For the new PPA 06 notice requirement for employer stock diversification, the notice has to be given when the participant is first eligible to diversify. Does this apply separately to eligibility with respect to employee and employer contributions? What's the general opinion. Have heard different interpretations.

We have a claim for the wife of an attorney in one of our law firm clients, who have submitted a claim for breast implants. She submitted a doctor's letter explaining that he was treating her for assymetry. This looks cosmetic to me, but I wanted other opinions because I know that this action will be harshly questioned by the client. Thank you for your help.

S-corp ESOP – effective 2001, terminated 12/31/2004. No administration was ever done. My recommendation is to bring it in under VCR. My concern is - what if they classify it as an abusive transaction. The attorney feels comfortable that it is not, however, a review of a different plan by this attorney, felt that it was.

Another question – since no payments were ever made on the note, should they rush to setup an account to put all the money in? or it doesn’t make a difference?

This 401(k) with Safe Harbor feature has decided to make a discretionary PS contribution - the first one since Plan inception ten years ago. The owner prefers not to receive any of it - can he simply waive his right? If so, would the waiver be permanent or can it be a year by year thing? Thanks in advance...

Can anyone list or point me in the direction of what should be included in an annual retirement plan review?

I have a client (I took over in 2004) that implemented a 412i plan back in say 2000.

The plan they implemented was a 100% life insurance plan that clearly violated the incidiental death benefit requirements and thus many other qualification issues. The client was aware of this, but prospectively chose to handle new participants more in line with the rules, such as limiting the insurance premium to 50% of the employer contribution, but made no change to its original participant.

The IRS will not allow the plan sponsor to enter its national global settlement program for 412i plans and the plan will thus likely be subject to a full local audit and be disqualified.

Does anyone have suggestions as to how this situation can be remedied in some fashion? That is, pursuing a voluntary compliance intiative of some sort or somehow minimize the damages?

I can come up with a suggested solution that essentially converts the plan to a standard 412 insurance funded plan where a side fund is established and ultimately consists of at least half the costs, and perhaps the insurance is converted to a paid up policy thus lowering the death benefit and not requring future insurance premiums.

Of course my main question is what can be done with the IRS to get on track, before a specific approach is even relevant?

Thanks.

If an organization has both a 403(b) plan (to which contributions are made by employees only) and a Defined Contribution (Money Purchase) plan (to which only the employer contributes), is an employee subject to a specified overall aggregate contribution limit for both plans combined? Or may the employee contribute up to the maximum allowed contribution for each plan considered separately?

Thank you.

I have a plan that excludes bonuses from the compensation definition, and for this plan year fails the compensation ratio test. The plan is meeting the ADP safe harbor with a 3% nonelective contribution. There is also an additional discretionary match. I cannot find anything definitive to tell me what we need to do with this situation, although my assumption is we need to do the 3% nonelective on the basis of total compensation instead of compensation less bonuses. Correct? Thank you.

I heard today from an annuity carrier that it could not comply with the provisions of our client's retirement plan, which provide for automatic rollover distributions on the plan's termination (for participants who fail to respond to election forms). The stated reason was that New York law prohibits the establishment of an IRA without the account holder's signature. That would seem to interfere with the automatic rollover rules under 401(a)(31). Has anybody heard of this? Client is going out of business and needs to roll these accounts out of the terminating plan. Thanks.

While starting conversion of a takeover plan have discovered prior loans did not follow loan provisions of the document, ie multiple loans were made under the document specified minimum of $1,000. In addition all loans were made at a 6% interest rate.

This is a large plan and will be audited. The last seminar I attended regarding EPCRS and VCP seemed to suggest there are no correction methods for loans.

Any cites or suggestions would be appreciated.

I know that compensation of participants that are eligible to defer, but elect not to, is included for determining the maximum deductible contribution to a 401(k) plan, but do not have a referral cite. Does anyone have a cite that refers to this?? Thanks.

can a DB plan, w/ treasury approval, implement a retroactive benefit accrual reduction??

has anyone heard of such a thing and if yes, by what authority?

Not sure what happened with my first attempt to post this, but here's another try.

To what extent does the $5,000 consent rule apply to the termination of a money purchase plan? More specifically, if one or more participants with more than $5,000 do not consent to a distribution and the employer has another DC plan, must the money purchase plan remain in place until consent is given (or merge into the other plan), or can the plan purchase annuities for the participants?

A client contacted me earlier this week to let me know that they have not been removing deferrals from soneones paycheck - since January! The new firm administrator let this woman know about an plan meeting and the partiicpant mentioned the fact that no deferrals have been coming out of her check.

Anyway, as much as I want to go the "to bad, so sad" route, we are looking at EPCRS to fix this mess. I just got a copy of her enrollment form (which was sent to Hancock in a timly fashion) and she elected to defer $40 per pay. This plan has a safe harbor match with the 100% to 3% & 50% on the next 2%. I have a list of her gross pay per pay period, and it varies each period, but the $40 is around 3%.

Opinions:

Should the company make up the $40 for each pay plus the SHM? (citing 2006 TEOB page 15.647 Issue 16) OR

Should the company make up 50% of the deferral plus the SHM (Rev Proc 2006-27 Appendix A page 60 ©)

I am having a hard time wrapping my brain around the fact that this woman went months without noticing that she was not deferring........

Your thoughts are appreciated.

Do you include receivables in the Top heavy test?

Say we have a 1 participant DB plan.

Under 74-307 the maximum death benefit allowed is either:

1. The proceeds from a life insurance policy where the premium represents less than 50% of the total employer contribution, plus the amount of the auxiliary fund.

My understanding of the auxiliary fund is that it is essentially the total value of the side fund that is used to fund the retirement benefit. Is that correct?

Of course the death benefit must be at least as much as the QPSA, which in this plan's case is a 100% j&s of the AB (unreduced).

2. The maximum of

- 100 times the projected monthly benefit or

- the reserve (not the face amount above) plus the auxiliary fund

My understanding is that the Reserve is amount obtained from the insurance company. That is, the actuary doesn't compute it based on what he considers reasonable assumptions. Is that correct?

So the two questions pertain to the auxiliary fund and the reserves.

Thanks.

I am wondering if any of you could opine as to the Service's level of enforcing nondiscrimination rules under 105(h) - specifically a waiver of eligibility waiting period for employees at the vice-president level or above, most of whom constitute highly compensated individuals.

I believe a goodly number of non-profit organizations maintain self-funded plans with provisions like these, which are common and permissible in fully insured arrangements. I am wondering if anyone has ever seen adverse tax consequences befall individuals in such arrangements.

I am confused on the impact of an ADP test failure and catch-up recharacterization on future salary deferral contributions.

A 401(k) plan year ends on 9/30/06.

For calendar 2005 - the deferrals for an HCE (over 50) were $12,000. -

Also no catch-up due to ADP testing from the 9/30/05 Plan Year

For the period 10/1/05-12/31/05 deferrals for an HCE were $3,000.

For the period 1/1/06-9/30/06 deferrals for an HCE were $15,000.

For the plan year ending 9/30/06 the ADP test is failed and the maximum allowable deferral for testing is $13,000. Of the $18,000 deferred for the plan year $5,000 will be recharacterized as catch-up for 2006.

For the period 10/1/06-11/30/06 the participant has deferred another $5,000. Since he has already had $5,000 recharacterized as 2006 catch-up, how would these additional deferrals be treated? Would they need to be returned to him as excess contributions, if so, by what time, or could they remain in the plan since the total calendar year deferral remains under $20,000?

Can the deferrals be characterized as follows?

Non-Catch-up contributions from 1/1/06-9/30/06 - $10,000

Catch-up contributions from 1/1/06-9/30/06 - $5,000 - ADP test failure

Non-Catch-up contributions from 10/1/06-12/31/06 - $5,000

Hi, I am just a regular person looking for information. I am 41 years old. I resigned from my employer a few years ago. I left behind a balance of $27,000 in my 401(k) Plan. I didn't do anything to roll it over or anything. I am now unemployed and need access to the money. Is there any way that I can get the money? If so, what types of penalties or fees will I pay?

Thanks.

PSP will soon terminate. The PSP holds a "life ins contract" as one of the plan investments for participant X.

Can participant X roll her "life ins contract" from PSP to IRA ?

I've had some people (insurance agent , a high school bookkeeper, a minister, etc) tell me it is impossible, some say it can be done with difficulty, others say it's no problem.

I have never run across this situation before. Can anyone advise ?