If a participant dies after RMDs have begun, can the designated beneficiary still make a qualified disclaimer to transfer interest to the contingent beneficiaries?

A client maintains a SIMPLE Plan and has elected to make matching contributions thereunder. The client desire to establish a qualified plan and will probably establish (1) a safe-harbor 401(k) plan and (2) a cash balance plan. Of course, the client will receive substantial benefits under the new plans.

Should we establish the new plans as of 1/1/07? Alternatively, are we able to freeze the SIMPLE effective 9/30/06 and establish the new plans effective 10/1/06. Of course, we would need to reduce deferrals under the new 401(k) plan by the amounts deferred under the SIMPLE. Additionally, we would need to insure that 415 limits had not been violated.

Under the new plans, NHCEs will receive larger contributions than they currently receive under the SIMPLE.

I recall once talking with an IRS official and he indicated it was the IRS' desire not to have to include Code Section 415 language in SIMPLE plan documents that prompted the IRS to require that adopters of SIMPLE plans not maintain other qualified plans. If that is the case, we should be able to freeze the SIMPLE 9/30/06.

Thanks in advance for your assistence.

The 401(k) plan of a Native American tribe has received an order from a tribal court dividing a participant's interest in the plan. The QDRO rules require that an order be issued pursuant to state law, but the order sent to the tribal plan was issued pursuant to tribal law. Will the plan violate the anti-alienation rule of the Code and ERISA (assuming it applies) if it recognizes the alternate payee's interest under the order?

A QDRO is executed in 2006 saying AP get 50% as of 8/12/05.

In determining the 12/31/05 balance for the calc of the participant's 2006 MRD can I recognize the QDRO interest?

(So early in the year I gave him a number but now I can change it?)

My thought was the regs are set up so that you can determine the minimum on the first day of the year and that's it.

Thanks

The 2006 instructions for form 1099-R states Code B (designated Roth account distribution) can be combined with codes 1, 2, 4, 8, G and L as appropriate. Does that mean if you had a distribution of an account with non-Roth 401(k) money and Roth 401(k) money being rolled to a traditional IRA and Roth IRA you would only need to completed one 1099R?

What happens if an employer continued to report the PS-58 costs even though that is no longer permitted under the final split dollar regulations? What should the employer do now, if anything, to correct this?

I appreciate any help in determining if this situation is perhaps an Affiliated Service Group:

There are a group of 25 companies that engage in currency exchange. By state law, each location must be a separate business entity and that is why there are 25 separate busineses. 17 of the 25 are a controlled group. Of the 8 remaining businesses, 5 are owned 50/50 between a brother and sister, so this group of 5 is a controlled group, but not with the other 17. The remaining 3 businesses have ownership split 3 ways between brother/sister/other unrelated person.

Here's where it gets interesting. One of the company's sole purpose is a management facility that also does invoicing and payroll for the employees of all the other companies that do not want group health insurance. Another company's function is only to facilitate group health insurance. Therefore, anyone wanting group health insurance gets a paycheck from this company. Otherwise, an employee gets a paycheck from the management company.

Are the non-controlled group members perhaps an Affiliated Service Group? I appreciate any opinions on this.

I always understood that the safe harbor matching contribution could not be taken as an in-service distribution (including hardship). Is this still correct? We are looking at changing our plan to a safe harbor and in-house counsel has come back and questioned this restriction because they can't find any specific prohibition. As I recall, I thought it was kind of a circular interpretation related to Notice 98-52 but is there something more current I can point to or am I off base with this (I am admittedly behind on completely reading in detail everything that has come out over the past two years!!). Thanks.

PAL

We have a DB plan that allows for lump sum distributions regardless of amount. On plan termination, can we simply pay out lump sums to everyone and not offer annuity purchases? On a related note, to determine sufficiency of assets, can we simply look at the lump sum present values of benefits, or do we have to see if it will cost more for annuity purchases?

When s/h 401k plans are created, is the s/h contribution optional each year, or is optional (i.e., you can go from s/h to non s/h on a year to year basis)? I'd like to be able to switch year-to-year, but the following document passages lead me to believe otherwise.

The plan document seems pretty conclusive. Under a section titled Safe Harbor Non-Elective Allocation Formula:

"The Employer shall make a fully vested contribution to each Eligible Employee equal to at least 3% of his or her Compensation for the Plan Year."

Nothing potional about this, so that means the 3% contribution is required each year. However, in the next sentence, it adds:

"If the Safe Harbor Notice requirement and the Safe Harbor Non-Elective Contribution are satisfied for a plan year, the nondiscrimination tests under IRC §401(k)(3) and IRC §401(m)(2) are not applicable"

I can understand that if the s/h notice is not provided in a timely manner, than the plan is subject to the 401k/m tests. But since this passage also considers whether the s/h contribution is satisfied, does that it may be optional? I may be reaching here.......

My basic question is how to calculate "earnings on contributions" when I'm withdrawing excess contributions placed in a Roth IRA. My husband just received a bonus that will probably place us in the middle of the "Modified AGI" limits for contributing to a Roth IRA. Let's say, hypothetically, that our "Modified AGI" will be $152,000 for 2006. We have each already contributed $4,000 to our Roth IRAs since we didn't anticipate the bonus. According to my calculations (and based on the IRS' instructions), this means that the maximum each of us should be able to contribute to a Roth IRA is $3,200.

I understand that, according to IRS Publication 590, I can avoid paying a 6% excise tax that would otherwise be due for excess contributions to my Roth IRA. But in order to do so, I must not only withdraw our excess contributions of $800 apiece, I must also withdraw "earnings on the contributions."

How do I figure out how much of my earnings to allocate to the excess contribution? Each of our IRAs has approximately $18,800 in it at the moment. Each of the IRAs (invested in Vanguard mutual funds) received approximately $150 in dividends during the year. One way to calculate the relevant amount would be to assume that if the principal of $18,800 had been reduced by the excess contributions of $800, then we'd have earned about 4% fewer dividends (since $800/$18,800 = 4%). Thus we should withdraw excess earnings of 4% x $150, or $6.38, in addition to withdrawing $800 apiece.

Vanguard hasn't offered me any help in performing these calculations. I'm hoping I'm on the right track or someone here can point me toward the right track.

I'm also hoping there's nothing wrong with simply transferring our excess contributions (and excess earnings) into our Traditional IRAs, also with Vanguard. We're way beyond the point at which our IRA contributions would be deductible, but I'd still rather put that money toward retirement. Please let me know if that would pose any tax-related problems.

I am a 55 yr old teacher with little accumulated retirement savings and am trying to decide whether to put what money I can save into a 403B or a Roth IRA. I have a 403B right now but it is making about 5.5% -- it is on a fixed basis -- and have been talking to another company about switching to their 403B and letting them manage the fund stuff (AXA to be exact). But in the meantime I have been reading about Roth IRA's and wondering if I might be better off with that. I (quite obviously) don't know much about the whole financial business and really would not be up to the self-directed level of investment. I know I can't earn a lot from either one in the time I have left -- I would really like to retire at 62 but acknowledge that I will probably need to wait until I'm 65. Can anyone give me their opinion of what I should do?

I just posted this on the Welfare Plan Board in response to another topic title but thought I might post here as well to see if others had thoughts.

I have in the past had a couple of occassions to retroactlively adopt wrap plans in order to limit the DFVC filings required for plan sponsors who have never filed Form 5500s. I too have never had any objections from the DOL. In fact, one time I called the DFVC hotline and asked them directly if they had any problem with the use of a retroactive wrap plan in such situations and the person on the other end said no without any hesitation. (While I suspect the person answering the phone is admittedly not a DOL policy maker, it seems other DOL representatives have informally indicated that retroactive wrap plans can be used.) Although the use of retroactive wrap plans has always struck me as a bit suspect and not above challenge, it clearly appears that many plan sponsors have done this without issue.

I now have a client who is in a different situation. Basically they have filed a single Form 5500 for all their welfare plans for the last 10+ years or so as if they had a wrap plan in place. (I think they thought their cafeteria plan was a wrap plan which it is not.) Everyone is in agreement that the filings are not technically correct and that a wrap plan is needed going forward. However, when I suggested that they retroactively adopt a Wrap Plan to try and address the prior filings, their benefits broker (an experienced broker with a large national group) said they did not think you could retroactively adopt a wrap plan and did not think that would legally help the situation.

If anything, it seems to me the use of a retoactive wrap plan is is less offensive in this type setting than the use of retroactive wrap plans in a DFVC context since at least the plan sponsor filed a return and disclosed the information. The national consulting group did not reference any recent changes or developments on the retroactive Wrap Plan front--they just did not think anything could be done retroactively outside of the remedial amendment period. Again, I don't view retroactive plans as ideal either but they do seem to be accepted by the DOL in my experience.

My questions are as follows:

1. Has anyone encountered any problems or resistance from the DOL with use of retroactive wrap plans or seen or heard of any change in the DOL's position on use of retroactive wrap plans since the original post?

2. Anyone see any problems with the use of a retroactive wrap plan to conform to prior 5500 filings without a plan in place as compared to the use of retroactive wrap plans as part of a DFVC filing?

3. If a retroactive wrap plan may work--and, again, I agree it is not perfect but seems like a solution that is worth trying giving the alternatives--does it not make sense to go ahead and put a retroactive wrap plan in place now rather than waiting to see if there is ever a need to produce the plan document and then attempting to put one in place in the midst of a DOL audit, etc.? (Seems to me even though it is late, the "less late" it is adopted, the better.)

4. Finally, if you are going to do a retroactive wrap plan in this type of setting, is it legally necessary to take it all the way back to the beginning of the plan or could you argue that only the 2003, 2004, and 2005 years are techncially open and need to be corrected since a 5500 filing has been made (or is about to be made) for each of those years. While it is tempting to take the wrap back all the way to inception, the benefits provided under the plan and the insurers involved, etc. have changed considerably over the past 12+ years and it would be much easier to only try to get an accurate wrap document in place for the "open" years assuming earlier years have closed.

A small manufacturing company has 1 location, but runs b-weekly payroll for its hourly employees, and bi-monthly payroll for its salaried employees. The salaried group contains the owners plus a few others. No HCEs are in the hourly group.

Other than remitting 401k contributions separely for each payroll, is there an acceptable way to streamline the process, so that either 401k contributions are deposited on a bi-weekly basis, or a bi-monthly basis? Here's a worst case scenario: Bi-weekly pay ends on Friday the 12th and the bi-weekly 401k monies are deposited that day. Bi-monthly people get paid on Monday the 15th, but they have to wait until Friday the 26th to have their monies deposited. Is there a way around this?

I'm primarily a 401(k) person, so please be kind...

Performing ACP testing on a 403(b) plan and it fails - is shifting allowed as it would be in a 401(k) Plan to pass ACP?

Thanks in advance.

A company sponsors an underfunded DB plan and an overfunded VEBA. Can the excess assets in the VEBA be transferred to the DB plan to cover the underfunding? Thanks.

What are the ramifications for having plan assets titled in the name of the plan sponsor as opposed to the trust? This was merely an oversight by the plan sponsor.

Please clarify/furnish an example.

Thank you,

Joel L. Frank

We use a third party disabiilty case manager to handle our disabiity claims. Our plan requires that employees notify the DCM before the 8th day of their disability. We have a very generous salary continuation policy for employees away from work due to disability. I'm interested in knowing if other employers have timliness reporting requirements and, if so, what are the penalties, if any, for not making timely notification.

Can a plan have a 6 month and 1,000 hour requirement? I have a takeover plan with that provision!