XYZ 401k plan transfers from Investment company A to company B. A advises client that the GIC surrender charge is $5,000. B agrees to make up that loss to the affected participants. A liquidates, and wires to B, less the $4,500 charge (read on).

B prices the contract according to the $5,000 charge. Later we find out that A mis-quoted the charge. The charge really only was $4,500. And in fact when the plan's funds were transferred from A to B, A really only did charge $4,500. However B did not find out about this until after it had already deposited $5,000 into the contract as per agreeement.

$500 is now sitting in the forfeiture holding account and B is asking the TPA (me) what to do w/ it.

$500 just so happens to exactly = the GIC surrender imposed by A on a participant that terminated employment and withdrew from A several months prior to the transfer from A to B. It's pretty clear that A mis-stated the contract surrender (A did put in writing that the amount was $5,000).

Should B just pull $500 back out and take it back? They are not willing to re-configure the contract pricing although they state the impact to the pricing of this $500 is "minute."

Or - does this money have to stay in the contract. If yes, then should the money go back to the terminated participant that lost it in the first place? Or, should it be used as forfeitures? Or, should it be allocated to all eligible participants as "earnings?" Or something else?

Thanks for any help.

Discussions have been occurring regarding the proper computation of optional forms of benefit.

What is the proper method of computing the optional form of annuity in the following case:

Actuarial equivalent

Interest 6% (Pre and post)

Mortality 1994 GAR

Normal form Life annuity

Applicable interest rate 5%

Monthly benefit at 65 is 1,000

What is the monthly benefit under a 10 year certain ONLY optional form??

Thanks for any and all comments.

The final regulations permit matching on catchups "... if a plan applies a single matching formula to elective deferrals whether or not they are catchup contributions, the matching formula as applied to catch-up eligible participants is not treated as a separate benefit, right, or feature under §1.401(a)(4)-4 from the matching formula as applied to the other participants."

Fine, but I have a client that allows participants to make catchup contributions throughout the year, at a dollar amount per payroll period. The matching formula is 100% on first 6% deferred, including catchups. Up to 50% of comp can be deferred. Each paryoll period their system calculates a match on the regular deferral field and also matches a separate catchup field up to 6% of comp each, with an aggregate annual dollar limit for 2006 of $13,200. (6% of $220,000)

Assuming that everything orginally deferred as a catchup, turns out to be a catchup at the end of the year, then we end up with really disparate matching percentages. It appears that we have both a potentially discriminatory match and / or that we are failing to follow the plans matching formula. Perhaps we don't have a problem, (particularly if we raised the deferral limit to 75% of comp to pass the universal availablity safe harbor). Any thoughts? Can we, should we, have ADP combine the regular deferral and the catchup into one field and then calculate a match on that field?

EE A: $220,000 Comp, $20,000 deferral, $13,200 total match, 6% of eligible comp.

EE B: $150,000 Comp, $20,000 deferral, $9,000 match regular + $4,200 catchup match, 8.8% of comp.

EE C: $100,000 Comp, $20,000 deferral, $6,000 regular match + $5,000 catchup match, 11% of comp.

EE D: $ 50,000 Comp, $20,000 deferral, $3,000 regular match + $3,000 catchup match, 12% of comp.

EE E: $ 30,000 Comp, $15,000 deferral, $1,800 regular match + $1,800 catchup match, 6% of comp

If a holistic practitioner performs a thermogram is it necessary to request a letter of medical necessity from a primary physician? If no primary exists, is a letter from the same practitioner performing the test acceptable to document the medical condition he is treating? Would we be justified in requesting that the services be submitted to insurance first? What other forms of documentation should be requested to validate the expenses as eligible under a health care FSA?

Plan is a traditional 401(k) plan, that wants to be amended to become a 401(k) Safe Harbor Plan.

Can I just do an amendment to the plan, or do I have to restate the entire plan document to add a

Safe Harbor feature? I know I must provide the notice also.

Thanks

At the beginning of the plan year, the employer gives each of his employees $450 per year to "shop" for benefits. Ten months into the plan year, the employer would like to stop employer contributions. Is this allowed? Aren't there some discrimination rules broken? If so, where can I find the rule?

Sponsor wants to establish age based ps plan to a closed group (to make up for freeze of a db plan). By itself, it would meet the designed based safe harbor.

1. Does this avoid the gateway even though not all employees are eligible? I think that the closed group need only satisfy 410(b) and then it would be exempt from the 3/1 or 5% rules.

2. Any opinions on whether or not "employees formerly eligible for the employer's pension plan" might meet the reasonable classification requirement that is a prerequisite to use of the average benefits test for coverage? Any experiences with the IRS on that point?

Plan fails ADP test.

a discretionary match was provided weekly, but was stopped mid year.

so, any guesses on the calculation of related match.

Is it first deferrals in and therefore first deferrals out, so there is related match, or is it averaged over the whole year (ugh) or last deferrals in are refunded and therefore no related match.

Can an employee eligible to receive a SEP contribution elect not to receive it? All eligiblity requirements have been met. Not a SAR-SEP. Thanks.

I am administering the estate of my late uncle, who had established an IRA in 1986 and contributed $2,000 to it each year through 1993, when he retired. But he contined to contribute after retiring. His post-retirement contributions were funded by dividend income and Social Security.

Despite minimum distributions, the IRA had accumulated to about $27,000. My mother is the beneficiary. Although she could certainly use the money, we don't want to commence withdrawals until we are satisfied that the amounts withdrawn are properly taxable.

What will happen to this IRA when I present the custodian with this information about improper contributions?

Is a rollover from a Roth IRA into a Roth 401(k) allowed? And if so, when does the 5 year window begin? Is it the starting date for the Roth IRA or the starting date of the Roth 401(k)?

I realize that an employer is required to recieve authorization from an employee before benefit deductions are taken. However, does anyone know how the authorization is to be obtained? Can the authorization be done with an electronic signature? If a wet signature is requied, how do other employers deal with this issue?

Thanks

The plan was merged from a money purchase plan into a profit sharing plan in 2002; however, it has just been discovered that the name on the bank trust account was never changed to the profit sharing plan name. Could a case be made that we never merged plans? What is the worst case scenario in a situation like this?

If government plans aren't subject to ERISA, I suppose the state laws would determine to what extent there is protection from creditors. So a military person would look to his home state for the answer?

Folks:

We had a very interesting discussion regarding this topic recently.

The DOL issued Advisory Opionion 2005-23A, which deals specifically with our concerns.

Go To:

http://www.dol.gov/ebsa/regs/aos/ao2005-23a.html.

Don Levit

Taxable (conplex) Trust with employees. Can it adopt a qualified retirement plan? I can't get my arms around this question on a Friday for some reason and would appreciate help!

Very general Q: Are deductions for 401(k) contributions (say match or NECs) technically under 162?

When you report the value of life insurance for the 5000, do you use the cash surrender value or the face value?

Notice 2005-95 extends the time by which certain amendments need to be

signed depending on whether the amendment is a discretionary one or one due

to correct a disqualifying provision. The Automatic Rollover/ Mandatory

Cash-Out amendment is one needed to correct a disqualifying provision and

the time to sign the amendment has been extended for certain plans.

Question - if the plan had a $5000 cash-out threshold and has decided to

lower that threshold to $1000 via the Automatic Rollover amendment, does the fact

that the cash-out level has been reduced to $1000 constitute a

"discretionary" amendment on behalf of the employer and should have been

signed under the time frame disregarding the extension afforded by 2005-95?

Relevant Background Information

----------------------

An employer maintains a defined benefit plan and a defined contribution plan both having plan years ending Febuary 28th. The defined contribution plan is merged into the defined benefit plan as of Febuary 28, 2005. As of Febuary 28, 2005, all participants in the defined contribution plan are 100% vested with the exception of one participant that is partially vested. The partially vested participant terminated in a prior year but has yet to be fully paid out and has not incurred 5 consecutive breaks in service. The defined contribution plan allows for the reallocation of forfeitures upon the earlier of (a) the distribution of the entire vested portion of the participant's account or (b) the last day of the plan year in which the participant incurs 5

consecutive breaks in service.

Specific Questions

---------------------

Once the plans merged on February 28, 2005, what should have happened to the unvested portion of the partially vested participant's account?

Must the unvested portion be reallocated as of February 28, 2005 based upon the profit sharing plan's allocation formula although the participant has not been fully paid out or incurred 5 consecutive breaks in service?

Conversely, can the unvested portion be used to reduce future contribution in the defined benefit plan? As such, under this scenario, it is not reallocated to participant's accounts.