401K plan has eligiblity as follows: 1st of month following one month of service. For employees who enter on the first, the 401k deduction is being taken out of the first paycheck following, which is a paydate of the the 4th or 5th for services rendered in the last two weeks of the prior month. The employees are eligible and have met an entry date but the deduction is being taken out of a paycheck for service rendered prior to eligiblity. Any thoughts?

The PPA liberalized the withdrawal rules for pension plans by permitting in-service withdrawals upon attaining age 62. In reading the Technical Explanation it refers to "pension" plans permitting such a distribution.

May be taking this too literal but what about a MPP that was merged or amended into a PSP/401(k) - that MPP account balanced that was transferred had to follow the withdrawal restrictions of RR 94-76. But that MPP account balance is now part of a Profit Sharing Plan. It would seem odd that the MPP account balance that was transferred and now part of a PSP would not be available subject to this new rule but just wanted to check.

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dear sir:

if you wish to advertise you are more than welcome to do so under the proper the forum.

100% owner/participant has a DB plan where the only other participants are her husband and her father. Would the plan be required to have PBGC coverage, a fidelity bond and file a 5500, or is the father also deemed to own 100%? Likewise, would the father, who's over age 70-1/2, have to take required minimum distributions while he's still employed? All help is greatly appreciated.

Just took over a new plan that uses a corbel document (prototype). We don't have the trust portion, but the adoption agreement does not have anything on terminated participants that are rehired. Does anyone know how corbel document handles the following:

Participant terms in 2003, with break in service. He was paid out in 2004(100% vested). Rehired in 2005. Does he become automatically eligible upon rehire with a 2 year break and fully paid?

Thanks

Does the recently enacted Pension Protection Act give any sort of safe harbor relief to cash balance plans with respect to non discrimination testing? Or do we still have to go through the 401(a)(4) testing exercise?

I'm looking at the Treasury regs regarding a corrective amendment necessary to pass the Average Benefits Test for 2005. 1.401(a)(4)-11g. Our intention is to increase benefits for the NHCEs to a level that will pass the test for 2005. The regs say the corrective amendment may retroactively increase accruals as if they were adopted and effective as of the first day of the plan year. Do you think we have to redo our beginnning of year valuation which will increase our funding requirement ..Or do you think we can execute the amendment, leave the valuation and funding as it was before the amendment and complete the testing as though the amendment were effective as of 1/1/05.

A tax-exempt local government money purchase plan has a GUST document, which uses a vesting schedule that starts at 0% for years 1 and 2, and does not fully vest until year 8. Normally this would not be permitted, but is there an exception for government plans?

An client of mine is setting up a new 401(k) plan. He is an unincorporated dentist with 5 employees, including his wife. Initial plan assets, including rollovers, will total about $200,000. He and and his wife will have about $150,000 of the total. He called his insurance carrier to purchase a bond and was told $1,000 of coverage (the minimum) was enough rather than $2,000since his and his wife's assets are not included in plan assets for bonding purposes.

I have never heard this before, and can find nothing to support this position. Can anyone shed some light on this? Thanks.

FSA has Employer contributions. If an employee is terminated and elects FSA COBRA, does the employer have to fund remainder of their 'Annual election/contribution'? For example, employee elects a $1000 salary reduction for the year. The employer offers an additional $800 (so the total Annual Election is now $1800 for the year). If the participant terminates mid year and has contributed $500 of their own salary and the employer has put in $400 thus far, is the employee now required as part of their COBRA premium to compensate for the amount that the employer did not put in as of yet and include this in their COBRA payment? Any assistance would be appreciated.

We have a plan that did not make the SH contribution by 9/15. The owner says he has no money & cannot make the contribution. What are the consequences?

We were reporting the contribution on the 5500 - will we need to file an amended or just drag is along as a liability. The owner is trying to terminate the plan now. Any insight or direction would be helpful. Thanks

my place of employment is about to go under, and me and my boss got into a argument where he cut my pay in abou half. my question is can he cancel my health insurance and nobody elses just because he got mad?

I am a Cafeteria Plan Administrator at a TPA. One of my clients has a generous leave policy that allows their employees to take FMLA leave at whatever increments they need. Several take one or two days at a time on a regular basis. They may be paid by sick pay or vacation pay while on leave and if they use that up, they're still paid 70% pay up to 12 weeks. They never have unpaid leave basically. This is a large company and we try to do everything very uniformally because the participants will fight if they know something was done for one participant and not another....the whole discrimanatory administration issue is avoided that way too.

Recently one of their participants went on disability leave which the employer is still classifying as FMLA leave but he is being paid 70% of his usual pay. He wanted to drop all of his elections under the Cafeteria plan. This Cafeteria Plan only consists of Medical FSA, DCAP, and an individual insurance premium reimbursement account (I realize this is an ongoing controversial issue on this board but let's leave that one alone in this case). The employer does not want to let him drop his elections because they feel that then they would have to let the participants taking one or two days to drop their elections and this would cause an adminstrative nightmare for everyone.

I have not been able to find any guidance on partially paid leave. I have found that they have to allow them if its unpaid leave and they can refuse to allow them to drop if its paid leave. I recommended to the client that we ammend the PD to include language about paid leave being ineligible to make an election change and at what percentage (i.e. 50% or above=paid, less than 50%=unpaid).

Does anyone know any guidance on this or have any opinions about how to handle this? Your feedback would be GREATLY appreciated!

Is the interest crediting basis, e.g., 30 year treasury, fixed rate, etc. a protected benefit. Can it be changed with respect to already accrued benefits. For example, person terminates with plan providing a 5% fixed interest rate, can plan be amended to reduce the rate to 3% at some future date or is the 5% rate protected? How about for an active employee with respect to accrued benefit or only for future accruals?

E/er PSP allows for directed investment accounts. E/er wants to have each such account pay its own way as to accounting expenses. For example, one e/ee makes numerous trades daily and thus the annual accounting attributable to going through all of the trade history/data at year end is significant when compared to other participants. Generally, the plan provisions provide for the directed investment account to be segregated as to income, gain, loss, etc... as would be expected, but the E/er wants to also peg the administrative fees as well. Obviously, if we were talking about former participants, recent (sort of...) pronouncements by DOL and IRS would allow the plan to let the former participant accounts pay their own way; howeverm we are dealing with a current participant. Any suggestions appreciated.

A client is the only participant of his pension plan.

He wants to take $70,000 in plan assets and invest in a condo.

He believes that he can get net proceeds in a couple of years of say $200,000 from this investment.

He then asks if he can pay the $70,000 back to the plan plus say another $30,000 of investment return and keep the remaining $100,000.

Without going into much detail he claims he would structure it as an investment in a company of $70,000, where the company purchases the real estate and then sells it and gives him thenet proceeds. I don't see this altering what wa stated above, just his attempt at making the transaction seem legitimate.

My question is to determine the damages of this clearly PT transaction.

For example, I see it as a situation where he in effect takes $100,000 from the plan at the time of the sale of the condo. And therefore, it is conceivable that the PT excise tax could start at 15% of the use of the money. So if the use of the money were estimated at 10%, that would amount to $10,000 in the first year and the first year excise tax would be 15% of $10,000 or $1,500. Of course this would then compound every subsequent year that such transaction is not corrected. And the excise tax wopuld be increased from 15% to 100% if the transaction is not corrected and a DOL letter is received on account of this PT.

The above seems like one potential consequence. Curious to hear of other outcomes that people believe would occur. For example, perhaps the entire plan and all prior plan contributions would be disqualified, resulting in corporate taxes for all prior contributions, taxable compensation to the employee and maybe penalties, interest, excise taxes, etc.

Or alternatively, what would be the damages if right after the transaction the plan were immediately terminated? Would the $100,000 simply be a part of the accrued benefit that is taxable, end of story?

Thanks.

Two separate issues:

1. Safe Harbor 401(k) to be terminated prior to year end.

Seems that if the facts/circ's meet the requirements of obtaining a funding waiver as if it were a MPPP, then safe harbor status remains intact.....????

2. Regular 401(k) to be terminated where e/er maintains a "successor plan".

Even though deferrals cannot be distributed to participants it appears that they can be transferred to the successor plan. I assume this can be handled in the termination amendment. I also assume that the successor plan will need to be amended to maintain the 401(k) distribution restrictions as to the transferred deferrals.....???

Any comments/feedback on either or both of the above greatly appreciated....

Here are the facts:

i have a 70.5 year-old man who is a 5% owner and is already receiving RMD from the employer's 401(k) plan. He wants to take advantage of the charitable IRA contribution under the PPA of 2006.

Obviously, as his retirement plans are arranged now, he can't at all take advantage of the new giving provision because he isn't yet in an IRA or Roth IRA.

Question: how do we move him into an IRA/Roth IRA while he is currently receiving RMD under the 401(k) plan. The code and regs make clear that you can't rollover an RMD.

However, what if we included this year's RMD in GI while simultaneously rolling the 401(k) plan assets into an IRA, at which point we could make a $100K contribution in 2007?

Also, from my understanding, assets rolled into an IRA from a qualified plan retain their creditor-exempt status under ERISA.

What am i missing or just plain not thinking about?

I have what I feel is going to become a common occurance in our shop. A little background first: We had an employee who was in jail and wanted to withdrawl his 401(k) money to pay court costs, etc. Employee was advised that the only way he could get all his money would be to resign his position with the company. Gen. Mgr. stated that he would be eligible for rehire, but wouldn't guarantee his job for him. Employee gets money, a few weeks later gets out of jail and then comes back to work.

This employee is good friends with another employee and earlier this month, sec. emp. puts in his 2 weeks notice with some story that he needs to move but doesn't have a job, house, etc in new state. I get the funny feeling he needs his 401k money and is planning on asking for his job back. Sure enough, on Tues. I get a call from a cash checking place verifying that this was a former employee and an acutual check. Just 10 min. ago, I get the phone call from this employee that he needs his job back and wants to talk to the foreman.

Needless to say I have pitched a fit. Talk about extra paperwork to constantly hire and rehire these guys. I go to the GM and the Foreman and let them know my concerns because these guys in the shop feel that 401(k) "holds their money hostage" not that its a retirement account to be used when they are old. I am afraid that if they rehire this guy it will begin a rash of employee's taking the chance and resigning (not to mention they get paid all accrued Vac for next year when they resign), cashing out their 401(k) and calling to come back to work 2 weeks later.

Do, I need to worry about anything legally? Can the government come and fine us for something like this? We are following proper procedure when an employee quits, but I am afraid that our carrier will see a pattern and we could be held accountable.

Any help is greatly appreciated. It just makes me mad that they would even consider rehiring this guy.

Are Roth 401(k) contributions included as contributions when completing the average benefits percentage test?