Hello,

Plan's loan policy only allows one loan outstanding at a time.

Participant has a loan outstanding and applies for and receives a check for a second loan, while the first one is still outstanding.

Participant refuses to repay the second loan in full immediately upon discovery.

I believe the second loan is treated as a default (deemed distribution) immediately as it violates the plan's loan policy provisions and therefore the second loan is taxable (with penalties depending on age), but like any other deemed distribution remains in deemed status until it can be offset.

Any further insight will be appreciated.

andmik

Plan with 12/31 PYE adopts a resolution to terminate in 2006. They distribute all of the assets in 2007 and file a Final Form 5500. In 3/2009 they receive a check from settlement proceeds related to late trading and market timing. (See FAB 2006-1).

1) Does the plan need to file a Form 5500 for 2009? Does it matter if the funds are recevied and distributed during 2009?

2) If so, can you confirm that the participant count at the beginning of the year is zero?

3) Does the plan need to file a 2008 Form 5500?

4) Does the plan need to file an amended 2007 Form 5500?

All comments and cites are appreciated.

Any reason a wholly owned ESOP must own 100% of its subsidiary? or be in the same controlled group as the subsidiary?

Has anybody seen final treasury regulations, following the proposed regs that came out a couple of months ago? I have not, but it's not easy keeping up with everything. Thanks!

I have a minor (age 9) who is entitled to 50% of his grandmother’s account ($7,000). My document does not address what to do in the event of a minor child beneficiary however I have read multiple recourses that state the monies should be given to the guardian for the benefit of the child, and it should be placed in a UTMA account until the child comes of age (21). Is this correct? Also, does the guardian need to be court appointed or can the parents be named the guardian by the Trustee?

The beneficiary lives in New Jersey.

We have a debate going on about the proper handling of loans when an employee isn't paid in a given pay period (not a leave of absence) or is paid too little to allow a loan deduction. This typically happens during plant shutdowns when someone is taking the time unpaid, so they may be unpaid for the entire pay period, or be paid only for a day during the pay period. Our loan policy does allow for cure period.

Opinion 1 - the missed loan payment needs to be made up by the end of the cure period or the loan must be deemed. It doesn't matter if the employee makes a payment in the following pay period, the one missed payment causes a default.

Opinion 2 - When the employee is paid again, a loan payment is taken again, thus curing the loan default that occured from the missed payment. At end of loan repayment period, there is a balance remaining that participant must pay by end of cure period or loan is deemed.

Typically we try to make up the missed loan payment when the employee is paid again by doubling payments, however, we have multiple locations with decentralized payroll, multiple payroll systems involved, and multiple pay frequencies, so it is hard to enforce/monitor that this happens each time a loan payment is missed. So there has been discussion of whether it is truly necessary to try to catch these missed payments, and, since we have difficulty applying this consistently, would we be better off not trying to double up payments.

For leave of absences we reamortize, but our new 401k vendor refuses to reamortize for one or two missed payments when it doesn't involve a leave of absence.

I posted this under the 401(k) Plan Forum, but I am posting here as well, since it involves a DB plan, too:

If a DB and a DC plan are permissively aggregated, and the DB plan provides a subsidized death benefit to the surviving spouse of an active employee, how can such a benefit be provided for in the DC plan in order to pass testing? Will providing such a benefit under the DC plan result in any limit violations, such as 415?

If a DB and a DC plan are permissively aggregated, and the DB plan provides a subsidized death benefit to the surviving spouse of an active employee, how can such a benefit be provided for in the DC plan in order to pass testing? Will providing such a benefit under the DC plan result in any limit violations, such as 415?

My brother has a small business that is starting to offer health insurance to his employees. They cannot qualify for a group plan because they don't have enough participation. However, as the employer, he would still like to pay for half of the premiums for his employees and have the other half paid on a pretax basis by the employees. Can he do this thru a cafeteria plan? We can't find anything saying one way or another. Since it is individual policies can he still pay for part of it and have the rest pretax for his employees?

I was discussing this with an EA this morning, and we both were in agreement, but I thought I'd toss it out for discussion just for the heck of it. If a DB plan is in an AFTAP position such that distributions are restricted, can the HC still take participant loans?

We both agreed that they could, as the distribution restrictions do not specify participant loans as a restricted or impermissible distribution. This makes sense, because a loan is not a "distribution" per se.

Any other thoughts, opinions, or discussion?

Plan states forfeitures are to be reallocated. Forfeitures have accumulated for 3-4 years and have not been reallocated. Employer now wants to dispose of all these forfeitures. Assume the correction is to go back and determine who should have received the forfeiture reallocation for each year the plan required reallocation.

This forfeiture reallocation would be counted as a annual addition for the current plan year wouldn't it 1-1 plan year/fiscal year and no extensions)? If that's the case but what about former participants who are no longer actively employed and no compensation for this year? Is this a problem or are they due a share of the forfeiture regardless and no 415 issue for them.

Also - seems a significant enough of an error that VCP should be followed?

DB client establishes plan in 2008 and funds before 9/15 but after tax return due date.

Client intends to double up in 2009.

How is the 2009 maximum computed? Used to be the 2008 amount plus the 2009 minimum, I think. I know we have no regs.

This is a cash balance plan, so funding the 2009 minimum plus 2008 won't cover the total account balances, I am expecting.

Opinions please?

Situation:

1. Calendar Plan Year (Jan thru Dec)

2. School Year (Sept thru June)

Newly eligible ee has already, before becomming eligible, paid for day care up front for an entire school year (school not associated with day care center). How should we handle a dependent care election in this case. Is the amount not eligible at all because it is already paid or can it be eligible because it is not yet incurred? What about the monies for next plan year already spent? Just elect what's for this year and then plan on the rest for next year?

Anybody willing to share any new Cash Balance design suggestions?

In addition to the obvious interest credit question, what are others using for actuarial equivalency? I've heard that most used 417(e) rates but that seem unnecessarily complex with the segment rate 417(e) changes and phase-ins. I recently saw a takeover with actuarial equivalence defined as UP84 at 8.50% which obviously equalled testing rates and I suppose eliminated the MVAR calculation - interesting. Thoughts?

What about interest on payouts to terms - are most calculating interest quarterly? daily?

An employer wishes to terminate their old Keogh PS plan and adopt a SEP plan this year. I understand that the IRS Model SEP Form 5305 prohibits an employer from establishing a SEP if they "maintain another qualified plan".

Question: If the Keogh is terminated in 2009 and SEP started later in 2009 after the termination, does this fail to meet the requirements of Form 5305? Stated another way, does the employer "maintain another plan" if it's terminated mid year? Could we start the SEP in same calendar year using the IRS Model form?

Thanks for all help on this!!

Does anyone know of a reason why a plan would not file a schedule SSA for a multiemployer plan? I looked at the instructions to the Schedule SSA and it states..."In general, for a plan to which more than one employer contributes, a participant must be reported on Schedule SSA if: (1) the particiant incurs two successive 1-year breaks in service, and (2) the participant is (or may be) entitled to a deferred vested benefit under the plan."

We have taken over a new multiemployer plan that has over 3,000 participants but didn't have an SSA last year. Only employer contributions are made to the plan. I find it hard to believe out of that many partipants there's no one that doesn't need to be reported on Schedule SSA.

Any thoughts would be appreciated!

I am reviewing a health plan that says that dependents in military service are not covered by the plan. Any prohibitions on such a provision?

I have looked at TRICARE nondiscrimination rules and commentary, and the provision does not on its face violate the TRICARE provisions.

10 U.S.C. §1097c(a) prohibits offering incentives to waive other coverage and take TRICARE--no incentive involved here.

10 U.S.C. §1097c(b) says, "A TRICARE-eligible employee shall have the opportunity to elect to participate in the group health plan offered by the employer of the employee and receive primary coverage for health care services under the plan in the same manner and to the same extent as similarly situated employees of such employer who are not TRICARE-eligible employees." The questionable provision does not affect the opportunity of TRICARE-eligible employees to elect participation to the same extent as non-TRICARE-eligible.

If the SPD was originally written with misleading information and needs to be modified - SMM; how long does the Fidiaciary have until the information must be in the employees' hands? Under current laws.

How are people completing Line 23 of the 2008 SB if they are using 417(e) mortality as required under 1.430(d)-1(f)(4)(iii)?

For most plans that pay lump sums, 1.430 requires you to use the appliciable 417(e) mortality table to determine the funding target. This option doens't fit with any available options under line 23.

Our thought is to check the "prescribed" box, but add a footnote that we are using the table prescribed under 1.430(d)-1(f)(4)(iii).

Anyone have a different opinion?

An owner only plan terminates where say plan assets equal 70% of value of benefits.

436 would not allow full lump sum distribution.

Does anyone know of a practical example where such a plan distributed plan assets? And if there were any consequences, violations, damages, etc.?

Point being, if such a plan distributed lump sum to owner, what might IRS do? Anyone know of ramifications? Actual better than theoretical.

Thanks.