So let's say in September of 2005, a participant takes a hardship withdrawal. However, the employer fails to suspend deferrals. This is not discovered until July of 2006.

An apparently acceptable fix is to treat the deferrals for the 6 month suspension period as discontinued, and the participant will forfeit the deferral and any match. The employer will then make the participant "whole" in his paycheck currently, and use the forfeited deferrals/match as a current employer contribution.

Question - I would assume such a fix requires going back to re-run the ADP testing for 2005? It seems unlikely that it could be avoided if they are being treated as never made, but sometimes truth is stranger than fiction...

Thanks.

So this year is my ten year reunion from Arizona State University. I received an email from the alumni association inviting me to the home coming football game, some mixers, tours, yadda yadda yadda. The email was normal except for the picture they used in the email. It is the most bizzare thing I have ever seen. I actually called the alumni association and asked if their server had been broken into and my email address had been stolen.

Not only does the caption seem to imply that the festivities at the reunion are clothing optional, but the people in the picture are ridiculous. This is my ten year reunion so the email went out to people in their early to mid thirties. The "kids" on the picture look like they are maybe 20 and I swear it looks like they are all flashing gang signs. Even the guy that looks like his arms are crossed has his ring finger down in an inconspicuous gang sign. Maybe when we were 21 a naked reunion might have been fun, now though, no thanks.

I had to share this somewhere, I am still in shock over it.

Don't worry though, the alumni association explained to me that the picture was sent on purpose and that my personal infomration had not been stolen.

A non-profit corporation sponsors a defined benefit plan that terminated effective December 31, 2005. The plan has about 30 or so participants as of the current date. The plan was submitted to the PBGC (in a standard

termination) and the plan was also concurrently submitted to the IRS for a favorable determination letter. The plan sponsor is still waiting for the favorable determination letter from the IRS. The plan sponsor would like to await approval from the IRS prior to distributing the plan assets.

As of the current date, the termination liabilities are greater than the market value of plan assets although the plan sponsor intends to fully fund the plan prior to distribution of assets. The regulations state that terminating plans covered under Title IV of ERISA for the plan year in which the plan terminates are allowed to contribute the amount required to make the plan assets sufficient to satisfy all plan termination liabilities and permit the plan to terminate in a standard termination.

(1) Obviously, the plan's minimum funding deadline for the 2005 plan year is September 15, 2006. Since the plan terminated effective December 31, 2005, is 9/15/06 the date by which the plan must be fully funded (on a termination basis)? Is there an opportunity to fund the plan after 9/15/06?

(2) Assuming there is no required contribution for the 2005 plan year, can the plan sponsor fully fund the plan some time after 9/15/06 although the plan is not subject to the minimum funding standards for the 2006 plan year?

Client has a non-ERISA 403b. Has a legal separation agreement but no QDRO yet. Investment provider will not permit beneficiary change without QDRO unless ex-spouse signs off. Not sure if this will happen now due to contentious nature of proceedings. Does my client have any other recourse to pursue or must he simply wait until QDRO is issued?

An employer (sole prop) sponsors a Safe Harbor 401(k) Plan with a basic match. For 2005, the owner's net schedule C (after the common law participants' contributions & SETD) is less than $210,000 and his deferrals are $18,000. The plan's definition of compensation includes salary deferrals. In determining the owner's employer contribution allocation (4% of comp in this case), should his SEI be reduced by his $18,000 deferrals after reducing it by SETD?

This question pertains to Defined Benefits plans that offer immediate lump sums, but have no early retirement provisions.

An enrolled actuary that we work with has stated that a DB plan would not have to offer immediate annuities, that they could make the annuity options only available at retirement, even if the plan allows for immediate lump sums upon termination of employment, further stating that no annuity options exist before Normal Retirement if the plan does not have early retirement provisions.

However, we believe that in order for the lump sum to be payable now, the participant must waive a QJSA that would be payable during the 90-day period that includes the annuity starting date. But, if no annuity is payable during that 90-day period (as the enrolled actuary has suggested), then the participant has not waived anything and therefore has not made a valid QJSA waiver.

Q1. Must a plan that offers immediate lump sums also have early retirement provisions that start immediately upon termination?

Q2. Must a plan that offers immediate lump sums also offer an immediate QJSA that would be eligible to have payemnts begin during the 90-day (soon to be 180-day) QJSA waiver period?

Does a defined benefit plan with the following language contain a retroactive annuity start date ("RASD")? The provision is: "Normal Retirement - A Participant shall be eligible for an Accrued Benefit if his employment is terminated on or after his Normal Retirement Age. Payment of an Accrued Benefit under this Section shall commence as of the first day of the month coinciding with or next following the date of the Participant's termination of employment with the Employer and Affiliated Employer." My concern with this provision is the situation that could arise if a Participant contacts the Plan on May 29 of a Plan Year (calendar year) and wants to retire June 1. Assuming that the Plan was not able to provide the QJSA explanation to the Participant by June 1, does this situation constitute a RASD? The Plan's actuary indicated that this situation is not a RASD because the Plan does not provide the Participant with the right to "affirmatively elect" between a RASD (i.e. the right too have his benefits calculated as of a retroactive annuity starting date) or a current date. Instead, the Plan document does not give a Participant a choice between two different distribution dates. It provides for the payment date (i.e. first day of the month coinciding with or next following the Participant's termination date). I have taken the position that the above situation constitutes a RASD because the Participant's payment relates to a date in time before he received the QJSA explanation, irrespective of whether the Participant had a choice as to the distribution date. Your insight would be appreciated.

Here's the scenario: Paticipant deceased 2004 age 51 at time of demise. No benefits payments were ever commenced.

Two sisters are the designated beneficiaries. Ages 60 & 45

Option one: As non-spousal beneficiaries can they leave the assets in the plan until the 31th Day of 2009 and excerise the 5 year option?

Option two: Or - as non-spousal beneficiaries were they required to start taking benefits out at the end of 2005?

Under PPA 2006 - If they can use option one....and if they wait until 2007, then they can do a non-spousal IRA rollover?

Plan allows for participant/beneficary choice between the two options.

I am aware that neither an employer nor a TPA can "adjudicate", question, deny, etc. HSA monies. There are a number of TPAs record keeping HSAs for employers whose employees have been given a merchant limited debit card (as opposed to a typical bank VISA or MasterCard).

Could the use of these merchant limited cards (vendor or TPA selected by the employer) be construed as employer meddling in how the employee spent their HSA dollars?

A plan made allocations of 5% of compensation for employees based on their total compensation during the plan year.

However, for non discrimination testing we intend to use compensation as a participant only.

So for example an employee that earned $100,000 during the plan year received an allocation of 5% of 100,000 or $5,000 (apparently they made an allocation that was more generous than the plan terms for NHCEs). However, since they entered the plan at mid year based on the plan provisions, it seems that for testing we can use their compensation earned while a participant for the half year or $50,000. This results in a non discrimination testing allocation of 5,000/50,000 or 10%, which helps the results for NHCEs.

Is this an acceptable method of testing? It seems that participant compensation is a non discriminatory safe harbor adjustment to total compensation.

Does anyone know the specific cite in the code and regs that supports this use and method of compensation?

Thanks.

I thought I read somewhere that coming up the SSA won't be needed any more. What year will that be?

When closing a Defined Benefit Plan that is fully funded, may the Plan pay out a cash payment in the form of a tax deferred custodian to custodian rollover to an IRA? (like when transferring funds from a 401k to an IRA). The beneficiary does not want an annuity and is age 51.

New safe Harbor with a profit sharing portion went effective Sept. 1 2006. 4 HCE's all earn over $220,000/yr., 3 employees NHCE's. can the 4 HCE's put in all their $44,000 for tax year 2006, being that the majority will come from the profit sharing portion even though the plan didn't go effective until Sept 1. Will profit sharing contribution be capped to their salary only earned between Sept 1 - Dec. 31?

Just took over a new plan that uses a corbel document (prototype). We don't have the trust portion, but the adoption agreement does not have anything on previous terms that are rehired. Does anyone know how corbel document handles the following:

Participant terms in 2003, with break in service. He was paid out in 2004(100% vested). Rehired in 2005. Does he become eligible upon rehire with a 2 year break and fully paid?

Thanks

On another forum I frequent, there was a question about dropping health coverage, not due to open enrollment or a status, but just because someone didn't want it anymore... a poster replied that at her company people can drop the coverage at any time, but because it is a Section 125 plan, they continue the deductions until open enrollment. I can understand the reasoning there, but that seems really legally problematic to me, and I would like to post back about it, but I can't seem to gather my thoughts properly and I was wondering if anyone here had any thoughts on this practice. Would ERISA have anything to say on employees paying for coverage they aren't receiving? It seems like state law might also come into play for improper deductions. I just don't see how a company could legally take this money (and I assume keep it for themselves since they no longer have premiums to pay?) when the employee isn't getting anything in return. The proper thing to do would be not to allow these employees to drop the coverage at all until open enrollment or a qualifying event, right?

Need to confirm that employee who joins union during plan year still receives match and profit sharing contribution for part of year he was non-union. Plan calls for EOY and 1000 hrs both of which employee would have satisfied at year end. Plan excludes union employees from participation

I understand that the change to a Health FSA election must be consistent with the type of change in status event. Please advise regarding the following: Employee has a baby and wants to cease contributions to the Health FSA. Is this allowable? I thought they could elect to enroll in the Plan, or increase their current election only.

Thanks so much for all responses.

Darla

Are non-plan imposed limitations taken into account for purposes of 401(a)(4)? For example, an investment option in a plan is available to all, but only permits liquidation if the investment is worth X dollars. This limitation is imposed by the fund, not by plan design. Although not discriminatory on its face, it could be perceived as having discriminatory effect since it's likely that those eligible for liquidation will be HCEs only. Any thoughts?

It is my understanding the balance of an Inherited IRA (beneficiary is not a spouse), must be paid out by the end of the 5th year following the death of IRA account owner. The problem is the stock was worthless upon the IRA owners death and still worthless 5 years following his death. It wasn't until 10 years after his death was their any value to the stock. In a situation such as this, how could the distribution take place by the 5th year following the death and what is the penalty? This beneficiary would prefer to take the zero valued IRA distribution and pay capital gain income rather than ordinary income as with an IRA distribution.

We administer a very simple small profit sharing plan. They are re-locating and would like to terminate the plan and distribute benefits. We feel comfortable terminating this plan without obtaining a determination letter. Does PPA '06 force us to apply for a DL? I would think the plan must conatin the language for PPA '06.

How do others handle this situation?

Thanks.