, and having a hard-time, especially with the IDP documents.

After you do your discrimination test, and have to have to include some benefits in gross income for a key participant. How is that tax reporting accomplished?

Do you have to issue a corrected W-2?

How would the FICA tax be collected?

Plan has discretionary match. Sevreal years go by during which Employer "wants" to make matching contribution, but is not able to do so. Employer later makes a matching contribution and allocates it based not only on current year deferrals, but on prior year deferrals, as well. (Don't ask me what it was thinking, or if it was thinking. )

Do you think that there is any chance that the IRS would approve a VCP submission requesting approval of a retroactive plan amendment that would allocate discretionary match based on deferrals during the last three plan years? Would such an allocation formula definitely be impermissible? Assume that ACP test is not a problem.

Thanks!