Please allow me to preface this email by saying I am not a litigator and rarely deal with such matters so I could really use some help.

A question arose involving a participant who was denied long-term disability benefits. After exhausting the administrative remedies in the plan he is looking to sue. While the participant was working for the company he lived in VA but worked in WVA. At the time the participant's claims were denied, and currently, he lives in PA. Can the participant sue in federal court in PA?

Thank you.

What is required (and when) to change from the prior year testing method to the current year testing method?

As I recall from IRS Notice 98-1, this change needed to be amended into the plan before the start of the first year to which it was to apply.

Now that they issued Treas. Reg. §1.401(k)-2© which says a plan may change from prior year to current year at anytime, does this mean, for example, that a plan amendment making this change could be signed on March 1, 2007 that is retroactive to the plan year beginning January 1, 2006 after it learns that it could pass using the current year method but not using the prior year method?

A client begged for as low an RMD as possible.

So with a frozen accrued benefit of $50,000 per year as a 100% j&s (normal form), we provided an optional payment in the form of a 100% j&s annuity guaranteed for 26 years (per ULT) with 4.99% COLA.

The outcome was an annuity of close to $24,000 for 2007.

The client then tells us that he took a distribution of $40,000 for 2007.

He does not want to consider the excess as a plan loan.

My reaction to this is as follows:

1) when computing the 2008 RMD, base it on actuarial equivalence as a result of the actual payment made in 2007.

2) Or revise the payment form to be a method that can accomodate the $40,000 distributed, such as a flexible payment method that computes the annuity as a range from the RMD to the 415 lump sum. Then the following year a new actuarial equivalent amount is computed based on the actual payment made.

Any thoughts, comments?

Non-top-heavy salary deferral only 401(k) Plan with prior year testing. Only 1 HCE, who is catch-up eligible for 2007. 2006 ADP for NHCEs was 5.0%.

Am I correct that for 2007, Plan will pass ADP if the HCE limits his deferrals to 7% of his comp PLUS his $5,000 catch-up?

Thanks!

401(K) with plan year end 12-31-2006. The company is an LLC taxed as partnership. The LLC has a taxable year ending June 30th. The document is not specific other than to state use plan year compensation and to used earned income for the partner for the plan year. Do I use the K-1 number for the LLC taxable year end 06-30-2006 when doing the 12-31-2006 compliance testing?

Just found out the LLC is a June 30th year end. Was not disclosed when plan set up. Any thoughts would be appreciated.

On 1/1/07, 100% Owner of Company A buys 85% of Company B. Company A and B have roughly the same number of employees. Company A has a 401(k) plan, company B does not. For coverage testing, I believe the transition rules allow for the exclusion of Company B through the 2008 plan year. They have to be counted for testing in Company A's plan starting 1/1/09.

Company A would like to allow Company B employees to make 401k contributions now in 2007, but would want to keep them out of the match and profit sharing until allocations until 1/1/2009. Can they pick and choose which plan components to have the transition period apply too, or is it all or nothing?

Thanks

A new 401(k) plan is effective 1/1/2006. For the 2006 plan year, only the 2 HCEs had met the eligibility requirements (and they deferred the full 402(g) limit).

On January 1, 2007, one NHCE enters the plan. This plan is currently written to use the prior year testing method.

If this new entrant is the only NHCE for 2007 and they defer zero for the year, what is the maximum percent that the HCE's could defer for 2007?

I'm thinking a 401(k) has to be in effect for at least 90 days, but can't be certain. Can the first plan year be a short plan year of let's say 60 days?

I am again working on an LLC.

The first LLC (I'll call it LLC A) has 3 owners. Each owns 33 1/3% of the Business.

This LLC is a 60% owner of another LLC (I'll Call it LLC B). A different unrelated LLC owns the other 40%.

Is LLC B part of a control group with LLC A? Are the rules different for the LLCs than for corporations?

Thanks!!!

We are introducing our high deductible health plan and employer sponsored HSA effective 7/1/07 to a group of newly acquired companies. 7/1 is our usual annual enrollment date and we are bringing the new companies on board with our benefits on that date. Company A just went through annual enrollment 2/1/07 and Company B's annual enrollment is effective 3/1/07. My question is - for the employees in Company A and B who elect the HDHP as of 7/1, can we rollover any deductible they may have satisfied in the prior plan to the HDHP because of the short plan year on their prior plans?

We have a client considering adding a wellness benefit - if employee certifies that he/she does not smoke and will not smoke, the employer will make a contribution to the flex plan.

Are there specific issues that need to be considered? If you have ever been involved in this type of arrangement, your thoughts would be appreciated.

Thanks.

I've read this forum as best I can and appreciate all the time and effort some of you have taken. I have not found another incident similiar to the one I find myself in.

My wife divorced her 1st husband in 1990, a DRO was drafted and sent to his pension. In May of 1991 A QDRO was entered with court. Wy wife recieved a copy of the signed stamped order and letters from her attorney to both the plan administrator and opposing counsel. In his letter to her he states...."please find enclosed a conformed copy of the QDRO which has been signed by the Judge. Please be further advised that we have sent the pleading on joinder of the pension Plane via certified mail to Primerica. We arealso sending a conformed copy of the QDRO th the plan administrator".

My wife's ex husband died of cancer last November and when she went to inquire about her half of the pension she was told that the pension plan had no record of her QDRO. She forwarded a copy of the QDRO and was sent back a form letter saying "Domestic Relations Order Reciept Denial Attachment" with the reason that the participant has commenced the pension benifit and there is no further benifit from the plan.

The funds were rolled into a trust and the trustee acknowledges he has the funds but states my wife needs to go get a court order. The attorney who handled her case says he did everything right and that going to court is a better and cheaper recourse then sueing the pension plan. He is checking since he's not a probate attorney who if anyone you could serve since the ex husband is dead. My understanding (please correct me if I'm wrong) is that the pension has a clear ERISA violation if they did in fact receive a valid QDRO. As a former trustee in a pension plan I know the penalties for violations are not small.

Thank you for any and all who read this, thoughts and suggestions are appreciated. It will take a minimum of $5,000 or so to get the requested court order. Assuming valid service is possible is this a worst case or would litigation ensue even here. My concern on "proof of service" is that apparently this dragged on from the May, 1991 QDRO until April of 1992. Is is possible her attorney "dropped the ball" or is this ongoing exchange proof enough? To further complicate things the ex father in law was an officer of the company in question and personally visited the plan administrator to faciiltate getting a finalized QDRO (this is documented).

We know the funds are in a trust and assuming we have valid proff of service can we compell the pension fund to reclaim the funds from the trust or compell the trust to release the funds using the current (assumingly valid QDRO). What is the best way to check if the QDRO we have is valid or see if it was ammended/challenged after May 1991?

If the plan's recordkeeper is not going to provide vesting information on their statements so that the plan will instead be providing an annual vesting statement, does anyone know when the first statement must be provided?

Assuming the plan is participant directed, would the first annual notice need to be provided by the date the first quarterly statement is due, I believe May 15, 2007? Or is some later date acceptable?

Thanks!

2 Cos. are a controlled group.

Co 1 has no owners on payroll, no HCEs, no Keys.

If Co 2 has Safe Harbor provision in the 401(k). Must Co 1 also have Safe Harbor provision?

Co 2 has about 50 EEs and Co 1 has 4 so coverage issues are not in play. No other plans or contributions other than 401(k) defs and SH match in each company.

Thanks

Facts:

Roth IRA holder is over age 59-1/2

Roth IRA opened with contribution on 5/15/1999

Took total distribution of entire Roth IRA balance on 6/22/06

Rolled over total amount of 6/22/06 distribution to new Roth IRA on 7/30/06

Took total distribution of entire Roth IRA balance on 1/25/07

Is the 1/25/07 Roth IRA distribution qualified?

Pub 590 and other guidance states the five-year clock starts the year for which a Roth IRA contribution is made. It does not say it starts the year the Roth IRA contribution is made, so it appears to be a loophole in which a person can open a Roth IRA, however small, take a distribution after five years, even closing the Roth IRA, and this preserves that taxpayer's qualified status for all subsequent Roth IRA distributions.

What am I missing? Any help is appreciated.

Thank you.

Two questions.

I have a plan that has 88% of the ownership in Trust under a deceased persons name but for the benefit of his wife who is living and owns 3% on her own. Should I be counting the Trust shares under her for a total of 91%?

Also, when determining the top paid group - 20% comes out to 3.2 employees. Do you round up to 4 or down to 3 in this case?

Thanks!

We have a new 401(k) plan effective 1/1/2006. Participants were eligible to make contributions until 7/1/2006. As of 7/1/2006 there were 100 participants. Is an auditor's report required to be filed with the initial Form 5500? Technically, as of the first day of the plan year there were no plan participants?

How restrictive should a 457 plan be for granting a hardship withdrawal for imminent foreclosure on a participant's primary residence. Would a default letter from a mortgage company or bank threatening foreclosure proceedings will begin by a certain date if the mortgage is not brought from arrears be enough to grant a hardship or would foreclosure proceedings actually need to begin?

I have noticed that when the bank actually begins foreclosure proceedings it goes to an attorney and the participant incurs substantially more debt to pay for attorney fees and other expenses to begin the public sale of the home.

Thanks.

First paragraph of letter received from the Department of the Treasury dated 2/2/07:

"This letter is to acknowledge the receipt of your letter dated July 27, 2006. I apologize for the long wait of the response for your request, we are currently in a pilot program for 6 months that will end in March, only until September a decision will be made, and then letter forwarding will be input with this pilot so hopefully we will be able to work efficient, thanks for your patients."

Do you think its time for us to use a lost participant service?

Company A had a 401(k) plan. In 2006 employees of Company B, which is considered a single employer with Company A, were allowed to make elective contributions, but Company B had not adopted the plan in 2006.

Is there some way to correct this (now in 2007) without a huge amount of effort?

I see that you can correct inclusion of employees who did not meet age and service requirements by a retroactive amendment and a determination letter request, but the reason these employees shouldn't have been included is because the employer hadn't adopted the plan (not because they didn't meet age/service conditions).

Is it too late to make a retroactive amendment under general remedial amendment period rules? I think it may be because this would probably be characterized as a discretionary amendment and we're past the end of the Plan Year.

I'm not even sure if this qualifies for VCP.

This seems like something that ought to be correctible because the companies are a "single employer," and employees weren't hurt.

Any words of wisdom would be appreciated.