Participant took a hardship distribution for the purchase of a primary residence. At the time of closing something came up and the participant did not end up buying the house.

What happens at this point? Can it be put back into the plan?

I will sleep better knowing that the IRS has addressed this very important topic:

http://www.irs.gov/newsroom/article/0,,id=161151,00.html

HI,

As people often say on this board, I am out of my element. I received a question as follows: Employer makes contributions to HSA. The employer makes the contributions to the individual bank accounts of each employee. Two employees were naughty and the bank closed their accounts. Now the employer has no where to put the money. Based on what little I've read so far, the employer cannot simply not make the contributions for these employees just because they don't have a bank account. What are the employer's options? What if the employees don't set up new bank accounts or no bank will have them? I don't know how employer contributions are normally invested for HSA's. Is this normal for individual bank accounts?

Thanks!

Company has a cafeteria plan and the following benefits provided are on a pre-tax basis: health, dental, cancer policy and vision. Each benefit has more than 100 participants. The company is self-insured and has set up a "Trust" for the plan assets. I understand this requires filing and an independent audit.

The company also provides two benefits that are not under the cafeteria plan, so premiums are not pre-taxed for short term disability and group term life insurance. Participants in these benefits exceed 100 as well.

I know we no longer file for the "cafeteria plan", but must file for the welfare benefits under the cafeteria plan.

What about the two benefits not under the cafeteria plan? Must they be reported and if so, is a Schedule A for each benefit just attached to Form 5500 (even though the name on the 5500 reflects the cafeteria plan name?

I would appreciate it if someone could clarify for me.

I am assisting an employer of a multiemployer plan that has been assessed mass withdrawal liability. The fund has proposed a four year payment schedule of an amount in excess of $3 million. The employer is seeking ideas on how to reduce their mass withdrawal liability and is willing to take an aggressive stance. Has anyone been able to reduce mass withdrawal liability other than by negotiating a reduction in the liability with the fund, obtaining an actuary to rerun the numbers, or extending the term of the repayment obligation?

I appreciate any and all suggestions.

Help please! I have a physician client who is the trustee of his practice's 401(k) profit sharing plan. His brother works at the practice as a technician. The brother's wife is working for a new local bank, and he wants to buy $60,000 of stock in the new bank. (Not publicly traded) The participant's do have self-directed accounts. I have tried to talk them out of this because it seems troublesome and expensive but have been unable to find on paper any reason that it is not allowable. Thank you for any guidance.

I have an ESOP and they are 2 years behind in giving me some benefits. I am afraid I will not get my lump sum when I turn age 62. Are their attorneys who specialize in this type of law and how would I find one. Thanks.

1. From what I have seen, the new funding rules in Title I of PPA 06 apply to cash balance plans as well as others. Is this correct?

2. Notwithstanding anything in PPA 06 about interest credits being within a market rate of return:

Has anyone ever heard of a cash balance design that allows for individually invested accounts equal to the hypothetical accounts, where the rate of return is then somehow justified in the document?

I don't know all the specifics, but apparently, for example, if a participant gets a 20% return on their account for the plan year, then somehow there is a mechanism in the document that gives them 20% on their hypothetical account.

Seems very far out there, as well as contrary to the definitely determinable rules, to me. But a contact mentioned it.

What is the difference between a Commingled Trust Fund and a Collective Investment Fund?

Folks:

I am curious what your thoughts are on this issue, considering there are still, I believe, a few states that do not have HSAs.

Because insurance regulation is left primarily to the states, does a state have the right to not provide for HSAs?

Or, would this state action be in violation of federal law?

Is the federal law more of a suggestion to the states on how to provide for the insurance needs of its citizens, or an obligation?

If one or the other, how can you tell the difference?

Don Levit

We make employer contributions of 3% of pay to the 401(k) Plan and also a match up to 1% of pay. I understand that the amount of compensation on which we can calculate these contributions is capped at $220,000 for 2006. So the maximum employer contribution we can make this year is $6,600 and the maximum match we can contribute this year is $2200.

The 401(a) 17 limits are being discussed on another forum. Someone is contending that the limits also apply to salary reduction contributions. They are stating that if an ee has not reached the maximum salary deferal contribution of $15,000 by the time his/her comp has reached $220,000, the ee is prohibited from making further deferal contributions. In effect, the ee is not allowed to spread the $15,000 evenly over all the payrolls of the year. The poster there stated "Section 401(a)(17) limitation takes precedent over the 401(k) limits and that it is even cross-limited by the Section 415 limits."

Is this true ?

Thanks in advance for your assistance.

Anyone know of an insurance company who will sell a fidelity bond covering a Puerto Rico plan?

My 401(k) plan is a large plan filer. All of my plan's assets are participant directed and held in 20 pooled seperate accounts at an insurance company in a group contract.

Do I have to check line 4i "YES" - I have assets held for investment purposes?

If I check yes and fill out the schedule - would I list each indivdual fund on the schedule or can I aggregate all the funds and list them as XYZ Insurance Company PSA?

Also, can you tell me is the insurance company a "Party-In-Interest"?

I think I need to complete the schedule but I am not certain what they mean by party-in-interest with respect to the schedule. The investment of the assets in the insurance company is not a prohibitted transaction, is it? Why would I indicate "party-in-interest?"

Just not sure what this is referring too or what is trying to accomplish by indicating or not indicating "Party-In-Interest."

Any help would be greatly appreciated.

Just discovered that a client has drawn some interest from the DOL regarding its 401(k) plan. The plan is of decent size (a few thousand participants) and permits company stock investments. The agent has asked for the usual laundry list of plan documentation, which we are in the process of collecting. However, we just got what I took to be an unusual request from the agent. As many public companies have been doing, the company recently assessed its stock option practices to verify that it didn't have any backdating problems -- didn't find any. Plan sponsor put out a press release to that effect. Now, the DOL is asking for back-up for the investigation.

My initial inclination is to tell the DOL to buzz off. They don't have jurisdiction over stock option plans, and it was not immediately apparent what relevance any of this could have for the 401(k) investigation. As I thought about it, the only basis I could come up with was as a sort of offshoot from the Enron situation. If the plan sponsor actually did have backdating problems and put out a bogus "all is well" press release that was subsequently shown to be inaccurate, presumably the jack-booted SEC and DOJ troops would soon be knocking down doors and cracking heads. This might have have a negative effect on the value of company shares, including those in the 401(k) plan. Seems like a bit of a reach to me, particularly since the DOL is not in a position to do anything about options backdating issues nor is it really (IMHO) qualified to assess whether the accounting and securities issues involved were correctly analyzed. Still, I can see the issue, and it seems to be in line with the positions they've taken in the "stock drop" cases.

I have since heard that the DOL has actually been doing some prospecting in this area for some of the companies that have reported backdating issues. Moving outside of that to check up on companies that have not had backdating issues suggests that the DOL may have too much time on its hands.

Has anyone had any experiences of this sort with the DOL lately? How have you handled -- cooperative or not? Usually, I'd be cooperative with the DOL, but I am not really inclined to faciliate a fishing expedition in this area.

After an absence of working with DB plans I'm now starting to learn again about these plans and need to know if I'm on the right track regarding interest rates for Lum Sum Distributions.

When calculating an LSD that is below the 415 maximum (prior to the PPA of 2006), the interest rate stated in the plan must be compared to the applicable GATT rate and the lower of the two rates would apply. So for example, if the plan rate is 5% and the the applicable GATT rate is 4.68%, then the payout is based on 4.68%.

When calculating the maximum 415 benefit (again prior to the PPA of 2006), a flat rate of 5.5% is used if the plan rate is below 5.5% for the 2004-5 years. This rate would not apply for benefits below the 415 maximum.

I know that the PPA of 2006 will change how these distributions are calculated and extend the PFEA rules with modifications, but I wish to know if I have missed anything with regard to the calculation (prior to the PPA of 2006). Thanks.

Hello! I am wondering about the effect of the changes in the Pension Protection Act of 2006. If a person is already deceased but the IRA has not yet been distributed to the non-spousal beneficiary, my reading of the law indicates that the beneficiary could elect to take the distribution under the old law prior to 12/31/2006, or could roll it over into his or her own IRA, etc. if the distribution is taken after 12/31/2006. Is that correct?

Also, I am not clear on how the new law impacts the required distributions - media reports state that under the new law the distributions will be based on the age of the deceased, rather than the age of the beneficiary (which I think is the case under the existing law).

Finally, I am told by the financial planner who set up the IRA originally that the distributions must be taken by the non-spousal beneficiaries within 5 years. Is that true, and does it change under the new law? Thanks for any and all advice! JWIRA

Company owner has a DB plan, is a deferred retiree and is taking annual required minimum distributions. RMDs were calculated by the previous TPA using Treas. Reg. 1.72 tables. The amounts paid were usually significantly less than what his annual benefit was. My first question is, aren't those tables only for calculating RMDs for DC plans? I thought that just paying out the annual plan benefit in a situation like this would suffice as the RMD and no actuarial adjustments are needed. If this is correct, would his current benefit have to be actuarially increased to reflect the under-payment of his previous RMDs? All help is appreciated.

We have several clients with DC plans that have terminated participants (with account balances less than $5k but more than $1k), which they would like to force these individuals out of their plans. We were thinking about creating a Group IRA Trust account to handle these balances and I was wondering if any other RIA/TPA firms have created a similar account for automatic rollovers? If so, what concerns or challenges have you faced?

This is a separate question from the qualified automatic contribution arrangement under the PPA.

Currently many plans that utilize the automatic enrollment feature also use an automatic contribution escalation feature. The automatic enrollment feature is a plan provision. What about the automatic contribution escalation feature? Prototypes have the automatic enrollment provision but haven't seen any with the automatic contribution escalation feature.

Do you think the ability to automatically increase deferrals must also be a plan provision? Or do you think if a Prototype (which gives the participant the ability to change deferral amounts) simply provided for language to change deferral amounts such as "at such times as established by the Plan Administrator in a uniform and nondiscriminatory manner" AND an annual Notice (included in the AE notice) is provided to employees describing their ability not to have the contribution escalation applied to them would be acceptable? If not, how are Prototypes currently dealing with the automatic contribution escalation feature?

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