A 401(k) Plan’s eligibility is 21 and 1 year of service (1,000 hours) with quarterly entry dates (1/1, 4/1, 7/1, 10/1).

In 2006, a participant who did not reach the Plan’s eligibility requirement made $15,000 of employee deferrals into the Plan due to an administrative error in 2006.

Date of hire was 11/15/2005. Entry date should have been 1/1/07.

Do I have the option now to retroactively amend the Plan’s eligibility requirement to six (6) months of service with monthly entry dates and allow this participant to keep his $15,000 employee deferral in the Plan for 2006? Is so, what would be the date of the amendment?

Hi - have a 401k plan whereby the 70 1/2 minimum amount for a father of an owner was calculated incorrectly for the last 15 years (TPA didn't include insurance cash value in account balance). if they do not go back and correct for each of the 15 years, can the plan be disqualified or is this an issue that affects only the individual participant? thanks.

I have a potential new client who wishes to establish a new Simple Plan. This non-profit nursing home is operated by two different types of employees.

First, there are about 50 regular everyday employees. No problem with these guys.

Secondly, there are about another 50 employees that are employed with this Not-for-profit company for about 12 to 15 months and then they are gone. They are mostly 18 to 20 year olds satisfying a mission requirement.

One of the reasons we are considering a simple is because we can exclude the second group based on the fact that they won't be employed long enough to be able to participate in the plan, thereby eliminating a lot of administration issues.

My question is..... on open enrollment, may we exclude the employees that have not been there for the length of time that the plan document will require? Or on the opening enrollment period, must ALL participate?

Thanks so much for your response. This board is great.

Jeff

To what extent are qualified plans (DB and DC) being amended for the final 415 regulations? Some have suggested that Cycle B plans must be amended by 12/31/07 (i.e., as also suggested by the 2006 Cumulative List) but that C, D and E plans have until the tax filing deadline for mandatory amendments (or until the end of the plan year in which a discretionary amendment is effective). We filed some Cycle B plans early in the year (before the final regulations were issued), so it seems as if a disconnect would occur if later filed plans must be amended by 12/31/07.

I have several 401k plans where the assets of the employer's old MPPP have been merged into them. How do the 5/22/2007 regulations regarding lowered permitted NRA impact these plans?

Company A wants to begin automatic enrollment on 1/01/08. The automatic enrollment contribution level will be 3%. This is a EACA, not a QACA.

1) Can existing paticipants with completed elections to not defer be enrolled at 3%?

2) Can existing participants deferring less than 3% be automatically be brought up to 3%?

Based on proposed regulations, I say that neither can be done since these two groups of participants have affirmatively elected to participate or to not participate. Howver, I understand the some companies are doing both. Any thoughts?

Hi,

I have an IRA right now that's had some good gains right now. I want to sell my positions in order to change up my investments, and I've had 20% in gains on my total portfolio since I bought the positions in July. After that, I want to immediately convert my IRA into a Roth IRA (before the end of this year because I am currently a grad student and therefore in a very low tax bracket for this year only). My question is- since I have held all the investments in my traditional IRA for less than a year- will I have to pay higher Capital Gains taxes on them? Also, is this the right way to do things? Should I convert it to a Roth first then change my investment mix in order to avoid that higher Capital Gains tax? Or am I completely wrong and I won't have to pay capital gains tax at all- I'll just be taxed whatever my tax rate is based on my income? Please help ASAP!!! Thanks!

I have made contributions to a Roth IRA since they were first authorized. In Jan. 2007 I made the full $4,000 contribution for the 2007 tax year. I now find myself ineligible for a Roth IRA due to my MAGI exceeding the limit. My question: How do I handle this? Can I merely call my investment company and tell them to move the money (principal and dividends for this year) out of the Roth IRA and into a traditional IRA? Do I have to file any forms with the IRS because of this? Should I wait to do this until Jan. 2008 or do it now? Please advise.

An employer had a profit sharing plan at a bank that served as trustee and custodian. The plan's documents were also due to the employer's adoption of the bank's prototype plan.

The employer decided to switch institutions, and instructed the bank to make the transfer. On the transfer form signed by the employer and by the receiving institution, it indicated that it was a qualified plan (i.e., Keogh). Above the employer's signature it provides that the employer will amend the plan documents to name the new trustee "specified below" as the new custodian. However, the form did not have a spot for naming a new trustee.

The assets transferred. The receiving institution created IRAs and deposited the employees' respective benefits in them. The receiving institution claims that a SEP agreement was signed, but hasn't been able to find it and the employer does not recall doing so.

The employer claims it thought the profit sharing plan was being continued, just that the custodian (and perhaps trustee) was being changed. The employer had its accountant continue to prepare Forms 5500 for the profit sharing plan, which were signed and filed. Contributions were also made (being deposited into the accounts at the new institution) for a couple of years after the transfer and deducted by the employer.

Recently, concerns were raised. One is whether a profit sharing plan can be amended to be a SEP (assuming the new institution can find the SEP document it claims)? If not (or no SEP document can be found), is the bank yet the trustee? and has the bank breached its duties as trustee by not assuring that the accounts at the new institution be titled in the name of the bank as plan trustee? If a breach or error, how would that be fixed?

Also, if a profit sharing plan may not be amended to be a SEP or there is no SEP documents, do amendments the bank has since made to its prototype affect the specific employer's plan documents and keep them updated? If not, would that require a VCP filing for a document failure since some amendment deadlines have passed in the meantime?

Since the new institution became the successor custodian of ERISA plan assets (and was notified by the word "Keogh" on the transfer form that was signed on behalf of the new institution), does that institution have any exposure for having titled the accounts in a way that does not require the plan trustee's signature for distributions?

Does anyone know how this new requirement must be reported? The regulation doesn't provide detail as to the form of the information return required. Am I missing something or did they actually issue temp regs that say absolutely nothing?

The plan wants to utilize a program that the TPA offers to do a financial analysis for each employee's retirement account. It is an employee education tool that basically tells them how much they should save and how much today's deferrals represent in tomorrow's dollars based on different assumptions and rates of return. I'm sure all of you have seen similar free calculators and reports at various websites.

The TPA charges a per participant fee for this, my question is since this will be passed out and reviewed at our employee education meeting, can we charge the fee to the participants? Or does this fall outside the scope of what is necessary and appropriate to administer the plan?

Assistance is needed in identifying the correct life expectancy table to use when calculating RMD’s for spousal beneficiaries from a 401(k) plan.

Participant died in 2004 at the age of 80, his spouse is the sole beneficiary and at the time of his death she was 75. Death occurred after distributions had already begun.

Please confirm if the following is correct:

In computing the benefit in the year of death the factor is determine by using the deceased participants’ age and the Uniform table.

In the year after death you switch to the Single Life table for both the deceased participant and the spousal beneficiary and determine which will give you the longer of the remaining life expectancy.

After determining the deceased participant’s factor you subtract 1 for the first distribution year following his death and for each subsequent year thereafter. The factor for the spouse is recalculated each year using her current age.

So, for the 2007 RMD calculation the deceased participants' factor would be 7.2 and the factor for the spouse would be 11.4.

The ERISA Outline book indicates that if the designated beneficiary was born in the same calendar year or in a later calendar year than the participant was born, you will use the designated beneficiary's remaining life expectancy because it will always be greater.

The question I received from one of my colleagues was: Is there ever a situation where the spouse could elect to use the factor from the Uniform table instead of the Single Life for her payments from the qualified plan?

What if she had rolled the balance (less the RMD) into an IRA?

A participant took a hardship withdrawal, client just realized they hadn't stopped deducting her deferral contributions. (3 have been submitted)

Do these contributions need to be removed from the participants account?

Will there be any tax liability/penalty for the participant/client?

Any help or guidance is appreciated. Thanks!

I thought this would be a simple thing to do, but I am having major trouble trying to find a book (similar to the 401(k) Answer Book) for Puerto Rico plans. Does anyone know of any type of reference book? If so, what is it and where can I get it?

Any help is greatly appreciated.

My question is about the language contained on the DOL website and the deadline for filing for participation in the Delinquent Filer Voluntary Complaince Program.

The Plan, which has less than 100 participants, filed its 2004 Form 5500 but kept no proof of mailing. In July 2007, they received a "Request For Information About Your Form 5500" letter from the IRS saying that it had not been received. The Plan responded with a copy of the 5500 to IRS and a response stating that it was timely filed in May 2005.

The IRS sent a follow-up stating that they intend to assess a penalty of $15,000 unless there is reasonable cause or an extension. The letter states that a penalty won't be assessed if the Plan satisfies the requirements of the DFVC Program

The Department of Labor website lists requirements for the DFVC program including:

"...if the required filings under the DFVC Program are made prior to the date on which the administrator is notified in writing by the Department of Labor of a failure to file a timely annual report under Title I of ERISA..."

and further states:

"IRS late-filer penalty letters will not disqualify a plan from participating in the DFVC Program. A Department of Labor Notice of Intent to Assess a Penalty will always disquality a plan."

My question is: Does the IRS letter mentioning an intent to assess a $15,000 penalty disqualify the Plan from participating in the DFVC Program (under the premise that the IRS is acting on behalf of the DOL)? Or, does the disqualifying notice of intent to assess literally have to come from the Department of Labor?

My reading of the PPA 408 investment advice guidelines lead me to believe that the fiduciary advisor must always be a third-party and could not be an employee of the plan sponsor (see 408(g)(4); the fiduciary advisor must be selected by a plan fiduciary that has no affiliation with the fiduciary advisor).

For example, if a bank has a 401(k) plan, the bank could not use one of its internal investment advisors (its "wealth management vp") as the fiduciary advisor...is that right? It just seems odd that a bank, insurance company, brokerage house etc., could not use one of its own employees as the fiduciary advisor. Is there another statutory exemption I'm missing?

Thanks,

RT

I have a Money Purchase Pension being audited. Because of different eligibility rules, this employer has kept this along with the 401(k) Plan. To get a better fee structure, this was set up at John Hancock as combined account with seperate recordkeeping.

The IRS auditor would be more comfortable if there was a statement that said Money Purchase Pension and did not have deferral and SHNEC contributions listed. So far he hasn't pushed the issue. But I am wondering: does anyone have any experience with this?

Does anyone have any thoughts about it?

Under the present morass, plans that have terminated are no longer subject to 412. So, if a plan terminated 12/31/2006, we would not file a schedule B for 2007. Has anyone traced the thread to conclude the 430 funding standards no longer apply after the plan is terminated?

We could have the scenardio where a plan is 79% funded in 2008 and terminates 12/31/2008 in a nondistress scenario with the Plan sponsor agreeing to make the plan fully funded at point of distribution. So, the question is can we pay unrestricted lump sums in 2009 while the plan is in limbo with its 5310 filing?

I have two separate issues:

- Designated beneficiary is under age 18, would the distribution be paid directly to him or to his legal guardian?

- Designated beneficiary is citizen of the UK, would the normal procedures to doing a non-spouse beneficiary remain the same?

Please advise!

Thanks!

Per section 1.401(a)(17)-1(b)(3)(iii)(A) of the Treasury regulations, "if compensation for a period less than 12 months is used for a plan year, then the otherwise applicable annual compensation limit is reduced in the same proportion as the reduction in the 12-month period." However, section 1.401(a)(17)-1(b)(3)(iii)(B) goes on to indicate that "a plan is not treated as using compensation for less than 12 months for a plan year merely because the plan formula provides that the allocation or accrual for each employee is based on compensation for the portion of the plan year during which the employee is a participant in the plan." We do not have a short plan year, since the plan has been frozen rather than terminated, so I guess that the question here is what is meant by the term "participant." Technically, still a participant until benefits are distributed, the individual is not a participant for accrual purposes, so I'm in a bit of a quandary on this one.

Does anyone have any thoughts on whether the 401(a)(17) limit is pro rated with regard to compensation that is disregarded after the effective date of a DB plan freeze?