May a trustee "choose" to value bonds or CD's at par or cost?

A dispute is brewing between the TPA and the financial advisor that appears at this point to be boiling down to the fair market value of bonds. TPA reconciles the trust and determines that the plan experienced a loss of 3%. Bonds were valued at fair market value by the brokerage house. Obviously, bonds lost value as interest rates have begun to rise.....plus a couple of GM bonds were downgraded adding fuel to the fire. Financial advisor explains to client that he hasn't lost money at all.....hold the bonds til maturity and everything will be just fine.....no losses to the plan. TPA says that ERISA requires the valuation of all assets at "fair market value".....very clear for purposes of 5500 reporting.

Assuming TPA is correct and all plan assets must be reported at fair market value for 5500 reporting purposes, could the trustee decide to value the bonds at cost or par value for purposes of the valuation without jeopardizing qualified status of the plan? Trustee does not want to show a loss to plan participants if the loss is strictly unrealized and he has every intention of keeping the bonds until maturity.

Of course, a Form 5500 that doesn't tie to the valuation doesn't sit right with me, just wondering if anyone else has run into a similar situation.

CD's present the same problem. Had a case recently where the trustees bought CD's at various banks for 15 years. They were always valued at par until they decided to start buying them through a brokerage house. Banks always reported the value of the CD at par.....the brokerage house reported the value at fair market value. So simply because the CD's were held somewhere else, participants began to see losses in their accounts even though the portfolio was invested entirely in insured CD's.

Just wondering if anyone else has come across these issues and if so how they were dealt with.

The actuary uses a specific pre-approved method in the first year of the plan.

Then for year two, the same actuary in the same firm makes a change to another pre-approved method.

As I read 2000-40, the automatic approval is ok, because there was only one change in method. The method adopted in the first plan year is not labeled a change.

Any disagreement?

I am trying to put together a benefit statement (my first one ever) so that the participant can decide what form they want to take the distribution in. I was going to ask for someone to help talk me through it, but I have a feeling that would be too complicated. I have asked for help here at the office but everyone seems too busy to really give me good help.

I am trying to get the Life and 10 annuity amount at NRA and also a Joint and 100% Survivor annuity at NRA. The gentleman's accrued benefit at NRA is $2,000. His wife is actually three years younger than the participant.

The perfect solution is if someone has an Excel file that can assist me with the calculations.

I know this is complicated, but hey that's what message boards are for. Throw it out and see if someone can help. Thanks everyone.

The instructions for Schedule SSA indicate that for the participant's balance in 4(h) should be the value at 'time of separation'.

Does anyone really put that value in there? Or do you put the balance at the end of the reporting period? Or even just a current vested balance? Does it matter?

Your thoughts are appreciated...

We have an ESOP that has a frozen money purchase portion (it was merged into the ESOP years ago). We filed Form 5500 and included the codes for both an ESOP and a MPP (since that portion of the plan is subject to J&S, etc.), and completed Schedule R to report plan distributions. We left part II of Schedule R blank because the form says to skip this section if the plan is not subject to Section 412 minimum funding. We got a reject letter. DOL is not buying our response, and says that if you have a money purchase plan/feature, you MUST be subject to minimum funding, and to call IRS since it's an IRS schedule. IRS has no clue what to do. DOL person suggested that we put 0's in for the amount of funding.

From my Googling, this seems to be a common problem for which there is no right answer. (i.e., you can't properly fill out the 5500 for a frozen money purchase plan.) Has anyone had a successful response to the DOL on their reject letter that I could learn from?

Thanks in advance!!

Took over a 401(k) plan in late 05 - we restated document effective 1/1/06. Just notice that both documents (1/1/04 & 9/16/05) from prior administrator did not name a trustee. What are the ramifications of this? How should it be handled? Or is it not a big deal? Please advise.

On 1/1/05 Plan a plan had 97 participants. In the previous year, they were an audited plan. Here is what there accountant informed them:

" If a plan had 80 or more employees that were participating, eligible or eligible to participate, the plan must file the same Form 5500 and therefore need an audit"

The client says the accountant must be right. The DOL rep at the accounting office in Washington told me: "I always have problems with what TPA's do. IQPA's have a code of ethics, you don't and I don't care what TPA's say."

Please help me. I have always understood that if a plan has less than 100 lives they file as a small plan and if they have between 80 and 120, they MAY file the same way as last year.

Thanks!

A 401(k) plan terminates in 2006. There are 4 eligible ee's. When can they implement a simple 401(k) plan? What is the earliest possible date?

The Board of Directors will not meet until mid-December to determine whether the defined benefit plan will be frozen as of December 31st. May the 204(h) notice that is distributed in mid- November state that the freeze will be effective December 31st or not all, depending upon the decision of the Board?

I have an employer that used qualifying employer security (a promissory note) to fund its DC plan. The ER now wants to terminate the plan and:

1) Distribute to each participant a pro rata share of the promissory note; and

2) Advise the employees to roll it over into an IRA.

Can both (or either) be done? If so, is there caselaw and/or Code/reg guidance on the issue?

Thank you in advance to anyone who may be of assistance!

Are there any rulings regarding purchasing land from your IRA?

Plan is a large multiple-employer 401(k) plan which has adopting employers all across the country. Typical adopting employer is a small firm which is on the very "low side" of sophistication. Processing is further complicated as adopting firms have varied payroll cycles (no standard). Deferral data is required to be sent to a "central site", which processes actual deposits for all adopting entities. Given that the 15th of the following month is no safe harbor, how should (or can) one determine when deferrals should be deposited to satisfy the "timely standard" of the DOL?

We recently received payment of the plan's share of a class action settlement on our Company Stock. Although it is a nice payment, it only represents about one tenth of one percent of the Company Stock Fund.

The plan's recovery was based on its calculated loss, which was in turn based on net omnibus account level purchases over a period from 1999 to 2003 at a price higher than the specified trigger price. We could allocate the recovery to a participant level based on a calculation similar to that of the claim. But that raises the following issues:

- Many of the participants have terminated, and taken a lump sum. We could track them down but it would be expensive.

- The recovery was based on days with net trading activity resulting in a purchase over the trigger price. It was not based on participant level transactions.

- The cost of an allocation based on the original claim calculation would be very expensive.

So the decision on how to do the allocation is undoubtedly a fiduciary decision, but I am looking for ideas on what might be a reasonable, cost-effective approach.

ok - this one goes back a ways...I know there were posts, but have been unable to find them...

What, if anything, would happen if an Employer was making the 401(k) deposits on say, Wednesday, but the actual payroll check date is Friday? Wasn't there something in the Regs about this being a "bad" thing because participants were receiving an allocation to their 401(k) account prior to actually receiving their payroll $ ? Most paychecks checks are paid for time worked, so the employee has earned that money already.

Any & all thoughts appreciated.

Does anyone have a copy of the "Padilla Memo". The memo issued by Carol Gold on March 13, 1998? Thanks.

Have a company that decided to terminate its 401(k) Profit Sharing Plan. As of the end of the plan year (12/31/2005) they had not yet paid out the trust assets.

We are assuming that on page 2 of the 5500 where you detail the employee count, those participants (who are still active employees with the plan sponsor) would be counted as active participants with account balances. Or, would you consider them terminated with future benefits?

ok, no missing bodies or anything.

Plus this is the Simpsons and I am going to assume you have watched them too many times to count.

I haven't, and I am not a big movie fan, but I was still able to identify from the pictures most of the movies they were imitating/making fun of/spoofing/whatever.

but heck, its Friday, sit back and have some fun.

21 movies to identify

A plan has 5 active participants and 1 terminated participant. Two of the actives are owners. The 3 non-owners are laid off.

a) Did the plan experience partial termination?

b) If yes, does the previously terminated participant become 100% vested also?

c) Suppose only one employee was laid off (1/3rd of non-owners). Is there a partial termination? What if two were laid off?

Our plans provide for a specific lifetime maximum on "medical coverage." Can we count the premiums we as a company contribute for the medical coverage in this maximum? Is there any case law out there on this?

A single participant with > 10 years service is terminating on 6/30 and is set to receive a lump sum on 9/1.

The question is will there be any benefit if she dies between 7/1 and 8/31?

The plan document seems to discuss what happens when a married participant dies prior to receiving benefits but not for single participants. However, there are two sections I am not quite clear on as I've never had to interpret them:

Election of Beneficiaries

Each Participant shall designate in writing in the form and manner prescribed by the Committee a Beneficiary to receive the benefits payable under the Plan by reason of the Participant's death if Sections 5.2 (Retirement Annuity Requirement) or 5.3 (Survivor Annuity Requirement) are not applicable....

Procedure in Absence of Election

Wherever provision is made hereunder for the payment of any death benefit not governed by Section 5.2 (Retirement Annuity Requirement) or 5.3 (Survivor Annuity Requirement) and there shall be no properly designated surviving Beneficiary, such benefit shall be paid to the following person or persons if they are living on the date of the Participant's death...:

a) Spouse; or, if none, then

b) Equally among the Participant's children; or, if none, then

c) Participant's estate

Thank you.