I am in the process of terminating a PBGC-covered 412(i) Plan. There are two matters that have arisen.

First, is a 412(i) Plan subject to IRC 417(e)? Two of the three participants in the plan have cash surrender values greater than their so-called 417(e) minimum, but one does not. What to do? Make an additional er contribution for him to bring him up to speed?

Second, the plan's benefits were frozen as of 4/06, so there would be no 2006 accrual. However, the plan sponsor has not made the 2005 contribution yet, and does not want to do so. Is there a way around it? Is the 2005 contribution considered a minimum funding requirement, a receivable as a part of the definition of the cash value (read: accrued benefit), as well as a part of the exemption from the remainder of IRC 412? Does this lack of the 2005 funding mean that the Plan cannot terminate as a standard termination?

I called the PBGC, and they had no idea. One final question: what's so simple about 412(i) plans if a standard termination of such a plan requires an enrolled actuary's signature on unknown matters like this one? Or am I missing something?

Any thoughts or ideas would be appreciated. Thanks! Carol Caruthers

Can anyone provide a resource documenting that hardship distributions are NOT protected benefits and can be removed from the plan?

As I sit here working this evening, listening to the Sabres v Hurricane game, watching Idol, and looking forward to Lost...guess that explains why nothing gets done when I work from home...anyone have an opinion as to who will win the Cup?

In my opinion, it has to be Buffalo. Sure we can't win the Super Bowl and already lost the cup once...but I have to believe this is our year!

Recently, a TPA asked me how to respond to a subpeona they received from the attorney for a plan

participant. I am not an attorney, so I am looking for advice.

It seems to me that the TPA has no direct fiduciary duty to the participant. Any disclosure would require the permission of the plan sponsor or plan administrator or plan trustee.

No participant data would be released on any person except the plan participant. Amounts of distributions, compensation, service, etc. that were not the direct records of the participant would be off limits unless the other participants gave express written approval to disclose the information. This would include information on the timeliness of participant loan payments.

Any other guidelines I should follow?

Is a SEP IRA Plan or a Simple IRA Plan subject to Title I of ERISA?

Please reference any resources stating your case.

I have a situation where the trustee name was filled out incorrectly on the SS-4 and the client wants it fixed with the IRS. Anyone know how to proceed with doing this?

I have heard from multiple sources that cash contributions to an Roth IRA can be withdrawn at any time for any reason, not matter what, hands down, black and white, no penalty, no additional tax. For example, if today I put $1000 into the Roth IRA and tomorrow I have an emergency I can remove the same $1000 with out any other cost to doing so? Is this true? It seems my financial institution was unsure of this point... they kept talking about 5 year minimum this and qualified withdrawl that (home purchase, etc.). My understanding is those criteria are only on the earnings, right? Contributions are "liquid," yes? If withdrawn do they ever have to be paid back? Please set me straight if I am somehow confused.

Another possibility I guess is that my bank may have a different policy... is this possible? I thought the rules are universal? Could the bank have some fee for doing this?

I have a plan with a benefit formula of 500% X compensation reduced 1/25 for years of service less than 25 years, limited to 100% compensation. Accrual is pro rata based on participation.

A participant has 5 years of past participation and 30 years of future participation. His compensation is $1,000/month.

His projected benefit is calculated as $1,000 X 500% X 25/25 = $5,000 limited to $1,000. His accrued benefit is $1,000 X 5/35 = $142.86.

Does this meet the safe harbor under 1.401(a)(4)-3(b)(4)(i)(2) which begins "The normal retirement benefit under the plan must be a flat benefit that requires a minimum of 25 years of service at normal retirement age for an employee to receive the unreduced flat benefit, determined without regard to section 415...." and which ends "......An employee is permitted to accrue the maximum benefit permitted under section 415 over a period of less than 25 years, provided that the flat benefit under the plan, determined without regard to section 415, can accrue over no less than 25 years."

A client’s DB plan is terminating. One of the assets of the Plan is a Limited Partnership that they cannot liquidate. In order to get all the Plan’s assets liquid, it would be nice if the client could purchase that Limited Partnership asset from the Plan so that the Plan would have liquid cash. However, the client cannot do this since that would be a prohibited transaction (i.e a Plan doing business with a party-in-interest).

The client also has a Profit Sharing Plan that they are not terminating. The Profit Sharing assets are pooled. Here’s our question: Can the Profit Sharing Plan buy the limited Partnership asset from the DB Plan? Would that be or not be a prohibited transaction?

Can a 401(k) plan that is not using a safe harbor for either the ADP or ACP tests provide for a suspension period of more than 12 months for those participants that take a hardship withdrawal? Alternatively, could the plan provide that a participant that receives a hardship distribution could start deferring again after 6 months, but provide that they would not be eligible for matching contributions until 12 months after the hardship distribuiton?

Is there a limit on the amount that a group can set as their Medical Reimbursement Maximim?

An officer of Company A, and a plan trustee, uses his self directed account to make an improper investment in a limited partnership in which he has ownership. (He is no longer employed by Company A.) The investment has been carried at cost on Company A's 5500 for several years. The most recent K-1 is blank where there should be a dollar amount, but the LLC went bankrupt a couple of years ago, so the investment is probably worth little or nothing. The participant has attempted to roll the asset into an IRA without success.

Can the employer force a distribution, issue a 1099R (once they get the K-1 preparer to provide a dollar amount) and get rid of this thing?

Any thoughts or ideas on this situation are appreciated:

Most self-directed 401(k)s and PS that we work are run through a fund or multi-fund family, with all the bells and whistles of web-access, unlimited trades at little to no cost, (within the same family), etc. I am working with a new financial guy who seems to have a problem that no one else does. It appears that he wants to/must use brokerage accounts for the 401(k) prospect. However, with all trades will cost approximately $15-$20 to execute. So, for 10 participants, who have 401(k) money deposited each month, into on average 4 funds each, there would be $1,200 - $1,600 in fees that he would have to pay each month to accomplish all of this. Obviously that is not workable. When I asked about using the more common approach above (big daily val system), he claims that the employer actually ends up paying more in fees using that approach and he wants to avoid doing that.

Its really not my problem to solve, but I just wanted to understand this dilemna a little better, as no one seems to have run into this before. Even the few other clients that we have that use brokerage accounts have never mentioned this problem before.

One solution would be to no permit self-direction, which would allow the trustee to control things and that would reduce the number of trades. But in allowing self-direction, the trustee is obligated to have the partiicpant's money invested "within a reasonable time period". Could the advisor impose a minimum deposit threshold for the funds, say $1,000? No investments into this fund until there is at least $1,000 to invest into it? Doesn't that violate a BRF if the HCEs are reaching that threshold sooner than the others?

Thanks for any comments.

I have a client that is a sole proprietor and a member of an LLC. He has a SEP for his sole proprietorship and the LLC has a SEP. Assuming he has enough income from each business and the businesses are not affiliated service groups or controlled groups, can he get $42,000 in each of the SEPs?

Thanks

The language of Rev. Proc. 2005-66, Section 8 ("Plan Termination") provides that the termination of a plan ends its RAP and that, accordingly, any amendments required to bring the plan into compliance as of the termination date must adopted in connection with the termination.

I read this to mean that if an adopter of, say, a standardized prototype DC plan, has only one shot to make sure the plan is in compliance as of the termination date. However, the prototype sponsor has the opportunity to later cure defective good-faith amendments by adopting valid and retroactively effective amendments.

Thus, it appears that if the sponsor's amendment turns out to be invalid, the circumstance could exist where the IRS refuses to issue a favorable determination letter to a terminated plan, but later allows the prototpye to obtain a new opinion letter based on a cure down the road.

Does anyone know of any mechanism that gives relief to the terminating plan? Would the employer be able to rely on a fvorable opinion letter that was issued before the EGTRRA amendments were submitted to the IRS but adopted?

This may be too basic - but does a VEBA trust that is part of an employee welfare benefit plan have to file a Form 990 or is it exempt? I saw on the instructions that a retirement plan does not have to file a Form 990 - but what about welfare benefit plans? Thanks!

The sponsor of a small PS plan received a letter and forms from the state's child support enforcement office, requesting that a portion of any compensation paid to the employee be paid to the agency for child support. The letter and follow up conversations indicate that a portion of any payments from the PS plan should also be sent to the child support agency.

The employee has now terminated employment and wants to take his money. He is aware of the above situation and is OK with receiving an amount less than what has been determined must go for child support. He wants to take a cash distribution. Would he be taxed on the child support portion? If not, who would get the 1099-R?

Thanks

Can anyone tell how to reference the portion of the code where it states and Employer cannot pursue the EE if the EE left employment at the beginning of the plan year. Example EE declares $5,000.00 - he uses all of the $5K in the first two months of the plan year, and then leaves employment.

Thank you if anyone can help me with the portion of the code that states this.

Here is a situation for you.

A Rep makes a sale of a Mutual Fund to a client that lives in the Virgin Islands but the Fund is NOT registered in the Virgin Islands. The Rep is licensed to sell in the Virgin Islands as well as Florida and has his office in Florida.

Is the point of sale in the Virgin Islands or Florida?

The Fund Family is registered in Florida but not the Virgin Islands, issues with this sale?

We are working with a client to determine what compliance tests are performed on a H&W Medical Plan for all areas (COBRA, FSA, HSA, Dependant Care, Prescription Plan, LTD, STD, GTL, etc.) of a Health & Welfare Plan. Can anyone guide us as to where to find a list and the descriptions?

Thanks in Advance for your responses.

Annabella