S-Corp bank wants to add company stock to existing 401k plan( all other investments daily valued). Are there any restrictions on this? The stock is valued quarterly.

1.401(a)(4)-5(b) restricts distributions with no mention of posting bond, letters of credit or escrow accounts.

Rev. Proc. 92-76 details what the plan sponsor must do if it permits a distribution of a restricted amount.

Q: Does the employer HAVE to provide for any lump sum distribution in excess of the straight life annuity or social security supplement to which the EE is entitled? In other words, can the ER say, we don't care what Rev. Proc. 92-76 says, you are getting the annuity or social security restricted amount?

Our Pension Plan currently allows participants to repay their lump sum benefit upon rehire in order to have their service reinstated. My question is whether or not this practice can be eliminated. Is this feature considered a "protected benefit"? Any guidance would be appreciated, especially location of any legal guidance, etc...

Thanks,

Fred

With March 15th behind us, we are focusing intensely on the new statement requirements. I received the following email from John Hancock which seems to imply that plans on these types of platforms will not have to address the vesting requirement UNTIL 02/14/08. Is this correct? - certainly would be wonderful news! And/or, is anyone doing a notice, based on DOL 2006-3, explaining that this info will come at a later date? We've got a variety of platforms, LOTS of individual brokerage accts (yikes!) and a few pooled, self-directed plans (most doing quarterlys anyway so NBD). Our brokerage account clients are not going to pay for quarterly vals and a separate statement stating one's vested % is really useless when all money types are comingled in one account. I would really appreciate thoughts about this item from JH and how others are dealing with this issue. Thank you!!

From a John Hancock email:

"The PPA requires that a “quarterly benefit statement include the total

benefits accrued, the vested benefit or the earliest date when a

participant will be vested.†In the case of a plan with a calendar plan

year, if the vesting information is to be made available on a quarterly

benefit statement, the information will have to appear on the statement for

the quarter ending March 31, 2007. The DOL requires the plan to provide a

statement to their participants 45 days after quarter end.

As an alternative, the plan may provide the vesting information in a

separate annual statement that enables a participant to determine their

vested benefit. If the annual statement method is used, these plans will

have until February 14, 2008 (i.e., 45 days after December 31, 2007) to

deliver the vesting information to their participants.

For 2007, John Hancock will be supporting the annual statement option. We

understand that some of you already provide vesting statements to plan

sponsors and participants and may choose to continue to do so. For those

who are not, if you are looking to John Hancock for assistance, we will be

collecting vesting data from you and providing annual vesting statements to

plan sponsors to distribute to participants. Additional details on the

process to provide us the vesting data will follow."

Hi!

Please let me know your thought regarding how a plan that provides for matching contributions only in employer securities should handle dividends.

Thanks

Hi!

Please let me know your thought regarding the following:

A plan has taken the position that it is exempt from registration because it only provides for matching contributions in employer securities. Will a right of a participant to reinvest dividends and/or repurchase any shares of employer securities sold [pending clarification of IRS Notice 2006-107] constitute an investment decision that will jeopardize the exemption?

Thanks

I am new to the Cafeteria Plan and tried to read up on the information the employer gave me, but sometimes my interpretations are a little prejudice. If a participant elects $4,000 per year for dependent care, at what point may the participant request reimbursement? Total daycare expense to date is $1,500, but the participants account only holds $750. May the participant take out the full $1,500, or is the participant limited to $750, which is the account value.

Thank you for any assistance in answering this question.

New client (for us) has a money purchase plan, effective since 1985, that they want to terminate and then start up a 401(k) plan. The MP document is out of compliance though. They have a standardized TRA prototype document signed in 1993, but nothing after that. No UCA, GUST, EGTRRA or other amendments since EGTRRA. The plan appears to be in compliance with all other matters. There are only 2 people in the plan.

They will file via VCP to fix.

A couple questions:

#1 - The user fee is $750. Is there any fee in addition to this that can be imposed upon review?

#2 - The VCP Application Guide on the IRS website seems to require an additional 5300 filing along with the application. Is there an exception for a standardized prototype plan that would not normally need a Det. Letter? Also, if a D-Letter is required with filing, its a 5307 that is used, not a 5300 correct?

#3 - As the new document is drafted, what effective date should be used? Current date? First day of current plan year? Different effective date corresponding to all of the missed deadlines for amendments?

#4 - Finally, we will request an acknowledgement letter back from the IRS. Other than receiving this back from the IRS, is there any "approval letter" from the IRS stating the the submission was successful and we can move on? As I said, the intention is to terminate this plan, and we can't terminate until the document is up-to-date. We want to move ahead with distributing the assets, but can't until we know the document is accepted. How long does this normally take and will the IRS send a letter of approval?

Thanks for any comments

A participant rolled over his lump sum distribution into an IRA. Several months later, the employer has notified the participant that he was given too much money and the excess must be returned. The participant is willing to do what has to be done, but he is concerned that the distribution will be taxable to him. He should not receive a 1099R for this excess because the money is going back to the employer's plan, not into the participant's pocket. How should this be handled?

Plan Effective Date 01.01.2003. Adoption Agreement says voting rights w/r/t Employer Stock Option passed through to participants. This was not employer's intent. Trustee has been voting such shares as employer intended. No "material items" were subject of a vote during this period. Can this type of operational failure be corrected under SCP via retroactive amendment?

When should (or should not) line 7f of the 5500 equal line 7g?

The plan is a MPP plan with no excluded groups of ee's. This would mean that all active participants are also receiving a benefit and should therefore have an account balance at year end, right? Along SSA and retirees and a few deceased participant balances in the plan The record keeper is coming back with some variances between the numbers and we can't really figure out what the cause would be.

I have a client who does not believe that they are required to file a 5500 for their voluntary group vision plan. The premiums are 100% EMPLOYEE paid, and there are over 100 participants.

I believe that a 5500 should be filed, but was hoping to provide applicable documentation on the subject.

Any help would be greatly appreciated!

With regard to lump sum distributions, would someone born after 1/1/37 be able to utilize 10-year averaging and capital gain treatment?

What is the fed reg/law that discusses 10-year averaging and capital gain treatment?

The reason I ask is that the tax notice from 2006 addresses lump sum distributions to those born after 1/1/36, but I would like to know if that changes each year and can not find any specific information.

We recently took over a client that has a 401(k) Plan. We found out after the fact that the owner's spouse own's a separate company and sponsors a Simple IRA. They have minor aged children which makes them a controlled group. They were told by their prior TPA that this was allowed since when tested together, they passed 410(b) and 401(a)(4). Is this OK, or is my client prohibited from having a 401(k) and must he also provide a Simple IRA? If the 401(k) was not allowed, what do we do to bring them back into compliance?

I have a new calendar year 401k Plan that started deferring contributions 11/1/2006. Employee deferrals are the only contributions made to the Plan. The plan fails 416 for the initial 2006 plan year. Compensation is defined as calendar year earnings. Plan has 7 active participants as of 12/31/2006 of which 4 are Key EE's. Does Plan need to make TH contribution to non-Key for 2006 as well as 2007 since it is the first plan year?

Aloha nui!

I have a plan that started using automatic enrollment and immediate eligibility as of 7/1/06. The plan only applies the automatic 3% to employees hired after that date it does not look at exsisting participants. The plan does not increase the amount automatically each year. It will remain 3% unless the participant elects. Also the plan provides for a default investment to an asset allocation portfolio based on the participants age absent of any election from the participant. The plan will not utilize the safe harbor options that is available for automatic enrollment plans.

I can't seem to find guidance on what if any type of notice I should be providing. Currently the employee is receiving the form to opt out or change the election at the time of employment since the plan provides for immediate eligibility.

I can't seem to find consistent language.

Thanks

-Stacy

I have been asked to prepare an amendment to allow one participant to receive a PS contribution who is inelegible due to hours (1000 hour requirement in doc). I have not prepared anything like this and I am unsure how to begin. A colleague referenced a 411(d) amendment, but I have been unsuccessful in finding a sample amendment similar to what I am attempting to do. Any suggestions, thoughts, cites?

Thanx!

I know QNEC's can be used to satisfy various deficiencies when it comes to nondiscrimination testing, but if all of the yearly nondiscrimination tests are passed, does the employer have the option to use QNEC's as an added bonus feature for employees (assuming the "bonus" allocation to employees' accounts is nondiscriminatory in nature)?

Can the Employer also choose to add a little extra to employee's accounts in one year (via QNEC's) and then decide NOT to the next year, due to low profit margins? Or are you required to continue giving out QNEC's at the pre-determined percentages once you start the plan.

Thanks for your time guys.

I understand the Service's position is that a cross-tested plan by a non-corporate employer cannot specify one self-employed person to be a cross-tested group. That would be a non-qualified CODA.

What about a categorization that given the data for a given year results in just one self-employed person qualifying for that categorization, but may in other years result in two or more self-employed persons being in that group?

I'm trying to determine some options I might have in a couple of plan design areas, and I've had a little trouble finding the answers in my attempts at searching through the IRC.

If I want to classify a few levels of employees, are there other ways to segregate groups of employees other than salaried employees vs hourly? And are there any possible effects/restrictions I can impose upon matching contribution %'s via these classifications? For example, is it possible for managers to receive a higher MC % relative to hourly employees MC %? (bear in mind, nobody involved with the 401k, not even the managers, would be considered a "HCE")

I was also trying to look into ways of crediting prior service (service recorded before the effective date). Are there a few ways to do this? Or do you simply have the ability to credit up to 5 years of prior service, period.

I don't want to take up too much of your time, so if you can even direct me to the right sections of the IRC that would be a great help. Thanks so much.