Company A buys Company B. Company B is now operating as a wholly owned subsidiary of Company A. Both companies currently operate 401k plans that mirror each somewhat. Both have immediate eligibility and full immediate vesting. Ideally going forward it would be best to just merge the two plans. Is the only option to merger B's plan into A's and A's plan will be the surviving plan? Or can A's plan be merged into B's? I was under the impression that merging B's into A's was the only option since Company A purchased all of Company B and therefore was the successor employer.

From the time a defined contribution plan files for termination, how long do the participants have before they must take a lump sum distribution out of the plan?

Participant has $60,000 account balance consisting of $50,000 in investments and $10,000 outstanding plan loan balance. Participant dies and daughter takes a distribution of the $50,000 cash. The loan is offset upon distribution.

The beneficiary has received a 1099 for the $50,000 she received, but what should happen regarding the $10,000? Should the 1099 be issued in the name of the beneficiary? Or should the 1099 be issued in the name of the participant? What code would be correct?

Thanks for any help.

Eligible employee was not given the opportunity to make salary reduction contributions to 401(k) in January, 2005. It is my understanding that the employer must make a QNEC in an amount equal to the average deferral for the NHCEs. (She is also an NHCE). Is that correct?

Also, is there anything we need to disclose on the 5500 about the omission?

Thanks.

With regards to 1.401(a)(4)-8(b)(1)(iv)(D)(2), it refers to "allocation rates based on age". Does this apply to plans with allocation rates based on points representing age plus service?? Thanks.

Can anyone confirm whether premiums paid under Aflac supplemental income policies for health related occurrences are permitted as pre-tax benefits under a Section 125 plan?

Company has a calendar year MP and SEP plan and they want to get rid of both. I'm told that the 2004 MP contribution has not yet been made (neither has the 2005, but there is still time for that). They will obviously have to fund the MP plan before terminating. Does this late deposit (for 2004 plan year) get reported on Form 5330 and is there estimated lost earnings that have to be calculated on it as well? Is this a plan defect that has to be reported via EPCRS?

Thanks for your help.

Hi! I'm planning to acitively manage my Roth IRA from now on and I was wondering if there are any tax consequences for actively selling and buying stocks with an IRA account.

Right now I'm invested in a mutual fund in my Roth IRA that I want to sell and then I plan to buy some stocks with this money. To my understanding, as long as I don't contribute more than I'm allowed to or take early withdrawals, I think I can actively trade without any tax consequences. I just want to confirm this before doing so.

Thank you in advance for any response regarding this.

Rotherford

If a company is putting in a new 401(k) plan, and it owns a 100% owned subsidiary company at the beginning of the plan year that it will own less than 80% by the end of the plan year, are the subsidiary's employees counted in the minimum coverage test for that year?

Plan is being audited and the employer wants to pay for attorney's fees leading up to audit using the plan. The fees the employer wants to pay from the plan are specifically the fees charged by the attorneys to review the DOL request, assistance of client in preparing documents, advice to client during the audit. It seems inappropriate, but it doesn't seem to fit neatly into the 'settlor' example categories highlighted by the DOL guidance in DOL Guidance Settlor v. Plan Expenses Hypotheticals or Advisory Opinion 01-01A.

Anyone have any experience regarding this or could point me to some formal or informal guidance from DOL. I'm advising against it, but I'd love any input you all could offer.

The ABC Company has a 401(k) PS Plan. The company is sold to John Smith as an asset sale. John wants to keep the plan intact.

What is the best option?

We have a situation wherein several years ago (5+) a participant requested and was denied disability benefits because she had not attained the requisite age at the time her employment terminated due to the disability. (this is a jointly trusteed plan) A union trustee now wants to reopen the issue claiming there are new facts - these facts were known at the original meetings, but the trustee is claiming she was unaware and/or misunderstood the information. Are there any cases out there or can somebody guide me to information which states that the decision back over 5 years ago is final and binding on the trustees and that the issue cannot be reopened? If the trustees can in fact reopen cases such as this, what prevents them from reopening and rehearing almost any other case?

Any guidance is much appreciated!

A DB and DC plan are aggregated for testing and coverage. The DB benefit is based on years of service and a high 3-year average. A person earns a year of service in 2004, enters the plan 1/1/2005 and then terminates 1/31/2005.

To determine her DB equivalent normal allocation rate for the gateway I am valuing the difference in the benefit earned during the year, so she had a $0 benefit at 1/1/2005 and a positive benefit at 12/31/2005. Of course I am valuing this benefit using the testing assumptions. For gateway, plan year compensation is used, so the result is that this person has an extremely high DB equivalent accrual rate, since she only had one month of compensation in the plan year.

So, I can certainly choose to average the DB equivalent normal benefits of the NHCE's who are benefiting and so this one little person is increasing the average by a lot. I have to believe I can count this person as benefiting even though they didn't meet the accrual requirements for the year because they did have an increase in the accrued benefit for the year. This goes to the position you can't have an accrued benefit prior to entering the plan.

Anyone see any flaws in this?

I can't find anything in the proposed pension reform legislation (H.R. 2803 or S. 1783) that discusses variable rate premiums. I know they are proposing an increase in the single-employer flat rate premium. Anybody know if variable rate premiums are proposed to increase, too?

What fiduciary is responsible for completing this SEC form?

Here is a question a client has posed to me:

i know buying the property in my 401(k) requires an annual appraisal be done, is that also true if land is purchased in an ira?

I deal with 401(k)s, profit sharing plans and money purchase plans, but not IRAs. While I have one myself, it is made up of stocks and mutual funds. Does anyone know the answer to this question? Many thanks!

I am preparing a 6/30/05 FASB reconciliation for a defined benefit plan where the fiscal year is 7/1/04 - 6/30/05. The plan was amended to freeze benefit accruals as of 6/30/05, thus I have a curtailment under FAS 88.

As of 6/30/05, prior to the curtailment, the plan had the following:

unrecognized net (gain)/loss = ($45,000)

unrecognized prior service cost = $0

unrecognized transition obligation/(asset) = ($20,000)

The curtailment reduces the PBO by $1,000,000.

Given the following, what is the effect of curtailment recognized on the (accrued)/prepaid pension expense (as follows)?:

(Accrued)/Prepaid Pension Expense at 7/1/2004 = ($100,000)

Net Periodic Pension Profit/(Cost) for 7/1/04 - 6/30/05 = ($75,000) {edited - inadvertently reversed signs in original post}

Contributions deposited 7/1/04 - 6/30/05 = $75,000 {edited - inadvertently reversed signs in original post}

Effect of Curtailment = ????

(Accrued)/Prepaid Pension Expense at 6/30/2005 = ????

Do I fully recognize the Transition (Asset)?

Do I fully recognize the Unrecognized (Gain)?

Any help would be greatly appreciated!

We have a Paid Annual Leave (PAL) Sell plan that allows employees to sell accumulated PAL. Employees are allowed to sell PAL as long as they have a balance of 80 hours.

Does this type of benefit run afoul of the Section 409a code?

I would appreciate any thoughts on this subject.

A governmental defined benefit plan is a unit benefit plan with a 5% mandatory contribution feature. The Plan permits active participants who have at least 10 years of in-state participation to purchase up to 3 years of service credit for active status (not active service) in the state's national guard. "Active status" requres serving in the national guard unit one weekend per month and 2 weeks in the summer.

The amount of service credit which is purchaseable is based on the ratio of 5 years of active status to one year of available service credit. Therefore, an active member would need 15 years of active status in the national guard to purchase three years of service credit. Service purchases under this provision are not recognized for purposes of satisfying minimum service requirements for retirement or other benefits. The purchased service credit is recognized solely for determining the amount of benefit payable under the Plan's unit benefit formula: 2% of average final compensation times years of credited service.

For the example below, I would appreciate opinions as to the meaning of Internal Revenue Code Section 415(n)(3)(A)(ii) which provides that permissive service credit means service credit "which such participant has not received under such governmental plan".

Consider a full-time employee who is accruing service under a governmental plan based on his employment as a governmental employee. Simultaneously, he is in active status with the state's national guard. If between 1990 and 2004, the employee accrued 15 years of service under the plan as a state employee and during the same period, had 15 years of active status in the national guard, could he purchase 3 years of service credit for his active status in the guard, using the above described 5 years to 1 ratio?

One line of thinking would be that since he already accrued 15 years of service under the governmental plan between 1990-2004 as a state employee, he could not use his national guard service which occurred in the same period, even on the 5 to 1 ratio, to purchase 3 years of service credit without violating Internal Revenue Code Section 415(n)(3)(A)(ii).

Another line of thinking would be that the phrase service credit "which such participant has not received under such governmental plan" refers not to the specific time period 1990-2004 but rather to the type of service; specifically, the participant had not already received service credit under the plan for service related to active status as a member of the national guard. Further, he would receive credit for national guard time only by making an additional voluntary contribution. The period of 1990-2004 is only a yardstick to determine if the participant had 15 years of national guard service. If he individual is allowed to purchse three years of service, those 3 years are not credited to a specific calendar year(s). The additional 3 years are used merely to increase the participant's ultimate benefit.

If you agree with the first line of thinking, what would be your position on the purchase of 3 years of "air time" if for an individual's entire work history he accrued service credit under a governmental plan resulting from his position as a full-time state employee?

Thoughts, please?

The Background...

I have a 401(k) plan that uses a standard 6year vesting schedule for the employer contributions. Service is credited based on "elapsed time" rather than actual hours worked using the employment anniversary for the measurement period. The plan was established effective 1/1/2000. The plan excludes service prior to the plan establishment.

The problem/question...

A participant was hired in September of 1997 and terminated in July of 2005. I want to be certain that the vesting is correct before we process a distribution and the elapsed time thing is confusing me. My thoughts are that this participant's service begins to count as of 1/1/2000 so her vesting computation year is essentially the plan year and we need to ignore the employment anniversary. She is credited with a year of service for 2000, 2001, 2002, 2003, and 2004 but not for 2005 and is, therefore, 80% vested.

1. Am I correct that her vesting measurement period is the plan year?

2. Am I correct that she does not get credit for 2005 since she did not work the full 12 months?

3. Am I correc that she should be 80% vested?

Thanks in advance!