Are people waiting until the Final 403(b) regulations come out before amending 403(b) plans for the Final 401(k) regulations, or is everyone amending now?

A governmental defined benefit contributory pension plan provides that if a participant terminates employment within 6 months of his/her commencement of participation in the plan that all employer contributions made on his/her behalf shall be returned to the employer. Would such a provision be in violation of the exclusive benefit rule of Internal Revenue Code Section 401(a)(2)?

Consider the following facts:

Single employer, Non-PBGC covered Plan

3 owners are only participants.

Plan is underfunded and cannot pay unrestricted lump sum.

1 owner is retirement age and wants lump sum distribution. He would be willing to take lump sum equal to non discriminatory, fair share of allocated assets if plan could pay unrestricted lump sum.

Clearly the plan could terminate and each could receive a lump sum distribution equal to non discriminatory and fair allocation of assets. A new plan could be adopted for the remaining 2 owners. However, the 2 remaining owners do not want to terminate plan and potentially lose future contributions based upon prior accrued benefits (i.e. IRS position that benefit for 415 purposes attributable to prior plan distribution is not based upon actual lump sum but accrued benefit in prior plan).

Any problem with spinning off the 2 remaining participants into a new plan, allocating assets between the two plans, terminating the original plan and paying the lump sum equal to allocated assets?

Must the allocation of assets follow the priority class allocation or is another reasonable allocation available (document just indicates that benefits after spinoff are equal to amount payable before spinoff if plan terminated)?

Assume other restricted benefit payment options (restricted IRA, escrow, bond) are off the table. Assume administrative cost of spinoff, termination, and new plan are not relevant.

Any thoughts are appreciated.

Can a cash balance plan can be merged into a 401(k), or would it have to be terminated with participants having the option to roll over?

If a merger is possible are there any unusual issues invovled?

What do you think about the following:

In the past, a multiemployer pension plan has always used an (actuarial) assumption of 8% in calculating withdrawal liability.

Is there any reason to believe that the trustees, who have reserved the right in the trust agrmn't to calculate employers' withdrawal liability w/o reference to a specific % number, could not change how they calculate it for 2006?

For example, if an ER withdrew in January 2006 and was assessed a liability based on an 8% assumption, is the trustee potentially estopped from changing the rate for employers who withdraw in November 2006?

Also, is the trustee required to use an actuarial value? (Can they never use a higher value?)

Thanks in advance for your help.

A trustee was removed and the reason given was that there had always been an executive board member of the union as a trustee. This is not spelled out in the trust agreement. Is this a valid reason to remove a trustee?

Does anyone have a listing of all the required amendments since GUST for both DC & DB plans?

A company with calendar fiscal year maintains a PS plan with calendar plan year.

For the 2005 plan year, the TPA prepares an allocation report based on the amount of discretionary contribution the company wishes to make. For some reason, the company doesn't deduct those contributions on its 2005 return. It files the return before any contributions are made for the plan year, and plans to deduct the contributions on its 2006 return.

What is the latest date that the company could make the contributions?

This question relates to ESOP fofeitures and when are they allocated to remaining participants, basically a timing question.

We have an ESOP whereby its distribution policy changed from paying out 100% of vested amount upon termination to paying out to 20% of the vested amount over a 5 year period.

With the old policy forfeitures were allocated either upon distribution or after 5 years if the terminated participant had not requested a distribuion.

Now the plan has changed paying out only 20% of the vested amount over a 5 year period. When do forfeitures get allocated out....is it 20% over a 5 year period or upon the entire vested amount being paid out.

The plan document indicates that for the 401(k) forfeitures will be paid out upon the entire vested balance being paid out or after a 5 year period if the terminated participant has not requested a distribuiton.

of which the 401(k) is paid out at 100% at upon request after the plan is valuated for the end of the end of the plan year.

continuing....when the plan document gets to the forfeiture section of the ESOP part of the it states how forfeitures are allocated and then states to refer to the above section.

Please note this plan is an ESOP with a 401(K).

What would be the determining factor of when to allocate forfeitures? thanks.

The division I'm in, in the company I work for was sold to another company. The new company has a plain 401k plan that includes loans. However, they state they cannot roll over the old 401k plan into the new 401k plan, and that it must be rolled over into an IRA (or I guess, can be left where it is since I have more than the 5K min balance). The old company's plan manager is Fidelity, the new one is TRowPrice. Both support 401k loans, but the Fidelity one is apparently some kind of esop/401k hybrid. They did say that a 401k from a previous employer *can* be rolled over into the new 401k, just not the 401k from the division that was aquired-- though in getting clarification that would appear to contain some conditions that weren't mentioned originally.

My main communication on the issue is with the HR dept., and the best I've been able to extract is that the reason we can't rollover is the original plan wasn't just a 401k, but an esop/401k combination of some kind which included employee stock benefits. Supposedly the esop/401k can't be rolled over without adulterating the new company's TRowPrice 401k in some manner-- and could somehow affect all of the new company's existing employees. The company is proposing setting up an optional 1-year loan to pay Fidelity some amount of money up front that the employee can then have deducted over the period of 1 year in order to reduce the loan as much as can be done under those circumstances.

I don't own a home, so I can't use that for a loan source, and the loan offset amount is substantial. My alternatives appear to be-- 1) get a loan from somewhere else to pay the loan offset to Fidelity, or 2) take it as a distribution and then have to pay ~50% of the amount come tax time (28% fed + 10% penalty + state tax), or 3) some combination of one of those and the 1-year loan offered by the "new" company.

However, I'm confused by a couple of things-- what do you suppose my limitations might be in rolling over the Fidelity 401k into another plan of a different employer? While not exactly a preferred option, it would appear that changing jobs at this point to a company who could accept the rollover might save me some serious $$$ here, as the loan is pretty sizable. I would think at least if I were to go self-employed (theoretically, anyway) that I could pick-and-choose my own Solo401k and roll it into that so it seems at least *possible*.

Not only that, since it is possible to transfer from one plan to another either by trustee-to-trustee (check goes direct rather than thru me), or having them send me the check and I've got 60 days to get it into a new plan-- at that point if it's just a check coming from me what connection could it even have with the original plan's characteristics-- would it not isolate the new 401k from any constraints of the original plan? Is it not at least theoretically possible to roll it into another employer's 401k temporarily, then leave them and come back to work here and rollover *that* 401k? Sure, these are kinda goofy options but I kinda get the sense here that there may be some options that have been overlooked due to lazy or overworked HR personnel who may have ended up tasked to address the problem. Yet they are going to some trouble to set up payroll-deduction loans for 1 year in an attempt to solve the problem (seems to make it more complicated, rather than fixing anything)... The company has over 100 people with outstanding loans, so I'm not the only one with this problem, though I may have one of the higher $$$ amounts and this is a small percentage of the totality of employees aquired with the division...

I suppose the 1-year loan thing is just a way to say "we did something" in response to anyone who complains, but I have this nagging feeling that there may be some reasonable options that just haven't been spotted here...

The HR guy that I'm supposed to work this out with suggested I roll it into an IRA and use that for bank loan collateral, which turns out is essentially illegal (causes an immediate distribution) so obviously the guy is not very knowledgable-- also with the acquisition he appears to be rather swamped with other work so this is not particularly a priority issue for him. I don't see any way to keep the original 401k going and paying the loan installments manually, though I suppose Fidelity would know about that if there's any way to do that and I am planning to contact them and see if they can suggest any other options.

I'm in California, so I don't know if EGGTRA or anything CA-specific is of any help-- the acquired division was uS nationwide and the new company is international but has a large US presence. If the esop portion of the Fidelity plan contributed some money to the account that needs to be tracked separately or something, how could a rollover even to an IRA work-- and rollover IRAs might be later rolled into another employer's 401k-- what kind of strings are likely attached here and how can the funds be freed of them so they can be readily rolled over???

Certainly this is something they never tell you about in 401k loan discussions-- that "leaving your job" isn't all that can trigger a loan default-- as the company changing hands can apparently do it as well.

If you have any ideas of other options I may be unaware of, whether or not these guys are doing something illegal (probably out of ignorance, rather than malice IMHO), or where I lack the understanding of what is possible in rollovers-- I'd appreciate any info you might have...

Thanks,

-- Z

Can anyone suggest a resource that would provide guidance on the steps to take when an employer discovers it has a plan covered by ERISA but only recently realized it. A client has been promising employees retirement income if the employees work until a certain age and have a certain number of years of service. The employer has kept its word and made these payments to employees who retire and meet the requirements. I've determined that this is a pension plan under ERISA, but the employer has never created or funded a trust or filed any 5500s.

We have quite a few 401(k) plans with profit sharing accounts that have 3/20 vesting and are under the impression that the 2007 safe harbor notices can be given to the participants without the plans being amended to 2/20 vesting as prescribed by PPA. Just wanted to be sure - is this correct, and when would the plans actually need this amendment? Or would it just be part of the inevitable PPA restatement that will happen years from now as long as the plan operationally uses the new schedule? All help is appreciated.

We're looking to start a relationship with a new trust company. I was curious to see what feedback people had using either STN or Matrix. I'd appreciate it if users could send me a PM with the good and the bad if you've worked with either of these companies before. Particularly, we are trying to evaluate: client service, ease of daily trading(we use Relius Administration) & accuracy of reporting.

Are there any other platforms people use for daily val trading people might recommend?

I'd prefer not to make this a public forum, hence the PM request.

thanks

Steve

I'm working with an employer who we have determined is a local governmental employer for ERISA and tax purposes.

Their head is maxed out in their defined contribution plan. On their face, the Code sections exempting local governmental plans from minimum participation and discrimination provisions, etc., would appear to allow them to put in a 401(a) qualified DB plan benefitting solely the top person (we've also discussed drafting it to benefit a few other of the key executives). However, this seems a way to permit additional executive deferred comp in a way contrary to the policy of 457(f), and I have not found any PLRs addressing this.

So far, I've found nothing in the state statutes that would prohibit this either.

Has anyone done something like this in practice? I'd appreciate any suggestions or thoughts.

Employer maintains a Safe Harbor 401(k) using the basic match formula. The match is calculated for the whole year, versus payroll by payroll. Safe Harbor notices were given prior to the 2006 plan year. The employer wants to terminate the plan effective 12/31/06. Wouldn't he still need to fund the match for the 2006 plan year?

I read some materials, but now I've totally confused myself. Some of the things I read appear to say that you can terminate a s/h 401(k) plan and not provide the safe harbor match as long as you amend the plan to omit the s/h match, notify participants at least 30 days before term date and run the ADP/ACP test.

But haven't the participants "accrued the benefit" since they were given notice at the beginning of the year? In looking at the document (prior to the final 401(k) amendment) it says you have to make the contribution. But not sure how the amendment affects the language.

I hope this makes sense. Thanks to all who can understand my babbling and can provide some input.

Individual was hired and worked for a company for a number of years. During this time person did deferrals and received employer contribution under qualified 401(k) Plan. Person is 100% vested. (We are talking about a long emploment.)

Problem becomes known after person terminates emploment and "disappears". Turns out that person's documentation (social security card, birth certificate...) were fraudulent!

How does this become know? Social Security Administration contacts employer to alert the firm that it appears that person was using social security number of dead person! Beyond all other related problems, what should be done with monies held for this person under the 401(k) Plan?

VERY vanilla deferred comp agreement needs a current market interest rate to reference. Something like "___ as published in the WSJ . . "

Anybody have a favorite?

A 401k plan has over 100 eligible participants at the beginning of the year for the first time. (90 last year 104 this.) They filed a 5500 last year using schedule I. This year we filed a 5500 again with schedule I and no audit because of the 80 -120 rule.

In the past I have understood that this audit exemption could only be used in the first year the plan went over 100 eligible. However, the instructions for form 5500, (Section5: What To File) seems to indicate that you can elect to file as a large plan or a small plan as long as you do not go over 120.

Questions:

Does a plan need an independent audit if it is the second year that they have between 100 and 120 participants?

Once the plan files schedule H with an audit can they go back to schedule I and no audit if their eligible participants at the beginning of the year drop below 100?

Thank You

We're currently reviewing an EB conference/ educational seminar that some of the trustees will attend. Part of the conference events include a dinner/dance party and the total cost of the conference includes the dinner/dance party. If trustees wish to bring spouses to the dinner/dance, the spouse's cost is not included (and likewise would not be reimbursed by the plan). Has anyone had any experience with the DOL taking issue with a plan covering the total cost of a conference which includes an event that will likely not be directed towards "plan matters"? Trustees may take part in other social events at an added cost (which likewise would not be reimbursed by the plan), but I'm not sure why the conference sponsors then decided to lump this dinner/dance event into the cost of the conference.

Facts: ABC, Inc. and XYZ, Inc. are members of a controlled group. They have separate plans and each plan passes coverage testing on its own; therefore, the plans are tested separately for nondiscrimination testing. There are key employees that participate in each plan (ABC's key is ABC's plan and XYZ's key is XYZ's plan). ABC, Inc.'s Plan is top-heavy by itself. XYZ's is not. Do the plans have to be aggregated for purposes of determining top-heavy?