Assume a situation where the amount involved is within the involuntary cash-out / automatic IRA rollover range of $1,000 - $5,000. The terminated participant elects a cash distribution (minus withholding) and the check is prepared and mailed. Some time later, the check is returned as undeliverable or is never cashed. Attempts are made to locate the participant but the search is unsuccessful. Due to the passage of time the withholding may not be recoverable and we are left with 80% of the taxable amount in the cash account of the plan. Assuming the 1099-R record can be changed and we have written authorization from the plan sponsor, I would think it would be appropriate to allow the rollover of the remaining amount to the IRA. The revised 1099-R would reflect the rollover of the amount involved and the taxable amount would be the withholding. This would serve a couple of purposes: 1) preservation of the participant's distribution, and 2) allowing the plan sponsor to be in compliance with the plan document requirement to distribute the vested account balances of terminated participants with balances ranging from $1000-$5,000. Any thoughts?

Generally, a participant must exhaust all possible sources of financial assistance, including plan loan, prior to applying for a hardship.

With regards to victims of Hurricane Katrina, do you think they are required to apply for a plan loan before requesting hardship?

Thanks

For new hires we have a 30 enrollment period during which if they elect any benefits they are enrolled retroactively back to their date of hire (we have first day coverage). So if a person is hired on August 15th they can wait until September 13th to enroll in medical, but their coverage is retroactive to August 15th if they had any claims. Our attorneys said we cannot use this same methodology for the FSA's. They said HC and DC FSA's go into effect the date of election and can never be retroactive. So using the same example above, the person elects DC FSA on September 13th - that is the day their coverage starts and no claims can be submitted before this date. This is a real problem in explaining to employees and also in programming our HRIS. None of us in benefits has every encountered this before - has anyone heard of this?

We have a 125 with FSAs that operates on fiscal year. Dependent Care participant paid for entire summer's day care with one check at beginning of summer. The plan year ended in the middle of the summer (i.e.: about 1/2 of what she paid was for the weeks before the plan). Participant sent in copy of check and tuition bill for the total.

I've always told participants that the dependent care service is incurred on the last day of the period for which you paid. i.e. you pay on Monday for the full week but the service isn't incurred until Friday. Therefore we can't reimburse until after Friday and then only up to what you have in the Dependent Care FSA at that time and only based on the plan year that includes that Friday. I've even mentioned monthly payments in employee enrollment meetings - i.e.: you pay for the whole month at the first of the month but the service isn't incurred until the last day of the month.

So, do I reimburse the part of the expense that incurred in the plan year that ended mid-summer with dollars set aside for that year and the rest with dollars set aside this year? or is all reimbursable only with this year's dollars since the last day of the period fell in this plan year? (Which means participant forfeits last year's dollars).

And, what other documentation do I request since the bill was for the whole period as was the check they wrote?

Thanks for any help and cites you can give!!

Can a former employee of company A who participated in the 401(k) plan of company A in 2005 and deferred $2,705 in salary deferrals establish their own Simple IRA at their own business (Company B) in the same calendar year? If they can, can they defer the full $10,000 plus matching or are their contributions reduced by the deferrals made into the 401(k). I was not sure given that the 2005 deferral limit for 401(k)'s is $14,000

Our department is being spun-off and our department manager is forming his own new company...an LLC taxed as a sole proprietorship. We have elected to take COBRA benefits, and have gone through the list of options for favorable tax treatment (cafeteria plan, HSA and now HRA). As part of the comparison of these options, we are trying to determine if the spouse and dependents of a self-employed person may have their COBRA premiums reimbursed through an HRA (we understand that the self-employed person himself may not participate in the HRA). Has anyone come across this situation?

Have a client who is a Schedule C owner of a company who does not receive w-2 wages from the company. However, this client would still like to make deferral contributions. In looking at the adoption agreement, there are 3 choices to make an election; (1) W-2 wages; (2) Code 3401 (a) federal income tax withholding wages; and (3) 415 comp. Can anyone advise with which option to elect and give a brief explanation? Thanks!

Edgar Renteria is by far the worst shortstop that I remember seeing play for the Red Sox. Who have the others been. I recall:

Cabrera

Nomar

John Valentin

Rick Burleson

Luis Aparicio

Rico Petrocelli

Jerry Adair?

I'm missing a bunch. Without looking them up, who are they?

The pension plan has an individual who was eligible to retire on September 1, 2004; however, the individual just applied for his pension benefits. Is the individual eligible for interest on the pension payments he would have received, if he had applied to receive his pension in 2004?

The plan did not provide the individual with a notice indicating that if the individual does not start benefits at normal retirement, the individual may lose benefits. It is my understanding that if this notice had been provided to the individual, the plan would not have to retroactively provide benefits, if the benefits are applied at a later date. In that the plan did not provide such a notice, the individual has the right to retroactively start benefits. If the individual retroactively starts benefits is the individual is entitled to interest on late payments?

Thank you in advance for your help.

Owner of Plan Sponsor retired in 1999, electing a J&S 75% benefit. Actuary calculated benefit, and used improper J&S factor, overstating benefit by approx. $800/month (cumulative overpayment is approx. $60,000). Issue was noted during my initial audit of Plan (was not detected in previous audits or even in previous IRS audit which specifically looked at benefit calculation).

Other than having to put $60,000 back into the Plan, are there any other correction options available?

I highly doubt it, but could the form of the benefit be changed to a 10 yr C&C or a J&S 50% benefit (with spousal consent to the lower survivor benefit)?

I'm just looking for general corrections people have seen in this situation in the past. The issue will be discussed with ERISA Counsel, but I'm just trying to gather as much input as possible.

Thanks!

Adding a further wrinkle, what if the Spousal Consent Form cannot be located? Absent this consent form, the Plan would revert to a J&S 50% benefit - in which case the Owner would have been UNDERPAID by approx. $25,000. I can't imagine that the IRS would want an additional $25,000 being paid to the Owner for being unable to locate a form.

Two Questions:

1. If a profit sharing plan is top heavy, must the permitted disparity percentages be lowered from 5.7 to 2.7, from 4.3 to 1.3 and from 5.4 to 2.4?

2. Regarding the employer contribution percentages, can you use amounts other than whole numbers? Say, 7.5% and 13.2% or 7.5% and 10.2%?

Thank you for your help.

Skimmed through and didn't see it....???

I would be interested in agruments pro and con re creating an amendment base under FIL whenever there is an increase in the 415 limit (assuming the increase does produce an increase in the EAAL and that no ACTUAL plan amendment is required to effect the change).

Would it matter if FIL had been the original funding method for the plan and the description of the method specifically said that no such bases would be created though bases for other amendments would VS. FIL having been adopted with approval under Rev Proc 2000-040?

Company has PS plan with 401(k) feature.

Currently no investment choices. Everyone is in same conservative investment.

Company wants to add participant directed investment feature, as follows:

There are 6 options:

5 Lifestyle accounts (funds of funds) (geared toward time horizon)

1 Money Market account

Participant must choose ONE from the 6 choices.

Can this meet the 404© requirement of "broad range of investment alternatives"?

I feel it cannot due to language in 29 CFR 2550.404c-1(b)(3)(B)(4). That is, that the investments must minimize risk "when combined with investments in the other alternatives." So, because they cannot choose more than one alternatives, they are not properly minimizing risk.

Am I way off? I have seen some discussion about the unavailability of 404© protection where there are lifestyle accounts.

Any thoughts? Thanks.

Is there a specific timeframe a plan sponsor should notify employees of plan termination before actually terminating the plan?

Participant in PSP applied for a hardship distribution in June '04 on basis that house payment was behind and bank might foreclose. Participant again applied for a hardship distribution on the same basis in january '05. Now participant is back again presumably for another hardship distribution for the same reasons. The plan doc does not contain any restrictions on the number of hardship distributions that one can apply for. Assuming the participant can produce some documentation to the effect that the bank is going to foreclose or that the house payment is otherwise late, does anyone see a problem with the plan making the distribution? The only restriction that would be applicable is that the PSP is holding funds from a merged MPPP and no hardship is allowed from those funds.....

Plan covered by PBGC, wants to terminate, and is underfunded. As I understand the rules, we can do a standard termination and pay 'to the extent funded'.

Are there any traps or problems we should be aware of before proceeding? As a note the company is no longer in business so there will be no more contributions.

Thank you.

Can an employer (or employee) who sponsors (or whose employer sponsors) a "frozen" SEP contribute to an Individual IRA? Thanks

Errors were discovered in the 2004 ADP test resulting in additional refunds of $55 for each of 5 HCE's. The IRS correction program says $50 can be ignored. Does the plan have to distribute these?

Can someone please help me locate the final loan regulations. I understand it is under Treas Regs. 1.72 and final regs were approved in late (?) 2004.