A large plan auditor is instructing the client to provide a deferred vested benefit notice to participants reproted on the SSA. My feeling is that the quarterly investment company statement satisfies this obligation( plan is 100% vested safe harbor 401k). Would it be any different if the plan was not fully vested as vesting is not on the investment company statement? Does anyone actually do these things?

I'm looking for recent guidance on how to rectify an employer's failure to deduct deferrals from employees' paychecks. I know that earlier guidance requires the employer to make up the deferral, match and earnings, but I really seem to remember reading somewhere a change in this guidance, i.e. an unfair windfall to the employee. But I sure can't find it now! I believe the example I read was extreme, i.e. employee elected to defer $12,000, employer didn't set it up in payroll, employee didn't notice for 18 months.

The situation I'm dealing with now is much less extreme, small amounts over a short period of time, picked up on audit, never noticed by employee. It seems fair to me that the employee should receive the match, but it just doesn't make sense that he should be entitled to a QNEC and the fatter paycheck. Even if you decide to fund the QNEC and the match, it just doesn't make sense to me that you should give the employee earnings as well, isn't 100% return good enough??

Participant in a real cash crunch. State Law (CT) requires the employees authorization for payroll deductions, and the employee can revoke the authorization. Does anyone have any concrete cites for whether or not payroll deductions can/should cease if the participant rescinds the authorization?

I realize of course the loan must still be repaid, and that therefore the sponsor must try to get payment from the participant via personal checks or whatever. Also, I think the sponsor should never lend them money again, but is that where it ends?

All money is in individual accounts.

Here's one I've never seen. Participant in a 401(k) requested a hardship withdrawal. TPA incorrectly calculated the allowable hardship, and told them they could take (x) when in fact they were only allowed to take (y), which was a couple of thousand dollars less than (x). By the time the error was discovered, check already cashed, and money spent.

What would be your approach to correcting this? Seems like Rev. Proc. 2003-44, Appendix B, .04 (2)(a)(iii) is appropriate, but I'm wondering if there isn't a simpler method.

I think recovery from the participant is unlikely, since they have no money which was why they took a hardship in the first place. And I'm dubious about the legality of the employer withholding this from pay if participant doesn't agree to it. So if participant can't pay, just code the excess on a separate 1099 as premature distribution, and that's that? It doesn't seem appropriate for the employer or TPA to deposit this into the plan as you would in some situations, since this would result in a windfall to the participant.

Appreciate any thoughts!

Plan has not filed 5500's for 11 years. We have prepared the 5500's for these years and the plan will file under DFVC program. Employer will pay DFVC fees.

Our fee for the preparation of the 5500's is almost $15,000. Client wants to pay fees from plan assets. Although we agree the plan may be charged with normal fees for preparing 5500, is is alright to charge these fees against the current year assets when they pertain to the last 11 years?

Although the workforce was fairly stable over that time period, about half the participants left the plan and took distributions during 2004 as the result of one owner breaking away to start his own business. Therefore, the remaining participants will bear the cost.

OK, anyone have some straight skinny, or decent speculation, on what's going on with Treasury guidance and the 409A effective dates?

I saw an industry org. at-issue memo asking Treasury to postpone certain 409A effective dates due to the lack of guidance. Personally, I was expected to see more from Treasury before summer and I don't like having projects on perma-hold.

The reality is some NQDC sponsors are going to be headed for enrollment meetings in Sept - Oct with issues undecided, designs unfinished and questions unanswered.

Ggrrr.

NRA under DB plan is 65. NRA under DC plan is 62. Is it ok to aggregate the two plans for general testing purposes and use 65, the later of the two uniform retirement ages, as the testing age for all particpants in both plans?

One person told me I need to amend the DB plan to have a NRA of 62.

Thanks in advance for any comments.

Arlingtonray

Self employed doctor in city A sells his clients and moves his practice to another city. Dr. sponsors a 401k plan. Can the dr simply terminate the employees in city A (creates a partial plan termination) and when he moves to city B and sets up practice use this same plan with provisions for employees he hires?

I have a client that is being purchased as part of a stock sale. The sale is set to close several weeks before the end of the plan year and the plan has a last day requirement to receive an allocation of the match. Client wants an amendment providing an exception to the last day rule for participants employed on the sale/merger date but involuntarily terminated before the end of the plan year. Client has asked that the amendment only be effective from a short time before the proposed sale date to the end of the plan year. It appears that if the sale takes place during the 2006 plan year, no exception will apply for the match allocation.

The more I think about this, the more it bothers me - but I am unable to pinpoint why. I keep thinking that it is a discrimination issue, but the amendment would be tied to when the sale occurs and not when any particular group is terminated. However, an amendment that says "Effective from 11/1/2005 to 12/31/05, participants who ... are excepted from the last day rule" just seems to "smell".

Any thoughts?

a husband divorced and received a order. the wife elected to receive the payments in monthly installments effect. jan06. amount is appx $950 per month. husbands plan is governmental and ex wife is 401(k). she wants to rollover payments into her plan, but what if she died a year from now? would they continue to her beneficiary or would she have been better served taking a lump sum rollover into her plan? thanks.

There do not appear to be many restrictions on what type of compensation can be deferred into a 401(k) plan. Based on informal comments by the IRS (and prior to the new 415 regs), it seems as though the only significant restriction is that the compensation must be payable to an employee. So here is the question: can an individual elect to defer nonqualified deferred compensation distributions into a 401(k) plan and have those contributions made on a pre-tax basis?

Assume: (1) that the elections to have those distributions contributed to the 401(k) plan are made prior to participating in the NQDC plan (no control over those assets at the time of election); (2) the 401(k) plan's definition of compensation for deferral purposes includes distributions from a NQDC plan; and (3) the individual is an employee when the distributions/contributions are made.

Would this be okay under the 401(k) rules? Would this be considered a second deferral under 409A that could potentially trigger the penalty? Please help. Thanks.

Can a doctor release PHI of a deceased patient (who passed away while under the doctor's care) to that individual's adult daughter? The daughter is not the executor of the estate nor is she an authorized representative. However, it seems ridiculous that HIPAA would prevent the doctor from explaining to the daughter what happened to her mother.

For plans subject to 419(e) deduction limits, it is understood that the deduction is limited to the "qualified cost", where such cost is computed as the level premium for the death benefit coverage of a life insurance policy.

The question is when determining the qualified cost, is it necessary to compute the death benefit based on the guaranteed policy rates or the assumed policy rates?

With the assumed rates the death benefit is higher or the coverage extends to an older age, due to the greater return on the investment.

The guaranteed v. assumed rates are shown in the policy illustrations.

Thanks.

I've heard some thoughts about this in the past and am resigned to the fact a Form 5500 needs to be filed for the first plan year, even if the only contributions are accruals deposited in the following plan year.

For example, effective date of 401(k) plan is 12/1/2004. No contributions in 2004, however, there is a PS contribution deposited in early 2005.

Would a Form 5500 need to be filed for 2004? My guess is "yes" so that you could report the coverage results on the Schedule T, even though there will be no financial data because of cash basis reporting.

Any thoughts?

An S-Corp has income of $100,000 and the owner pays himself $90,000 in wages. The required DB contribution for the year is $100,000.

Based on previous posts it appears that a loss created by the DB plan is allowable and that the loss can be carried forward or even possibly backward to offset income from the S-Corp.

Is it possible to use the loss to offset income (not from S-Corp) from the spouse of the owner of the S-Corp?

We had a retiree pass away on 5/27 and we were not notified until 7/20 when her 7/1 pension check was returned to us. We were, of course, able to recover the 7/1 check since it was returned, but we have been unable to recover the 6/1 pension check.

I sent a letter to the retiree's sister, who sent me to her neice, who sent me to her daughter, who sent me to the greatneice of the woman who lived with our retiree. Apparently, the woman who lived with our retiree (they had a joint bank account) is now in a nursing home with Alzheimers. The greatneice just called and said she doesn't know what happened to the 6/1 check. And, everyone else I've dealt with is refusing to repay the 6/1 benefit.

The pension check has cleared our bank account and we're in the process of getting a copy of the endorsed check. But, I'm not sure that will even do us any good.

Not sure what to do at this point. Will our plan be in violation of any ERISA rules/regs if that benefit is never returned to the pension fund?

Help!!

I utilize an off-the-shelf volume submitter software package with an IRS opinion letter on the pre-approved language. One of the design options is to make each participant their own allocation group with the allocation rate defined as a "pro rata" amount of the compensation of each participant in the group. I recently submitted this document to the IRS in the context of a proposed correction under audit and was told by the EB Manager that the plan was not qualified and did not contain a definitely determinable benefit. I was informed that an amendment to the plan would have to have been made each year to define the actual allocation?!? I am not interested in challenging this or becoming a "test case" for the service. Any thoughts on this unusual outcome??

What is the current state of the PBO = ABO = sum of cash balance accounts issue? Any chance this is going to be effective for FAS132 disclosure at 12/31/05?

It is my understanding that if the employer contributes to an HSA for anyone who enrolls in the HDHP, it needs to make a contribution to an HSA for all the employees who enroll in the HDHP. What do you about employees who fail or refuse to sign the documents required by the trustee to set up the HSA?

I found an error on withholding on a distribution from 2004. THe 1099R is OK but taxes were withheld and sent to the IRS and state in error. Now that we are in a the tax year 2005, I know there is a way to recliam the withholding errors from previous years,

Does any of the knowledgeable folk on this board know how to petition the government (what form?) to reclaim back taxes? Help! and Thanks!