I work in client services for a retirement program sponsored by a prototype plan. There are approximately 4,000 small employers nationwide that use this prototype and retirement program. Several of these plans allow for loans. One of our clients has dissolved its business and is terminating the plan. One of the participants has an outstanding loan in the amount of $20,000 (her overall balance is about $200K). The loan was taken out several years ago for purchase of a primary residence so it amortized over a 20-year period. Since the plan is terminated, she will have to roll over her balance to her new employer's plan and, in doing so, the outstanding balance of the loan will be deemed distributed. Even if she were to do a partial rollover and take out a new loan from her new employer's plan, she would not be able to amortize it over a period longer than 5 years since she is not using it to purchase a principal residence at this time.

The client is insisting that we should be able to roll over the promissory note of the loan "in-kind" so that she does not incur a deemed distribution of the loan balance. We have pointed him to the Special Tax Notice regarding treatment of plan loans but he thinks we are being uncooperative. No one here including our legal dept. has ever heard of rolling over the prom note in kind. He states that he has outside ERISA counsel telling him he can do this.

Has anyone ever heard of this? If so, what is the procedure for doing this? Thank you for your help.

I realize plans are permitted to charge no more than 102% of the "applicable premium" for any period of continuation coverage. Generally, the applicable premium is the cost to the plan imposed by the insurer for similarly situated beneficiaries who have not had a qualifying event. Is anyone in practice carrying over surcharges such as smokers or spousal surcharges to COBRA premiums? I understand this may be risky given the lack of guidance permitting. Any thoughts?

An employee went on military leave during calendar year plan 2003 after working 1560 hours. He received a profit sharing allocation and QNEC for that py. For py 2004 he received no income however the plan made QNEC/QMAC/PS/Match contributions. 2005 py the employee came back to work, clocked in 560 hours and received a QNEC/PS allocation.

The employee was on 2 year military leave so he would have 5 years to make up any elective contributions he would have been entitled to make.

The employee received PS/QNEC/QMAC in 03 and 05 based on actual hours worked and comp received. My question is would the employer have to: 1) make additional contributions for the 2003, 2004 and 2005 plan year based on the hours the employee would have worked had military leave not occurred and 2) if the employee decides to make up deferrals within 5 years, then the employer must match those deferrals, if not he receives just a QNEC/QMAC/PS?

The PPA allows rollover of eligible distributions to an IRA for a non-spouse beneficiary. All the commentary I have seen refers to rollovers from qualified plans to an IRA. If the distribution is coming from an IRA, can it be rolled over to a non-spouse beneficiary's IRA?

Thanks.

Does anyone know where a small defined benefit plan can get an IAS 90 service? I understand this is like a FASB, but has an international scope. Unfortunately, I don't know anything more about it so any help would be appreciated.

Not for profit Organinzation sponsors a money purchase plan. The employer errored in calculating the MP contribution and under-deposited aprrox. $10,000 into the plan.

Plan Year End = 09-30-2005

Company Year End = 12-31-2005

1. Does if matter that they are a not-for profit company when determining if 5330 is due?

2. Assuming 5330 is due - isn't it late? Wouldn't the original 5330 would have been due 7/31/2006?

2a. If it is late - what can I do other than wait for the IRS to send notice of penalty and interest?

3. If they have to pay the excise tax - should they now file

a. One 5330 for the initial $10,000 * 10% = $1,000 excise tax.

If I'm reading the ERISA Outline book corretly - doesn't the $10,000 funding defiency carry over and become part of the minimum funding for the plan year ended 09-30-2006 - and as long as this $10,000 is paid in within the 8 1/2 period following the end of the 2005 plan year <ending 09-30-2006> than there is no additional excise tax?

EARNINGS

Finally, the employer wishes to make the deposit to correct the missing contribution ASAP - am I assuming correctly that they must also allocate earnings on the late deposit? If yes, from what date should the plan base lost earnings on? They origianlly deposited 95% of the contribuiton back in January of 2006 - if it weren't for the miscalculation they would have deposited the whole amount in January 06 - should they be the date to use for a lost earnings calculation?

Can we use the DOL calculator to determine the lost earnings, or must we use some other method - i.e. one of the federal rates or highest rate of return for any plan fund?

Corporation (5 owners with equal ownership)sponsoring a Simple 401k is dissolving as of 12/31/06 and forming two separate entities 1/1/07 (one with 3 previous owners and the other with 2 previous owners).

The new entities will not be affiliated - they are 'breaking up'

The owners are trying to figure out how to handle existing plan going forward.

Each new entity will take half of the old company's employees with it.

Can either of these plans establish a new 401k plan effective 1/1/07 or do we have successor plan problems?

My employer is two months late in transmitting my voluntary pre-tax deductions to my 403(b). It is October 15th and the last contribution to my account was made in Sept. for July's withholding. There was no match for July. My August and September monies are in limbo. I called HR and they said they'd look into it--it is "finance" that sends the money. I hate to miss out on the tax-deferred benefit and the match, but this situtaion is too stressful. How should I address it. Do I need a lawyer?

My wife's company went bankrupt and the judge ordered chapter 7. The lawyer who was nominated to dissolve the company became the plan administrator and got the judge's approval to use the plan's money to pay her legal fee to terminate the plan. As the company hardly has any assets it became clear that the lawyer intends of milking the most from the plan. Objections of plan participants or even attempt to place a pre-determined cap on the fees were rejected by the judge.

Does anyone know what applicable ERISA or bakruptcy law explicitly allow or forbid tapping into the plan's participants' money for that purpose ?

We feel that this is hiway robbery in the middle of the day with full endorsement of the court.

Thanks for any relevant info.

I am writing an economics paper on pensions and need information on how a large company is regulated when employees are contributing to a 401k plan from paycheck deductions. For example, how can a company take money from a specific contribution election such as Fidelity Mid Cap, and change it to another plan such as Morgan Stanley Mid Cap? If the contribution is the employees money, how could this change be made by the employer?

Where do you put the premiums paid by the plan to PBGC on the form 5500. Lump them in with professional fees? If that's the case then that line item won't tie to Schedule C. Or do you hsow them there too?

Can an employer force an employee to pay for premiums on a pre-tax basis? For example, an employee may want to pay for all premiums on an after-tax basis so that his Social Security benefits are not reduced. Another example, an employee may want to pay for disability premiums on an after-tax basis so that the benefits received would not be subject to tax.

I've got an outsourcer saying that all benefits must be paid on a pre-tax basis.

The statute under §125 is pretty sparse, and the proposed regulations Q&A-6 isn't really clear.

Any thoughts?

Hi folks, I've been reading some articles recently about why it's prudent to convert your IRA's, 401k's, etc to an annuity for when you're wanting to retire and establish systematic monthly retirement income. I was wondering if those that are experts in this arena could provide the pros/cons to this approach. If this is the wrong forum, I apologize. Thx.

Is there something in PPA or other recent regulations that allows for roth ira balances to be rolled over into a qualified plan? I have an ASPPA supplement comparing plan types with an May/June 06 date on it that indicates roth iras are only eligible for rollover to another roth ira, but someone mentioned to me she thought there had been a change in the recent regs. I can't find anything.

An old client brought in a Social Security Administration letter sent to a participant letting them know about an account balance that they may be due from the plan. SS letter was generated from the 1999 SSA filing. Unfortunately, the SSA filing was incorrect. For some reason the recordkeeper at the time reinstated forfeitures, made all participants 100% vested, and showed about a dozen people on the SSA as being owed account balances. Life goes on and participants show 100% vested account balances but nothing was done on them. 3 years later the plan terminates. During termination process this was caught and account balances were forfeited and allocated. However, those participants were not reported on the 2002 final filing. Hence the letter generation.

Certainly I can create a form letter for each participant showing them that do not have a vested account balance, but it would be much easier to stop that letter from generating. Should I file an amended 2002 return with a new schedule SSA at this point? Or is it simply too late?

Fortunately none of the above actions were mine as I started in June of 02 and final filing had already been completed. But, still my job to clean up the mess....

Simple question? If you have an over 50 sole propreitor that has a small net schedule C that is trying to contribute as much as possible to a 410(k) profit sharing plan, do the catch up contributions count towards the 100% of pay limit?

$30,000 net schedule C

25% of pay profit sharing allocation

This leads to $2,119.43 half SE taxes, a $5,576.11 profit sharing allocation, and what must be the schedule C after pension contributions of $22,304.46. (22,304.46 + 2,119.43 + 5,576.11 = 30,000)

Now if we add some deferrals to the profit sharing contribution we could go with $5,576.11 + $15,000 + $5,000. But this ends up with a total contribution of $25,576.11. That is over 100% of the $22,304.46 schedule C.

I visited two websites yesterday that calculate the maximum for a 1 person plan, and they both came up with the $25,576.11 number.

I thought the maximum would be somewhere between the $22,304.46 and the $25,576.11 because if you lower the profit sharing allocation down from the 25% of pay then the schedule C after pension will increase. So who is wrong here? Me or the websites?

I know the catchup contributions have to count towards the 100% of pay limit because then someone that is paid $1 could contribute $5,000 to the plan and that makes no sense.

Can you contribute to both a SARSEP and Simple IRA plan? If so, what is the maximum contribution limit?

I met with a Financial Advisor the other day who posed a question to me regarding Pre and Post tax money in an IRA. Here's the scenario:

A person rolled ALL of his monies into an IRA. This money consists of 20% after-tax money, 50% pre-tax IRA money and 30% pre-tax money from a qualified plan. When this person takes his distribution, how is the tax calculated?

Your input is greatly appreciated!

Thanks!

Frozen plan purchases irrevocable commitments from an insurance company to provide for all benefits under the plan. They never formally terminated the plan with the PBGC or the IRS. No notices were sent out.

Since the PBGC guarantee obligation has ended, do you still have to go through the termination process?

I suspect that you would still have to and notify the employees. Thus, what would be the penalties for doing the paperwork after the fact.

I have a client who has income from his law practice. He also has director income from somewhere else - not in any way related. Is he allowed to receive an allocation of $44,000 from both incomes?