An employer has been operating a cash balance plan for the past 4 or 5 years. The employer is waiting for an IRS Determination letter relating to the plan's initial qualification. It is my understanding that the Service goes to great lengths to issue a favorable letter, having the employer make whatever changes to the plan that might be necessary in order for the IRS to give their blessing.

But what if, for whatever reason, the plan does NOT get IRS approval. Or perhaps the employer terminates the plan before IRS approval is granted?

In either case, I'm thinking the employees would be entitled to whatever assets had accumulated over these last few years. Obviously, if the IRS determines that the plan has not achieved qualified status, the participants would receive taxable distributions with no option to roll.

Could there be a circumstance where the assets would revert to the employer?

Must a participant loan policy allow a participant to revoke payroll deductions for repayment and force it to go into default?

Took over a plan where the required beginning date is defined based on the TRA '86 of age age 70 1/2, regardless of whether the 'EE has retired. Participants have been paid their RMDs based on that RBD. The employer now (2006) wants to amend that provision to the SBPJA date of the later of 70 1/2 or retires.

Can participants, who are over age 70 1/2 but not yet retired, now elect to suspend their RMDs because of the amendment? Or is it too late for those participants because the plan wasn't amended during the GUST remedial amendment period and such a participant did not make an election during that RAP?

I have a DB plan that is terminating. Has other two participants besides the owner. One participant has moved out of the country and the other is incarcerated. How would I go about paying these people out so that we can finalize the termination of the plan?

Please respond to the following email also:

Jamess@derbyco.com

Thanks,

James

I have a client who has a Safe Harbor 401(k) Plan. They satisfy the safe harbor requirements by making the 3% SHNEC. They have recently asked me to amend the document to exclude bonuses from the definition of compensation. (They no longer want to allow the participant to defer on their bonuses and they no longer want to consider bonuses when calculating the 3% SHNEC.) Aside from the additional compensation testing that needs to be done for excluding bonuses, can this be done? Is it permissible to exclude bonuses in a safe harbor 401(k) Plan?

A minor child is designated as the beneficiary of a death benefit. In most (all?) states, the benefit can't be paid directly to the child. The payment check(s) must be issued to the "Parent or guardian of the minor child...".

How do you prepare Form 1099-R at year-end? Common sense tells me that the income is taxable to the beneficiary, not to his/her guardian. Shouldn't the Form 1099-R should be filed under the minor child's name, as recipient, using the child's own SSN? The fact that the payment checks are issued under the protection of a parent or guardian doesn't change the ultimate tax treatment of the benefit.

How do you handle this situation? How do you prepare Form 1099-R when a minor child is designated as beneficiary of a death benefit?

Can the user fee for a funding waiver application be paid from the pension trust?

client has a MP and a PS that have not been amended for GUST or EGTRRA. they want to get rid of the MP. is it necessary to bring both the MP and the PS into the VCP program and then merge the MP into the PS or can i first merge the MP into the PS and take the merged PS into VCP. this would cause the emoloyer to only have to pay one compliance fee. however, my inclination is you have to submit both plans.

Is it permissible to allow participants to elect to contribute to either the pre-tax or the roth 401k, but not both? (Not allow them to elect 2% Roth and 2% pre-tax)

Here are the facts: Participant's account balance is $1800.00. Participant wants a loan in amount of $1000.00. It is my understanding that the loan amount can be up to $1800.00 but the COLLATERAL for the loan cannot exceed 50% of the account balance. If this is correct and the participant wants to put up additional collateral, how is this handled?

I have a Profit SHaring and Money Purchase plan that has not been contributed to in almost 20 years. It was transferred to a bank trust department and held there for about 5 years. Then transferred to a Brokerage company and just held and assests have continued to grow. I have not filed any 5500ez because I only recently discovered that maybe I was supposed to. I have been told to just transfer all of it to an IRA in the same brokerage company. Is that a good idea?

a participant in a 401(k) rolled his balance into an ira when he left the employer. now, after surrender fees have passed, he wants to roll this ira into another ira that he has set up. is this ok??????

What are permissible ways for a TPA to pass on 12b-1 fees to a company? Can the TPA place the reimbursed fees into the forfeiture account if the employer uses that account to reduce the match?

If a plan sponsor if selling two stores from it's overall portfolio of stores, what happens to the 401(k) vesting of the participants who work at that store? Do they automatically become 100% vested? If not, could the plan sponsor, as a good will effort, make all of these employees 100% vested in the 401(k) plan? Or would this be viewed as discriminatory.

I have a plan where there is a HCE who waived out of the plan. Is he required to get a Safe Harbor Contribution? Is he still included in my testing when I run a profit sharing contribution? Thanks for any insight!

Does anyone see a problem with providing for vesting and distribution upon "change in control" where the def comp agreement provides a definition of change in control that is narrower than the definition in 409A?

Here is how our Sec 125 Premium Conversion Agreement reads.

"I agree to have my gross salary re-directed to pay any employee contributions/premiums for employer-sponsered benefit plans, in accordance with Section 125 of the Internal Revenue Code. I instruct my employer to make these contribution on my behalf.

This salary re-direction arrangement will continue until:

The end of the plan year covered by this agreement. For future plan years, I will have the opportunity to modify this agreement;"

Do I need the employee to complete one every year? If so, how can I word is so I don't have to?

An employer pays X toward the premiums for everybody's health insurance. Some people want family coverage that costs more than the amount the employer pays. Therefore, they want to put in a plan that would allow these employees to pay the additional amount on a pre-tax basis.

Here's the rub -- it just so happens that the employees who need the family coverage are HCEs. The NHCEs are fine with just the amount the employer is paying so they don't need to use the plan.

The NHCEs would be able to jump in anytime they have a change in family status and need family coverage, but until then, is the plan discriminatory just because HCEs are the only ones using it?

I have a question regarding the status of an HCE in 2005 versus the status in a short plan year.

From 07-01-03 thru 06/30-04 a participant had compensation in excess of $100,000.

The plan then went to a short plan year from 07-01-04 thru 12-31-04 and that same participant did not have

compensation in excess of $90,000 for that period.

He has never been an owner.

Because his compensation in the short plan year was not in excess of $90,000 my question is "Is he considered an HCE for 2005? For the calander year of 2005, he had compensation in excess of $100,000.

Thanks for your help

lets say you have two medical groups, each with a 401(k) plan, that join forces and form a new company. the intent is to terminate the plans of the "old" companies (merging would be messy) and start a new one for the new company. the catch is that the new company has the same tax id# as one of the "old" companies. (not sure why they did that). So, they are terminating a 401(k) plan of an employer with the same tax id# as the employer for which a new plan is being established. if it was the same employer, they can't start a new 401(k) within 12 months of the termination of an old plan, but its not the same employer. the question is - will the DOL or IRS object to this?