Please help alleviate some confusion in regards to "church plans" I am having difficulty getting my arms around the definition of a church plan. More to the point - is a church that establishes any type of plan (e.g. 403((b), 401(k), etc.) considered a church plan? Or is a church plan based on rules found under 414(e)?

Also, I am aware a Church which establishes a 403(b) can invest in retirement income accounts (403b9). Are all employees of the church eligible to investment in retirmeent accounts or only ministers for tax purposes.

Any additoinal information on this topic is appreciated.

Thank you

According to Sal Tripodi's ERISA Outline Book, when you have a short plan year, for eligibility and vesting you look at hours for the 12 months beginning with the first day of the short plan year per DOL 2530.203-2©. I believe that somewhere in the past I have read that you could also use the 12 months prior to the end of the short plan year, i.e., if the short plan year is from 01/01/2006 through 6/30/2006, you could use hours from 7/1/2005 through 6/30/2006. Has anyone else seen that? Also, what about just putting in the short plan year amendment that anyone with one hour of service in the short plan year is granted a year of service? Anyone seen a PLR, IRS Q&A or anything that would allow either of these? I really don't want to wait 6 months after the end of the SPY to calculate vesting! Thanks.....

Employee terminated 6/30/06. Completed request for distribution upon termination. Re-hired 7/5/06. Can distribution still be made?

daughter of an owner is classified as an HCE. her husband, who makes less than 90K and has no ownership, is he classified as an HCE for adp test purposes? imo he is not.

Any idea how to handle the allocation of forfeitures in frozen MPPP where the formula was amended to 0% of compensation? The TPA firm may or may not have read the allocation provision of the plan document which allowed for forfeitures to be used to pay plan admin. expenses. In any event the TPA firm allocated forfeitures on the basis of compensation or they might have used current acct. balances over total acct. balances to make the allocation. Have tried to convince client to terminate the MPPP to get it out of the way, but to no avail. Any suggestions appreciated.

Calculating quartlerly contribution penalty for 2006 calendar year plan. Contribution of $50,000 made on 4/1/06 for the 2005 funding standard account. For the 4/15/06 quarterly requirement, it is my understanding that the contribution made on 4/1/06 receives interest from 4/1/06 and not 12/31/05 even though it is part of the 12/31/05 credit balance and made before the 4/15/06 quarterly due date. Am i thinking correctly or not?? Thanks.

Client is closing a plan because he is joining a larger medical practice. He doesnt like the investment choices he will have in the new plan and has asked where can he put his $ and still protect it. If he opens a plan and is the only participant he is not protected under ERISA... what are his options. IRAs are subject to litigation... what to do

Thanks!

Can a participant have a negative cash balance and a positive stock balance?

Plan has immediate entry for 401(k) but 1 year of service for the safe harbor match. 3 HCEs become eligible after the beginning of the year for the safe harbor match.

Question:

Is adp/acp testing performed with these hces included or because they became eligible for the safe harbor match during the plan year, are they deemed to satisfy the adp/acp safe harbor requirements?

Howdy Folks-- I had this posted on "Correcting Plan Defects"...quite a few people read it, but never got a single response. Maybe I will here.

A client with a 401(k) plan began providing a matching contribution Jan 1 this year, with the maximum match equaling 3% of compensation. At the same time he reduced contributions in his Section 125 plan by 3%. When the employees complained, he decided to provide an additional 3% in the 125 plan for employees who make no 401(k) contributions (and thus get no match). His thinking was that this way everybody will get 3%, either in the 125 plan or in the form of a matching contribution in the 401(k) plan (or a combination of the two, for those who receive a match that's less than the maximum).

Since this makes an employee's benefit in the Section 125 plan contingent on the amount he contributes to the 401(k), it's a clear violation of the contingent benefit rule in section 401(k)(4)(a). But what would be the least painful yet appropriate correction for what has already happened the first half of this year?

Can Section 127 education assistance programs exclude part-time employees? Assume the plan satisfies all of the other statutory and regulatory requirements. I would appreciate any thoughts.

I recently went to a financial advisor. He introduced a concept to me that is new and I want to run it by you guys and gals. Here's what he said I can do to build wealth.

1. Start a corporation or LLC

2. Fund a Roth

3. Have the Roth buy 100% of the shares in the corporation

4. start a business or buy a piece of real estate with the money from the Roth that is now in the corporation

5. profits from the business or gains from the real estate transaction can be distributed to the Roth because it's a 100% shareholder...and no taxes will be due on the gains as the Roth allows for gains in an investment ...TAX FREE.

Is this legal as long as I personally don't take a distribution?

Comp. A & Comp. B co-sponsor a 401k plan. Comp. A stock is sold to Mega-Comp. C on 4/1/06.

Comp. A's Board, on 3/31/06, passed a resolution saying, "the Company will cease to be a participating "Employer" in the Plan effective as of the close of business on March 31, 2006".

I don't think that created a "distributable event" for the employees of Comp. A because it was not "termination of the plan" before the sale.

Am I correct? Or would this allow for distribution of 401k money for employees of Comp. A now working for Mega-Comp. C?

**************

I think that to allow for distributions they would have had to spin off one of the companies (A or B) from the A+B Plan and then A could have terminated pre-sale, thus allowing for distribution of assets. Without the spin-off, if plan terminated and distributed $, Comp B. would not be allowed to have a plan for a year.

Right?

**************

Is there any issue with a Trustee-to-Trustee transfer of the money from the A+B plan to the Mega-Co Plan now that Comp A is not a participating employer in the A+B Plan? (Although I don't know where else the money can go.)

Thanks

I have a DB plan that was recently restated. Under the old plan, a married participant could designate a non-spouse for his or her survivor benefit at any time (while an employee, terminated vested, or retiree), assuming appropriate spousal consent, etc. When the plan was restated, the company decided that it would let employees and retirees continue to designate non-spouses to receive the benefit, but that terminated vested participants would be restricted to having the benefit paid to the spouse.

My question is whether this elimination of the ability to designate a non-spouse beneficiary for the survivor benefit has run afoul of the protected benefit rules under 411(d)(6)? Do we need to protect the ability for the term. vested to designate a non-spouse generally, to preserve the right merely for the benefit accrued before restatement, or does it not matter at all?

Any thoughts would be greatly appreciated.

It's been a while since I have had this question and I can not find exactly what I am looking for.

I have a 2 person PSP and the two people are the owner and his wife. Is a surety bond required in this case?

Takeover safe harbor 401k plan form Citistreet has no named trustee in document. Assets invested in Travellers (group annuity). Form 5500 marks insurance but not trust and sch P has never been filed. Citistreet syas that since assets invested in insurance this is correct. Does anyone have a point of reference for this approach?

Do both of the House and Senate bills contain provisions to eliminated the whipsaw issue with cash-balance plans ?

Person dies with an IRA and some bills to pay (payments to friends, credit cards). IRA bene is the daughter. Will the daughter need to pay those bills from the IRA? How does payment of bills usually work when a person dies without money other than an IRA in which a beneficiary is named?

Plan A is an ESOP. Pursuant to § 401(a)(28), assets derived from a "qualified participant's" diversification of employer stock is distributable immediately, i.e., in-service, but remain subject to the § 72(t) 10% tax on early distributions for participants under 59½. For administrative reasons (namely, because of its contract with Plan A's custodian), Employer wants to handle all Plan A distributions by first transfering the assets to Plan B (its 401(k) plan), then distributing them from Plan B. I see no problem with that when the event is a distributable event under both Plans, but can Plan B provide for an immediate in-service distribution of amounts that were distributable only because of the ESOP rules applicable to Plan A? As I read the in-service distriubution restrictions under § 401(k), they apply only to elective deferrals. So, the general question is, does the "distributableness" of the diversification proceeds continue to apply to the assets post-transfer? Here's an example:

Participant is age 55. She diversifies her Employer stock. The proceeds are immediately distributable, and she wants to roll them over to an IRA, despite the 10% penalty. Can Employer accomplish the rollover by transfering the proceeds from Plan A to Plan B and then rolling them over from Plan B to the IRA?

Thanks for any ideas.

Is it possible to have a loan in a qualified plan that pre-dates the requirement for level amortization? Say, an interest-only home loan? If so, what year did that requirement come into being?

Thanks.