What type of plan or benefit do you suggest as an alternative to a 401k Plan? Due to our complex business model (we have a significant number of immigrant common law employees who have no interest in a 401k) we are having testing challenges. As such, would like to consider an alternative benefit for our employees. What suggestions do you have and have you run into similar challenges?

A DB plan covers the owner and several of his employees. The owner borrowed $50,000 in 2003 but the loan went in default during 2004 and was considered a deemed distribution. He now wants to take out another $55,000 from the plan and an early retirement provision is being considered in order to accomodate this intent. The plan is somewhat underfunded but there would be more than enough assets left after taking out this additional amount to pay all of the other participants' benefits.

A colleague seems to remember hearing about a rule stating that an HCE cannot receive a distribution that is more than 50% of the plan's assets under certain circumstances. I'm not familiar with this - has anyone heard of this rule? I've looked through many research materials and haven't been able to find a reference. If this rule does apply, and since he would have taken distributions in two different years, would there be no problem if the plan's assets at the time of the $55,000 distribution were at least twice the sum of $55,000 plus the deemed distribution amount (I'm guessing brought up with interest to the date of the $55,000 distribution)?

While trying to find this in the regs I stumbled across Treas. Reg. 1.401(a)(4)-5(b) and Rev. Rul. 92-76 which gave me something else to worry about. If I understood them, a restricted employee (as this owner seems to be) cannot be distributed more than what he would receive as a monthly annuity for the year? There were three exceptions to this, but none of them apply in this case. I've spoken to some TPAs who've said they have HCE clients who receive varying partial lump sum distributions every year, sometimes skipping a year or two, with no systematic method. Is the Treas. Reg. and the Rev. Rul. only applicable under certain circumstances? Thanks for any advice.

If a participant has a trust as bene of his plan account, and part of the trust is a QTIP trust, and the trust says "income" must be paid to the spouse...let's further assume that the plan account is the only asset of the trust...how is "income" determined and how do RMDs come into play?

Let's further assume that the plan uses a pooled account, so there is no reasonable way to look through to the underlying assets. The participant (or bene) receives a statement once a year showing beginning balance, gains or losses, contributions (there shouldn't be any!) and distributions.

If the account has gains of $20,000, and the RMD is $5,000, what does that mean in terms of the amount that must be paid to the spouse from the trust?

Conversely, if the plan has a loss of $20,000, and the RMD is $5,000, what does that mean?

I'm looking at a book by Noel C. Ice, who I just noticed is the moderator of this forum (!), and I think it says that annuity payments are considered income. I don't see anythinbg that says RMDs are treated as annuity payments for this purpose.

Prospect called and asked if we would file his 5500 as his accountant didn't have the software. Told him we would and fee would be nominal if he had all of the answers filled in ahead of time. He wanted to meet and provide me with data...which should have been my first clue to run! Turns out he has never filed...plans have been around since 92.

Questions are..which forms to file?

92-96 owner is only participant..... 5550 EZ? If I file that I'm not eligible for DFVC am I? Would I be better served filing C/R? Can I even file C/R?

97-2002 owner had an employee...obviously file 5500

2002 employee terminates and takes distribution

2003 file EZ again or 5500?

2004 new employee gets contribution...Again back to 5500.

So, what do I file in 92-96 and 2003?

obviously we want to minimize the damage here, there's actually 2 plans for each year a MPPP and a PS plan...so DFVC filing for all years would be optimal.

Also, if i'm not required to file as a sole prop with <100k. Do you mark the first return that I do have to file as a first return? seems odd for it to be a first return with a begbal.

Seems to me I recalled a past thread on this, but I can't find it.

I have 5 plan years on the system for a client from inception to current date. I want to run a report to pull the cumulative 401(k) contribution amounts for all participants for all plan years. Is this even possible? Anybody have a Crystal report that does this...Tom....???

Thanks in advance !

If a plan has a 90 day wait for eligiblityand defines a part-time employee as an employee who works < 19 hrs/week, can they exclude part-time employees? This is under the assumption they pass 410b w/ the exclusion.

If an employer uses a cash basis for company accounting purposes, does that mean that the company's 401k plan must also use a cash basis? For example, if the company decides to make a $20,000 profit sharing contribution in Feb. 2006, because it is using cash accounting, it would show the $20,000 on the 2006 tax return. Would that mean the employer could only allocate the $20,000 based on 2006 wages (pro-rata allocation). And since the 2006 wages will not be known until 12/31/2006, they could not be allocated until probably 2007?

Has anyone seen a plan allow a loan over the $50,000 limit on purpose. I understand it is a deemed distribution. They do not want to amend plan to allow for in-service distributions but someone needs money to buy company stock and the loan over the $50,000 is the only way he can get enough money since most of his assets are in his 401(k) Plan.

I am interested in your thoughts on this.

Let's assume there is no "whipsaw" problem -- that is, the plan's interest crediting rate is the same as the IRC 417(e) rate. Assume this rate is 5%. Assume a front-loaded plan (interest is crediting after employment terminates). Assume the plan participant is age 55 and has a cash balance account of $100,000. How should the single life annuity commencing at age 55 be determined? The lump sum benefit projected to age 65 (normal retirement age) is 1.05^10*$100,000 = $162,889.46. The age 65 annuity is $1155.67 based on 5.0% interest rate and the IRC Section 417(e) mortality table -- that is the expected present value to age 65 of this age 65 annuity of $1155.67 is $162,889.46 (age-65 lump sum).

How is the age 55 single-life annuity determined. Is it the immediate annuity derived from the age-55 $100,000 lump sum, where the expected present value of the age-55 single-life annuity to age 55 equals $100,000. Is it the age-65 single life annuity discounted somehow? If so, how should this discounting be done? Should it determined some other way?

We are a small TPA firm. When we put together our annual reports, we always have a lengthy cover letter which has on it pertinent info about the plan that year. Basically it says you are/are not top heavy this year and next, the 5500 is/is not enclosed (will be sent later), your plan did/did not pass testing, you do/do not have anyone who is 70 1/2 next year, etc....and there is standard language that goes along with each of those answers.

it is pretty time consuming to type all this out every year. We do save the prior year, but plans change, add stuff on, take stuff out, etc.....it is still time consuming.

I was wondering if anyone knew of a program, that works like this: you would go through a checklist and check off populated questions (like those above) and it would automatically create a letter from the options you chose.

Anyone know of a good option?

Thanks!

I would like the opinion of others. We have made a few typo corrections to our volume submitter and I think that is OK and not concidered a change from the specimen language.

Do you think that it is OK to make minor changes to the speciment language and still expect reliance as a word for word document?

For example: The specimen plan has several vesting options, but it does not have the particular option of 1 year cliff vesting that the client wants.

Do you think we can change the 2 year cliff vesting language to 1 year and assume that the change is too minor to really be called a change in the specimen language?

Thanks.

Say a participant required to take a minimum distribution under 401(a)(9) also wants to take a distribution of $10,000 (this additional distribution does not completely wipe out their account balance). As we understand the rules, the MINDI portion of the distribution is subject to the withholding rules applicable to periodic payments and the extra $10,000 distribution is subject to the withholding rules applicable to eligible rollover distributions. Periodic payments are subject to the same withholding rules applicable to wages, but the payee (the participant) has the option of electing no withholding. Assume the participant wants to elect no withholding with respect to the MINDI portion of the distribution. How do they go about making that election?

Are TPAs using their own election forms or do they require the participant to complete Form W-4P (a withholding certificate for pension and annuity payments)?

Thanks in advance for any help.

We have an individual who is trying to set up 2 SEP plans for her 2 companies. Do you know if this is allowed?

Do you have to aggregate an ESOP and a 401k plan for testing purposes?

Just wanted to get a few opinions on this. I have searched a lot of old posts that discuss settlor expenses. Many talk about the cost of doing a search for a new vendor. There were varying opinions on that one.

I am wondering if the fees for conversion to a new TPA would be considered settlor expenses. The EO Book (2004) Chapter 3 Appendix B has a discussion regarding the hypothetical situations that the DOL has addressed. It seems to me that their response to situation # 6 regarding a decision to outsource administration is very similar. The opinion was that they were not settlor expenses and could be plan deducted.

Does anyone have a differing opinion?

1) A retirement distribution has been calculated using the fixed amortization method which provides for an equal payment amount each year. Can the timing of the distribution be changed to where one year they receive a lump sum of the entire amount and then the next year, they receive 12 monthly payments and the next year they receive 1/2 of the distribution in a lump sum and the beginning of the year and the remaining monthly - as long as the amount distributed during the year does not change?

2) Is the year used for calculating the required distribution always the calendar year or is it changed to the actual retirement date month?

What is the standard procedure for a terminated 401k participant to take their life insurance policy out of their former employer's 401k plan. Can this be done by merely changing the policy's owner from the plan sponsor back to the insured?

It was my understanding the general way to do this is to have the insured "buy" it out of the plan w/ money out of his pocket.

I'm transfering a plan to a new vendor that will not accept life insurance w/o an outside TPA and the owner isn't willing to do that.

Any guidance would be appreciated.

Hi,

Does anyone know if there is a resource to find out all the current state mandated health care benefits?

Thanks.

How long after separation from service does COBRA mandate availability of entended health coverage (at the employee's expense, of course). Thank you

Is a financial advisor automatically a fiduciary for a plan? I looked up the definition of fiduciary and read that "...a person who renders investment advice for a fee or other compensation, direct or indirect, with respect to any assets of the plan, or has the authority to render such advice (even if not actually rendered), is a fiduciary".

In my specific situation, the financial advisor will receive commissions on the assets, but I take this to mean something different than receiving a fee or compensation. Also, all assets are self-directed.

Thanks for your help.