If a participant rolls money into the 401k ...can they roll it out into an IRA while they are still employed? I am trying to see in the Plan Document whether a direct rollover out of the plan is subject to the distribution rules in the Plan. Does anyone have experience with this?

I have a client interested in adding a NQDC plan because their 401(k) plan always fails ADP generating large refund. The employer is large and safe harbor is prohibitively expensive. They will limit deferrals into the NQDC so that they will not exceed 402(g). Then transfer enough deferrals into 401(k) to pass ADP. This seems to be in-line with the new regs on 409A.

With this type of wrap plan, when it is time to transfer out of the NQDC into the 401(k), how is the actual transferable amount calculated? I am new to NQ but haven't found any information on this point. Would we transfer shares at cost or at the value at the time of the transfer?

Is anyone aware of any support for the position that the interest credits that an employee who continues working past normal retirement age receives under a cash balance plan could be the equivalent of the actuarial adjustment required when benefits are suspended without meeting the suspension of benefits notice requirements?

I believe that this depends on whether post-NRA interest credits are considered part of the accrued benefit. I'm aware of the cases saying that pre-NRA interest credits are part of the accrued benefit for employees who are vested under the plan, but I haven't found anything that addresses the post-NRA employee. My guess is that no such guidance exists, but I'd appreciate any info or thoughts you might have.

Issued yesterday, by the way.

Of all the stuff I discuss with colleagues in the business, this is the one where I find the fewest clearcut, confident opinions. Understandable, because even the actuaries I've talked to find this a struggle, so for us poor saps who are not so mathematically inclined, it's worse yet.

Here's a question that we've been kicking around, that I'll toss out for discussion.

Suppose you have a plain vanilla DB plan. No subsidized benefits whatsoever, and all distribution options are actuarially equivalent. And the lump sum using plan assumptions is, say, $100,000. However, due to 417(e)(3), the lump sum actually payable is $120,000.

For purposes of the regulation only, is this considered "approximately equal" to the QJSA?

On my untutored level, it would seem that this should be disclosed as being 120% of the QJSA. But is that what is required by the regs? Let's say you are using the general disclosure method, with a "chart" that shows the lump sum based upon plan assumptions, and the chart shows, (accurately) that based upon the plan assumptions (which are stated on the chart) that the lump sum is equal to all the other forms of benefit. But there's also an asterisk that says the actual lump sum may be higher depending upon interest rates - would this satisfy the disclosure requirements? Or must there be a specific statement somewhere that the lump sum available under 417(e)(3) is relatively worth 120% of the other benefits? (P.S. the employee benefit statement for a terminated participant that shows a lump sum distribution amount shows the actual, higher, 417(e)(3) lump sum.)

It seems to me that the final regs give a corridor of 95% to 105%, and anything outside of this cannot be considered approximately equal to the QJSA.

1. Do you agree that I'm reading this correctly and that this would apply to a lump sum under 417(e)(3)?

2. Am I correct in general, but the 417(e)(3) doesn't fall under this requirement?

3. Am I wrong altogether?

4. If # 1 is correct, then is the general disclosure I outlined acceptable, or must it be more explicit?

Thanks in advance - our actuary is going to be discussing this garbage with cohorts at some conference in June, I believe, but I'm just trying to get a handle on it in the meantime for my own edification.

I am trying to collect information for Cafeteria Plan compliance with HIPPA regulations. Could you all take few moments and tell me how your practices have changed due to HIPPA? Do you ask for Rx names with claims, do you lock up the claims at night, are your emails encrypted due to SS#'s Rx names, etc... I am now working with a new company, and I want to make sure we are doing all we can to follow HIPPA guidelines.

Does anyone have or know where to find standard insurance broker fees/commissions for medical, dental and vision plans for medium sized companies (400-500 employees)?

Thank you.

I was at a Corbel conference just over a year ago, and I've got a hastily scribbled note that says "real net K-1 earnings are net of IRC 179 amounts and non-reimbursed expenses".

Now, not that I don't trust myself, but I can't find anything anywhere that corroborates this. Does this sound familiar to anyone out there?

Also, does this hold for Schedule C comp as well? Should I be backing line 13 out of the the net comp?

I'm not certain yet as to the reasons for this, but the employer of a 401(k) profit sharing plan wants to "freeze" the plan, but not yet terminate it. In other words, he does not want to let anyone else into the plan, and he also wants to prohibit current participants from making any future 401(k) contributions. I assume there will be no more PS contributions either (there is no match). They will eventually terminate the plan and pay out either later this year or sometime next year. I can't think of a good reason for the delay, but, assuming the proper plan amendments are made, do you see anything wrong with doing this?

We may not imagine how our lives could be more frustrating and complex--but Congress can.

Company X has an employee who became disabled and has been so now for more than 6 months (most of 2005). Company X pays for a disability policy with an insurance company to cover its employees. The insurance company had Company X act as the payor and they told Company X to also pay and withhold FICA for the first 6 months and to report the payment on the Form W-2 (box 1).

After 6 months, the insurance company explained that the FICA tax no longer needs to be paid, but that Company X must still report the amount paid on the W-2 (box 1).

Company X has a nonstandardized prototype Safe Harbor 401(k) plan that defines compensation as W-2 wages for allocation purposes. As you know, the 3% nonelective Safe Harbor contribution has no allocation conditions.

Company X has reviewed the rules for reporting the sick pay on the W-2. Company X explained to us that unless they have an agreement in place with the insurance company to act as their agent, the insurance company must provide Company X with a notice of sick pay payments (meaning the insurance company will not act as the payor for tax reporting purposes).

Company X will see if it is possible to make the insurance company the payor. However, for 2005, Company X believes that they still in an employer-employee relationship with the disabled participant (this individual is still covered as an employee in their medical insurance plan). Company X believes that they must continue to include these payments on the employee's W-2, including the payments made after six months disability.

Company X has asked us if the Safe Harbor contribution should be allocated to the participant for 2005 based on all of their W-2 pay, or just the portion before they were paid before they became disabled, or just the portion before the 6 months expired.

Is there a way to exclude this participant from getting allocation based on these disability payments that are being paid by the insurance company?

I work with employers that would like to obtain their claims data from their TPAs to use for various purposes like data analysis from external vendors, etc.

I have always believed that a self-funded employer "owns" their own paid claims data, however, there is a struggle right now with getting the TPA to actually hand it over.

I am wondering where the self-funded employer's ownership of their own data can be referenced in the law or other documents.

Does anyone know where this validation can be found?

Hi,

I'm new to the board, and I'm having trouble with determining some definition when it comes to retirement planning. Things like "active participant" and 'employer plan". I prepare income taxes.

Anyway I have a client who is 47, and makes about $140,000/yr and files Head of Household. The client is a union electrician and has a union pension. But the W-2 form he receives from his employer shows no contribution to any retirement plan, nor does it have the "retirement plan" box checked.

If he has no contributions is he considered an "active participant", and if the pension is from the union and not the employer paying wages, is this still considered an "employer plan"?

My client would like contribute to an IRA. His income would disqualify him from a Roth IRA, so I'm wondering if it's possible to contribute to a traditional IRA and take the deduction. I wouldn't see a point in making a non-deductible contribution to a traditional IRA.

Any guidance would be appreciated. I kind of have a feeling that there's no option here and the union plan would be considered an employer plan. But I'm not yet convinced beyond a shadow of a doubt.

Thank you.

We have been advised to recommend to a plan sponsor who offers its common stock as an investment in its participant-directed 401(k) plan to consider "unitizing" the stock. The stock is traded on the NASDAQ NM exchange. What is the difference in unitizing the investment from just purchasing (and selling) shares, at current market value, as contributions, distributions, investment exchanges, etc. occur in the course of normal plan operations? How does one go about unitizing the stock? Thanks.

A company sponsors a 401(k) plan for its participants. The plan is intended to comply with ERISA Section 404© and offers a number of funds as part of the plan's core funds for which the company's investment committee is responsible for selecting fund managers and monitoring their performance and a self-directed brokerage window, through which participants may choose from a universe of several thousand mutual funds.

A participant has written to the plan administrator requesting information on whether any of the plan's existing core funds or any of the mutual funds available through the brokerage window are designed to comply with Islamic law. According to the participant, a fund would be in compliance with Islamic law if it did not include investments in any business manufacturing or serving alcoholic beverages, providing pornography or charging or collecting interest, among other criteria.

Does anyone know of any Islamic based funds or any type of mutual fund that would otherwise satisfy the requirements of Islamic law?

Such worries!

Participant received a lump sum pursuant to a termination and as provided in the Plan. Problem: participant did not receive a lump sum of the entire amount.

Suggestions?

Please confirm which HCE threshold is used for 2005 tax year ADP Test. 2004 gross wages are used for HCE determination, but it's unclear whether 2004's $90K or 2005's $95K is to be used.

I got a response from IRS 401K department. However, they didn't seem confident in their response. It's hard to tell what the original 414 (q) (1) $80K base year was because that threshold remained constant from 1997 through 1999.

ASIDE: also, if you know...why did the threshold drop drastically from $100K in 1996 to $80K in 1997? 2006's $100K is quite low compared to the current job market wages high escalation (a lot of line staff, non-management, in oil & gas field are exceeding that with big 2006 raises needed just to keep necessary staffing levels).

When calculating earned income, it is necessary to allocate forfeitures between the employees and the owners. How is this done? Pro-rata based on the contributions allocated to employees? Profit Sharing only, or would you include all employer contributions (i.e., including safe harbor)?

Is there any published guidance on this?

An HCE is in the qualified election period and is able to diversify his plan holdings. A question has come up about whether or not he MUST make the election during the first 90 days of the plan year. Is he limited to that time period? If so, why is that the case?

A self-employed individual has earned income from a real estate business. She also has self-employed income from another business that she has. She has a solo 401(k). Does she need to include income from both entities to determine the maximum that she can contribute?

I've got a 457(f), DC plan where the executive vests in earnings each year. Because they are vested, the earnings get taxed each year. But what about the earnings (that are vested) on the vested earnings already taxed? I know they are not subject to employment taxes under the 3121 regs, but what about income? I can't find any guidance out there. Is it ordinary income or capital gain? I assume it is ordinary income under a plain reading of 457(f). But could it be capital gain taxed at liquidation of the assets, i.e., at distribution. Any thoughts?