Assuming agreements are subject to 409A to be safe (good reason termination is included), but the agreements use "termination" instead of "separation from service." It means the same thing, but is use of terminology that is different from the statute/regs going to be an issue here like it is (was) for 401(k) plans?

Hello

I would like to know the views of everyone on offshoring of some of the monotonous and mundane daily tasks to India. I ask since I am running a small retirement offshoring services firm based out of New Delhi, India.

Your views would be most helpful.

Best regards

Offshore Option

We represent a bank that is considering lending money to a small profit sharing plan so that the plan can purchase commerical real estate. The bank would hold a first mortgage on the purchased property. The bank is concerned that this may constitute a PT and subject it to liability as a nonfiduciary. Assuming that the bank is not an interested party and assuming that the real estate will be occupied by non-interested parties, is the transaction itself a PT? Should the bank require the trustees of the plan to provide it with a written opinion of counsel that the purchase of real estate and the bank's lending do not constitute a PT? Should the bank also require the trustees to indemnify the bank for any liability? I am assuming that even if the plan's investment in the real estate constitutes a fiduciary breach, this would not expose the bank to any liability. Thanks for the input.

I have a plan I work with that is currently operating under a prototype plan document. Recently, we reviewed the ownership structure and discovered that we may be improperly operating under that prototype document as it is not a controlled group, but is instead a multiple employer plan.

Company A is 100% owned by Bob.

Company B is 35.6% owned by Bob, 35.6% owned by Chris, 11.9% owned by John, 11.9% owned by Tom, and 5% owned by Scott.

Company B is almost a subsidiary of Company A - providing computer networking services to an insurance company (Company A) as well as many other local customers. Chris and John are also employees of Company A. This could be an Affiliated Service Group? Don't know if that even has ramifications to the issue at hand.

Anyhow, the owners thought they were within the controlled group rules. I don't see how, unless they can be considered an affiliated service group. They have been making matching contributions throughout the years, and even recently were converted to a safe harbor 401k plan. Both Company A's employees and Company B's employees have been contributing and receiving employer contributions. If this plan is not a controlled group, what must we do to fix this?

Thanks.

can someone point me to a page in the ERISA Outline Book where it discusses when employer contriubtions must be deposited to the trust in order to be treated as "relating" to a prior plan year?

It's clear as day when you're discussing 404 deduction limits, and 415 annual additions, but I can only find a vague reference to "the year in which the contribution is TREATED as allocated." 1.401(a)(4)-2©(2)(ii).

I don't think the 415 regs are necessarily always relevant because the limitation might not necessarily be the Plan Year.

Any help is greatly appreciated.

Curious how any of you handle this situation....discretionary match, payroll based using 50% up to 6% of compensation, no true-ups required per document...employee earns $25,000/month in first quarter and defers $5000 per month, maxing out deferral. Employer matches 50% up to 6% per month, therefore giving employee $750 Match per month, for a total of $2250. Employee can no longer defer as has reached max but continues to earn $25,000/month.

In this situation, based on your experiences, how does employer handle it so employee receives the full Match due ($6600)? Is payroll system set up to look at compensation annually (recognizing this employee makes well above the $220,000compensation limit) so giving $2200 per month for match during the three months employee is deferring? Doing this, however, creates a problem if employee terminates, for eg. in the fifth month. Or, do employers with this situation manually watch match system? Seems like a ton of work. Or, do employers notify employees that if they defer heavily in first few months (as in my example), they risk not getting full match they're entitled to due to payroll system having Match formula based on monthly earnings.

Thanks in advance for any assistance you can give me.

I have always swayed people away from investing in RE. Here is the plan...

Invest $100K of plan $ in rental properties AND use the plan as collateral for a loan to purchase the balance of the property. Or that is what I think their plan is. I have searched for more specific posts but none address the second part which is to use the plan as collateral for the mortgage.

Thanks!

in reading the roth ira rules, i came across this paragraph:

"You are not allowed to perform all of these following transactions under both the traditional and the Roth IRA.

Borrowing funds from your IRA to pay off debt or loans

Buying personal property with funds from your IRA

Selling your personal property to an IRA"

What is someone after the age of 65 wants to withdraw all his retirement savings (e.g $200,000) to buy his son a house... is he NOT allowed to do that?

This topic started in another thread, and I didn't want to post my question there because it was off-topic in that thread. That thread was http://benefitslink.com/boards/index.php?s...c=33564&hl=

How are you handling the vesting and withdrawal provisions in the safe harbor notice? Without being able to reference the SPD, the withdrawal section becomes almost a repeat of the SPD because the language of the Final 401(k) Regulations is that the notice must contain "withdrawal and vesting provisions applicable to contributions under the plan".

My concern is that the Final 401(k) Regulations do not limit this requirement to "withdrawal and vesting provisions applicable to safe harbor contributions under the plan".

----Client had payroll withholding for employee 401(k-1) contributions and employee loan payments on 6/30/2005. Client finally remitted the contribtution and employee loan payments one year later 6/2/2006.

How do I calculate the lost earnings to compute the 15% excise tax? Also client has not yet put the "lost earnings" amount into the plan.

Plan year and sponsor year is 12/31. Will I need to prepare a 5330 for 2005 and 2006?

Thanks, Shelley

Under our current plan, there is a (1) voluntary employee deferral and (2) 3% Safe Harbor flat employer contribution for all. All funds go direct into a MM account and then the employee can transfer to any Vanguard fund.

In reading about the changes, I believe I am correct in stating that going to Automatic Enrollment on the deferral side is optional. But then there is, to me, confusing mention of Safe Harbor and default investment. Does that refer to pre-exisiting Safe Harbor or is it just in reference to the Automatic Enrollment change?

If we do not add Automatic Enrollment, does our Safe Harbor remain the same? Can we continue depositing funds into the MM account? This could become a major issue here if we are required to change our exisiting arrangement.

Thank you,

gfeligonde

Has anyone heard when the IRS intends to finalize the 402A regulations? If so, what is the estimated time frame?

Is anyone aware of any proposed changes to plans that contain a 7 year vesting cliff?

We have been recently reviewing a non-governmental, non-for-profit (501©(3)) organization’s retirement plan. The organization has approximately 80 employees and they maintain two 403(b) plans (not sure of the rational for maintaining two plans), one for employee deferrals and one for the employer’s defined contribution of 3.3% for all employees.

A few issues have surfaced and I am not sure if they are applicable. First, it is my understanding that once an employer is materially involved in the plan, such as making contributions, then the plan is subject to ERISA reporting. In this case the organization did file a Form 5500 in 2001 and in 2005, however no Form 5500 has been filed for 2002, 2003, and 2004. Query: Are they subject to the late filing rules as outlined in ERISA and would they be candidates for the VCRS?

Second, they have not been testing their plan for discrimination or top heavy. How would this be corrected dating back to 2001? Thank you.

An employer current has a calendar year safe harbor 401k plan. They want to convert to a Simple 401k effective 1/1/07. The plan would have to be amended by Dec 1 to revoke 2007 safe harbor - by what date must the plan be amended to adopt Simple 401k for 1/1/2007?

Are there amjor institutions Merrill? Fidelity? That handles transfers from an 401(k) format to a 457(b) format?

Obviously, participant contributions/loan repayments that are not timely remitted to a plan's trust (i.e., as soon as administratively practicable) are a prohibited transaction and, if the time period for remitting such contributions to the trust is specified in the plan document, an operational failure to follow the plan's terms.

What if a plan specifies the time period (e.g., monthly) for remitting matching contributions and that period is not met? It's an operational failure to follow the plan's terms, but is it also a prohibited transaction (i.e., impermissible extension of credit)?

Are most out there fixing the prohibited transaction issue through VFCP, Form 5330 or both?

Rev. Proc 2006-27 adds new loan failure correction methods, but indicates that the corrections only apply if the failures are submitted under VCP. Since EPCRS usually provides that self-correction is available if the correction methodology specified in the rev. proc. is followed, this seems a bit out of step. Has anyone heard anything different on this issue or received any indication that the IRS may reconsider? We have a loan default in a plan with a large number of participants...seems a shame to have to correct under VCP and pay a huge fee just to correct one loan failure. Hmmm...

DB plan will be terminating 12/31/06. Client will be filing for a favorable determination letter as part of the termination process.

1. Would former participants otherwise eligible for a distribution from the plan (i.e., attainment of early or normal retirement age) during the FDL process be eligible to receive a distribution or must distribution wait until the FDL is received? If former participants must usually wait, is there an operational failure to follow the plan's terms?

2. Would participants active as of the termination date have to wait until the FDL is received?

3. If either or both categories must wait until the FDL is received, how should this be handled if part of the plan includes a cash balance element and the FDL could take much longer than normal?

Thank you in advance.

The new timing rules under the proposed 415 regulations provide that certain amounts payable within 2-1/2 months after severance will not fail to be 415©(3) compensation. Employers may presently rely on this timing rule. If an employer wanted to rely on this rule now would it have to adopt an amendment or could the employer merely adopt this rule in operation?