A plan has the following eligibility requirement:

500 hours in a six month period. Entry date is 1/1.

A participant is hired on 8/22/04 and worked 550 hours by 12/31/04. Entry date should be 1/1/05, correct? A takeover plan I have either missed this or their system missed it because the participant has been flagged as eligible 1/1/06!

I have a client whose executives typically enter into consulting arrangements after retiring from the company in order to provide additional services. The company has a non-grandfathered deferred compensation plan. Because of the consulting arrangements and the amount of service and compensation that is often associated with these arrangements, we have been struggling through understanding the Separation from Service/Termination of Employment guidance provided in the proposed 409A regs (specifically Prop. Reg. § 1.409A-1(h)(1)). My question has to do with the 20% and 50% tests. I am reading these as meaning that the services provided AFTER the purported termination of employment must, on an ANNUALIZED basis meet the thresholds. However, given the meager amount of guidance available and the lack of an example, would really appreciate someone else's thoughts on my reading of this provision.

Under the new IRS plan document determination letter process, does a newly established customized Plan still file (if they elect to exercise their option to file) for a DL with the IRS at the time the Plan is adopted (within the customary deadlines), or do they wait until the year that correlates to the last digit of their EIN?

Having studied IRC 409A and the regulations under it, it appears to me that any plan that permits setting aside funds (including funds of the employer and/or of the employee) for use at a future time is deferred compensation with the need of complying with the requirements of 409A.

A welfare benefit plan typically sets aside funds for welfare purposes, such as: medical reimbursements, death benefits, education reimbursements, disability benefits, etc. However, a great number of so-called "419 plans" or "419(e) plans" provide a mechanism whereby an employer, by dropping out of a multiple-employer or by terminating a single-employer plan, can trigger a cash distribution.

IMHO, such a cash distribution would fall under IRC 409A. A plan that permits such distribution must comply with 409A by 12-31-05 or be subject to the penalties provided thereunder. If I had a client that participated in a WBP or "419" plan, I would make sure that no cash distributions were possible (with the exception of medical payments or reimbursements) or get my client out of the plan by 12-31-05.

Does anyone know if a QDRO can be drafted for child support arrearages? I have only seen QDRO's drafted for splitting of assets.

I'm curious to see if anyone takes what I perceive as the more aggressive stance on this...

Suppose a plan has been in existance since 2003 with 401k and match provisions, but has never made a match contribution. Begining with 2005 or 2006, the employer would like to make a match contribution.

Would anyone take the stance that the first year they make the match contribution triggers the assumed 3% prior year NHC ACP or is the plan required to switch to current year testing if the employer wants the HCE's to get any match the first year? Of course, that puts them on the minimum 5 year route for current year testing.

Thanks,

Steve

A participant who is subject to RMD requirement rolled over his total QP distribution to an IRA and then took his QP and IRA RMDs from the IRA.

What is the likely penalty? 50% of QP RMD? Inclusion of the QP RMD in income (along with the full IRA distribution)? 6% of the QP RMD as an excess IRA contribution? No harm, no foul?

I think 6% is the answer, and that this could be cured by a withdrawal from the IRA of the QP RMD, plus earnings, before 4/15 of next year. It would seem then that the full IRA withdrawal would be taxable this year, but only the earnings on the “excess contribution” would be taxable on the corrective distribution.

Any thoughts on this would be appreciated.

Hi all,

I was wondering if anyone could direct me to a reputable ERISA law degree curriculum that was offered online - I'm interested more in the general benefits side and not the practicing side. I found a college based in Chicago with an LLM (?) program in Employee Benefits but I don't believe they offer online courses.

Thanks!!!

Vicki

I am 31 years old and quickly realizing that I need to start saving for retirement. I checked 5 books out of the public library and have come to a few conclusions.

1) I want to open a Roth IRA

2) I want to invest my money initially in an index fund

3) Fees are the enemy

After looking over reviews of online discount brokerages I have decided that I would like to invest with either Vanguard or E*trade. I like Vanguard because of the low fees and commissions and choices, especially on index funds. What I do not like are the $10/year they will charge until I have $5000 in my IRA and $10000 in an index fund. I like e*trade because of the lower still comission on some index funds, the lack of maitenance fees, and the ease of having money market accounts and checking accounts all at one stop. I not like the lack of choices, especially with respect to index funds (only 4 no transaction fee options!).

I was wondering if anyone could give me a pointer that would lean me one way or the other. I'm the kind of person that needs to research everything beforehand, but I feel that I need to start investing now.

Thanks in advance.

Peregrino

PS - One bonus question. If I pay a transaction fee to buy shares in an index fund, do I have to pay that fee _every time_ I purchase more shares?

Not my idea and I suspect this is a strange question but what if somebody wants to modify discounted stock options subject to 409A in order to comply with the new 409A requirements rather than convert them to fair market value options. I assume that in order to modify you would have to make exercise mandatory either on a fixed schedule or one of the various 409A distribution / payment events (e.g., change of control, termination of employment, death or disability).

In order to comply with 409A, would not the exercise have to be mandatory upon the stated payment event? If so, what happens from a tax standpoint if the option is underwater at the time of the stated event and the optionee does not exercise. How would the IRS assess taxes and penalties in that event?

Also, can you grant new discounted stock options given 409A? Obviously, I assume any discounted options would need to be subject to the specified distribution events as discussed above but would there also be a 409A issue in terms of the "deferral election"--i.e., if you received the grant of a discounted stock option would you automatically violate 409A if the grant was made without a "deferral election" the year prior to the option grant.

Thanks for any thoughts or guidance on these issues. I cannot imagine wanting to use discounted options in the current environment but have a client that wants to know exactly how this plays out and have not seen anything discussing these issues.

I'm wondering if 1.401(a)(9)-6, Q&A 12 applies in this scenario. A DC plan uses a variable annuity contract and is considered an individual account plan that is annuitized. The contract provides for a stepped-up death benefit where a designated beneficiary will receive the greater of:

1. the participant's vested account balance

2. the participant's remaining principal (contributions - distributions)

3. the maximum anniversary value (anniversary value for each anniversary of the deceased participant's birthday prior to the participant attaining a specified age)

It appears that the contract is guaranteeing that there will be no loss of remaining principal. Has the benefit already accrued or is making up for a loss an additional accrual, thus Q&A 12 applies.

Thanks!

Received a request for reimbursement for Bayer Aspirin, Bengay Heat Patch and a Heating Pad. All of these were on the receipt from a Walgreen's. The receipt had a "F" in front of each item with a note that these were approved OTC expenses for a flexible spending account. I can understand the aspirin and heat patch but not sure about the heating pad. Any comments? Also, is there a definitive list provided by the IRS on what otc items are approved?

Wisln

Our TPA has been asked to takeover a client from another firm that clearly is having major service issues. The most significant concern is that the (prospective) client cannot locate a copy of their 401(k) plan documents and the current TPA has not provided a copy after repeated requests. The plan has been in existence since the late ‘90s. We have advised the client to hire an attorney if necessary to get the document from the current TPA, but there is a concern that the TPA may not have a copy to provide. The client wants to make things right. Can anyone advise as to the proper way to handle this issue (VCP, etc.)?

This is one of those "I know there's something out there, but can't find it" issues. Can a self-insured medical plan cover a retired member of the board of directors (assume he/she was never an employee)? Seems it should be OK, assuming the plan meets the non-discrimination rules, but I just can't find anything addressing this issue, so far.

Thanks.

Can this occur?

Joe Smith has $60k in 401k. Rolls $40k into the plan then takes a $50k loan. Can he withdrawal the remainder of his R/O provided the plan allows in-service on rollovers?

current plan allows for deferrals and match...

Plan is intended to become safe harbor, given the sheer number of changes that need to be made to the document and SPD, wouldn't it be safer to simply restate the document? Scary as it sounds...in 13 years I've never had to convert a plan...always restated as there were multiple other changes the clients wanted to make as well. It's not so simple as adding the SHMAC or SHNEC formula language is it? Since neither is guaranteed, I'd imagine that you still need all the ACP/ADP language to remain in the document.

Also, do you need a material modification letter if you restate? or is it enough to provide everyone with new SPD?

I am a public school teacher in New Jersey who has used the 90-24 transfer rule for many years. Most districts in our state, as in others, only offer high expense, low return variable annuities. The transfer rule allows me to periodically move money to the vendor of my choice. Is the proposed eliminaton of this rule "set in stone?" While many positive changes may come from changing the regulations and making the 403b similar to the 401k the elimination of this rule hurts thousands of people. If the school districts do not offer a low cost mutual fund or annuity in their plans employees will be stuck with poor investments which are incredibly over priced. What is the rationale in eliminating this option? Thank you

A question was posed to me and I wasn't sure of the answer...

A participant has an IRA of 350k. He is age 57. He would like to start taking distributions from his IRA to build and pay a mortgage on a second home but doesn't want to incur the penalty. Can he take out more than the amounts calculated using the minimum distribution amounts, so long as it won't deplete the balance sooner than 5 years?

This person wants to take 20k a year....

allowable?

If so, would it be prudent to recommend that the person take 100k of the money and move it into another IRA, since you don't have to aggregate them, purely as a just-in-case you need to access additional funds and prevent yourself from changing your installment payments?

current adp for the hce group is 27.43%

hce's consist of 95% owner, owners father and owners wife. other 5% owner is owners brother who is not an employee.

was wanting to look at top paid group and see if i could help them get a lower refund back.

question is owners wife, who's adp is 61.4%, made only $17k in pye 9/30/05. she would not be in the top paid group, but would she still be considered an hce due to attribution? also, the plan doc. does not clearly state top paid group as an option for adp, just current year data. could a retroactive amendment be done to allow for top paid group?

California recently adopted a sweeping tax bill that, amongst other things, specifically states that the exclusion from income for the Medicare Part D subsidy (Section 139A of the Internal Revenue Code) shall not apply to California income tax.

Basically, the employer must include the amount of the subsidy for income tax purposes. So, what do you do with a multiemployer VEBA where there is no taxable employer? The subsidy does not really fit the definition of unrelated business income. There might be a preemption argument here, but I thought I'd see if anyone has any thoughts.

Thanks!