A company that would fall into Cycle A adopted a Fidelity prototype 401(k) plan several years ago. In 2003, it amended the plan to provide for multiple matching contribution formulas, which took it out of prototype status ("amended prototype"). Fidelity has issued a notice to its employers advising them that "the vast majority" of amended prototype plans (i.e., those that have not been amended "extensively" off prototype) can file under the 6-year prototype cycle and that it would actually do more harm than good to file an amended prototype plan during the individually-designed 5-year cycle.

However, this article by Deloitte (recently appearing on BenefitsLink) says that only amended prototype plans that were amended after February 16, 2005 can take advantage of the 6-year cycle and all others must file during the applicable 5-year cycle.

Both articles state that they are based on conversations with IRS officials.

Fidelity appears to rely on Section 19 of Rev. Proc. 2005-66. Deloitte appears to rely on Section 17.02 of Rev. Proc. 2005-66.

The company felt reasonably comfortable with Fidelity's position until it came across the Deloitte article. Obviously with the January 31 deadline fast approaching, it needs to decide who is right quickly. Any thoughts?

Folks,

Any thoughts as to whether or not qualifying an unsigned DRO is a violation of the fiduciary's responsibility under ERISA?

The judge signed the DRO, however, none of the parties signed. Neither Attorneys signed - the weren't aware of the DRO. Nor did my ex-wife sign - (she was effectively representing herself pro-se). Instead, she listed the Atty's info (bar #, address, tel no.) but ommitted their signatures.

An unsigned order, pleading, etc. - gives me certain minimal rights against my ex-spouse for a violation of the MO Rules of Civil Court (55.03). However, she is what has euphemistically been referred to as "judgement proof." I filed an ERISA claim with the plan based upon the failure of the fiduciary to provide timely notice of the qualification of the DRO. However, I'm interested in knowing whether or not other grounds for action exist.

For those of you that know, would qualifying a DRO that has the judge's signature (but none of the parties) raise any eyebrows?

Regards,

Bjorn

What schedules for form 5500 are needed for a 403(b) with Employer Match?

Our cafeteria plan administration software company is causing us no end of headaches. We're a TPA, and many of our clients are using the FSA debit cards for Unreimbursed Medical Expenses. For some reason, our nightly uploads of info to the software company are not working as they should. The "purse values" keep slipping back to zero ($0.00) overnight. Purse values=available funds in their FSA accounts. So when a participant goes to swipe the card for a valid (or even not valid) expense, the card is declined for lack of funds, when they in actuality, have thousands of dollars available. Three of our largest clients are very upset, because this is an ongoing problem, and has happened three times this week.

Any TPA's out there have relatively little problems with debit cards?

Also please share if you do have issues, and what they are (for those that do have signifigant problems).

Thanks in advance.

Jeremy

In reading the Act it appears to me that if a DB plan is covered by the PBGC, it appears that the combined limit will not be applicable. Or to put it another way the DB plan would not be factored in the 25% deduction limit for the DC plan.

Assuming the above is correct, my question is "When does this become effective?" Is it for plan years beginning in 2007, 2008?

Thanks.

Continuing from where that leviathan thread left off... jims made a suggestion that intrigues me:

"I assume your 2006 income is extra high compared to 2005 and 2007 due to the inheritance. I also assume you like Roth IRA better than traditional IRA (I agree.). So here's how to get the best of both and save taxes. Contribute the max to traditional IRA for 2006 - you can still do it in 2007 up until you file your tax return (4/16/2007). At your income level, you can still get an IRA deduction (even though you contributed to a 401(k)) along with the Savers Credit to reduce your taxes for 2006. After you contribute for 2006, immediately convert to Roth IRA for tax year 2007. You'll owe taxes on the conversion and you should make an estimated tax payment to the IRS. Convert now and pay taxes while you have the extra cash, otherwise you'll never get back to it. Plus the sooner you convert, the less taxable earnings you'll have. When you convert, make sure you covert the entire balance to Roth IRA. Use other funds to pay the taxes. You effectively contributed to a Roth IRA, but you didn't waste the regular IRA deduction for the year you had high income."

Yes, income for 2006 is 20,000 higher than for 2007, not because of the inheritance per se (which is tax free and still forthcoming) but because of a taxable amount of money outside of the estate, so essentially, that supposition is correct. Total income for 2006 is about 65,000 and for 2007 will be about 48,000.

I had pretty much decided to just fund Roths for both years even though the lack of tax break will hurt (a lot). My instincts tell me to just cough up the tax while we're young and working if the tradeoff is to never pay tax again on that money. (by the way, calculated tax break for 2006 for us, if we decided to fund trad. IRAs instead, is about $1200 and for 2007 is about $950, give or take. We are in the 15% bracket currently and barely into the next bracket up for 2006.)

The thought of doing something like suggested above did cross my mind, but I assumed that Uncle Sam would have safeguards about people pulling a fast one, and the tax on the conversion would be just about the same.

I am probably missing something and honestly, I don't completey understand the process. If you could break it down in easier-to-understand chunks I'd appreciate it. For example, I understand how to open and fund IRAs, whether new or established, but I have no idea how a conversion is done or what taxes are assessed and when on a conversion. THANKS in advance!

I am trying to find the rate for 30-year Treasury securities for certain months in 2006. The IRS used to refer to the interest rate published in Fed Reserve release H.15 (average yield on 30-year Treasury Constant Maturities for the month). Now, the IRS issues a notice with the rate, based on the "monthly average of the daily determination of yield on the 30-year Treasury bond maturing in February 2036." For 2006, the rate in the IRS notice usually, but not always, matches the 30-year rate in Federal Reserve release H.15. For June 2006, for example, the rates are 5.16 and 5.15. Why is there a difference? And does this mean I should not use H.15 to look up the interest rate, even though 30-year Treasury securities are back?

Does anyone know of any potential issues with having a self-directed brokerage account in a non-qual plan? I have heard conflicting opinions on this topic. Thanks

Dr. Jane Doe is 100% owner of her medical practice. She has a prototype Safe Harbor PS/401k for her six employees. Her husband, Dr. John Doe, is setting up his own medical practice in his wife's office and will share her staff. Dr. John Doe will be the only employee in his practice.

Dan Dr. John Doe adopt his wife's PS/401k plan?

Having looked at the history of posts related to ASG issues, my scenario seems straightforward.

Dr. D owns 100% of JD Dental. Dr. R (an HCE) works as an employee of JD Dental. Dr. R wants to strike out on his own with the "blessing" of Dr. D.

Dr. D will let Dr. R go out on his own with no issues, but wants to sign Dr. R's new company to a 5-year contract to provide services to JD Dental and its patients. Dr R's new company (owned 100% by Dr. R) can do work for other companies, but likely will receive 100% of its revenues from JD Dental. Dr. R's revenue will come solely from working on JD Dental's patients, and no revenues will be related to management functions for JD Dental since Dr. D provides all of those.

Dr. D will not own any of Dr. R's new company. Dr. R has never owned any part of JD Dental.

1) is this an ASG? Since there is not one whit of common ownership, nor any management functions, I think not.

2) if not, can Dr. R set up a retirement plan for his new company without any potential coverage ramifications with JD Dental's plans?

The father-in-law of the owner is currently employed and is over 70-1/2. Is it necessary that he receive a minimum distribution as long as he stays employed?

Thanks

I'm a non-spouse beneficiary of 401(k). I'm wondering about Plan requirements to notify participants re: the new inherited IRA rollover to non-spouses option in PPA.

My plan hasn't made any written notification to participants or put one on their website about their policy of handling non-spousal distributions to inherited IRA. On the phone I've been told that they don't allow it--PPA makes it optional for plans to do or not. I'm not sure I'm getting accurate info from Plan.

I need to make my distribution-type decision by Feb. 15. I'll lose $20,000 in taxes if not able to roll to inherited IRA.

Are plans required to notify what their policy is--here and for any new changes or relating to new laws even if opting out, and what are terms of any given requirement?

Is it possible to change the search function so that capitalization is not a factor when looking for a match? I have been stymied several times in my searches by a stray capital letter.

My wife and I both have a Roth Ira. My wife did not work in 2006 but I made enough money to contribute for both of us....($4,000 each)....Am I correct that I was able to do this.. Did I have to open up a different "spousal" IRA or was I correct in just contributing to her existing IRA already? Thanks for any help.

In an article I read recently, the author recommended that 403(b) sponsors select a single investment vendor rather than offering a choice of several. The context of the discussion was the new regs and changes to plan operation. In your opinion, is the main reason for this recommendation better control, reliability and availability of investment information, is it to simplify communication & education, or is it for other reasons? Please comment. Thanks.

Can a safe harbor contribution be made with employer stock? If anyone has a cite one way or another that would be great, thanks.

Is a DB plan sponsored a governmental employer required to provide for actuarial increase in case where participant continued to work past Normal Retirement Age?

I'm aware of the penalties imposed for failing to issue 1099s. Does anyone have a sense as to whether there would be any liability to the recipients? For example, a participant receives a distribution, but did not receive a 1099 and does not report that amount on their personal return. Would the company be liable for the costs (and potentially additional tax owed) incurred by a participant? Granted, the participant knew they received a distribution, but did not report it. Is anyone aware of any caselaw on this? Thanks.

I am staring at a grandfathered governmental 401(k) Plan, which I have never dealt with before. I thought some of the experts would have some advice on the following two specific issues:

1. Is there any reason NOT to recommend immeidate termination of the 401(k) and rollover into a newly created 457 Plan?

2. Grandfathered governmental 401(k) plans are not subject to various forms of discrimination testing (ADP/ACP). The plan, however, has a generic plan document that does not identify it as a grandfathered plan, and states that various ADP/ACP tests will be conducted if there is no safe harbor election. Does anyone think that this sort of language would cause a plan to "elect in" to such testing?

Thanks in advance.

A doctor(age 60), who is the only active employee in a terminated pension plan, wants to take a portion of his account balance ($17,000). He has been advised that 20% with holding is not required. From reading prior posts, it appears as if he is being given incorrect information. He is not terminated and will not be taking installment or periodic payments. Is he subject to the 20% and ordinary income or just the ordinary income?