In the next few days, I am planning to begin a Roth with one of Vanguards target-date retirement plans. The plan is to deposit what we can each month. (between $150-$250).

Now I am wondering if I should also start one for my wife? We would give the min. needed to start one (1-3K) and then most likely only deposit once or twice a year if we get some extra income. The ultimate plan would then be for her to make larger contributions on hers when she goes back to work full-time in around 10 years. (home with baby)

If we plan to do this, would it be wise to have her start her own roth with a different company? Say T.Rowe? Or does it matter? I would think we could have a little more risk with hers, that's why i was thinking T.Rowe.

Thanks for any input!

Participant died in 2000 prior to their RBD at age 60. The spouse is the sole beneficiary. The spouse did not elect to take a full distribution prior to the end of the 5th year following the participants death. They would now like to take a distribution of the full amount.

Generally, they should be taking payments over their life expectancy which can begin at or before the participant would have been 70.5. Is there any way to accelerate the payments and get the $ out of the plan now or are they stuck with annuity payments?

First a confession...Some slacker friends came over to my home last night and I ended up only get 4 hours of sleep. So stating the obvious, I am having a rough day. Ok now on to my current dilemna...

Some other company set up a safe harbor 401(k) plan we have a DB plan for the client. All employees are covered by both plans. His combined DB and matching contributions are under the 25% limit, but once you add in his deferrals the contribution is over the 25% limit. I am trying to convince myself that this is ok because if there wasn't a matching contribution then I wouldn't be worried about this at all.

Total eligible salary = 272,300

Total DB contribution = 59,275

Total Match contribution = 8,169

Total Deferals for 2005 = 14,000

25% of eligible comp = 68,075

If I subtract the DB and matching contributions from the 25% limit, the plan is $631 under the limit.

What are my options here?

1)Tell them to return all of the deferrals less $631?

2)Eliminate the match contribution (although it is safe harbor and I don't think can just be done away with).

3)Or I am confused and deferrals don't count against the 25% limit anymore, the plan is fine.

4)Something else.

Of course I want to vote for #3 !!

I'm an active employee with a 401(k) account with my current employer. Can I rollover my 401k account while I'm still employeed into an IRA? If so, can I then take a distribution from the new IRA? I am under 59 1/2 years old.

This started out in the "Retirement Plans in General" section, but i think it needs to be in the DB section. It seems there is a window of opportunity for a restricted employee to recieve reduced compensation in the year prior to termination/retirement/distribution to take them out of HCE status so they can receive a lump sum. If a non-owner active participant who has been earning more than the HCE threshold recieves less than the HCE threshold in 2006, they would not be considered an HCE in 2007 and therefore could retire and receive a lump sum distribution in 2007. Is this considered an acceptable loophole? I don't think the intent was for the 110% test to be circumvented. I'm not sure if this is something that needs to be discussed when a restricted employee is thinking about retiring and taking a lump sum. Any thoughts would be appreciated. Thanks.

I have a question about the proposal from the Centers of Medicare and Medicaid Services to require health plans to provide personalized notices of creditable prescription drug coverage upon request. Unless the Medicare Part D enrollment period gets pushed back, we’re supposed to be ready to provide these personalized notices on May 15. How are you planning to make that happen?

I found an older thread on this topic (3/28/2002) but I was wondering if there are any updates or is there some additional thought on the subject. The ESOP did not give diversification notice and now the 6 year period has completely passed.

If we give the participant opportunity today to diversify, how would we handle the distribution? Participant is not yet NRA and the plan does not provide for in service distributions. Any thoughts, suggestions or other references are appreciated.

Is governmental plan status determined only by looking at the participating employers and employees under the plan? Unlike elsewhere in the Code and ERISA where the term "employer" is used and includes the employer's controlled group, the definition of governmental plan seems to focus on the employees for whom the plan was established and the entity that established and/or maintains the plan (the term employer is not used). If a governmental political subdivision or instrumentality maintains governmental plans but then operates a non-governmental for-profit subsdiary, does the mere fact of the subsidiary's existence jeopardize the governmental plan status even if the subsidiary's employees are not eligible for participation in the plans? Under the literal reading of the statutes, this does not seem to be the case (meaning that governmental plan status is determined just by looking at the employees and participating employers in the plan itself). Although there are a number of IRS rulings on governmental plans, I have not been able to find any on this particular point. There are some rulings that discuss how having a de minimis number of non-governmental employees in a governmental plan does not jeopardize the plan's status (at least for DOL and IRS purposes -- PBGC may have another take on this), but those facts are not totally aligned with the issue I am reviewing. Thanks in advance for any input.

Just an FYI, the following question was raised at the "Dialogue with Treasury and IRS" session:

If an employer contributes to a DB plan for participants who also have an account balance in a DC does the 25% limit come into play or do they actually need to receive an annual addition in the DC plan during the current year.

Harlan Weller answered "that is a fairly messy topic and we have no answer at this time"

I find his none answer very enlightening. I guess I will need to tread a little lighter with my advice to clients.

Hi

I am under the OPERS system and I work for a local govt non profit agency. I want to take control of my 403 b plan. is there a way i could do so . my employer tells me that i cannot withdraw any money from my plan until i am employed with them

any ideas would be appreciated.

thanks

Currently any match on an excess contribution must be forfeited

How would that work in a Roth 401k plan where the test fails and Roth 401k amountis to be refunded.

Assume plan matches Roth 401k

If a plan contains the prior year testing method provision and a plan amendment is processed to change the definition of compensation used in the ADP/ACP test, does the prior year test need recalculated with the new definition in order to obtain the ADP/ACP percents to use on the current year test?

Example: Plan amendment in 2006 for compensation provisions (to change from Simplified 415 pay to W-2, or to include only pay while eligible or to exclude fringe benefits from ADP/ACP comp). Do I have to go back to my 2005 test and calculate the 2005 averages using the new definition?

The ERISA Outline Book, 2005 Edition, Chapter 11: 401(k) and 401(m) Testing - Section VI (Performing the ADP test): Part C.2. (Section 414(s) compensation)

2.b.2) says 'yes', but I can't find a regulation to back that up.

Thanks in advace for the help!

Schedule C income. Sole prop passes away in December. Can his spouse make a SEP contribution for 2005.

I think yes.

Thank you

First off, I've posted a few times in the past few weeks and each time I've gotten great advice. Thank you to all!

Now that I am positive I want to begin a Roth IRA, I'm not sure if I should begin it before April 17th for this past years taxes or after? Or does it matter?

I would be looking to contribute $3000-$4000. Thanks in advance!

Distributions were being made to a participant's beneficiaries for what was supposed to be a 10 year period. However, the checks kept going out for 2 years beyond the 10 year period before somebody discovered the error. Now the employer is asking for thousands of dollars back. Of course, the beneficiaries have been paying tax on it all along.

I understand that the employer has a duty to restore the plan to where it should have been, and in a perfect world the beneficiaries would hand it over. But I have a feeling that in the majority of cases, the employer ends up making the plan whole. Does anyone have any real world experience with this type of situation?

I have studied the ERISA outline book on this numerous times but still can’t understand it.

I have a client who is switching from counting hours during the plan year to doing elapsed time for vesting. Does anyone have a grasp on how we are supposed to give credit after the switch?

Here is my actual situation:

Plan year is 11/1 – 10/31. Client is making the change on 5/1/06 to amend to use elapsed time.

I realize that each participant will have a different scenario because they all have different hire dates . Do we account for this by just giving all of them an extra year of service at the time of the switch? Also, the ERISA book seems to indicate that we should calculate the elapsed time going forward based on either the 12 month period starting with the date of the switch (5/1) or the beginning of the plan year (11/1) – I’m confused on this point.

Any help you can give on this would be GREATLY appreciated!

DOL Opines that the purchase of a policy from the plan by the participant for its cash surrender value meets the PTE 92-6 class exemption. Nothing new here. However, DOL goes on to mention recent IRS guidance regarding the fair market value of such policies in Rev Proc 2005-25, and that if the 2005-25 FMV is greater than the CSV, such amount is a taxable distribution. DOL then goes on to say:

"This amendment to the IRS regulations provides for different tax consequences than those described in the preamble to PTE 77-8,(7) the predecessor of PTE 92-6. In this regard, it is the view of the Department that this amendment to the IRS regulations does not affect the relief described in PTE 92-6, or any of the conditions contained therein."

What does this mean? If the IRS changes do not affect "any of the conditions" in PTE 92-6, does that mean that to comply with the class exemption the policy transfer must be done at CSV? And if the 2005-25 FMV is greater the participant is stuck with a taxable distribution? If so, then such could only be done when the participant is due a distribution under the plan. So, for example a DB plan could not do this as in-service distribution are not permissible unless the participant was at NRD or otherwise eligible for a current distribution. If so, this is going to make it a lot more difficult to unwind 412(i) plans, as the only choice would apparently be to surrender the policy.

We use Ohio National as one of our investment providers. They are now filing as a DFE. Do I still list each fund that the plan invested in on the Schedule D or do I now just list "Ohio National Life Insurance Company Portfolio C" and put the total plan assets in the dollar value section?

Can someone point me toward a good resource to answer some questions. I've surfed the web but can't seem to find these addressed.

Firm currently has an FSA which runs calendar year.

Firm may change to a HDHP and offer an HSA starting 7/1

1) What happens to the money already deferred from paychecks into FSA? When people made their FSA elections last fall they were deferring for all of 2006. Now half way through an HSA may be offered.

2) Does the FSA cease to exist on 7/1 if we move to an HSA?

There must be guidance somewhere as not all HSAs are implemented 1/1, but I can't find anything that speaks to what to do about the FSA.

a plan whose document defines comp as w-2 wages, allows participants to defer from 2% to 17%. there are no comp adjustments except the period of the plan they were not a participant. there is a special deferral election with respect to bonuses that participants may make. a part. may elect to defer up to 17% of pay. a 2006 bonus was issued. no deferrals were taken out. would it be ok to allow the participants to go back and elect NOT to defer from this bonus? would this be ok, even if the part. deferred let's say 10% during the normal pay periods? basically, i feel the plan sponsor should go back, give the part. the option to defer any amount they wish from the bonus and adjust their bonus checks accordingly. any thoughts?