I opened my Roth account in June 2006, so I will be able to withdraw a "maximum" of $10,000 for a first house in the beginning of January 2011.

I've read websites that say I can withdraw 10,000 worth of contributions and earnings for the first house. Suppose by then I have $16,500 in my account, and $500 of it is pure earnings. Does the government have a strict "earnings" and "contributions" column, so that there is a certain percentage of earnings and contributions I can take out when I buy the house? Or, may i opt to take ALL of the earnings and 9,500 worth of contributions out of my Roth account?

Does that make any sense?

Basically I'd like to take all the earnings out when I think about housing, particularly since I won't be able to touch any earnings until I retire.

And, if I can withdraw CONTRIBUTIONS without penalty, can I also take out the extra $6000 worth of contributions toward this house as well?

Or can I take out $16000 with no penalty, and have to keep the earnings in there because the government doesn't keep track?

Thank you all for your help!!

Anyone on the board using DataPath DPI 125 with Microsoft Office Pro 2003? I'm having problems printing out employees account balance letters. DataPath says it's a problem with Microsoft Office 2003 and not theirs. Was wondering if you have the same problem and how you solved it.

Thanks,

Wisln

An employer maintains a calendar year cafeteria plan with health FSAs, dependent FSAs and premium conversion. The employer is acquired and becomes part of a large controlled group. The parent of the controlled group establishes a group medical program and cafeteria plan (with health FSAs, dependent FSAs and premium conversion) effective 1-1-06. This employer decides to stay under it's existing group medical (and cafeteria) plan until at least renewal on 8-31-06.

Now the employer wants to join the controlled group plans as of 9-1-06. The major difference in the cafeteria plans is that the health FSA limit is substantially greater in the controlled group plan. Can the employer terminate its cafeteria plan and join the controlled group plan for the remainder of the year? If yes, would the employees be able to make new FSA elections under the controlled group plan for the remainder of the year, and use up the existing FSA balances under the old plan?

If the employer can't terminate the old plan and adopt the new plan mid-year, can the plans merge? Even if possible, I assume that the employees could not make a new election under the terms of the merged plan to take advantage of the increased FSA limit, so I don't really see any benefit to this option.

Obviously, the old plan can continue until 12-31-06 and then be terminated, with the employer adopting the controlled group plan for 2007. Are there any other options?

I'm looking for some general information on the use of option plans by LLCs. This type of plan would grant an employee the right to purchase a membership interest in the LLC. Does anyone know of a good website or article that addresses the major issues associated with these arrangements? Thanks.

We took over a plan. There was a distribution for a terminated participant. We weren't aware of the distribution (timing) and thought the prior TPA would have taken care of it, but they didn't. When doing the year end valuation, we found the distribution. We prepared the 5500. The client now received a letter from the IRS stating they owe the withholding (and that there was no 1099 prepared). How do we correct this?

Thank you so much!

I have a participant that requested an age 59 1/2 inservice withdrawal through the recordkeeper's website. The participant received check and is now saying they made an error when navigating the website. They accidently requested the maximum avaialble, but they really wanted a much smaller amount. Essentially, they have removed their entire account balance, which is a sizable amount, but they wanted only a fraction of the account.

The participant contacted the recordkeeper. Recordkeeper is refusing to reverse the transaction unless we (the plan sponsor/employer) indemnify the recordkeeper AND agree to make good on any loss that will be incurred by reversing the transaction. The indemnification wording they are suggesting is basic holds harmless type wording - no specific regulations or statutes are referenced.

What I am trying to understand is what is risk to our Plan if we authorize this reversal? The recordkeeper has been unable to cite the specific regs or statutes that would be violated by reversing the transaction.

I would like to help the participant out in this situation, but I'm hesitant to act without a better sense of the risk to the Plan. Has anyone had a similar situation occur? Any comments on how other plans handle these types of participant mistakes?

Prior to January 2, 2006 the New Jersey State Employees Deferred Compensation Plan (NJSEDCP) was administered by the New Jersey Division of Pensions and Benefits with the New Jersey Division of Investments and the State Investment Council responsible for investment of the funds. The Plan is funded solely with voluntary employee salary reductions with the employee responsible for paying all costs associated with the administration of the Plan. The Plan offered four investment funds (DCP Funds) each with an expense ratio of 0.08 percent (eight basis points). On a national level only the Federal Thrift Savings Plan (TSP) offers a more cost effective retirement savings/planning tool.

This all changed on January 2, 2006 when Draconian changes were introduced. The State's Deferred Compensation Board appointed Prudential Financial as the Plan’s Third Party Administrator (TPA). The new investment lineup comprises 23 investment funds with expense ratios as high as 1.45 percent (145 basis points). The lowest cost fund, the Vanguard Institutional Index Fund with an expense ratio of 0.25 percent (25 basis points), is more than three times as expensive as any one of the four DCP Funds.

On January 2, 2006 the DCP Funds were closed to future contributions. If the participant had not given Prudential Financial new investment instructions as to which new funds he or she wished to invest in Prudential Financial made the decision by default. DCP Equity Fund investors are now investing their current contributions in Large Cap Blend Enhanced Index/QM Fund with an expense ratio of 0.89 percent (89 basis points). DCP Bond Fund investors are now paying 0.80 percent (80 basis points) to invest in Core Bond Enhanced Index/PIM Fund and DCP Small Cap Equity Fund investors are now investing half their allocation in Mid Cap Blend Enhanced Index/QM Fund and half in Small Cap Value/Munder Capital Fund with expense ratios of 0.94 percent (94 basis points) and 1.35 percent (135 basis points) respectively.

Assume a participant invested equally in the three DCP Funds. On January 2, 2006 his/her expense ratio was increased nearly 12 fold to 0.94 percent (94 basis points). Assume an average investment return of 8 percent over the next 30 years. A DCP investor who starts off with $30,000 on January 2, 2006 (with no additional contributions) will have an account balance of $295,000 on January 2, 2036 while the "new investor", who also starts off with $30,000, will have an account balance of $232,000. Such are the results of paying 0.86 percent (86 basis points) in additional fees over a 30-year period. This cannot be defended!

This is a bad, really bad deal. An investor cannot control the investment markets but can control the cost of investing in those markets. Prior to January 2, 2006 the Deferred Compensation Board, Division of Pensions and Benefits, Division of Investments and the State Investment Council all keenly recognized this important principle of investing. It had served the employee very well for 25 years. Why was it suddenly abandoned? A cruel injustice has been inflicted on New Jersey State employees and must be corrected forthwith.

Joel L. Frank

Interesting issue:

Company has not performed 105(h) testing for several years for self-insured plan. They have included a select few retirees, and as a result will fail. Therefore, excess benefits to all HCIs are taxable.

Prospectively, the company can carve out an insured plan for the select retired execs they want to cover, but any ideas on what the retroactive correction is for prior years? Issue amended W2s and 1099s for past years to the HCIs (active employees and retirees) and have them amend their tax returns? That's tough to swallow considering the definition of HCI in 105(h) regs includes the top 25% wage earners (more than 200 individuals in this case).

thanks for your thoughts,

RT

On the 2004 Form 5500, Schedule I, the total expenses were not deducted from the total plan assets, thus it appears to have about $3,000 more in end of year assets than I think it should. As a result, I'm in a quandry over what to do for my 2005 beginning balance. Two questions:

(1) Am I correct that the total expenses (which equals the amount of benefits paid during 2004) should have been deducted to arrive at the end of year total plan assets? Is there any reason why this amount would not/should not have been deducted?

(2) How do I correct it? Should I use the correct balance for my 2005 "beginning of year total plan assets" and also prepare an amended/corrected 2004 Form 5500? If I prepare the amended/corrected 5500, do I need to provide any type of explanation for why I am doing that? Do I send the corrected 2004 Form, the explanation and the 2005 form in together?

Thanks!

Does anyone know if the DOL's DFVC program applies to Forms M-1? If so, what's the authority?

Thanks.

A 401(k) plan wants to add safe harbor match for 2006. The current eligibility for deferrals is 3 months, they would like to have the eligibility at 1 year for the safe harbor match.

Transamerica is telling the client that the entire population of employees must be ACP tested if there are different eligibility requirements for deferrals and safe harbor.

My thoughts are you would ADP/ACP test the otherwise excludable group who does not receive the safe harbor match. This would always pass since no HCE's would be in the OE group.

Top heavy will never be an issue.

Thoughts?

This is the first year that I am doing the 5500 for this client. A separated employee took a full (or so they thought!) distribution last year for which she received a 1099R, and was included as a 'code D' on the 2004 SSA. For whatever reason, the distribution was short by two cents. It appears that the Plan just sort of wrote off this two cents -- is that okay? It would seem silly to pay the employee the $.02, do another 1099R, amend the SSA, show her as a participant receiving a benefit, etc., but I don't want to have any trouble down the line. Is it okay for me to just ignore this oversight in payment?

Any care to share their two cents on this topic

I have one more question about this topic. The Plan, an annuity-only 412(i) plan, had a termination date of July 15, 2006, and the proposed distribution date is September 15, 2006. The insurance company has provided me with the asset values as of July 15, 2006, but there is a 60-day wait for PBGC purposes. This moves the actual date of asset distribution back to Sept 15, 2006.

Question: Must the interest that accrues between 7/15/2006 and 9/15/2005 be distributed to the participants? Or, assuming the plan permits it, can this be an asset reversion to the plan sponsor, a not-for-profit entity? Would the non-profit entity be subject to the 50% excise tax on reversion (25% if there is a successor qualified plan)?

Any thoughts or remarks would be appreciated. Thanks! Carol

This has happened before, but this one for some reason pushed me over the edge.

Our union employee has been participating in a multiemployer 401(k) plan. She is promoted to a supervisory position, and is no longer eligible for the multiemployer plan. But she is now eligible for the corporate single employer plan.

So she goes to the plan administrator for the multiemployer plan, asking to roll her account to her new plan. Plan administrator says, "sure, you can do that (after a 90 day wait)'.

Assuming that she is not age 59 1/2, where is the distributable event? She is still employed by the same employer--not retired, dead, termed, etc.

Second question. If the multiemployer plan makes a distribution to her, we are not responsibile for reviewing that plan for operational compliance, and its a lump sum distribution from a qualified plan. So we accept the rollover?

Review of new client's plan documentation shows that they did not restate document for GUST or any subsequent legislation. Any thoughts on actions that should be taken?

I'm very new to this, and preparing a 5500 for a small pension plan. I have a question regarding whether a participant loan was a deemed distribution and whether it should be taxable. The administrator sent me information that one participant requested "the maximum withdrawal allowable under the plan for use with her down payment on the purchase of a primary residence." The plan provided the participant with a 1099R showing an amount of slightly more than $5,000 as the gross distribution and fed tax of approximately $1,000 withheld.

I've looked at 72(p), and it appears that this meets the exception in 72(p)(2) and therefore would not be considered a distribution. If it is not a distribution, was a 1099 and tax withholding necessary?

If the 1099 and tax withholding were not necessary, is there anything that the plan needs to do to "correct" this?

Has anyone else been seeing Social Security Notices for people who never worked for the Company they say owes them a pension benefit?

I have a client that has received letters from two different people in the last few months; each enclosed a copy of the SSA notice with the clients EIN, Plan Name, Plan Number stating that the person should contact them for their pension benefit. The problem is they never worked for the company. They have both been resolved quickly with a phone call to the person. Both admitted they were surprised to get the notice and agreed that they never worked for them.

Both Notices stated they were based on a 2004 SSA filing. Anyone else having a problem? Maybe someone filed an SSA back in 94 with the wrong EIN and they all got attached to our client. It just seems a bit strange, once I can understand, but now this is two in two months.

ok, here you go, more 'missing persons'. One group of 8 are all child actors (boys). sorry about that ladies, that is all I have found for now.

Hey, I actually knew a couple of the 24.

I believe I have managed to set this up so you can type in the names in the yellow boxes and the spreadsheet will tell you if you are correct.

We have a recently terminated EE who completed an enrollment form for our 401k in 2000. She selected one fund and indicated she wanted to defer 6% of salary. HR completed on-line enrollment at the Principal website and Principal has a record of this. But the form was never processed by our Accounting dept. and no funds were ever deferred from her paychecks over the years. She would have been eligible for a 3% match immediately upon enrollment because she had been employed since 1998. I have consulted a benefits attorney and Principal (the TPA0 and I am still confused over what we should do to correct this error. Without knowing about the error, we have put processes in place in HR and Accounting over the past few years that should keep this from happening again. To correct its error, the company is willing to deposit 50% of EE's missed deferral amounts (even tho she never actually deferred anything), plus the match on what would have been her full deferral amount, plus any gain that the fund she selected would have earned over the years (hoping to calculate the gains/losses quarterly to reduce the effort involved). (Assuming deposit of 50% of the deferrals, the total amount involved is around $5000 because this was not a highly paid EE and she only worked part time.)

Yes, the EE should have noticed at some point in the past 6 years by looking at her paycheck stub that no deferrals were being made but oh well....

Do I need to file any formal paperwork with DOL or IRS in order to correct this error by depositing the amount suggested above? Or can I just make the deposit and document how I corrected the problem and go on?

Thanks,

carol

The company I work for is looking at administrating flex for a large corporation that has mulitple office through out the United States. I am wondering if we need a TPA license in any of these states to be able to administer flex. I am not sure where to find the answer to this question. Any help would be appreciated. I am mainly concerned with NY, IL, CA.

Thanks