If an employer has a Simple IRA plan in which monthly contributions are being made and several employees are making withdrawals as soon as the funds are going in, would the employer still have to match the salary deferral amount? I guess I am asking if you would deduct the amount of the withdrawal before depositing the match. Its crazy for the employees to be taking the penalty/tax hits but these are lower income employees who really dont care.

PPA stipulates that participant directed account plans provide a quarterly statement that discloses vested benefit or provides the resources to calculate. Has anyone heard from the major vendors as to how they are going to handle it? We are also concerned with self directed brokerage accounts that do not report by source.

Working on a 5330 for late deposits and not getting any help from IRS rep. Scenario:

Deposit 1 - considered late on 10/24/05, deposited 12/16/2005. Per DOL calculator lost earnings are $520.29 assuming final payment date (lost earnings restored) is now.

Deposit 2 - considered late on 11/16/05, deposited 12/16/2005. Per DOL calculator lost earnings are $271.07 assuming final payment date is now.

This is my understanding of the 5330: 2005 5330 (which is late) - For both deposits - report interest from 10/24/05 - 12/31/05, which is $490.36 and $255.47.

For 2006 5330 - report the $490.36,$255.47 AND report the interest from 1/1/06 - current ($29.93 & $15.60). This is basically the interest on the interest.

I guess my question has to do with the 12/16/05 date that the contributions were deposited, and thus corrected. It sounds like the prohibited trans continues until the lost earnings are restored, which is reflected in the example above, and does not end when the contributions are deposited?

Any help would be appreciated. Thanks.

The general rule is that deferral elections must be in place by the end of the calendar year preceding the year to which the compensation is earned. Can an employer establish a new plan in November 2006 and take advantage of the exception for deferral elections being made within 30 days of becoming eligible so that deferrals are made in 2006?

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?