A participant dies. The benefit is then of course payable to their named beneficiary (assuming they completed a beneficiary designation while they were living naming some other living person). Can this named beneficiary then in turn name their own beneficiary for the benefit that they are entitled to? If so, can it be any beneficiary, or can it only be a spousal bene? Does this have to be provided for in the plan document?

I know I already posted this in another section, just not sure where to put it, so thought I would ask in this part.

Does ERISA preempt state unclaimed property laws regarding benefit plan expenses, such as professional fees and other miscellaneous bills, that are not benefits to participants, etc? These are non-benefit related checks. We know ERISA preempts state unclaimed property laws regarding benefit payments.

For example, if a benefit office pays the bills for the various plans and send checks to a lawyer or banker for services and those checks are never cashed, should the benefit office turn the money over to the state under the states unclaimed property laws. Does the answer change if the bill is for landscaping outside the benefit office and has absolutely no connection to benefits provided to participants?

Does ERISA preempt state unclaimed property laws regarding benefit plan expenses, such as professional fees and other miscellaneous bills, that are not benefits to participants, etc? These are non-benefit related checks. We know ERISA preempts state unclaimed property laws regarding benefit payments.

For example, if a benefit office pays the bills for the various plans and send checks to a lawyer or banker for services and those checks are never cashed, should the benefit office turn the money over to the state under the states unclaimed property laws. Does the answer change if the bill is for landscaping outside the benefit office and has absolutely no connection to benefits provided to participants?

An employer sponsors both a DB and a DC plan.

They made the minimum funding for DB plan for 2007 plan year (calendar year).

They were required to contribute a total of 50k to DC plan for 2007.

They filed their tax return timely and did not extend return.

The tax return did not deduct for the 50k to DC plan nor did plan sponsor make the contribution.

Can client contribute 50k for 2007, but deduct in 2008? Of course the 50k would reduce the remaining cash contribution that can be deducted by 50k.

50k for DC plan was required to pass non discrimination, gateway, etc.

Thanks.

A participant that is older than 59 1/2 wants to take a non hardship in service distribution of his 401(k) deferrals. Is this allowed even though the plan does not allow for in service distributions?

I always thought that the plan needed to specifically state if it allows in service at a stated age but i am getting conflicting info that you are entitled to 401(k) deferrals "automatically" at age 59 1/2.

Thanks in advance.

I have a new Profit Sharing 401k Plan with a 3% Non-elective SH contribution that is running on a calendar year. The employer's corporate year ends on June 30.

For the 2008 plan year, what is the due date of the 3% SH contribution so it can be counted as a taxable deduction for the corporation? Would it need to be paid by 9/15/09 - the date the corporation's 2008 tax return is due?

Thanks.

a 401(k) is considering adding a loan provision to its current plan in order to allow certain executives to purchase stock of the plan sponsor, which is privately held. Is there anything in the code that would forbid such an amendment? Off the top of my head, I can not think of anything, but there might be some party in interest issues that I have not considered. The loan provision will be available to all participants and non discriminatory.

IRS Notice 2008-30 Q&A 7 states that a nonspouse beneficiary that is ineligible to make a qualified rollover contribution to a Roth IRA may recharacterize the contribution pursuant to §408A(d)(6). Presumably, this recharacterization would go to an inherited traditional IRA. The notice then states that "a surviving spouse who makes a rollover to a Roth IRA may elect either to treat the Roth IRA as his or her own, or to establish the Roth IRA in the name of the decedent with the surviving spouse as the beneficiary". The Roth IRA would be similar to an inherited IRA.

My questions is: What happens if the spouse beneficiary was ineligible to make a qualified rollover contribution (MAGI greater than $100,00)?

The Notice only allows recharacterization for ineligible participants or nonspouse beneficiaries. If a spouse beneficiary is ineligible, does that mean the rollover becomes a regular contribution? If so, is the spouse then deemed to have made the election to treat the Roth IRA as his/her own Roth IRA, by virtue of making a contribution [Treas. Reg. 1.408-8 Q&A 5]? Is the wording in the Notice an oversight, and would the spouse be allowed to recharacterize to a traditional IRA established in the name of the decedent with the surviving spouse as the beneficiary? If so, how does this fit with §402©(11) and Notice 2007-7, both of which clearly state that only a nonspouse can roll to an inherited traditional IRA? The definition of inherited IRA is found in §408(d)(3)© and specifically states that an IRA shall be treated as inherited if such individual is not the surviving spouse.

Another question: If a spouse beneficiary rolls to a Roth IRA established in the name of the decedent with the surviving spouse as the beneficiary, how is the distribution period determined under the life expectancy rule?

Notice 2008-30 refers us to Notice 2007-7, which says that the rule for nonspouse beneficiaries applies. That means that life expectancy payments would be required to start the year after death. However, we have a spouse beneficiary, and a spouse beneficiary would have the option of waiting until the year the decedent would have attained age 70 1/2 to begin payments [iRC §401(a)(9)(B)(iv)]. Which rule applies?

When considering the 20% threshhold, exactly how is it being counted? For example, A plan has 9,000 total participants, but 7,000 are already in pay status or termed vesteds. If 600 of the remaining 2,000 active participants are terminated due to downsizing, is that a partial termination? It's 30% of the actives, but only 6% of the total particpant base. Is there a clear line or is this something that is still the discretion of the courts?

In past years we have only included the participants enrolled in the basic coverage (Life & Disability Coverage), does the fact that some of these participants purchase additional buy-up coverage also have to be reflected on the 5500? Thanks for any guidance you can provide.

Hello,

Recently I invested in some mortgages on the secondary market in my profit-sharing plan (I am the sole participant). These were pre-foreclosure situations where I bought the loans at a discount and got paid off when the property sold. There were some legal fees associated with each transaction. Must these legal fees be paid from the plan, or is it okay to use my company's or my personal money to pay them? I prefer the latter because it leaves more money working in the plan. However if I do use company or personal money, can the plan reimburse me/my company later if I want?

Addendum: there were professional appraisal fees for one of the properties as well.

Thanks,

Tom

Two related entities together sponsor a 401(k) plan under the belief that they are in a controlled group relationship.

The prototype document defines "Employer" to include controlled group/common controllled entities without separate plan adoption.

Entities turn out not to be in a controlled group or common control relationship. Plan is now 2 years old. Can they retroactively revise plan documentation to reflect the multiple employer relationship? Plan document permits related but non-controlled group entities to adopt plan as related employers.

The MRD paid in 2007 (for accrual in 2006) for a participant was incorrect. It was calculated using the account balance method which I believe is now inappropriate for use after 2005.

Whats the remedial action for incorrect MRD distributions. What kind of taxes/penalties etc apply?

Thanks

If a person has taken a loan, does the loan reduce the amount of the hardship availability if they have paid a portion of the loan back?

Say a person had contributions into the plan of $10,000.00 - took a loan for $7,000.00, loan balance is now $5,000.00. What would the hardship availability be?

Is there any way that the personal payment of legal fees accrued in connection with preserving the favorable tax status of an IRA would be a prohibited transaction? Must those amounts be paid from the IRA?

I understand the accrued benefit is calculated by taking the account balance and projecting out at the accumulation rate and dividing by an annuity rate at NRA.

If the accumulation rate is the 30 treasury rate so as of 12/31/2006 we would use 4.65% to determine accrued benefit as of 12/31/06. However for 2007 the rate is 4.68%. When determining Normal Cost for 2007 using unit credit method and for determining increase in accrued benefit for 401(a)(4) do I recalculate the 1/1/07 accrued benefit using the 4.68 accumulation rate or do I still use the 12/31/06 accrued benefit and Normal Cost does not equal hypothetical contribution assuming funding assumption is 30year treasury rate.

A combined plan passes non discrimination by means of cross testing.

The allocation rate fo rthe HCE is 5% in profit sharing plan and 40% in the DB plan.

Therefore, on a combined basis it would indicate that a gateway of 7.5% is required.

The eligiblity for the safe harbor 401k is 21 & 1.

The eligibility for the PS and DB plans is 21 & 2 (immediate 100% vesting upon entry).

Employees who have satisfied the 21 & 1 of course receive the 3% 401k non elective safe harbor.

The plans are combined to pass non discrimination.

For employees participating only in the 401k safe harbor (only 21 & 1), can their 3% safe harbor satisfy the gateway, sicne they only participate in DC plan where the HCE allocation is only 5%, or do these employees need to receive the total 7.5% gateway?

My feeling is that they should receive the 7.5% gateway, but curious to hear other views.

Thanks.

Must a privacy official be named in a SPD?

Does anyone have a link for absolute requirements that the SPD must include? Thanks

db plan has been frozen for a number of years.

the company put 15% of current comp into the DC plan.

what % can be put into the DB plan since no one is accruing any more - one is simply funding the DB

In the very first paragragh of the 1.414(v)-1 reg. it states that catch-ups are elective deferrals that exceed the applicable limits ( as long as they don't exceed their own limit, currently $5000) and in Example 6(ii) of the reg. it states "once participant E's elective deferrals for the calendar year 2006 exceed $15,000, subsequent elective deferrals are treated as catch-up contributions ................"

Taken alone these excerpts suggest to me that an elective deferral is classified as a catch-up once the 402(g)(1)(B) is reached - however, we have differing opinions within our department here - some say that the 402(g)(1)(B) need not be reached in order to count a deferral as a catch-up - for example, you could have only a $4000 deferral and another $5000 catch-up on top of that.

There is also an internal debate as to whether or not you need any deferrals to have a catch-up - e.g. could you have $0 deferrals and $5000 catch-up ?

I'm primarily a DB'er and so any insights would be appreciated .