Things for Which to be Thankful

The spouse who complains when dinner is not on time, because s/he is home with me, not with someone else.

The teenager who is complaining about doing dishes, because that means she is at home & not on the streets.

The mess to clean after a party because it means I have been surrounded by friends.

The taxes I pay because it means that I'm employed.

The clothes that fit a little too snug because it means I have enough to eat.

A lawn that needs mowing, windows that need cleaning and gutters that need fixing because it means I have a home.

All the complaining I hear about our government because it means we have freedom of speech.

The space I find at the far end of the parking lot because it means I am capable of walking.

My huge heating bill because it means I am warm.

The lady behind me in church who sings off key because it means that I can hear.

The piles of laundry and ironing because it means I have clothes to wear.

Weariness and aching muscles at the end of the day because it means I have been productive.

The alarm that goes off in the early morning hours because it means that I'm alive.

What advice can you provide for organizations considering changing their health and welfare plans from a Church Plan to ERISA?

Can you declare a full termination of a profit sharing plan if the employer has not made a contribution since 12/03?

basically all the employees have left (in several waves) and we are left with a trust and some assets attributable to former employees.

the plan is basically an orphan plan at this point as the employer was sold to a foreign investor.

Admittedly, we are slackers with respect to this issue. There will be quite a few mandatory distributions that we should be doing automatic rollover to IRAs for, but we got started late. This post is not related to the issue of not amending; assume that the amendment is done by 12/31/2005 for a calendar year plan.

I have several questions regarding this:

1). Are we the only ones who aren't going to be distributing by 12/31/05?

2). What is the correction for not following the terms of the document? We should have done automatic RO distributions by 12/31/05?

3). I think we can self correct as an insignificant failure and distribute in Jan or Feb of 06. Assuming the self correction is done properly; does anyone see much risk in doing this?

Different, but somewhat related situation: Assume "Good Faith" amendment is timely done and automatic RO done before 12/31/05 for a participant. But, this participant terminated in 2003 and per plan document should have had a mandatory distribution prior to 2005. Am I correct in that the IRS relief for automatic ROs done by 12/31/2005, is only relief for distributions that should have been done some time after 3/28/05? What would you do in this case?:

4). EPCRS self correction?

5). Nothing, other than the distribution

6). Something else

Second different, but somewhat related situation: We took over a plan recently that had already done an amendment lowering the mandatory threshold from $5,000 to $1,000. But, this plan has several participants who have balances between 1,000 and 5,000 that should have had mandatory distributions in prior years based on the plan document in effect in prior years.

7). Is there a correction for this? The plan no longer allows mandatory distributions on balances over $1,000.

Thanks

If Plan Sponsor fails to make an RMD, must it notify Participant of Participant's excise tax liability? Or must Participant figure this out herself after she gets the 1099-R? If Plan Sponsor does have an obligation to inform Participant, where does this requirement originate--in the tax regs, or in ERISA's fiduciary rules? As I understand it, Participant must report the late RMD on Form 5329 and include the 50% tax; Participant may also include a request that the IRS waive the excise tax. Nothing in the Form 1099-R instructions, though, says that the sponsor has to characterize a distribution as a late RMD, even if that's what it is. I've looked at the 401(a)(9) regs, the 4974 regs, and the instructions for all the relevant IRS Forms--nothing in any of that about notifying the participant of her excise tax liability. Nothing in EPCRS about it, either (not even in the section on applying for a waiver of that same tax)--it just says to pay the late RMD, plus interest. I'd like to be able to point to a clear requirement that Plan Sponsor step up and disclose, but I'm just not finding one. Has anybody run across the rule?

Thanks!

We have a several clients with 401(k) plans that have pooled investments. We usually try to make distributions soon after an annual valuation. Our document provides for annual valuations and interim valuations if the plan administrator sees fit to do so.

Because of the new automatic rollover rules on mandatory distributions, we will be making quite a few distributions late this year. I would think that there may be a few others in the same situation.

If you are in the same situation; which of the following are you doing?:

1). Distribution based on 12/31/2004 valuation.

2). Distribution based on an interim valuation.

3). Something else (please specify)

Thanks

I have searched this forum high and low, but can't seem to find the answer to my question:

Is it permissible (assuming the plan doc allows) to allow certain employees who are unavailable during the open enrollment (e.g., out of the country, hospitalized, on leave, etc.) to enroll in pre-tax benefits after the plan year start date? Obviously, the elections would have to be prospective, if this is even allowed. If it is permissible, where can I find supporting documentation in the regs or other IRS guidance?

Thanks!

When do distributions begin on terminated 401(k) PS plans? Here what I know:

The company went out of business on 11/3. We are filing the 5310 for the company. There was a layoff 30 days before the actual day the doors closed. We have received completed forms for those participants.

1. Can we begin distributions as soon as all administrative issues have been cleaned up - outstanding payrolls and our fees? Do we have to wait until the "Notice to Interested Parties" is mailed? Can we hold the forms already in hand until we receive our fees?

2. How far back are all participants considered 100% vested if the were already paid out 2, 3 4 months ago?

I have not done a termination in over 5 years and am very very rusty! We have received a call from the DOL and I need to return it.

Thank you all in advance.

Topic: WHO decides that NQ-Deferrals stop?

In Prop. Treas. Reg. §1.409A-2(h)(vii) on page 224 is the following sentence:

"An arrangement may permit a cancellation of a service provider's deferral election due to an unforeseeable emergency or a hardship distribution pursuant to §1.401(k)-1(d)(3). "

Because the word "distribution" was omitted after "emergency", I interpret this to mean that a plan may (but need not) permit NQ deferrals to stop when a participant has an unforeseeable emergency regardless whether a distribution occurs from the NQ plan. And if my interpretation is accurate, then it is the participant who decides to stop future NQ deferrals just by his act of requesting them to stop and stating his unforeseeable emergency.

But if he wants an emergency distribution to be paid from the NQ plan, does this mean that the plan document (as approved by the Board) must require the stoppage? Or that the participant may elect to stop future deferrals? And if the participant may elect to stop them, must the NQ-Plan Administrator require it as a condition of approving the emergency withdrawal if it would reduce the amount of the withdrawal?

In the preamble on pages 91-92 is the following:

"In response, these regulations provide that a plan may provide that a deferral election terminates if a service provider obtains a payment upon an unforeseeable emergency."

The first thing that this sentence, from the preamble, seems to do is put the word "distribution" in the regulation; i.e., require an actual emergency distribution before allowing a stoppage.

Second, it appears that the safest interpretation (absent clarification in the final regs or additional guidance) is that, if stoppage is to be included, the plan document must stop future NQ-deferrals when approving an emergency withdrawal, period; with no election by the participant.

Does anyone see this differently? It would be preferable if the regulation and the preamble were consistent. It seems that the draftsmen didn't use all the words necessary to express the intent that is evidenced by the preamble.

upon changing TPAs, under ERISA does a client have a right to receive its data in the format it is created in or can the prior TPA give the data to the client or new TPA in a reasonable but different format.

Are split dollar life insurance plans generally subect to ERISA? There does not seem to be much guidance on this issue. I came across a D.C. district court case from earlier this year that says that they are not subject to ERISA if there is no ongoing administrative scheme. Is it that simple?

Is there anything that has to be done to terminate a SEP plan?

None of the brokers seem to know what a 4204 purchaser's bond is - even the ones that know about the 412 fidelity bond. Please let me know if you have some contacts. I am over in Hawaii - Mahalo.

Will Lee

will_lee_esq@sbcglobal.net

In a moment of delerium our client elected to drop the 401k feature from his profit sharing plan. This was in Nov 2004. All accounts stayed in plan. Now seeing the error of his ways he asks that the provision be added to the plan effective Nov 2005 so he can defer some money this year, ADP tests permitting.

As the 401k piece was effectively terminated, then I assume the 1 year restriction is in play. But as the money was not distributed did the clock ever start? Can he ever re-add the feature? Or am I having a late Friday moment? Thanks for any thoughts.

Can someone please explain how the final 401(k) regs effect the safe harbor notice? do you need to include information about specific plan provisions?

Is there any point at which a transaction between the employer and a party in interest could indirectly be a prohibited transaction for purposes of an ESOP? (the answer may be "no," but I'm thinking of where an owner may also be a fiduciary of the ESOP, and where the employer may have transactions with that fiduciary/owner or another entity held by him.

Can you roll a Simple IRA and 403(b) into a regular 401(k) Plan?

I'd appreciate confirmation if I've got this right.

Suppose you have a plan year 7-1-04 to 6-30-05. You have a highly compensated employee (not eligible for catchup) who deferred 13,000 from 7-1-04 to 12-31-04, then deferred 14,000 from 1-1-05 to 6-30-05.

While this is permissible for 402(g) limits, as you might expect, it failed the ADP test, and some amount must be refunded - let's say 10,000.

All set with tax issues, etc. The question posed was - since this 10,000 is being distributed, can the employee defer another 10,000 between now and the end of 2005? In other words, does a refund of deferrals due to ADP failure "reduce" the deferrals counted towards the 402(g) limit?

I believe the answer is no. The deferral stands, and this person cannot defer anything more in 2005. Possible I missed it, but I didn't see anything in the regs to allow otherwise in this situation.

Thanks!

Client has had an FSA for a long time and has amended it to take advantage of the newly-available 2.5-month extension of coverage. Client is also adding an HDHP/HSA combo beginning 1/1/06. Client has been told that anyone who contributed to the FSA in 2005 will be ineligible to contribute to the FSA until 4/1/06 (first day of first month following expiriation of extended coverage period) because of "exclusivity" requirement attached to the HDHP/HSA combo. Client must answer the following questions in the next 2 hours (I know, I know):

1. I have some memory of the IRS issuing transition relief on this very issue, but can't find it and might be imagining it.

2. Assuming that those who contributed to the FSA in 2005 aren't eligible to contribute to the HSA until 4/1/06, can they "backload" their contributions for the remainder of 2006 and thereby still contribute the annual maximum? I assume they can't.

3. Same assumption as #2--what about expenses incurred between 1/1/06 and 3/31/06? Can HSA participants who were 2005 FSA contributors use $ in the HSA to to pay for expenses incurred before they started contrbuting? I'd be surprised if the answer is "yes."

Thanks for any help.

Did anyone else take the C-4 yesterday?

I didn't have time to answer all the questions, but I gave good in-depth answers. I wondered if it was normal or expected that all the questions wouldn't be answered.

Anyone have an experience like mine and still pass the test? The wait for the results is going to kill me!

TIA!