In Feb 2005, a MPP was merged into a PSP. The MPP plan formula used integration and the PSP didn't. The PSP has a non-integrated discretionary formula. It's now April 2006, and the client want's to use the integrated formula for this PSP for their 2005 allocation. Can this be done?

Our loan policy nor the plan states what will happen to a participant loan upon termination of the plan. Any recommendations on what can/should be done?

Is there a specific order that testing must be run on and catchup contributions allocated? Specifically I have a plan that will fail ADP. Owner's deferrals exceed other HCE's by about 4,500 so if I run ADP first then refunds get attributed to owner and reclassified. However, if I run 415 first then refunds get reclassified there and not included in ADP, thus plan failure gets attributed to other HCE's. So, which way do I go????

Doesn't impact owner at all, his max is his max...but since the other HCE's are children of owner it does have a dramatic impact on overall family contribution level. Children are young so are receiving 0% in profit sharing contributions so they depend on being able to maximize their deferrals.

Guidance would be much appreciated.

Client is about to distribute excess deferrals/earnings to self-correct a 401(a)(30) violation. Because the excess deferrals are being returned after April 15, does the 72(t) early distribution tax apply to the distributions?

Companies A, B,C, comprisee a control group and all had adopted a 401k plan. Company C is no longer under common control and wishes to establish a plan. They would like to keep all existing assets and move into the new plan without giving participants the ability to roll money out( larger assets, better pricing). Can they move the participant accounts without consent?

Can someone take only dividends as distributions from their 401(k) after they turn 55 and have separated from service without taking away their ability to do an NUA transaction on the rest of the stock? Thanks in advance for your help on this.

A state office of Child Support Enforcement sent a letter to a Profit Sharing Plan Sponsor, stating that a participant owes a duty of child support. This is not a DRO. The letter states how much is to be withheld from gross income each month for child support. It seems to focus strictly on employee income. However, an attached information notice has a small 1 sentence blurb that states that gross income includes any payment from a pension plan. The individual in question is on disability but is not receiving monthly payments from the plan. He only has about $2,000 in the plan.

I read the Notice to mean that if a participant is receiving monthly checks from the plan, it is included as a source of income, but that is not the case here. Would you agree?

Since this is not a QDRO, does that automatically mean that his plan assets cannot be touched for child support?

Finally, the participant in question has more problems than just child support. He is about to be evicted from his house and wanted to take as much as he could from the plan as a hardship. Do you think he can still do this given the child support issue?

Thanks for any replys.

I was wondering if anybody could point me to old DB exams (or sample exams) that students could take

to prepare for the upcoming exam. I am teaching a study class for the exam, and my students need to have some exams to practice on. Thanks for any help you can provide me.

1) To be used with the split funding method, what requirements must a life insurance policy meet?

2) Policy illustrations generally show guaranteed and non-guaranteed projected values at the end of each policy year. Is there a requirement to use one or the other projected values or can one use either?

Here is the situation I am dealing with:

A "participating" life insurance policy has the following features:

a) To avoid the policy becoming a MEC (Modified Endowment Contract), no premium payments will be permitted from year 8. So basically it is a high cash value 7-premium insurance policy.

b) The policy has 4-tier expense load: Tier 1 for year 1 thru 5, Tier 2 for year 6-10 and so on. Tier 2 is substantially higher than Tier 1 (ranging from 2 times Tier 1 to 5 or 6 times Tier 1), Tier 3 is lower than Tier 2 but higher than Tier 1 and Tier 4 is lower than Tier 3 but is still higher than Tier 1.

The guaranteed values are projected using the 4-tier expense load and as a result the projected guaranteed values go down from year 6 thru 10 and then start going up again slowly.

c) In reality, the insurance company stops applying the expense load after year 5.

d) Non-guaranteed values are projected assuming zero expense load after year 5 and yearly policy bonuses of x%.

The projected non-guaranteed values are much higher than the guaranteed values even after year 7 (when the premium payments stop) and continue to remain substantially higher in later years.

For someone with more than 7 years to NRA, can this policy be used for split funding method ? And if yes, which projected values should one use for split funding – guaranteed or non-guaranteed? .

My understanding was that for split funding, the policy premiums must continue to at least the NRA of the participant. Otherwise, what is to stop someone using split funding in conjunction with a single premium policy – and in an extreme case completely fund the plan in a single plan year?

Hi! I'm a FT pension admin for a small company (<100), 4 years of experience, in the process of finishing QKA designation and was wondering what other companies are paying? Thanks for your response.

A client's employee (the Partipant) will soon retire (and become eligible to commence receving pension benefits). A dozen years ago, a QDRO was entered that awarded his now former spouse 50% of his pension benefits, accrued through a date in 2000.

Now, the Participant is remarried. He wants to make a QJSA election with respect to his new spouse.

The client informed him that the plan is obligated to split payments with the former spouse.

Participant is angry.

I'm out of my depth here. Anyone have any thoughts.

Since the Alternate Payee has a right to only 50% of the pension as accrued through [specific month and day], 2000, would it still be possible for the plan to pay the Alternate payee her portion, but ALSO to allow a QJSA election on behalf of the participant and new spouse, only with respect to HIS 50% accrued benefit through the 2000 date PLUS all accruals after that date?

Thanks for any reality check anyone can provide.

I preface this by saying a FASB expert I am not. Now that we are clear on that, the plan has the following:

Unrecognized net loss: 1,000,000

Transition asset: 50,000

Reduction in PBO due to curtailment: 200,000

My focus is specifically on the transition asset as it affects the net periodic pension cost. I understand when determining if there is a curtailment gain that the transition asset is first netted against the unrecognized loss. Then the reduction in PBO is compared to the net to see if there is a gain. (1,000,000 - 50,000 = 950,000 > 200,000 - therefore no gain)

But for the NPPC is the net unrecognized net loss (i.e. 950,000) used to determine the amortization of the loss or does the transition obligation remain separate?

Thanks.

I'm having a discussion with our new HR director and we have a difference of opinion on the amount to which a participant in a Section 125 Plan FSA is entitled to if and when the participant terminates employment. Don't worry about COBRA for these purposes.

Assume Participant ("P") elects $2,400 of coverage on day one (January 1) of the plan year and will have $200 of compensation withheld from his paycheck on the last day of each month. As of March 31, P has had $600 of compensation withheld, and incurred no claims. On April 17, P got very ill because he owed so much in taxes, and incurred the full $2,400 of medical claims. Assume the claims will not be submitted until May.

Now, here is where I'm having a dispute or difference of opinion. My HR director agrees that if P continues to work for the employer and submits the claims for the April 17 services in May, the employer must reimburse the full $2,400 even though at the time of the claims submission in May, only $800 has been withheld. However, the HR director says that if P terminates employment on April 20 and then submits the claim in May, the employer "must" only reimburse the sum total of the year to date withholding ($600 - 3 months @ $200). Her position is that you can treat a terminated participant different than an active participant with respect to a claim that was clearly incurred while P was an active participant, if the claim is submitted after the termination of employment. Her position draws a distinction as to when the claim is presented (i.e., while employed or after termination), even though the claim was incurred while P was an active participant in the plan.

This evidently is the position of a national section 125 administrator. To me, it guts out the concept of a risk shift if the employer's potential liability is mitigated in this manner when the employee terminates. To me, it seems that all that matters is when the claim was incurred, and it does not matter if P was an active participant or terminated participant when the claim is submitted.

Is a 403(b) Plan the same thing as a 401(k) plan, just that its sponsored by a non-profit?

Do they have the same rules, limits, testing, etc?

Must a Code 4 (death) be used on Form 1099-R to report periodic annuity benefits to a surviving spouse? Or is Code 7 (Normal) more appropriate? The guide to the codes in the 1099-R instructions indicate the following for 4: use it regardless of the age of the employee/taxpayer to indicate payment to a decedent's beneficiary, including an estate or trust. But it also says to use Code 7 when no other code applies.

I think I have read somewhere that in J&S situations, the surviving spouse is to be treated the same as if he/she was the participant, meaning 7 might be more appropriate and I know of a number of plans that use this method.

It seems to me that either way, the IRS isn't going to care that much as neither code suggests the payments aren't taxable. I'm just wondering what's most appropriate.

For a new Plan effective 1/1/06, since there is no lookback year, only the determination year, who is an HCE for the first year other than the 5% Owner, if any?

We have a client that is considering a plan, but they have a lot of seasonal employes. Any ideas on how to handle those contributions?

For a first year 401(k) Plan, are there regs that allow a Plan to switch from ADP/ACP testing to a Safe Harbor during the Plan Year?

I have a participant who went out on Disability in 1/2006 and is expected to return in 7/2006. She has now called the Plan Sponsor and asked about taking a loan from the 401(k) Plan. If the Sponsor and Trustee believe that she can make repayments to the loan, can she take a loan?

Furthermore, if the Sponsor and Trustee do not believe that she can make repayments to the loan, can they stop her from taking a loan? If so, what documentation should I request from the Sponsor/Trustee?

Any thoughts would be greatly appreciated.

Regarding the same plan under audit in my last post - the employer still owes some 2001 matching contributions. The IRS agent wants it to fund the missing contributions, then put the plan through Audit CAP to avoid disqualification for "failure to operate in accordance with the document." I can't think of any statutory authority to support this, as long as the contributions are eventually made (or does the fact that the audit has been initiated create an artificial "deadline" that the employer has passed?). I don't believe there are any statutory deadlines for employer contributions, other than for the purposes of deduction and 415.

Also, the IRS agent wants to accrue interest on the matching contributions - again, I don't believe there is any requirement for this on employer contributions, only required by the DOL on employee contributions.