Participant wishes to insure his spouse. I believe that this would be a violation of the "exclusive benefit" rule and possibly some other rules. However, I cannot find a specific citation for this particular scenario. Can anyone help?

Under 1.401(k)-1(d)(3)(iv)(E) a distribution is deemed necessary to satisfy an immediate and heavy financial need if "the employee has obtained all other currently available distributions..." and is prohibited from making elective contributions for the following 6 months.

Does anyone see a problem with structuring a plan to provide that a participant may not take an in-service withdrawal from his or her profit-sharing account until he or she takes any available 401(k) hardship withdrawal? In some ways this seems to be drafting around the 401(k) rule that provides that other distributions (like profit-sharing distributions) should come first. However, the 401(k) rules say that all other "currently available" distributions must be taken first - so if the plan doesn't permit profit-sharing withdrawals before 401(k) withdrawals, then the profit-sharing withdrawal isn't "currently available" when the participant is seeking a 401(k) hardship withdrawal.

Any thoughts or links to guidance would be greatly appreciated. I didn't see any PLRs on point, but if someone knows of one, I would love to have the cite.

Many thanks!

Investment oriented institutionally priced life insurance (ILI) is now available for personal ownership if an employer validates the role and compensation of the employee. ILI is only available to mid-upper income white/gray collar employees. Hence, just as you can't buy retail life insurance without your doctor validating your health, you can't buy ILI without your employer validating your employment and compensation to qualify for the ILI GI risk class. Employers have no costs or administrative requirements ... simply validate employment.

Is an employer legally obligated to validate employment, role and compensation if an employee requests it, or merely a convenience?

If convenience, if employer refuses to validate thus denying coverage, is the employer at risk if the employee becomes uninsurable while employed? Obviously the employer has a credibility problem, but do they have a legal problem?

Thanks.

If a plan allows a participant to defer receipt of his benefit past normal retirement age - - - assume he quits before NRA, and does not work on or after NRA at all - - - and the participant affirmatively, voluntarily does so by electing to defer until age 68, must his benefit be actuarially increased for the delayed payment? My understanding of 401(a)(14) and 411 is that the payment must be increased, but I wasn't sure whether his affirmative election to defer somehow eliminates that requirement.

Thanks.

If a participant becomes eligible for COBRA as a result of a reduction in hours (he is reduced to part-time status) does his subsequent involuntary discharge trigger subsidy rights with respect to the remaining 9 (or fewer) months of COBRA coverage, counted from the date of his involuntary termination? I would assume so, but couldn't find anything explicitly on point.

Thanks very much.

A plan sponsor whose 2009 FTAP is well below 80% has opted to fund the minimum required contributions. 2009 actual contributions and 2010 quarterly estimates are as follows:

7/15/2009 $ 52,000 (for 2009)

10/15/2009 52,000 (for 2009)

....................=======

....................$104,000

1/15/2010 $ 52,000 (for 2009)

4/15/2010 80,000 (for 2010)

7/15/2010 80,000 (for 2010)

9/15/2010 107,000 (for 2009)

10/15/2010 80,000 (for 2010)

...................=======

...................$ 399,000

In such situations, it is important to stress that the client should not contribute any of their 2010 estimates in 2009. In such case, they would not be able to use the PB that arises from 2009 excess contributions to reduce their 2010 obligation. Consequently, they would only get the immediate value of the reduction in shortfall amortization -- about 1/6 of the contributions. For example, suppose the client decided to make the entire $399,000 in 2009. They would add $240,000 to their PFB which they couldn't use to reduce 2010 contributions (because the 2009 FTAP<80%). The excess would reduce the shortfall by $240,000 which would reduce the amortization by let's say $240,000 / 6 = $40,000. This would reduce each 2010 quarterly installment by $10,000 so they would still have to come up with additional $70,000 for 4/15/2010, 7/15/2010, and 10/15/2010, or $210,000. And the plan sponsor thought they were doing the right thing, which they did, except they forgot that "no good deed goes unpunished."

So much for encouraging plan sponsors to accelerate funding their plans!

I work in Human Resources, so I don't know all the financial lingo and could really use some help.

Last year on January 1, my company acquired another. We each had a 401k plan. The first few months after the merger, we ran both 401k plans (and were told we could do so until the end of the year following the merger). In revieiwng the plans, we actually liked their 401k plan better, so we worked with their provider to terminate our 401k plan and trasnfer the assets in their plan. We took all of the steps we were told to do, including having a blackout period and informing all of the employees in advance. We sent a termination letter to our 401k provider and to our TPA and they worked with the new provider for the merger of assets. It all seemed ok. I thought the final step in this process was to file the final 5500 for the terminated plan, within 7 months of the termination. Then, later in 2009, to file the 5500 for the existing plan.

However, our auditors are telling us that there wasn't really a merger and we still have 2 active 401k plans. I keep asking what more we could have done to terminate the plan, but no one can give me a response. Was there something more we needed to do? And what can we do now? The auditors won't process either 5500 because the existing 401k provider gave all of the information together and the auditors want it separate as if it is still two plans. Help!

Current Fidelity Bonding Requirements for retirement plans: What amount must one have for the bond?

Fidelity Bonding Requirements for retirement plans; what happens if you have two distinct plans? Say a money purchase plan and a profit-sharing plan.

There is a debate raging in our office, and I'd appreciate some input from others.

If a participant, who has made Roth deferrals and has a loss on his or her account, elects to take a distribution partially in cash and partially as a rollover, can they choose how to allocate the loss between the cash and rollover?

The Erisa Outline Book says that gains must be prorated, but apparently some of our Compliance people believe that does not apply to losses. I'm struggling to understand why losses would be treated differently than gains, but I do know that logic and IRS rules are sometimes mutually exclusive.

IRS ISSUE 1: Disallowance of first year’s premium. The IRS actuary says "In general, a qualified plan does not exist unless a corresponding trust also exists. When a qualified plan is first established, the trust must be in existence no later than thel ast day of the initial plan year for the plan to be in existence with respect to that plan year. Within the context of a plan described under IRC section 412(i), the insurance policies and annuity contracts that are used to fund the retirement benefits function in the same manner as a trust functions with regard to a traditionally funded defined benefit plan. Therefore, if the policies are not in effect and if no premiums were actually paid until after February 28, 2000, not only does the plan fail to be a plan described under IRC section 412(i) in 1999, but also the plan itself does not exist in 1999. Therefore, the deduction for 1999 (or 2000 depending on how the tax year correlates to the plan year) should be disallowed."

The client made the 1st year contribution within 8 1/2 months of the plan anniversary. How do you argue with the IRS actuaries assertion? Funding the 1st year contribution after the 1st plan year end in a 412(i) is a very common practice. Anyway, how can they take away an eight year old deduction? What happened to the statute of limitations.

Thanks, much help needed on this one.

Does anybody know what the deadline was for amending a plan to provide for non-spousal rollovers in 2008? I seem to recall that the provision could be implemented during 2008 at the option of the plan sponsor, but that there was a remedial amendment period. Or was it necessary to amend the plan by the end of the 2008 plan year?

Thanks!

Can the Plan Sponsor pay distribution fees from the Plan? For example, if the lump sum is $500, can there be two checks written from the Plan - one for $500 to participant and one for a $100 processing fee for the distribution? Or do the fees have to be paid outside of the Plan?

We have a failed roth conversion. If we inform the IRA provider that the IRS is taking the position that we have a failed conversion, will the IRA provider simply allow the taxpayer to move the assets out of the Roth without issuing a 1099? Do they report anything to the IRS?

If a company whos main office is located in Kentucky has various other locations in other states, WV, FL, IN, etc....they put a cafeteria plan into place and offer to all employees eligible in all locations, is the cafeteria plan governed by ky law since that is the main office or do all of the states apply and you need to find out how the states differ to manage the cafeteria plan?

Does a 401-k plan that is not eligible for Form 5500-EZ have to file a 5500 if they have less than $100,000 in assets? They have never had over that amount (a new plan started 01/01/2008)?? I'm thinking they do, but not 100%.

I've searched for info on this topic to no avail and am hopeful someone can lead me to more information.

I have a client that pays severance benefits from its over-funded pension plans (yes, they do exist!), both DB and Cash Balance plans. My contacts at the company (in Treasury) have been unable to give me details on the mechanics. My vague understanding (perhaps incorrect) is that an employee is given an option to receive a severance benefit in a lump-sum, or to take it as an addition to their retirement account or ultimate pension payments. (most take the lump sum, of course).

Can anyone who is familiar with this arrangement lead me to more information?

Another, related question: Can a Supplemental Unemployment Benefits Plan (SUB Plan or SUB Pay) Trust under 501©(17) be funded with Pension distributions?

Thanks,

Joe

I know this is asking for the obvious, but does anyone have any authority for the position that 1.401(a)(4)-4© only requires that a benefit right or feature be available on a non-discriminatory basis, and that there is no requirement that any NHCEs actually take advantage of the BRF, as long as it is available to them and they knew about it?

We have a situation where self-direction was available to all participants and it was in the SPD, but no NHCEs took advantage of it, so we're getting heat from the reviewing IRS agent.

Can the effective rate be outside the range of the interest segments??

For example, a plan has a 5%, 5% Applicable actuarial equivalence and the sole participant is 62 retiring at 65. There is no effective rate within the range (assuming a 1/1/2009 valuation) of interest segments that will work.

Another PPA anomaly???

A client is converting a 412i plan back to a regular DB plan. The primary issue appears to be that the PPA valuation reflects 100% lump sums. However, the proposed regulation method which uses the interest segments and the plan PVAB are producing a funding target less than the current lump sums in the policies. Is it acceptable to set the funding target equal to the grandfathered lump sums (knowing these are not moving and will disappear over a period of years)??

This could also create the problem where although there are benefits accruing that the normal cost is zero because the minimum lump sums have not been reached.

DC Plan client (I'm the TPA) forwarded a presumably "proposed QDRO" to me for initial review and input. First and foremost - I do not even begin to presume or purport to have the knowledge and/or experience to deem whether a "DRO" is qualified or not - but can usually point out any "glaring" issues - and then recommend forwarding "to counsel" for review and opinion.

Apparently, the participant's now ex-spouse (trying to save a few bucks) attempted a "do-it-yourself" QDRO and was able to get her attorney to file it with the court.

The proposed QDRO appears to me - at first blush, anyway - to contain language more pertinent to a DB Plan than to a DC Plan. I am posting this just for general feedback from the more learned and experienced of you out there.

Following is some of the language contained in the proposed QDRO (all "emphasis" has been added by me):

The Alternate Payee's award is payable for "the duration of the Participant's lifetime".

The Alternate Payee's interest in the Plan is to be determined by the following formula: A marital fraction multiplied by 50% and then multiplied by the Participant's "accrued benefit at benefit commencement".

The Alternate Payee's benefit shall be paid to the Alternate Payee in such form "as elected by the Participant" (?!) at the Participant's benefit commencement.

In the event of the Alternate Payee's death, either prior to or after the commencement of the Alternate Payee's benefit, the Alternate Payee's benefit "will revert to the Participant". (Sounds like a CSI - Pension Crimes Unit plot/motive to me!)

In addition, there are other references to "standard actuarial assumptions", "early retirement factors", "post retirement increases" - all of which lead me to believe that this is "way off base" for a DC Plan QDRO - or am I?

Thanks for any and all comments.