A participant is 64. He is a new enrollee to a Roth 401(k) plan. If he defers to the Roth in the plan, for the first time at age 64, when can he remove his money without the penalty (a tax free distribution). Is it at age 69?

Has anyone done a communications campaign for their plan on the topic of company stock diversification that they would be willing to share? Our plan has a high concentration of company stock and we'd like to take some measures to cut this down.

We're also looking at potentially instituting limits to company stock in each participant's account. Does anyone have a similar policy in place?

A parent company owns 51% of a smaller company. They qualify as an affiliated services group (ASG) under 414(m). May the subsidiary’s employees participate in the parent’s 401(k)? If so, would the 401(k) plan be a multiple employer plan?

I've read on these message boards that a 401(k) sponsored by a parent company for its controlled group or ASG would not constitute a multiple employer plan. However, I have not found any justification for that.

Though the parent is considered the employer of all the employees of the ASG for testing purposes, 414(m) does not seem to pertain to 401(a), which states that qualified plans are for the exclusive benefit of the employer’s employees. (In the health benefits world, their health plan would be a MEWA because they would not be a single employer.)

Thank you for your help in advance.

Plan has investment options in mutual funds and they also have a stable value fund option. The mutual funds are offered through one of the large mutual fund companies and the Stable Value Fund is managed by a separate investment company. The company that manages the Stable Value fund does not file as a DFE. This Stable Value fund used to be invested totally in a GIC from 1 large insurance company. That insurance company provided Sch. A info and everything was fine. During the plan year the GIC assets were transferred to this other investment company and the fund became the Stable Value Fund, which has investments in a number of different GIC's and other stable assets.

The question is now how do we report this Stable Value Fund on the 5500. We have the Sch. A info for the investment for the time it was still invested at 1 insurance company. But, after the assets transferred to the outside investment company we are unsure how to show this on Schedule H (what line) and also are not certain if we need to complete a Sch. D and also obtain information from all of the GIC's that the fund is invested in. As mentioned the Investment Company does not file as a DFE and they also do not receive any insurance info from the GIC's. Most of which are investments through other investment companies. Any opinions on what to do are appreciated.

Is it possible to convert a cash balance plan to a 401(k) plan?

Follow up on recent post. Looking for opinions to confirm position or to see if contrary opinions exist.

If a person is paid indirect compensation, in cash or some other form, under an agreement with an insurance company based on volume and/or profitability of business placed with the insurer and some of this business involves ERISA covered plans, presumably (based on DOL AO 2005-02A), a portion of this compensation has to be allocated to the ERISA plans and appropriately reported by the insurer to each plan for Schedule A purposes. At the least, this needs to be done for compensation paid to external persons, e.g., brokers, etc. Noncash compensation reported should reflect the cash or fair value of whatever is provided. What about similar indirect compensation paid to internal sales persons, i.e., employees of the insurer? For example, an insurance sales employee gets such additional indirect incentive compensation over and above any set base salary. Does this additional compensation for such employees need to be allocated and reported for Schedule A purposes?

A professor stood before his philosophy class and had some items in front of him. When the class began , he wordlessly picked up a very large and empty mayonnaise jar and proceeded to fill it with golf balls. He then asked the students if the jar was full. They agreed that it was.

The professor then picked up a box of pebbles and poured them into the jar. He shook the jar lightly. The pebbles rolled into the open areas between the golf balls. He then asked the students again if the jar was full. They agreed it was.

The professor next picked up a box of sand and poured it into the jar, where it filled up most of the remaining spaces. He asked once more if the jar was full. The students responded with an unanimous "yes."

The professor then produced two cups of coffee from under the table and poured them into the jar, effectively filling the empty space between the sand. The students laughed.

"Now," said the professor as the laughter subsided, "I want you to recognize that this jar represents your life. The golf balls are the important things - your family, your children, your health, your friends and your favorite passions - and if everything else was lost and only they remained, your life would still be full.

The pebbles are the other things that matter like your job, your house and your car.

The sand is everything else - the small stuff. "If you put the sand into the jar first," he continued, "there is no room for the pebbles or the golf balls. The same goes for life. If you spend all your time and energy on the small stuff you will never have room for the things that are important to you.

"Pay attention to the things that are critical to your happiness. Play with your children. Take time to get medical checkups. Take your spouse out to dinner. Play another 18. There will always be time to clean the house and fix the disposal. Take care of the golf balls first - the things that really matter. Set your priorities. The rest is just sand."

One of the students raised her hand and inquired what the coffee represented. The professor smiled. "I'm glad you asked. It just goes to show you that no matter how full your life may seem, there's always room for a couple of cups of coffee with a friend."

Does anybody know how to go about using EPCRS to fix an impermissable premature distribution of a participant's 401(k) account? This is #5 on the IRS's list of top ten failures found in the VCP, but I can't find any discussion of how to solve the problem under Rev. Proc. 2006-27. I'm assuming the solution is repayment of the amount and a VCP filing, but I'd appreciate any authority. Thanks.

Plan has immediate entry, no eligibility requirements for full-time employees. Can the plan impose a 1-year service requirement on part-time employees?

We have a nonprofit client who currently has a 403(b) plan with a discretionary employer nonelective contribution. Their advisor has inquired about a floor-offset arrangement with a DB plan, using the employer's nonelective contribution to the 403(b) as the account that will offset the DB benefit. Is this permissible?

I am leaning toward "no" but wondered if anyone else has had this question before. In any case, they will be made very aware of the increased fees and testing issues involved.

I’m trying to better understand how to credit service using the elapsed time method on a plan year basis. I want to avoid crediting each employee on their hire date for simplicity reasons. Is there more than one way to accomplish this?

1.409A-1(h) provides that an employee is not considered to have separated from service during a bona fide leave of absence for up to six months, or later, if and as long as the individual has a statutory or contractual right to reemployment.

Can the right to reemployment be conditional? I am considering whether certain employees that have been laid off, subject to a right of recall in the event the company recommences hiring, have a "contractual right to reemployment" and are therefore considered to have a continuing employment relationship. The language in the regs (specifying military, sick, or other bona fide leave) leads me to believe that such recall rights do not establish a right to reemployment, and they are consequentely separated from service.

Some thoughts coming to mind.

Suppose you have a case that only had deferrals and a safe harbor match (and maybe rollovers)

The fund house has the ability to reflect vesting on the quarterly PBS's (assuming you upload them from your files), but does not have the capability to hard code sources of funds as always 100% vested.

Further assume that a) you only upload vesting for participants with an account balance at 12/31/06, and:

b) You cannot upload vesting for a participant not already enrolled at the fund house.

Now, you have new participants entering the plan after 12/31/06, so their vesting is showing as 0% in the deferral and safe harbor match sources.

Since we only update vesting once a year (at the Plan Year End), have we complied with the good faith requirements or not?

I guess we can argue that the participant's vesting at the end of the prior year was 0% since they had no account balance.

What else can we do? This requirement is an unfunded mandate, and we certainly cannot afford (or are staffed) to deal with each new participant as they enter the plan.

Thoughts?

Company A maintains a 401(k) plan for its employees. There is a classification of employees which A requires to undergo a 3-4 week training period. If the prospective employee successfully completes the training period, s/he is appointed an employee of that classification. Company A counts eligibibility and vesting service from the date on which an individual is appointed to the status of an employee of the classification and not from the commencement of the training period. Is A permitted to exclude the training period from the calculation of eligibility and vesting service? Does it make a difference if the plan document states that service is counted from the date that an individual is appointed to a certain status?

An employer wants to pay certain plan fees, but will only do so if he can deduct the fees as an expense against income.

If the company pays for these expenses and takes a deduction, then the amount the company pays is really an employer contribution and is subject to the allocation formula in the plan, correct?

It seems like this could lead to problems, but I'm not sure why. Does anyone have experience with this situation?

Thanks

Last thing I read was that an IRS official said that he was "hopeful" that final regs. would be published by the end of March.

Does anyone have any up-do-date information from the Horse's mouth that he or she would care to share with us?

One of our employees is covered by our HDHP and her spouse is covered by a Medicare advantage plan. The employee makes pre-tax contributions to a Limited FSA for herself and spouse. Recently, the spouse had several acupuncture treatments. These are not covered by his health plan. Does anyone think that the acupuncture expense could be reimbursed by the Limited FSA ?

I have a prospect/nonprofit who is interested in an erisa 403b plan. The previous CFO set up a non erisa 403b plan and then the nonprofit put ER contributions into the plan. The CFO also embezzled money and evaporated! I am working with the new CFO and at this point they have frozen the previous plan so they can make it right (or try).

The new CFO was directed by counsel to discontinue old plan and set up a new plan so they can effectively deal with the mess. Counsel recommended non-erisa 403b and then a 457 if desired. The new CFO is interested in an ERISA 403b plan so they could do a discretionary ER contribution if and when desired. They are uncertain as to how often they will actually make an ER contribution and whether it would be a match or just ER contribution. The new CFO likes the accounting of the 5500 for the plan.

1. Does having an ERISA 403b plan have limits relative to the non erisa 403b? Example: Could there be a limit what an HCE can put into the plan in a year the nonprofit did not make a contribution to the plan?

2. If having an ERISA 403b limits in any way what the HCEs can contribute, wouldn't it make sense to do a non erisa 403b and then put in a 401a and 457?

The nonproft has about 50 employees and 35 participants, 5 of whom are HCEs. My thought was to go non erisa 403b for simplicity and then add bells and whistles with 401a and 457. Am I on track?

This is a great forum. Thanks for reading.

Troy

Sales Guy Trying to Keep Pencil Sharp

There are several terminated participants who have account balances in a recent takeover plan that we are TPAs for. For 2 of these terminees, they left years ago, and the employer has no information on them, not even their Social Security Numbers. Any advice on how to go about finding someone without SS #'s?

Another concern is that even if we "find" these lost participants, how can we identify that they are who they are? They can say "Yes, I am John Doe, here is my SS#" but since we can't confirm that the SS# is correct, doesn't that create a potential problem for the Plan Administrator. Paying out to someone other than a participant or beneficiary?

Here's the short question -- a participant's first RMD is due on or before April 1, 2007. How far back can you go to determine if the full RMD was distributed?

Here's the longer fact situation -- Participant turned 70 1/2 in 2006, therefore, her required beginning date is April 1, 2007, and she must receive her first RMD on or before April 1, 2007. The way I read the regs, that RMD is the "distribution required for the employee's first distribution calendar year." (1.401(a)(9)-5 A-1© ) The employee's "first distribution calendar year" is the year in which the employee attains age 70 1/2 -- in this case 2006. (A-1(b) ) Participant received distributions in 2006 exceeding the value of the RMD due to her on or before April 1, 2007. Has she fulfilled the requirement?

I understand that in subsequent years, she can not "carry forward" any distributions in excess of her RMD to apply in future years (in other words, if she received more distributions in 2007 than is required, she could not apply the excess to satisfy her RMD in 2008). But it makes sense to me that if this first RMD is essentially for calendar year 2006 (even though it is not required to be taken until April 1, 2007) the "on or before" language would include distributions taken in 2006.

Does anyone agree? Disagree? Have an on-point reg that you can cite for me?