I just ran the ADP test for PYE 12/31/2005 and the test fails. One HCE is due a refund of $6.04. Even though the refund is less than $10 (and no Form 1099-R will be issued) we will still make the distribution of $6.04.

Since this distribution is occuring after March 15th (2 1/2 months after the close of the plan year), do we have to pay the 10% excise tax? After rounding, the total is $1.00. I think the right thing to do would be to pay it, but it is an awful lot of work for such a minimal amount.

Any thoughts on this? Any input would be greatly appreciated.

Thanks!!

If a plan previously had a benefit formula with under the old integration rules (before 1989) and then continued to provide for disparity under the newer permitted disparity rules, does the 35 year cap on YOS include both years earned under old integration rules plus years earned under the newer permitted disparity rules (vs. just starting from 1989 forward) ?? I'm thinking it includes both but would appreciate a confirmation if true.

A multiemployer group health plan with several participating unions is interested in converting their existing "dollar bank" into an HRA/HSA type account that could be used to pay health premiums, out of pocket expenses, etc. For those who are not familiar, a union construction worker will have a set amount of money paid to a health fund for each hour he works. The plan in question puts the contributions into a "dollar bank"--a hypothetical account balance from which deductions are made in the amount of the monthly premium.

One question that has arisen about the conversion/establishment of an HRA/HSA is that many of these members already have similar accounts through their local unions. Is there any legal prohibition against an employee having two or more HSA/HRA accounts established in his name?

I also posted this on the 401(k) board as it is an for two different plans.

Is it possible to freeze an elective deferral-only plan to future deferrals and participation, but allow employees (including new ones) to rollover contributions from other plans into the frozen plan? My concern with the 403(b) is not just the "is it really frozen" but also the universal availability rule.

I feel like I should know this, but I can't find any discussions - either general or 403(b) specific.

Thanks in advance

Hello Folks,

I stumbled onto this site and have been reading for hours now. Those of you who offer information and guidance to those of us who need to hear it in a straight forward manner are rare individuals and my thanks go to you for being so generous.

I am a 47 yo business owner. When I was younger, I did not have the foresight to understand the importance of early savings. I spent 15 years with a very large corporation and thus have a retirement income scheduled from them, provided they do not experience financial difficulties at some future point and simply erase any benifit I have earned. Obviously SS has its own issues and I do not attempt to count on its benifits.

For the past 13 years, I have been unable to do much saving because of the financial burden of starting and maintaining a small manufacturing business. Over this time things have improved financially to the point that I have eliminated all debt, personal and business, except my primary home. I currently have about 12 years remaining on a 15 year fixed mortgage with about 40% equity, and my income is now stable enough that I have begun saving and have resources to fully fund a Roth account and additional each year. I have built an emergency fund for approximately 6 months of expenses.

The problem is I feel like I am trying to play catchup for retirement. Im not so much interested in retiring at a given date as I am simply facing the reality that I will retire someday and want to be as well prepared as possible.

I have enough time, inclination, desire and knowledge to be interested in investing in individual stocks and have opened an account with Scottrade to do so.

My questions to you would be, What opinions would you offer in regard to investing inside or outside of a Roth account? What are your opinions regarding my particular age and situation for retirement planning and is Roth the best place for me, at least to the limits allowed by the program?

Thanks for any help you might provide.

Is it possible to freeze an elective deferral-only plan to future deferrals and participation, but allow employees (including new ones) to rollover contributions from other plans into the frozen plan?

I feel like I should know this, but I can't find any discussion. Thanks in advance.

If an employee was a union member and was put on layoff with 5 years recall rights but never recall but was later rehired and he was credited with 501 hrs per year. would those years of credit be eligible for his retirement and did his credit years quit when his recall rights run out or would they contiue untill his rehire. i can get no help from the union.

Does anyone know of a free calculator to determine the right mix of IRA and Roth conversions during retirement?

I live in California and I'm doing a Traditional to Roth IRA conversion at Sharebuilder.com, they claim that California Law requires that they withhold part of the conversion for taxes (can't opt-out) - regardless of whether there will be any taxes.

My question is, since they have withheld some of the conversion money, how do I eventually get that money into my Roth IRA? To my knowledge even if you do owe taxes on the conversion, you can pay them out of non-IRA money, so how do I get the withheld amount deposited into my Roth?

I assume this is a common scenario (part of IRA being witheld for taxes), can someone please let me know how this should work?

Question 1: We distributed 100% of a participants account balance. Later they receive a true-up of the employer contribution for less than $10.00. The cost of a check and 1099-R is more than $10.00. Can we forfeit or gain/loss the participants account or do we need to send them another distribution check?

Question 2: Plan has distribution fees of $85.00 charged to the participant the day before a distribution is processed. Do we charge a distribution fee if the participants account is less than $85.00?

If you know the answer to either let me know. Thanks!

Plans excludes union employees from participating. The plan’s normal entry dates are 1/1 & 7/1.

Effective 11/1/2005, six union employees become non-union. All six employees have previously satisfied the statutory eligibility requirements, that is, they all have completed more than one year of service and are over age 21.

I am currently having a discussion with the attorney who prepared the plan document as to when these six former union employees would enter the plan --- is it 11/1/2005 or 1/1/2006?

Our non-standardized prototype plans contains language which clearly indicates that these employees would enter the plan on 11/1/2005 if the plan was using one of our prototypes. However, the document for this plan is silent on when these former union employees would enter the plan. We have not been able to find anything in writing in the regulations, etc… which specifically addresses this issue.

Does anyone both know the answer to this question and have a citation to support your answer?

Thanks!

Help! Company A maintains a 401(k) plan for its employees on a calendar year plan year. Participant M was employed by Company A during 2005. In a letter date stamped April 6, 2006 but delivered to the appropriate people on April 13, Participant M notified the Company A plan administrator that s/he had an excess deferral during 2005 and requesting a timely correction of the appropriate amount plus earnings. The plan administrator was advised to process the change this afternoon (since there is no extension to the 4/15 date to the next business day in the case of a weekend). In addition, the stock market is closed for Good Friday tomorrow so if the trade order is received late the participant will not be timely corrected. This would result in the participant being taxed in both 2005 (the year of the excess deferral) and 2006 (the year of the corrective distribution). Any suggestions on how this can be corrected and the double taxation and 4979 excise tax avoided? (Participant M is 37 so recharacterizing the excess as a catch-up contribution doesn't work).

Group elects 2.5 month extension (calendar year plan) but the person trying to file 2006 service dates (medical reimbursement category) against their 2005 plan did not actually re-enroll in that category (they are only doing pre-tax premiums) for the 2006 plan year. The SMM does not give specifics about enrollment for the new plan year but it seems logical that they have to be participants in the new year in order to accept the claims and then give them the option to claim it against old plan year or new. Any thoughts?

Can a non-Erisa 403(b) be switched over to a PS/401(k) plan if the company in question is a non-profit?

Thanks,

James

Target maturity funds are the "new thing" in the mutual fund industry. Since many folks just getting started scan this message board for advice, I want to post something about these kinds of mutual funds.

The concept behind these funds is simplicity for the customer. Just pick a fund that matches the year you expect to retire.... 2055, 2045, etc. The maturity year fund will start with shift the balance between stocks and bonds. In the early years the portfolio will include a higher percent of equity (stock) holdings, perhaps as high as 80%. As you get older, the fund will automatically shift towards a greater percent in bonds, even as high as 80% for some of these funds. Its all automatic, its simple, its easy.

What could be wrong with this approach? Well, I am not a big fan, and here are my concerns:

1. Do you really want 100% of your retirement assets in just one fund?

2. Anytime someone says "easy" or "simple", keep you hand firmly on your wallet. Some of these maturity funds are funds of funds with high imbedded fees. You best hope would be with the Vanguard version. What is even more rediculous is that many of these new packages are being sold via commissioned agents - aka LOADED funds.

3. You just can't "set it and forget it" with investing. The implication in the way these funds are marketed is that your on autopilot. It is foolish to think that you can have hundreds of thousands of dollars in a mutual fund that does not need to be monitored. That you don't need to periodically evaluate the performance of your fund.

4. While notching back on risk as you get older is a widely accepted concept, you better look very carefully at the percents used. Going with 80% bonds when you are 65 seems way to conservative since you could readily live three decades. And some of these funds start you at 60% equities, which is probably too conservative if you are in your 20s. Automatic percents vary by fund family and are based upon your assumed retirement age - no one asks you if you got started late, your retirement needs may be higher/lower than average, or how well you tolerate risk. And, these "lifecycle" or "lifestyle" (other industry names for this catagory) have no knowledge of how any other retirement assets (401k, 403b, pension, etc.) are invested.

My conclusion: think twice about the alure of the marketing hype about these funds. Am you getting dinged for higher fees and expenses? Does the rigid formulation match your needs? How does this fund match up with my other investments?

I think that most people would do very well choosing a few NO LOAD and low expense funds - perhaps a combination of index, growth, value and bond funds and handling their own "mix". Remember, these funds only address on issue - the balance between fixed income (bonds) and equities (stocks) which is called asset allocation. When you are just getting started and know next to nothing about investments, perhaps these funds put you at ease. But, please don't buy into the "simple" part. Successful investors never give up on the thinking part!

I invite folks who have choosen these funds to post.

The deadline for making corrective distributions of excess deferrals is April 15. April 15 in 2006 falls on a Saturday. Since April 15 falls on a Saturday, is the deadline extended to Monday, April 17?

The final Roth 401(k) regs make it clear that a 401(k) plan that wishes to add the Roth option must allow participants to make both pre-tax 401(k) contributions and Roth 401(k) contributions, but this requirement could mean two different things:

1. At any point in time, a participant may make either pre-tax 401(k) contributions or Roth 401(k) contributions (but not both); or

2. At any point in time, a participant may make some pre-tax 401(k) contributions and some Roth 401(k) contributions.

The first interpretation works if the requirement is that over the course of the plan year a participant must be allowed to make both pre-tax 401(k) contributions and Roth 401(k) contributions. The second interpretation works if the requirement is that as of any given deferral a participant must be allowed to make both pre-tax 401(k) contributions and Roth 401(k) contributions. I don't know which interpretation is correct, but a need has arisen to resolve this issue.

One of my clients has been told by their lawyer that it is OK to implement the Roth 401(k) rules so that at any point in time, a participant has the option to either make a 100% pre-tax 401(k) contribution or a 100% Roth contribution, but that the plan does not have to give the participant the option of designating, for example, 40% of their deferral as pre-tax and the remainder as Roth. The lawyer obviously thinks that the first interpretation is correct. Has anyone else thought about whether the requirement in the regs supports the lawyer's position? Does anyone think the lawyer's position is unreasonable?

Thanks in advance for any help!

We have a self-funded health plan that has premium only under the cafeteria plan. There is not a FSA only a health plan. The company is changing from a corporation to a Limited Liability Corporation. Does this cause the partners to be ineligible to participate in the self-funded health plan or are they just excluded from the pre-tax cafeteria plan? Does it also exclude their spouses and other dependents from the health plan?

I was hoping to be able to put some Roth IRA funds in I Bonds. I checked the Treasury Direct website but there was no mention of putting Roth IRA funds there so I guess I can't. Can anyone recommend a similar investment -- safe, easy, no fees, good return. I'm guessing maybe I could look at CDs. Thanks.

If a Plan Sponsor fails to provide SARs to Plan participants for many years, is this violation of ERISA § 104(b)(3) only subject to penalties by the Secretary of Labor, or can participants also bring an action for civil damages?

Section 502©(1) of ERISA seems not to provide participants with this remedy, just only for documents requests and sections 101(e)(1)[notice of transfer of excess pension assets to health benefits accounts] and 101(f)[multiempoyer DB plan funding notices]. Am I missing something?