DB Plan that offers Life Annuity, 50% J&S Anniuty and lump sum benefit options is being terminated. Do participants have to receive the option to receive their benefits at both deferred to NRA and immediate or can Plan just offer immediate.

For example accrued benefit at NRA is 1000/month and paid today is 350/month. Does the benefit election form need to include both or just the 350/month option.

Bank is directed trustee on 401(k) plan w/ 3% safe harbor/NEC and deferrals. There are no psp contributions in the plan. IN other words, everything is 100% vested. Bank is advising client to merge instead of terminate the 401(k). Looks like to me a way to hold onto the assets and trsutee fees....??? Generally, from the e/er perspective the main benefit of merging vs. termination is that the participants do not become 100% vested in a merger, but that is not applicable in this situation. Anyone see any other benefits to merging vs. terminating? Thanks.

some lively discussion on the Q and As in regards to 'otherwise excludables'. we still have no clear guidance on this one, but there was sort of a promise that something would get done in this area. in the past the informal guidance was that you could use maximum exclusion and not worry about the plan's entry dates.

this time there was insistence from the IRS that the plan's entry dates had to be considered. probably the more important issue was whether one could be penalized retroactively for following a procedure that was imformally given an ok. I'm sure we will see more on this one.

........

had a chance to actually meet and talk (if only for a few minutes) Sal 'Mr. ERISA Outline Book' personally.

from time to time I have tripped across a few typos in his book. because of the nature of these typos, the e-mails have been rather interesting - one involved the knights of Ne (or however that is spelled) from Monty Python, and another I had signed the correction from Jethro Bodine and he responded with a thanks from Jed Clampett.

......

It was especially meaningful to me to sit and talk to someone who found one of the custom Relius reports I posted on Benefits Link as being very useful- maybe not in the format I had, but as something they could easily modify for their purposes. one never knows if it is worth the hassle of posting such things.

......

the talk went well, but I almost gagged for a portion of it due to a tickle in the throat. ugh. as for the 'pension' song, well, of course on has to remember humor is individuallistic. it seemed to go well. always great to hear some chuckles during parts of the song.

Cats in the Cradle not by Harry Chapin.

The plan arrived just the other day

The company added a 401(k)

They put in a match, and what can I say

I deferred in the usual way

The cash was growin’ ‘fore I knew it, as I put away

I’d say, “I’ll have a lot some day, yeah

You know I’ll have a lot some day.”

refrain:

And the cat’s in the cradle and the silver spoon,

Little boy blue and the man in the moon.

“When will I retire?, well I don’t know when,

But I’ll have a good time then

You know I’ll have a good time then.

The plan turned 10, just the other day

I said “Thanks for it all, I’m doing okay”

I invested low, now its high today

I’m glad I deferred 10% of pay

As I saved away, my wife her smile never dimmed

Said she “I admire him, yeah,

You know I admire him.”

Refrain

The plan was tested just the other day

It failed ADP in a big time way

They put in a QNEC once in a while

Good news for me I said with a smile

The deferrals were too high for the HCEs

See you later, can I thank them please?

Refrain

I retired just the other day

I was sick of work and the rate of pay

But I said “The 401(k) was such a good find

The money is there and it grew over time”

Well the job it was a hassle, but now I’m free

I recommend you save like me

Recommend you save like me.

Refrain

Looking at new Code Section 401(a)(36), it appears that the new rules allowing in-service distributions at age 62 will also apply to money purchase and target benefit plans. Many of the PPA summaries only refer to DB plans as being impacted by these new rules. Am I missing something?

Has anyone heard Dan Hogans or anyone else from Treasury/IRS comment on the following issue?

One of the exceptions in the proposed regulations permits payment upon termination of an arrangement (and all substantially similar arrangements) pursuant to "the service recipient's discretion under the terms of the arrangement" within 30 days preceding or 12 months following a change in control.

If the written terms of the arrangement do not reserve this discretion to the service recipient, can you still take advantage of the exception if all of the participants and the service-recipeitn agree to terminate and pay out the money within the permitted time period surrounding a change in control? If not, can you achieve the same objective by first having all the participants and the service-recipient agree to amend the arrangement to give the service-recipient the necessary discretion, and thereafter have the service-recipient exercise that discretion? Seems kind of silly that you can do it through the 2-step approach but not the 1-step approach, which makes me think that maybe you can't do the 2-step approach either.

Do affiliated service group rules apply to VEBA's, as it would pertain to 410(b) coverage rules under a DC plan?

I'm a DC plan consultant. I've got doctor who owns his own medical practice. He is also 1 of 30 owners for a emergeny physicians clinic, in which he provides services to. This is an affiliated service group.

The clinic maintains a 401(k) Safe Harbor plan. The doctor opted out of that plan. He'd like to establish a VEBA but I'm not sure if he can because of the affiliated service group rules.

Another one I have is a doctor w/4 partners within his corp. One of the new partners wants to set up his own S Corp or PA and enter into a VEBA. His CPA says that if he sets up his own corp he cannot participate in their 401(k) - which is contritictory to other cases I've worked on.

Any words of wisdom is appreciated. Sites are even better!

I have a client who has a small Defined Benefit plan. Recently, he discovered that an employee had embezzled funds. He wants to know how he can get the embezzled fund out of the pension plan. I have already told him that the pension assets cannot to “attached” but that he will need to payout the money and hope the employee pays he back. Does anyone else have a suggestion?

When testing benefits, rights and features, must the benefit, right or feature being tested satisfy the ratio percentage test or can the lower threshholds of the nondiscriminatory classification test be used?

If an employer has a Simple IRA plan in which monthly contributions are being made and several employees are making withdrawals as soon as the funds are going in, would the employer still have to match the salary deferral amount? I guess I am asking if you would deduct the amount of the withdrawal before depositing the match. Its crazy for the employees to be taking the penalty/tax hits but these are lower income employees who really dont care.

PPA stipulates that participant directed account plans provide a quarterly statement that discloses vested benefit or provides the resources to calculate. Has anyone heard from the major vendors as to how they are going to handle it? We are also concerned with self directed brokerage accounts that do not report by source.

Working on a 5330 for late deposits and not getting any help from IRS rep. Scenario:

Deposit 1 - considered late on 10/24/05, deposited 12/16/2005. Per DOL calculator lost earnings are $520.29 assuming final payment date (lost earnings restored) is now.

Deposit 2 - considered late on 11/16/05, deposited 12/16/2005. Per DOL calculator lost earnings are $271.07 assuming final payment date is now.

This is my understanding of the 5330: 2005 5330 (which is late) - For both deposits - report interest from 10/24/05 - 12/31/05, which is $490.36 and $255.47.

For 2006 5330 - report the $490.36,$255.47 AND report the interest from 1/1/06 - current ($29.93 & $15.60). This is basically the interest on the interest.

I guess my question has to do with the 12/16/05 date that the contributions were deposited, and thus corrected. It sounds like the prohibited trans continues until the lost earnings are restored, which is reflected in the example above, and does not end when the contributions are deposited?

Any help would be appreciated. Thanks.

The general rule is that deferral elections must be in place by the end of the calendar year preceding the year to which the compensation is earned. Can an employer establish a new plan in November 2006 and take advantage of the exception for deferral elections being made within 30 days of becoming eligible so that deferrals are made in 2006?

A recent newsletter I got from one of the larger document providers states that there has been an extension of the deadline for adopting the PFEA 2004 amendment as a result of PPA 2006.

My document vendor doesn't know anything about an extension, but is thinking that something may come out of the ASPPA conference.

Does anyone have any infomration on the topic either way?

10/25/06

Seeing how these new RMD rules are based on accrued benefit and vesting service, it seems to me that those things should be heavily planned out when designing a new Plan for a client who is already past age 70.5. So, I would imagine that without otherwise lowering your deductible contribution amout, you should start a plan for this client with a NRA of later of age 65 & 5 years of participation. To keep the accrued benefit small you should base the formula on years of participation instead of years of service, and you should exclude vesting service prior to the plan's effective date. Does this all sound logical? Any problems with it?

And what if the client mention that he's really semi-retired and only works a couple of days a week in between his golfing. If he reports each year that he only worked, say, 728 hours, wouldn't that mean that he doesn't accrue any vesting seervice and would be 0% vested until his NRA. Wouldn't that mean that he wouldnt have to take a RMD until his fifth year in the Plan? (The plan would be written that you need 1000 hours to accrue vesting service, but no hour requirement would be needed to accrue credited service for benefit accruals). Does this all sound logical? Any problems with it?

Could an employer change the terms of an outstanding loan - in this case, if the policy in place at the time the participant took the loan utilized the maximum permissible cure period could the employer change the policy so that the cure period for that loan was shorter than what was communicated to the participant at the time he took the loan?

Does anyone know of any certification or award programs for employee benefit depts. I am talking about an award or certification for the program or a portion of the program itself, not for individuals. I work for a company that is program/process award crazy and I thought something like that would be a help to our department. Thanks.

We are working with a new startup custodian, although the person behind the custodian has 25+ years experience with other trust companys.

This custodian is requiring that with each deposit that either the plan sponsor or the record keeper provide the detailed loan principal and interest amounts with each deposit. They claim to have an ERISA fiduciary and a bank regulatory responsibility and a to provide the information on their statements. We disagree that the loan is an asset to them when the plan trustee holds the notes so they should have no reporting requirement associate with the loan.

I've used 3 other custodians that acted in the capacity as a custodian and a corporate trustee and they have never requested detailed loan information. They have only gone as far as wanting a breakout on any deposit as to the type of money and nothing else. I have also never had an auditor question a certified trust statement about the loan information. They have always relied upon the records of the record keeper for loan information. If the custodian is acting as a corporate trustee too, then I can see a stronger argument for reporting the loan detail information.

Does anyone have any information that would support the custodian's position that they must receive and report loan information and report the loan balances on their statements? If so, how would this be any different then them not tracking the plan's self-directed brokerage accounts or other outside investements (employee stock or property)?

I'm looking for specific sites in ERISA or federal/state banking regulations that would require the tracking of loan information.

Sponsors of SIMPLE IRA's must either make a matching contribution or a 2% nonelective contribution on behalf of all eligible participants.

IRC 408(p)(2)(B)(ii) caps considered compensation for the 2% nonelective at $220,000 [for 2006].

The matching contribution is anywhere from 1% to 3% [the 'applicable percentage] of total gross compensation for those who contribute. It doesn't look like the 401(a)(17) cap applies when computing the match amount, as opposed to computing the non elective amount. Is this correct?

So, if an owner had gross comp of $ 300,000, a nonelective contribution of 2% would limit the [2006] contribution to 2% of 220,000, or $4,400. But if the 3% match was applicable for the year, the matching

contribution, if the above thinking is correct, would be 3% of $300,000, or $9,000.

??

With the new plan year, 1/1, my employer wants to do away with the 75% it pays towards EE's premiums. Instead, they want EE's to pay 100%, while increasing our gross pay to make up the difference. Are employers required to pay some portion of the premiums with group health plans?

I am just wondering what other trustees/recordkeepers are doing if a transaction is back dated and there is a gain or loss. So, basically I am interested in knowing what happens if there is a loss (e.g., do you fund the trust the loss, make participant whole, etc.) and what happens if there is a gain (e.g., do you keep the gain, do you allocate it to all participants, etc.). Finally, is there any legal authority for how we should be handling gains/losses.

Thanks