I have a plan that terminated in 2008. The plan does not allow for lump sum distributions until NRA. When the plan termination resolultions were done, an amendment was not included at that time to allow for lump sum distributions. The document does not indicate lump sum payouts upon plan termination.

Can I currently (after the term date), do an amendment to allow for this lump sum option? My prior understanding is that only regulatory amendments are allowed after the termination date.

If not, does that mean that deferred annuity policies must be purchased for all participants?

I've had a couple of participants request the plan documents for our 401(k) Plan and our Severance Plan. In both cases, although there is nothing to hide, I'd rather not begin sending over voluminous plans with multiple amendments and simply send the person a copy of the respective SPD again.

Nothing in the DOL regs seem to contemplate the actual plan document being required to be provided. Perhaps I'm reading between the lines too much, but it seems that the DOL sees the SPD as serving the same purpose as the plan document itself.

So, the question is whether I do have to provide the plan document or can I just keep sending out SPDs?

Under our cafeteria plan, our employee chose to receive cash in lieu of health insurance coverage. The employee's ex-spouse carried health insurance for the dependent children. The ex-spouse will be losing his insurance coverage through his employer, so our employee would like to pick up full family medical coverage for herself and the children under our health insurance. The dependent's loss of insurance would be a change in status. My question is, if the employee currently does not have the medical insurance would the dependent's loss of insurance qualify her to now pick up full family coverage which would include coverage for herself?

Terminating employees that do not pay off their loans and the loan is called......is the loan offset shown on Schedule H (or I) as a "benefit payment directly to participant" or a "deemed distribution". The 5500 instructions are not clear to me. However, logic tells me that the only loans that should be reported as a "deemed distribution" are those that violate 72(p), i.e. participant stopped paying and is still working, amount of loan too high, etc. The above example is not violating any provisions of 72(p) since a distributable event has occurred.

I have always reported such loan defaults as a regular distributions, but reviewing the 5500 of an audited takeover plan made me question this issue.

An existing cross-tested SH 401(k) plan is sponsored by an affiliated service group. A new group of doctors (part of ASG, only HCEs in that employer) not otherwise sponsoring the plan previously now wishes to sign onto the existing SH and then max-out their contributions for 2007 (calendar year). Can they sign on to the existing plan after Sept 30 and still participate in the SH without needing to separately ADP test?

Participant has submitted a credit card bill from a company called, CareCredit. I looked up the company on line and it is a company that offers credit to people for medical reasons. The bill shows a balance of $5,800 and, as with most credit card bills, shows a minimum amount due ($264.00).

We believe the participant is requesting a hardship withdrawal for the total amount due, but it seems to me that she has already paid the medical bill with the credit card.

Can she take a hardship withdrawal to payoff this bill? The plan uses the safe harbor hardship rules.

Thank you.

Seems like I should know this but I'm not sure. If a participant terminates with less than $200, since there is no mandatory withholding necessary, would it be permissible for the plan to cash him out by just mailing him a check without giving him any options or must he receive a distribution form and special tax notice first?

We have a 401k plan that we are taking over that uses the MFS platform for investments but allows participants to have individual brokerage accounts. Not surprisingly, the only four people who have brokerage accounts are HCE doctors. The plan would like to eliminate the brokerage accounts but are getting resistance from some of the docs who have them, so they are asking for recommendations.

I have informed them that they could simply announce that they are no longer allowing these accounts, but short of that, I would like to recommend some alternatives as follows:

1. They could announce that no further brokerage accounts can be established in the future and grandfather the existing ones.

2. They can pass on administrative fees for the brokerage accounts to either all participants or just to terminees.

3. They can inform participants that once they terminate employment, they can no longer maintain the brokerage accounts.

I'm confident that they can implement both 1 and 2 - although I welcome any opposing viewpoints on that. However, I'm not certain that recommendation 3 is legitimate, but I think that it is. Seems to me that this is discrimination issue.

In reviewing the (a)(4) regs on this, I don't see any roadblocks. This is a brf and termination of employment is an excluded condition. All the effected people are HCE's so I don't see any effective availability issues.

Any input is appreciated - thanks.

We have a plan design where DCAP experience gains are forfeited. This surplus is used to increase the annual benefit amount to each employee who is participating in the DCAP the following year. The experience gain is $6.99 - or about $0.58 per participant. Is there a di minimus threshold when working with forfeitures?

My understanding of whether document preparation (prototype) fees are a settlor function or not regards whether the plan is already drafted or not. An initial drafting is a settlor function, subsequent amendments are restatements are not. Can someone please confirm or correct me if I'm wrong? I have a client who will restate into an EGTRRA prototype soon, and they pay the TPA's fees from the plan assets. The TPA will do the prototype. I just want to make sure the TPA doesn't need to bill the plan sponsor vs the plan itself for the cost to update the prototype for the EGTRRA restatement. Thank you for any help.

Do you look to the year a participant attains age 70-1/2 to determine if there is 5% ownership, or is the rule "once a 5% owner, always a 5% owner"? I get the latter statement from Rev. Notice 97-75 (in "Background" Section). In this case, the individual has not had any ownership %-age since about age 65, and does not want to take MRD while he still works. Language in 97-75 seems to say that distribution must continue even if no longer a 5% owner, but I don't think it requires the distribution to begin if there is no 5% owenrship at age 70-1/2. Treas. Reg. Section 1.401(a)(9)-2, Q&A-2© is not very helpful. Any thoughts?

A participant has requested a hardship distribution for costs related to the purchase of a principal residence. The participant has a letter from a mortgage broker stating that the participant needs the distribution to cover the down payment, closing costs, and to "qualify for the mortgage" (i.e. pay down other debt so that the participant will be approved for the mortgage).

Has there been any guidance released anywhere indicating that a hardship distribution to pay down other debt so that a participant can qualify for a mortgage is permissible as a cost directly related to the purchase of a principal residence?

Thanks for your help with this.

A plan is implemented in 2008 with a calendar year plan year.

We'll assume a 1 participant plan.

We'll also assume the following:

1st funding segment rate = 5%

2nd funding segment rate = 6%

3rd funding segment rate = 7%

1st 417e minimum present value segment rate = 4%

2nd 417e segment rate = 4.5%

3rd 417e segment rate = 5%

Plan rates are 5%, GAR94 (post ret only)

Hire Age and Participation Age = 45

NRA = 62

AB 1/1/08 = 10,000

Assumed form of payment at 62 is lump sum

Summary of PVAB 1/1/08 for verification:

using plan rates PVAB is presumed to be

v^17 using the 2nd funding seg rate of 6% for deferral period up to time of lump sum payment

at 62 compute pv benefit as a62 using 5%, GAR94

based on 417e min pv

v^17 using 2nd funding seg rate of 6% for deferral period up to time of lump sum (payment all at once, thus the 2nd funding segment rate)

at 62 compute pv ab as a62 based on 2nd funding seg rate for 3 more years and 3rd funding segment rate, thereafter. 2008 applicable unisex mortality table.

Note that I use v^17 using 2nd funding segment rate for entire time of annuity (even after the 20th year, where I would switch to 3rd funuding segment rate if form of payment were an annuity) since the payment is all made at the end of year 17 in a lump sum.

SInce th is so much in one thread, Part II will be the 415 lump sum basis, where it is subject to:

5.5%, Gar94

105% APR using 417e methodology

plan rates

Thank you

Just received a call from a plan sponsor. It seems that the 100% owner of this LLC has deposited funds as salary deferrals for himself in 2006, 2007 and 2008. He now wants all of those deposits refunded before October 15 because they were supposed to be deposited to his SEP, not the 401(k) plan. It sounds fishy to me.

Anyone care to share thoughts about what sort of documentation we should request of the employer before processing a refund?

Is there a requirement that an employer must actually have a custodial agreement in place with the custodian in order to have a custodial account under 403(b)(7)? Common sense would suggest that it is required - i.e., how can you have a custodian without a custodial agreement? However, we are hearing from a client that at least one provider purports to offer a custodial account without such an agreement. The definition of "custodial account" in the final regs (1.403(b)-8(d)(2)) does not appear to address the issue. Any thoughts?

Individual owns 100% of S corporation. He also owns a sole proprietorship with no employees. The corporation has a 401(k) plan to which the 100% owner is not contributing. The owner would like to set up a solo - 401(k) for his sole proprietorship with the same benefits, rights and features and contribution rates, investments, etc. as the corporation's 401(k) plan. Is that possible? He doesn't take much of a salary from the corp. and has a big Schedule C net income, which is why I think he posed the question.

Employer X is an S corporation that had a nonqualified deferred compensation plan. In anticipation of the sale of all the stock of X (in which a Section 338(h)(10) election will be made) and the treatment of the deferred compensation plan as an excluded liability by purchaser Y, a C corporation, X terminated and paid out the plan in January 2008. The stock sale occurred March 31, 2008.

With the deferred comp being paid out in the short S year of X (January 1 to March 30, 2008), is there any way under Section 404(a)(5) and Reg. 1.404(a)-12(b)(1) (or other guidance) that X should be able to take the deduction for the contributions attributable to the payout in its short S year?

Any thoughts are appreciated.

We have a client with a prevailing money purchase plan with us. In 2007 they started a prevailing wage plan with a new provider and did not notify us until January 2008. They sent their 2007 prevailing wage contributions to the new provider. The prevailing wage contributions are the only contributions to the plan. Both providers filed the Form 5500 for their respective plan. As of this date, they have not terminated our plan nor rolled the assets from our plan into the plan wtih the new provider.

Does anyone know what kind of problems this could present. Should our plan have been amended to a zero contribution prior to them starting the new plan?

Thanks for your assistance.

We have a client that wants to change their employer contribution amount from 100% EE only to 50% EE only as of 11/1/08. Can we do this outside of a S125 open enrollment or do we need to wait until our open enrollment for S125 which is 1/1?

Thanks

Employer is delinquent in contributions and has filed for bankruptcy. Do the trustees violate their fiduciary duties if they do not file a proof of claim where legal fees will exceed the amount owed?