I am looking at a Form 5500 prepared by the insurance co that is also the rk for the DB plan. They show that the benefits as well as funding is insured (and don't check trust on either). However, there is a trust with money in "Separate Account No. 1" which appears to be a money market fund. The insur co. completed the Schedule A showing the money under Part II, number 4 - plans interest in separate account, completed a Schedule D listing it as a PSA (#000) but listed it on Schedule H under #13 - registered investment company assets. Should this actually be listed under PSA? If so, does that really get them where they need to be because it doesn't appear as if the the Separate account filed as a DFE. Also, shouldn't this at a minimum indicate that the funding is through insurance and trust?Thanks.

PAL

If the plan is truly silent, then you have no grounds on which to limit comp by pay period.

Good afternoon,

I have a client who is setting up an ESOP. My understanding is this will be a leveraged plan via an employer loan. However, my client has become very sketchy on explaining the actual accounting transactions for the following 1) the actual transference of stock from the company to the ESOP (a separate entity) and 2) how the monthly contributions to the ESOP will be accounted for.

Can someone shed some light as to the typical DR's and CR's both B/S and I/S that I would expect to see?

Also, a few other items in which they could not explain:

1) How is the employee's investment growing if a) the plan contributions remain at a constant level year after year and 2) the employer is receiving the debt service from the contributions being made?

2) If the outside investments being made result in negative earnings, the debt incurred to cover those investments is then the responsibility of whom to cover?

The last two questions made be a bit specific to my client, but if it is general enough, I would appreciate feedback.

Regards,

LAT

Right now we need to data enter expense ratios for all of the funds we use (we are an RIA) in our various. We get all of our performance data from Principia, but we cannot download expense ratios for some crazy reason.

Does anyone know of a good solution to obtain downloadable expense ratio information?

Have a 401(k) where mother & daughter had an LLC. The daughter bought the mother out, and now maintains a sole proprietorship. The plan name has now changed as well as the EIN. Does the original LLC need to be closed out on a 5500?

A corrective distribution from a DB plan for many years of missed installment and 401(a)(9) distributions. The total distribution is comprised of $25,000 in principal and an additional $10,000 of income for "loss of use" for a total of $35,000.

The $10,000 portion of the distribution would seem to eligible for rollover based on Q-6 of the 1.402©-2 Q&A as it could be treated as an "independent payment". It's too large to be considered a supplemental payment however would it be reasonable to consider it under the "Administrative error or delay" exemption and not consider it rollable? The example seems to imply a delay due to administrative processing, not a case where the participant was not correctly placed in pay status.

I can argue this one either way. If I were receiving the payment, I'd roll it and fight with the IRS if they challenged, but it is easier to call it non-rollable for administrative purposes. Anyone have an opinion or better yet a PLR that addresses this?

I know what the answer ought to be to this question, but I wondered if anyone has any thoughts about what the answer actually is. Here it is:

A participant in a 401(k) plan wants to take a hardship distribution to fund the costs of acquiring a principal residence. The twist is this: the participant is in the center of the universe (a/k/a New York City) and the residence at issue is not a regular apartment or house -- it's a co-op. Apparently, one does not actually "buy" a co-op but instead buys shares in the non-profit corporation that owns the building in which the co-op is located. The "buyer" is then able to live in a specified unit and pays "rent" to the corporation -- I gather that the rent is basically the equivalent of a homeowners' association fee and covers routine maintenance, some utilities, trash pick-up, etc.

You'd think that this would count as a principal residence purchase even though the participant is not actually getting a mortgage attached to a specific piece of property. I haven't been able to find any specific IRS authority on point, however. This may not be a particularly wide-spread issue since co-ops don't seem to be prevalent outside of NYC. Perhaps no one has ever asked the IRS for guidance.

In any event, if anyone has ever wrestled this one to the ground, I'd appreciate hearing about it.

Thanks!

Is anyone aware of a chart that shows wich states do/dont follow federal law w/r/t/ FICA treatment of 401(k) deferrals? I seem to recall a chart maintained by Northern Trust w/r/t/ states that required withholding on plan distributions.

I know the controlled group thing has been beaten to death, but I need to confirm a controlled group situation I am dealing with, just to put my mind at ease.

I do not believe this to be a controlled group, but the potential client's accountant insists that it is.

Here's the scenario:

Joe owns 60% of Company A

Sue owns 20% of Company A

Jan owns 20% of Company A

Rick does not own any of Company A

Joe owns 100% of Company B

Sue does not own any of Company B

Jan does not own any of Company B

Rick does not own any of Company B

Joe owns 60% of Company C

Sue does not own any of Company C

Jan does not own any of Company C

Rick owns 40% of Company C

Sue and Jan do not own anything but 20% of Company A, so wouldn't they be out of the equation? (lowest % = 0%)

Rick only owns 40% of Company C, so wouldn't he also be out of the equation? (lowest % = 0%)

The only one considered would be Joe, right? And Joe has only 60% common ownership in 2 companies, right?

Am I missing something???

Thanks for any help you can give me.

How do franchises affect retirement plan coverage issues? As I understand franchises, the main company serves as a supplier, with certain expectations of levels of quality from the stores or restaurants.

Hello,

Question:

Executive has an agreement allowing him to accelerate all noncompetition payments due and outstanding when the employer fails to pay for at least four consecutive months. The payment amounts are fixed and paid on a fixed schedule over ten years. 1.409A-3(j)(4)(xiv) allows for acceleration upon a "bona fide dispute as to the service provider's right to the deferred amount . . . ." This language would not seem to encompass the situation where the employer fails to pay due to financial hardship (ie, the employer doesn't dispute the right to the payment). It seems odd that an employee in that situation who sues to enforce the agreement in year 2 would not be able to accelerate the amounts owed. If there's no way to accelerate for non-payment by agreement, isn't the employee able only to sue for the amounts that are unpaid at the time of suit (or trial)? As always, I fear I'm missing something obvious. Thanks in advance.

I have run across two companies whose 401(k) plans are part of a control group. One is on a calendar year and the other on a fiscal year ending 3/31. Does anyone know how such a control group should be tested? If the census data is simply combined over the differing periods of time what deadlines regarding testing (such as corrections occurring within 2.5 months of plan year-end) would be applicable?

Thank you in advance for any help you may be able to provide.

Can anyone give me a specific reg that explains taking a hardship to PREVENT foreclosure? The participant does not have a foreclosure notice from the bank but they are telling her that she should pay down her mortgage as much as she can so that she can refinance. I have explained to the HR contact that this does not qualify for a hardship as she is not behind on her mortgate and she can't take a hardship to make mortgage payments. The participant says that she wants to avoid foreclosure and that the regs do not clearly state that she can't take it out now to avoid foreclosure. I've spent the afternoon looking but nothing is coming up. I did find another post from benefitslink

"I've never found expanded definitions for any of the deemed hardship situations -- medical care, education, eviction, foreclosure, funeral, etc. There's better guidance for what constitutes the overall principle of "hardship". You might want to read Reg. Sec. 1.401(k)-1(d)(1), and there are some good examples at Reg. Sec. 1.401(k)-1(d)(2). After you've determined that a participant does, indeed, have a hardship situation, you can usually apply the subset. "

I have not been able to bring up the regs listed above after doing a search. Any thoughts are appreciated.

I have recently taken over a plan where the participant took a hardship, rather than a loan. (The plan allows both.) Apparently the hardship distribution was not enough to satisfy the need (they said they thought they would be able to get more). So now they want a loan.

Can they now take the loan?

Also, the suspension lift for the hardship isn't until October.

I just need to confirm my thoughts...

My thoughts on this is that they CAN take a loan, and although THEY can't contribute to the plan until October, they could make loan payments to the plan.

Am I correct in my thinking?

5/30/2008

My had to resign from work because of health issues.

She has a 401(k).

What should she do with the money?

vinnie

I've only done testing on end of the year plans so forgive my ignorance... I'm still learning

when testing a 12/31 PS Plan with a 1/1 CB plan, which way do I test..

a) 12/31/2007 PS and 1/1/2008 CB

or

b) 12/31/2007 PS and 1/1/2007 CB

Thank you

There is a deferred comp. agreement with a certain individual and one paragraph states that this is merely a contract and not subject to ERISA.

Any citations to authority would be very helpful. Thank you.

Forgive me here, we have not had any non-pbgc DB plans terminate with insufficient assets.

Suppose this non-pbgc covered DB plan terminates with insufficient assets.

One of the options is to provide for an ERISA 4044 allocation of assets. This plan had no participant contributions and no annuities in pay status. Does this mean that HCE AND NHCE benefits are reduced on a pro-rata basis?

Somehow it does not seem right that NHCE benefits are reduced.

Client has sold assets of business and is in process of terminating its union plan. In days of yesteryear, client maintained two DB plans -- one covering its union employees; one, covering management. Union plan was $/service; management was final pay. Management plan was terminated 3 years ago and benefits were distributed. Management plan had provision that if employee transferred from nonunion to management, employee would get greater of (a) final pay plan benefit using service from date of transfer or (b) final pay benefit using all service with carve out of union benefit.

When management plan terminated, an employee's distribution was based upon a union carve out of about $800/month. Now, management has advised that service history provided for union employee was incorrect (that while a union member, employee hadn't been union pension eligible for some of the years) and that carve out should only be $100/month.

Ergo, if union plan pays $100 month benefit (what other choice is there?), employee was shorted in his management plan distribution.

Any thoughts of how to handle this? (I won't cloud your thinking with what I intend to suggest.)

Can any provide a brief outline of the steps/requirements for terminating a health and welfare plan? Basically, all I see is that the plan sponsor must follow the amendment procedures in the plan document, make a formal written plan amendment terminating the plan, provide notification to participants, distribute the plan assets according to the terms of the plan and ERISA, file a final Form 5500 and distribute a final SAR. It appears the requirements are far less than with a DC or DB plan and that basically there is not much to it. I know my outline above is extremely simplistic, but is it basically correct or am I missing anything? Does anyone know of any guidance on the matter?

Thanks