401(k) Plan A is merging into 401(k) Plan B. Plan B does not allow for loans, but Plan A does and has 1 outstanding loan currently. Can Plan B be amended to allow for rollover loans only even if it does not allow for new loans? Does it matter if the outstanding loan being brought over is for an HCE or NHCE?

My husband was recently murdered in the city of Philadelphia, number 106 as the city calls him. We both work for the same company. We were separated before his murder and he was living with another woman. I am getting the run around from my company because my husband filed to have his beneficiary changed around 2 weeks before he was murdered. We both were previously imformed that we could not change the beneficiary of our pensions or life insurance without a divorce decree or the other spouse waiving their rights. We began divorce proceedings but decided not to go through with them because we were working on reconciling. I was responsible for identifing his body at the ME's office, funeral and burial arrangements. The company is telling me that the other woman has made a claim on the benefits and they are trying to figure out who is entitled. Because we did not file the final divorce papers and we had on written agreement on the benefit distribution who is entitled?

Does anyone else dislike the new page layout? I gues the theory may have been put the most popular item towards the bottom to get more traffic on the "less trafficed" areas, but what a drag!

Hey benefitslink, can you have in the user profile to default you to a favorite board (i.e., 401k plans)?

Facts: On 1/1/2006, a sole proprietor with 3 employees and a calendar year x-test k plan incorporates, and amendment is made to plan for the corporation to succeed the sole proprietor as the sole sponsoring employer. However, after 12/31/2006, the plan's advisors learn that the sole proprietor only took a small chunk of his earnings as W-2 wages from the corporation, running the rest 'outside' of the corporation, in essence as a sole proprietor. (All the compensation for 2006 for the other 3 employees was W-2'd from the corporation.)

Contributions were made to a suspense account held in the plan's name, throughout the year. Totaling about $50,000--about the same amount that had been contributed for 2005.

Giving the other 3 employees their 5% gateway (about $5,500), the owner snags about $18,000 through x-testing. That leaves about another $26,500 having been contributed, and as yet unallocated.

Under 404 and given the total corporate payroll, only $34,800 is deductible.

I was thinking first to have the $15,200 ($50,000-$34,800 deductible limit), and proportionate share of earnings while in the plan, returned to the corporation as a mistake of fact under IRC sec 403©.

We can boost the allocation for 2 of the 3 NHCEs (two separate groupings of them) so that the NHCEs, in the aggregate, would receive about $7,000, and the owner (based just on the W-2 earnings) receiving $27,800.

That looks like the cleanest thing to do from my perspective.

I was wondering if anyone thought we could do an 11g amendment to add the owner's sole proprietorship earnings for 2006 into consideration. It looks to me like we'd at least have to give the NHCE's a second, duplicate gateway if we tried that--even if it were otherwise doable.

Any thoughts or other suggested approaches to correct the situation?

Under the Tax Relief and Health Care Act of 2006, someone who becomes eligible to contribute to an HSA anytime during the year can contribute up to the full-year HSA limit. That is, proration of the limit isn't required. However under the 2006 tax law there is a penalty if the individual does not remain *eligible* for the HSA until 12/31 of the year following the year of the mid-year enrollment. Said penalty results in any excess amounts contributed (that is amounts that otherwise would have not been allowed under the old proration approach) being taxable - plus a 10% excise tax as well.

On the surface, this all sounds like an individual taxation issue that employers need not worry too much about administering (although they may have to communicate it!) Furthermore, and perhaps more importantly, what about the impact on employers who run all contributions through a cafeteria plan? So if an employee does not stay in the employer's HDHP until 12/31 of the year following the year of the mid-year enrollment, does the employer have to adjust the prior year tax record of the employee to reflect that the certain excess amount run through the cafeteria plan actually was taxable? What if the employee immediately changes employers and picks up HDHP coverage seamlessly. How would the prior employer ever know such?

In short, how is this next-year-end HDHP enrollment requirement monitored and any "failures" reported? Or is this just another "honor system" aspect of HSAs?

Thanks in advance for any help,

Cole

I have an issue with a 2004 1099R issued. Code 4, Death Benefits.

The American Postal Workers Union filed a grievance back in 1981, concluded in 1986. 18,000 Survivors were issued funds, labeled under a "delayed roll-over" of COLA, including life insurance. The decedants paid taxes on the delayed prior to his death, under an Annuity Protection.

The arbitrator stated in the settlement 11 times "so no one will be hurt" or "no hurt" or "when the hurt began".

The Eagan accounting section states they do not define or interpret the income. They only report on a 1099R according to IRS rules and regulations. They also state that they have a fiduciary relationship to the Postal Service and only a "conmitant" to the survivors.

In the Post Offices haste, they caused a Mis-characterization by reporting to the IRS. That the "Legal Settlement" was fully taxable.

Does anyone know how this can be resolved? If the Post OFfice can be held liable for the additional taxes owed by the default of "The Offer In Compromise" The previous Federal Tax Lien has been reinstated and are about to take action.

New client for 2007 wants DB plan and reveals fact that he has an old MP and PS plan still in existence but currently terminating through other advisor (legal) but he has never filed 5500's on these plans. He's wondering if 1099-R filing and 945 filing on those plans by investment company as part of plan term will trigger 5500 tracking/red flags. I've suggested the voluntary correction approach of course on late 5500 filings, but since it's his decision, does anyone think the IRS receipt of 1099-R/945 would trigger an inquiry into 5500s ? I kind of think not especially given 5500s are now filed through PWBA (DOL) but would appreciate other opinions.

As best I can tell it seems to be limited to 5500/Disclosure issues as plan doc has been consistently updated by national investment company, CPA apppears to have handled the easy contribution calcs correctly, small office hasn't had any distributions previously.

Hello all! I am a former recordkeeper, but have been out of the business for awhile. Where is the best place or best resources to learn recordkeeping so I can start applying for jobs again? Any help would be greatly appreciated.

might be taking work with a governmental agencey

they put a % of your base salary (pre tax) into a deferred comp program 457 or 401a

now i have some money in my 401K from my previous employer...

can i transfer that to the 457? can i leave it were it is? what are the benefits?

what happens if i leave the government agencie...do i still get to move the money??? tax pentalties????

enlighten me thx

thanks...

Can a profit sharing plan have an in-service distribution age requirement of age 21? I know it sounds absurd, but from what I read, the age for in-service w/d can be any age prior to NRA. Does this sound OK?

From reading Rev Proc 97-9 I get the impression that you could not convert a regular 401(k) plan to a SIMPLE 401(k) mid-year. Would you agree that it can only be done for the beginning of the next calendar year?

I posted this on the nonqualifed deferred compensation board.

As everyone knows statutory stock options under Section 422 are excluded from the reaches of Section 409A. What I'm not so sure about is whether you have to use a 409A valuation method to keep those statutory options out of 409A or whether you can still use the Section 422 regs to value the stock. The following paragraph from the preamble seems to contradict itself:

"Several commentators expressed concerns regarding the determination of the fair market value of the underlying stock. Some commentators requested that the valuation rules applicable to incentive stock options be applied for purposes of the exclusion from section 409A. Under those rules, if the stock option would otherwise fail to be an incentive stock option solely because the exercise price was less than the fair market value of the underlying stock as of the date of grant, generally the option is treated as an incentive stock option if the issuer attempted in good faith to set the exercise price at fair market value. See section 422©(1). The Treasury Department and the IRS believe that this is not the appropriate standard for determining whether stock rights are subject to section 409A. Incentive stock options are subject to strict limitations on the amount of such options that may be granted to a particular employee. See section 422(d). In contrast, there are no such limits applicable to nonstatutory stock options, and grants of nonstatutory stock options often far exceed the limitation applicable to incentive stock options. In addition, section 422©(1) explicitly provides for the good faith standard with respect to incentive stock options, while no such provisions exist within section 409A or its legislative history."

Have a safe harbor 401(k) plan with the 3% QNEC. Physician group where each physician's PC has adopted the Plan. A physician for one of the PCs passed away during 2006 and the spouse is refusing to fund safe harbor contribution attributable to the physician's eligible compensation. What happens to the Plan if this contribution is not made bearing in mind the participant is highly compensated?

Thanks in advance.

Regarding participant directed loans - If a Plan limits loans to one loan at a time, hardship only, from deferral source only, and on and on, is this considered an investment restriction? Also, what about participant directed loans that are not illustrated on the quarterly statements provided by the Recordkeeper (TPA reconciles loans at the end of the Plan Year). If these loans are attached to a Plan that requires quarterly statements, do you feel that we would have the update the loans on a quarterly basis, or just provide the last available data?

Combination plans, where the deferrals are individually directed, but the profit sharing assets are commingled in a Trustee directed account - We have several of this sort and they have up to 10 accounts, with several pages of investments. Does anyone have a good method of providing this data on the quarterly statements?

All comments are welcome.

I don't believe this is addressed anywhere in the reqs. Is anyone using a loan tracking or repayment system or process that calculates interest on a daily basis? We think "no", and normally we don't care about the exact date when a payment is made. All payments are through payroll deduction, so the repayment date is always close to the date. Do you only start tracking interest if the loan goes into default?

Has anyone heard/witnessed/ or know the legality of the ability to have participate directed cb plans?

would allowing a participant to individually invest their "hypothetical account" make the plan a cb, not a db?

Also, if it is possible, what are the administration headaches involved?

As somebody who works primarily with other types of qualified plans, I thank everybody for their messages on this board as I have been a regular visitor over the past few months because of a 403b prospect. I wanted to run a scenario by all of the other professionals on this board to hopefully get some feedback.

My prospect has a 403b which has been in place for some time. This plan is set up with a large mutual fund company and each employee has thier own custodial account. The plan offers an employer contribution of a flat % of salary once the employee is 21 years old and as long as they are expected to work 20 hours per week. The plan has no document, the employer contributions have never been tested (ACP), and the plan does not file a 5500 (They file a 5500 for their cafeteria plan).

Does the fact that they file a 5500 for the cafeteria plan with the "Pension Benefits" box checked mean they do not need to file one for the 403b? Should the Er contributions have been tested all along or is this not required as this is not a match? Since this is an ERISA plan, can the plan specifically exclude Ee's who work under 20 hours from receiving the Er contribution?

I am sure they need a document. What types of penalties are involved for not having one, or what types of penalties are involved for anything else they are doing wrong???

Any advice/suggestions are much appreciated. We do have a compliance officer on staff that I am going to consult with as well, but I am also looking for thoughts from other experts. Thank you.

In today's EBIA weekly, there is an article about a case involving an adopted child and it includes a reminder about ERISA's adopted children mandate. "ERISA group health plans covering dependent children of participants or beneficiaries must provide the same benefits to such children who are placed for adoption that are provided to natural children of participants or beneficiaries. The mandate applies whether or not the adoption has become final..."

The first part makes perfect sense, since a dependent is a dependent once covered, so what kind of a dependent shouldn't matter, but I don't understand the part about whether or not the adoption has become final. If the adoption isn't final, then how would the child be covered? If the adoption isn't final, then it just seems to me that they wouldn't be considered a dependent yet and couldn't be covered yet. At what point in an adoption would the child be eligible for coverage?

Is there no longer a 409A message board?

Anyway, as everyone knows statutory stock options under Section 422 are excluded from the reaches of Section 409A. What I'm not so sure about is whether you have to use a 409A valuation method to keep those statutory options out of 409A or whether you can still use the Section 422 regs to value the stock. The following paragraph from the preamble seems to contradict itself:

"Several commentators expressed concerns regarding the determination of the fair market value of the underlying stock. Some commentators requested that the valuation rules applicable to incentive stock options be applied for purposes of the exclusion from section 409A. Under those rules, if the stock option would otherwise fail to be an incentive stock option solely because the exercise price was less than the fair market value of the underlying stock as of the date of grant, generally the option is treated as an incentive stock option if the issuer attempted in good faith to set the exercise price at fair market value. See section 422©(1). The Treasury Department and the IRS believe that this is not the appropriate standard for determining whether stock rights are subject to section 409A. Incentive stock options are subject to strict limitations on the amount of such options that may be granted to a particular employee. See section 422(d). In contrast, there are no such limits applicable to nonstatutory stock options, and grants of nonstatutory stock options often far exceed the limitation applicable to incentive stock options. In addition, section 422©(1) explicitly provides for the good faith standard with respect to incentive stock options, while no such provisions exist within section 409A or its legislative history."