A recent newsletter I got from one of the larger document providers states that there has been an extension of the deadline for adopting the PFEA 2004 amendment as a result of PPA 2006.

My document vendor doesn't know anything about an extension, but is thinking that something may come out of the ASPPA conference.

Does anyone have any infomration on the topic either way?

10/25/06

Seeing how these new RMD rules are based on accrued benefit and vesting service, it seems to me that those things should be heavily planned out when designing a new Plan for a client who is already past age 70.5. So, I would imagine that without otherwise lowering your deductible contribution amout, you should start a plan for this client with a NRA of later of age 65 & 5 years of participation. To keep the accrued benefit small you should base the formula on years of participation instead of years of service, and you should exclude vesting service prior to the plan's effective date. Does this all sound logical? Any problems with it?

And what if the client mention that he's really semi-retired and only works a couple of days a week in between his golfing. If he reports each year that he only worked, say, 728 hours, wouldn't that mean that he doesn't accrue any vesting seervice and would be 0% vested until his NRA. Wouldn't that mean that he wouldnt have to take a RMD until his fifth year in the Plan? (The plan would be written that you need 1000 hours to accrue vesting service, but no hour requirement would be needed to accrue credited service for benefit accruals). Does this all sound logical? Any problems with it?

Could an employer change the terms of an outstanding loan - in this case, if the policy in place at the time the participant took the loan utilized the maximum permissible cure period could the employer change the policy so that the cure period for that loan was shorter than what was communicated to the participant at the time he took the loan?

Does anyone know of any certification or award programs for employee benefit depts. I am talking about an award or certification for the program or a portion of the program itself, not for individuals. I work for a company that is program/process award crazy and I thought something like that would be a help to our department. Thanks.

We are working with a new startup custodian, although the person behind the custodian has 25+ years experience with other trust companys.

This custodian is requiring that with each deposit that either the plan sponsor or the record keeper provide the detailed loan principal and interest amounts with each deposit. They claim to have an ERISA fiduciary and a bank regulatory responsibility and a to provide the information on their statements. We disagree that the loan is an asset to them when the plan trustee holds the notes so they should have no reporting requirement associate with the loan.

I've used 3 other custodians that acted in the capacity as a custodian and a corporate trustee and they have never requested detailed loan information. They have only gone as far as wanting a breakout on any deposit as to the type of money and nothing else. I have also never had an auditor question a certified trust statement about the loan information. They have always relied upon the records of the record keeper for loan information. If the custodian is acting as a corporate trustee too, then I can see a stronger argument for reporting the loan detail information.

Does anyone have any information that would support the custodian's position that they must receive and report loan information and report the loan balances on their statements? If so, how would this be any different then them not tracking the plan's self-directed brokerage accounts or other outside investements (employee stock or property)?

I'm looking for specific sites in ERISA or federal/state banking regulations that would require the tracking of loan information.

Sponsors of SIMPLE IRA's must either make a matching contribution or a 2% nonelective contribution on behalf of all eligible participants.

IRC 408(p)(2)(B)(ii) caps considered compensation for the 2% nonelective at $220,000 [for 2006].

The matching contribution is anywhere from 1% to 3% [the 'applicable percentage] of total gross compensation for those who contribute. It doesn't look like the 401(a)(17) cap applies when computing the match amount, as opposed to computing the non elective amount. Is this correct?

So, if an owner had gross comp of $ 300,000, a nonelective contribution of 2% would limit the [2006] contribution to 2% of 220,000, or $4,400. But if the 3% match was applicable for the year, the matching

contribution, if the above thinking is correct, would be 3% of $300,000, or $9,000.

??

With the new plan year, 1/1, my employer wants to do away with the 75% it pays towards EE's premiums. Instead, they want EE's to pay 100%, while increasing our gross pay to make up the difference. Are employers required to pay some portion of the premiums with group health plans?

I am just wondering what other trustees/recordkeepers are doing if a transaction is back dated and there is a gain or loss. So, basically I am interested in knowing what happens if there is a loss (e.g., do you fund the trust the loss, make participant whole, etc.) and what happens if there is a gain (e.g., do you keep the gain, do you allocate it to all participants, etc.). Finally, is there any legal authority for how we should be handling gains/losses.

Thanks

EE took out 3K loan in 1999, never made any payments. The TPA was a payroll company. They never distributed the loan as a deemed distribution.

Do you go to the DOL's VFCP or IRS' VCP?

Assume that she borrowed 3k and was supposed to make weekly repayments totaling 1,000 per yr for 4 years. Also assume that the total outstanding loan balance as of today, using the original interest rate is 6k.

VFCP states that an acceptable restituition would be to restore the plan, participants, and beneficiaries to the condition they would have been in had the breach not occurred.

VCP will allow the plan sponsor to treat the loan as taxable in the year of correction, rather than when the violation of section 72(p) first occurred

Do you...

1. go to VFCP and give ee a 1099-R for 6K and have the er add 2k to ee's account, essentially making ee whole.

2. Go to VCP and giver her a 1099-R for 6K in 2006, rather than give her a 1099-R for the year in which the violation of section 72(p) first occurred?

3. Skip it all and just give ee a 1099-R for 6k and call it a day.

Thanks for the help.

I'm not a big fan of model QDROs, but we have a client who has been using them for years and wants to continue to use them. We've been asked to review. In the course of discussing their procedures, we just found out that they categorically deny any DRO that is not drafted in the form of their model, whether or not the DRO otherwise meets the statutory qualification requirements. Is this permissible? Is there any rule that a plan administrator must accept any DRO that meets all of the technical requirements...? It doesn't seem right that a plan can deny a DRO as not qualified just because it doesn't like the form in which the DRO is prepared.

Is tuition reimbursement (up to the $5,250) includable as taxable income to the receipiant?

(Sorry if this is a duplicate or in the wrong forum)

This question is similar to the previous post . . .

Here's my basic question: If a 401(k) plan provides that the fixed (2.5%) employer match is 100% vested, could the plan be amended to apply a graduated vesting schedule to future employer matching contributions? I know that such an amendment could apply to new participants, but what about current participants?

Here are the more complicated facts:

Current terms:

-fixed match (2.5%), 100% vested

-discretionary nonelective 2/20 vesting schedule

Proposed change:

-safe harbor match, 100% vested (note that the safe harbor match will be greater than the current fixed match amount)

-eliminate fixed 2.5% match

-add discretionary non-safe harbor match with 2/20 vesting

Thanks!

Can someone provide the IRC Section or Reg citing that provides passive (e.g., current year elections rollover to next year) FSA elections are prohibited? I read in IRS Publication 969 that "At the beginning of the plan year, you must designate how much you want to contribute." What I'm unable to locate is the citing where this cannot be a passive designation.

Thank you for your help.

IRA owner (age 92) dies in 2006 without distributing 2006 RMD. Primary beneficiary was spouse who dies in 2006 shortly after IRA owner dies. Two children were contingent beneficiaries of original IRA owner. IRA account not yet changed over to spouse/beneficiary before her death.

1.) I understand that there must be a RMD for 2006 using original IRA owner life expectancy, but who has to include as income deceased spouse/beneficiary or contingent beneficiaries?

2.) Is deceased spouse beneficiary ignored all together?

I have a small employer, who for the first time has consistently maitained 100+ enrollment at the beginning of the plan year in its welfare benefit plans (health, dental and life). Since the employer has offered these benefits for many years, is it necessary to locate the original plan effective date or can we use the date they first went over the threshold? I know I have seen a discussion or help on this before, but it has been awhile.....

All the prior DB RMDs I calculated were done using the account balance method. I have some questions about the annuity method. I'd like to keep this simple at the start and get more complex with follow-up questions (though it always seems impossible to keep these discussions simple).

Lets say....

An owner turns 70.5 in 2006, and must take his RMD by 4/1/07. He doesn't want to deal with monthly annoyances, so he wants his RMD to be taken annually. So, it's my understanding that he can calculate his vested monthly accrued benefit, multiply it by 12, and distribute this before 4/1/07.

Before getting into issues of being allowed to convert that accrued benefit into alternate forms,

Here's my first question: as of what date do I calculate the vested monthly accrued benefit? is it 4/1/07, 12/31/06, or 12/31/05?

This may have been addressed before, but I can't find anything in the forum....

I have a client who has had 100% immediate vesting for their employer match. They are moving into a new doc with me and would like to change their vesting from 100% to 50%, 75%, 100% over a 3 year period.

I realize that you cannot take away benefits from a participant after it's been communicated to them, but can the employer create a new source, "new employer match" where from 1/1/07 on, the new vesting schedule will be attached?

The employees who are already employed as of the new doc would be deemed 100% vested already and any new employees that they hire in 2007 would go on the new vesting schedule.

Is this allowable? I have read sec 1.411(a)-8 and I think it is.....any other regs out there relating to this?

Thanks!

We have a deceased participant in a 401(k) plan whose spouse is the primary beneficiary. The participant's account balance is approximately $500.00. The spouse refuses to sign the distribution election form from the investment provider (Great-West), so the investment provider will not distribute the funds until the form is signed by the beneficiary (per their legal department).

This has been an ongoing issue for almost five years.

Any suggestions on how to get the money out of the account, or is it even possible without the spouse's signature? Or do we have to wait until the plan terminates until a force-out will occur? Any other issues we need to look at here?

Any input would be greatly appreciated. Thanks!

I've looked at EPCRS and the instructions for DOL's on-line calculator. In each of the examples, it appears that they are illustrating the aggregate amount of late deferrals. In performing the actual calculations, wouldn't you have to determine each participants' late deferral amounts separately to determine their portion of lost earnings?

We recently received updates to the IRS rulings regarding debit cards and in the updates it's boldly stated that the IRS has not in the original nor the latest updates approved a "use the card to purchase now and chase later" approach to claims substantiation at merchants without health-care related Merchant Category Codes.

Typically, most debit card vendors allow an employee to use the card at certain merchants without health-care related merchant category codes, on the assumption that such a practice is OK if after-the-fact substantiation by employees is requested by an administrator.

However, if the merchant has a health-care related merchant catergory code, this practice is permitted but subject to some conditions.

My question is, how are other administrators handling this ? Do you feel it is OK to allow this process even though the IRS has not permitted it or are you restricting the card usage to only those merchant with health care related merchant category codes ?