I am confused on catch-up rule for a fiscal year plan and having some internal disagreement on the outcome.

Plan year 05-01-2005 to 04-30-2006.

HCE defer's $13,120 in 2005 calander year and which also corresponds to amount he deferred in 2005 plan year ending 04-30-2006. He has made no contributions in 2006 to date.

Plan failed ADP testing and he would get a refund of $1101.50. However, he is over age 50.

Can he reclassify his ADP refund as Catch-Up even though he has not made 2006 contributions?

Company is changing it's payroll cycle from semi-monthly to bi-weekly. For the outstanding loans, we need to re-amoritize the payments to reflect this change.

Do we need to issue new loan paperwork to all loan participants since the actual frequency and loan payment amount will change? The other terms of the loan will not change.

Any thoughts/comments are appreciated.

While cleaning out some stuff at home I found the following buried deep in stuff that I must have been given years ago. Good luck!

There are 36 books of the Bible hidden in the following:

(shhhh. don't tell people where they are yet. maybe just say how many you have found)

While motoring in Palestine my friend O. Dusty Baker and I met Chief Moth Mujud, gesticulating wildly. His fez, raiment and features were odd. I never saw so dismal a chief. On market days he pumps alms from everyone, a most common practice. A glance shows that he acts queerly. Excuse me speaking so, but he was showing a crowd how they used to revel at Ionian bouts, when the brew seems bad. A fakir was sitting on a humble horse, whose appearance was quite interesting – he was wearing as comic a hat as they make. He pointed up eternally toward a rudely carved J on a high cliff.

My companions excitedly cried, “See that J, Oh, now I know we are near the ancient Ai. Was this Ai a holy place?” From answer given elsewhere, I’ll say not.

We asked the age of the big stone J. “O eleven centuries at least,” he said. I knew that in such a jam escort was necessary. Besides, our car was stuck in a rut here. So leaving the sedan, I elbowed nearer the fakir. A toothless hag gained access to his side, and paused to rest herself. She asked, “Do you have a treasure?” To which I retorted: “Not I. Moth, you know – tell us. Chief Moth Mojud expressed a desire to show us, however, warning someone may try to steal or annex O Dusty Baker’s goods along the way.

Now I am at the work of tracing the missing cargo of tobacco that belonged to him. That’s my job. To the chief’s expression of sorrow over the tobacco loss I answered, “well, you did warn us.”

My brother might be able to help us. He is a lawyer; however, he is a bit of a tramp, rover, BS from Harvard. His name is Eugene. Sister is working with him as well. They asked, “Well, where is that rover, prodigal at?” I answered that it used to be incorrect to use ‘at’ that way (never use a preposition at the end of the sentence) but everyone does it anyway. By the way, the flu kept Eugene at home this year. It really is too bad, I, a homebody, am the one roaming the Orient looking for treasure, while he - a tramp - at home in bed.

I recall a federal statute was passed several years ago that prohibits the state of employment from continuing to tax the benefits paid to retirees who have moved out of the state. Unfortunately, I can't put my hands on the statute.

What I can't recall is whether the installments have to be paid over "more than 10 years" or "10 or more years."

Can anyone help?

If a participant takes an early withdrawal of their 401(k) plan after they terminate from a company (about $1,500), I know that there is a excise tax of 10%, are there any consequences for taking the retirement savings contributions credit on prior tax returns?

A not for profit organization (501©(3)) has controlled group of three entities and all entites are in one cafeteria plan (flex credit dollar arrangement). One of the qualified benefits offered under the cafeteria plan that flex dollars may be applied to is insured health coverage (HMO options, etc.)

One of the entities (covering 33 of 250ish employees in the controlled group) applied for (and is approved to receive) grant money to increase the employer contribution paid for the 33 employees - but not any of the other employees in the controlled group (the other entities were not part of the grant).

Can this be done? I just can't think of a way to do it - isn't there a discrimination issue? What about FICA issues? Would a separate plan have to be set-up to accomplish this?

Any thoughts would be greatly appreciated!

For most of the retirement plans that we administer, our role is that of a directed trustee. During my recent audit I have come across an issue with participant loans that are past due. As directed trustee, we notify the Plan Sponsor and request guidance on whether they need to be deemed. We have several plan sponsors that simply will not respond to our repeated requests. Since we are not receiving direction from the plan sponsor, the operations area takes no action.

As an auditor, I am wondering who is ultimately responsible for deeming the loan. From what I have researched and found, as a directed trustee we are required to follow the direction of the plan sponsor/administrator, and at the same time follow the plan documents. Several of these loans are more than a year past due. From an IRS perspective, I would presume the applicable 1099 should be filed within the tax year that the loan was deemed.

Do we, as directed trustee, have the authority and responsibility to deem past due loans? Any guidance is appreciated.

Hi everyone,

I've been told two different ways on the SSA count for line 7i on the Form 5500:

1. Your # equals the total of A's and D's (or B's and C's as well but it's not common to report those here); or

2. Your # equals only the number of newly reported participants (aka the "a's").

Unfortunately I can't find anything definitive (in writing) to prove or disprove either way.

Does anyone know of a source where I can find this info?? What is the standard practice on the board here??

Thanks for your help!

Vicki

Quick Facts: Employer is an "S" Corp. 100% employee owned via an ESOP. Distributions to terminated Participants are made as soon as administravely feasible following the separation of service using the prior plan year end valuation/appraisal. During the plan year the employer makes a cash deposit to the ESOP. The cash is used to to facilitate the distribution to the terminated participant(s).

A few of the higher balanced participants separated service during the last plan year. Employer deposits $1,500,000.00 and issues distributions equaling that amount.

Plan year end processing is taking place. Employer Contribution 404 Deductible limit and 404 declared dividend equates to $1,000,000.00.

For easy math say, share price is $10.00 per share.

So we issued and paid $1,500,000.00 in distributions, but we can allocate only $1,000,000.00.

This leaves 50,000 shares unallocated at the end of the plan year.

Any thoughts.

WIll the provision to not have an AGI limit to convert be for all years 2010 and after? I know the conversion in 2010 will not be taxed until 2011 and 2012 but I was wondering if 2010 is the only year you can convert without an AGI limit being a problem.

My understanding is that:

- 401(k) elective deferrals are disregarded when determining non-discrimination rate groups

- catch-up deferrals are disregarded w/r/t non-discrimination testing

- 401(k) elective deferrals are included in determining the actual benefit percentage for the average benefit percent test.

Does anyone know where these aspects are explicitly stated?

Thanks.

I am working with a plan that limits compensation for sales people to $50,000 for retirement plan purposes. These participants have actual salaries well in excess of $220,000. W-2 compensation applies to all other participants. Are these sales people considered high compensated for discrimination purposes?

If you can meet the minimum participantation requirements could you exclude employees who work more than 1000 hours in 12 months but are not considered full time in a nonstandardized plan?

I received a letter from a woman claiming to be the legal wife of a deceased participant. She says a 1978 divorce was fraudulent and the subsequent remarriage was invalid.

This participant retired in 1982 and died in 1987. The DC plan paid monthly benefits to the participant and later to the second wife(?) until the account was exhausted in 1991. Can the plan defend itself as an innocent victim if the marital changes were fraudulent? Could we be liable for half of the payments to the participant and all of the payment to the second wife?

I know this is more like the reverse of a QDRO, but I am hoping one of you has experience with something similar.

We have a client with a small 401(k) NC plan about 15 participants. In about 2 months, 8 of these employees will be joining the union. The 8 participants will now receive benefits from the union retirement plan. The union provides fully vested flat $10 per hour worked for every union member into their retirement plan. (Comes out to $2080 per person) The Union Plan does not have 401(k) provision.

The 401(k) is very popular feature to these union employees. Can we continue covering these employees in our 401(k) NC plan, (amending not to exclude collectively bargained employees of course) and use the contributions to the union plan to "offset" the contributions to the Profit Sharing? Except in one case each participant has typically received well in excess of $2,080 per year as a contribution.

Therefore the employer would be contributing part of the employee's contribution to the union plan, and the balance to the company's 401(k) NC Plan. (i.e. whatever number gets them up to the 7% they currently receive in the NHCE class of the 401(k) NC Plan)

If we can't recognize the union benefit toward the profit sharing testing, we would have to have all union employees stop their 401(k) contributions.

I see this kind of scenario when we have carve out plans, but the employer is sponsoring both plans. Does it make a difference that one of the plans is not sponsored by the the employer?

Thank you for any guidance.

Corporate sponsor liquidates and individual trustees want to properly document orphan plan status. Do the individual trustees now sponsor the plan as individuals? We are used ot sole proprietor plans, but this really is not the same (and the trustees don't have businesses running as sole proprietors).

They essentially want to continue the plan as frozen (and an orhpan) for a while before terminating it eventually.

We have a self-insured health plan and recently received a QMCSO with regard to one of our employees. The employee has enrolled the children without protest, but we are running into problems with our TPA being unwilling to provide the necessary documents for the children (via the custodial parent) to make claims. The three pieces of information that we have requested the TPA to provide are the claims address for submission of claims, ID cards for the children, and EOB's on the children's claims to the custodial parent. The TPA is claiming that they cannot provide this information without the employee's consent due to HIPAA privacy concerns. Of the three items, the only one that I think may have the employee's PHI is the ID card (with his ID number). I believe that the exception to the HIPAA privacy rule permitting disclosures in order to comply with the law is applicable here. Not only does the order require us to provide information on how to submit claims, it is issued pursuant to Washington law, which has a specific provision requiring us to provide "enrollment membership cards". The TPA is still insisting on a release from the employee and I have a conference call with them tomorrow to try resolve the issue. We are not concerned as much with this particular employee (it seems likely that he would sign the release), but we are concerned about less-amicable situations where the employee would not be willing to sign anything. Have any of you experienced this before? How did you deal with it?

Is the one-year delay in loan repayments for those affected by Hurricane Katrina/Rita/Wilma a mandatory requirement if an individual request it or is it optional and up to the financial institution holding the assets?

I have a client, a one-life group, who through no fault of her own, had a accum funding deficiency in the year prior to the year of plan termination. Her plan had been a 412(i) plan, which was in the 2004 PY converted to a "traditional" db plan. Last year we had some computer difficulties in getting the actuarial valuation out as a result of this conversion.

Once we fixed that - which was fixed after the Sept 15, 2005 deadline for PYE 12/31/2004, she had an accumulated funding deficiency. Now she is looking to terminate the plan. The plan still has an accumulated funding deficiency. Is it too late to say that she should remedy it by 9/15/2006 for the final PY? Does the exact date of plan termination matter? How do I report this on the final Sched B?

If this is too much free advice to ask for, please let me know. Thanks! Carol Caruthers

P.S. My paper on Theories of Dynamic Actuarial Optimization" was published on BenefitsLink on, I believe, Monday May 15. Any feedback would be welcomed. Thanks!

A terminated participant's Present Value of Accrued Benefits is $100,000. The plan contains individual life insurance policies and the participant has elected to receive the life insurance and maintain the policy as part of his distribution. The policy has a current surrender value of $20,000. He has elected to rollover the balance of $80,000 to an IRA.

For 1099R reporting purposes would he receive two 1099R's - the first reflecting the $80,000 rollover (code G) and the second representing the $20,000 current surrender value of the life insurance policy (code 7).

Would there be any tax withholding ($4,000 based on 20% of the $20,000 cash surrender value) or would it not apply, since a life insurance policy cannot be rolled over to an IRA.