Terminated 401(k) plan paid out all benefits, but overlooked an exisiting QDRO that assigned 1/2 of a participant's benefit to an alternate payee. The alternate payee recently inquired about receiving his benefit and that he plans on rolling the benefit to an IRA. Since the plan and trust are long gone, the employer will pay the benefit out of their general assets. Please tell me if I'm wrong, but I don't think there is anything that the employer can do to create any kind payment that could be rolled to an IRA or another employer's qualified plan. I don't even think this is a benefit at this point...it's really a settlement payment.

I'm a 401(k) guy, so excuse my ignorance if this is a basic question!!

Looking at a 403(b) Plan which seems to indicate that the employee must contribute 5% of pay in order to receive the 9.5% of pay contribution provided under the Plan.

Specific Question

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1) Is this a match or a profit sharing contribution?

2) What else do we need to know about this sort of a contribution? Is this some sort of a 403(b) safe harbor, or do I need to worry about coverage issues?

We resigned from administration of a 401(k) plan about 3 months ago due to nonpayment of fees. We have not received instructions to transfer assets or records to another provider to date. When we resigned, we specifically stated the last date we would process any contributions or distributions from the plan.

A participant terminated and wishes to take a distribution from the plan. As we are no longer the service provider, I don't feel like we have any authority to act on the request of either the sponsor or the participants. Do we have any responsibility to process this request, even though we have resigned as a provider?

Plan is definitely Top Heavy for 2006.

Both NC and CB have a 1 year eligibility rule for contributions and we are giving all active non-keys with over 500 hours, 5% between the two plans.

My question is this... the 401(k) enrollment is immediate with dual entry... so if a participant enters 7/1/06 and is eligible for deferrals, has over 500 hours, but is missing the one year for contributions... does he/she have to get the TH minimum?

Can an ESOP participant sue a plan fiduciary for mistaken tax reporting if penalties are imposed by the IRS? Is there an ERISA or IRS issue?

What is the effective date of the new $250,000 threshold? (Is it known?)

Is the question about prior filers with under $250,000 needing to continue resolved? Do they need to continue filing if they ever filed?

Thanks

An ESOP may have miscalculated the release of shares and as a result, the loan may not be exempt.

Does the Service have the authority to waive or reduce the 4975(a) prohibited transaction tax? Under ERISA Sec. 3003, they may waive the 4975(b) tax, but may they also waive the 4975(a) tax?

At first blush, GCM 38637 appears to be favorable, but it only applies to 'subsequent' 4975(a) taxes and not those already imposed.

Has anyone had any success negotiating a reduction or waiver of the (a) tax on the basis that the tax will hurt employees (reduce the value of the stock in the plan; it may also prohibit the employer from making discretionary contributions to other plans of the employer)??

Thanks

I am trying to find out what the rules were when the age discrimination laws went into effect in 1988 with regard to late retirement benefits.

To make my question simple, what if NRD was 65 and an active participant was 70 on the date the new rules went into effect? Would they need to get actuarial equivalent increases from age 65, or only from age 70?

This is hopeful, wishful thinking but I am going to ask anyway.

Plan terminates and decides to use benepay to pay everyone out. Money moves from John Hancock to Benepay.

Are the plan assets officially distributed now? Once it is in BenePays hands and they pay people out, are they still considered plan assets until they are distributed?

*holding breath, praying for answer I know I wont get*

Employer has an excess DB plan for compensation above limits. Excess DB plan has a normal retirement age of 65, however offers early retirement at 55 with 10 years of service. It seems that this will no longer be allowable due to 409A no acceleration, however I have not seen this example.

If employer changes normal retirement age to 55 with 10 years of service otherwise age 65, does this change present any problems?

Sole employer has a SEP in place and has funded it for 2007, but is looking for other ways to shelter some additional money. His earnings in 06 were 1.4 mil and expected to be the same this year. I was told he can not fund the SEP if he establishes a DB, but I do not think that is accurate.

I recently came across a company called Exec-U-Care that is designed as "Supplemental Medical Reimbursement Insurance". I looked over their brochure, and it claims that you can reimburse HCE medical expenses tax-free. Furthermore, it goes on to state " "Exec-U-Care" is designed to give you the freedom to reward those employees you feel are most deserving". This sounds like a red flag to me. If you are trying to be discriminatory, you're probably discriminatory, right?

Here is my thinking: If this was really a win-win situation for employers to cover HCEs, then (a) why isn't EVERYONE doing it? and (b) Isn't it only a matter of time before the IRS comes after them?

My question is, how are they doing this? Is this legal? If so, what IRC is this governed by and what types of requirements are they subject to? This seems to go against almost everything I have ever been told about employee benefits.

I'm quite perplexed by this. It seems to be an interesting topic and something to look into, but i am still more than a bit suspicious.... . I would greatly appreciate any thoughts on this.

For more information, the website is www.exec-u-care.com .

Employment agreement provides that employee's SERP benefit is calculated as though he were three years older for both age and service credit purposes. These fictional 3 years increase the PV of the benefit by almost $1 million.

Is granting the additional age and service credit an impermissible acceleration? Would the answer differ if the benefit of the additional three years was to qualify for a subsidized early retirement benefit?

I think the answer is no, but I can't find the cite to the rules on granting age and service credit in the final 409A regulations.

I'm having trouble reconciling what I'm reading in summaries by both Sal Tripodi and Deloitte - both sources smarter than I am so I'm suspicious of my conclusions - with the regs.

Both of them state that the annual adjustment applies to limitation years ending the applicable calendar year. I agree.

HOWEVER, they also use an example (Deloitte's is a 6-1-06 to 5-31-07 plan and limitation year) where for 2006, limit is 44,000, and 2007 is 45,000. They state that if a participant terminates employment prior to 1-1-07, that participant's 415 annual addition limit is 44,000.

I'm just not getting this result from the regs, or at least not in the manner I'd assume a plan would be drafted. Under 1.415(d)-1(b)(2)(iii), it appears to me under the last sentence, "However, after a January 1 adjustment is made, annual additions for the entire limitation year are permitted to reflect the dollar limitation as adjusted on January 1."

As I said, I would start off with the assumption that I'm wrong when two such sources appear to disagree, yet I'm not certain where. As long as the plan is drafted to take into account the adjusted limitation, where's the problem? Where is there a specific limitation for terminated participants where the date of termination is the deciding factor? Does the sentence prior to the above citation trump the final sentence cited above? If so, it isn't very clear to me. I'm missing something...

This may seem like a very basic question, but I could use some guidance:

An employer has a basic 401(k) plan with a discretionary profit sharing contribution, no match. In an effort to increase participation the employer is considering adding a small discretionary matching contribution. It does not want to do a safe harbor because, due to the nature of its business, it cannot be locked into making a set contribution each year. So discretion in any employer contributions is key!

Can the matching contribution be truly discretionary so that the plan document only reserves the right to make a discretionary matching contribution annually and the SPD discloses that a match is possible?

Must the employer set out some type of formula, cap, or upper limit??

Also, can the employer add the matching contribution to the plan mid-year (i.e., Beginning June 1, 2007, the employer may make a discretionary contribution) or must it implement it at the beginning of the plan year (i.e., January 1, 2008)?

Thank you!!

A client left us totally out of the loop with a hardship withdrawal taken in April. We have just found out that a participant took a hardship out of profit sharing dollars but the plan states that only deferrals may be used for hardship withdrawals. Also, the client did not suspend deferrals after the hardship.

We believe the participant should reimburse the plan for the amount taken out of profit sharing. Would that be the correct fix to that problem?

We also believe the deferrals that have been deposited after the hardship withdrawal should be returned to the participant, with earnings. Again, is that correct?

Thank you.

Company wants to grant discounted stock options. Can the grants be structured to comply with 409A by requiring that the options be exercised either within the ST deferral period after vesting or only upon a 409A-permitted event (as specified in the grant agreement)? If so, how would it work?

New client has a PSP that does not permit participant direction of investment. It's self-trusteed. The trustee caused the plan to invest in a closely-held LLC that owns undeveloped land held for speculation purposes. Rather than have an independent appraisal of the value of the LLC interest, the trustee and financial officers, with the assistance of a CPA, set the value each year, and that value was reported on the Forms 5500.

The DoL has audited, and the regional investigator in the post-audit report finds the steps taken in that valuation process were not adequate (didn't take the steps an appraiser would, so what was done was imprudent). That is cited as a violation of ERISA's requirement to follow the plan document (which specifies that the trustee will value the assets).

The DoL investigator has also notified the Office of Chief Accountant at EBSA, for its consideration of whether the Forms 5500 for the last 4 or 5 years reporting the 'inadequate' values rendered those annual reports materially inadequate and thus exposed to the $1,100/day penalty.

Also cited post-audit by the DoL investigator is that the mandatory distributions to former employees (those whose benefits are $1,000 or less since 3/28/05, or are $5,000 or less before that) were not being made. This threshold, and a listing of participating, related employers, in the SPD are outdated--now, erroneous.

The DoL is pressing the employer for a corrective action plan and timeline, but offering no suggestions for correction. That's when I'm hired.

I'm considering proposing (a) conforming amendment that would provide for no mandatory contributions, regardless of how de minimis, (b) amendment to stop all further contributions, rollovers into the plan and acceptance of plan-to-plan transfers--and thus vest everyone--© an SMM describing these two amendments and naming the sponsoring employer, but instead of naming the current participating employers, including the statement that upon request about an employer, the PA will indicate if then participating and provide address if so, (d) to keep the costs to the plan (and thus the adverse impact on the employees' benefits) to a minimum, just doing a current valuation through independent appraisal or have other vendor follow that methodology, and (e) asking that the Office of Chief Accountant agree not to impose penalties on already filed annual reports, explaining that requiring retro valuations would just run up the cost to the plan, which specifies it pays for the trustee's costs (and imposes the valuation chore on the trustee).

I don't like 'bidding against myself' but that's the posture the DoL's request for a corrective action plan without offering any corrective steps puts me in. I don't want to offer more by way of the corrective steps I propose than would be necessary. But I also don't want to be so far afield that we don't move this matter along to resolution.

All constructive input will be greatly appreciated.

An ex-spouse is listed as the beneficiary of her former spouse's IRA. If it were a qualified plan, that might be enough to assure that she receives at least some of the assets regardless of what the divorce decree says. But since it's an IRA, and the divorce decree says that the plaintiff and the defendant waives any interest in the other's retirement accounts of any nature, whether 401(k), IRA, 403(b) or defined benefit plan, I'm wondering if she has the ability to get any of that account. Does she have a chance?

Question 1: are employers whose healthcare benefits are self funded exempt from requirement to establish Section 125 cafeteria plan with liberalized eligiblity provisions for full-time employees resident in Massachusetts (e.g., 60 days from hire)?

Question 2: are employers whose healthcare benefits are self funded exempt from health care minimum coverage mandates effective January 1, 2009?

Citations would be welcome!