We know that the 100% of avg. compensation is based on the high aggregate three years of compensation, and less than three years of compensation if the employee does not yet have three years of compensation.

What if in the first year of participation the employee earns $30,000. We are assuming the employee has 10 years of service prior to plan implementation and only compensation while a participant is being used for 415 and plan purposes.

Is the 100% avg comp limit $30,000/1 or 10,000 (30,000/3) after the first year of service?

And in a different eg. an employee earns the following compensation:

Year 1 = 500,000

Year 2 = 50,000

Year 3 = 50,000

Assume 401(a)(17) is limited to 210,000.

Is the 100% comp limit equal to $200,000 (500 + 50 + 50)/3 or is it 103,333 (210+50+50)/3.

For plan benefit purposes the 3-year avg is 103,333, but in this case the plan could have a formula of 150% of avg comp and still be below the 415 limit of 100% comp. I've seen both interpretations supported.

Thanks.

I am having some difficulty in reviewing a DRO sent to

our plan office. It is for a defined benefit plan. The provisions

are as follows.

1. Assigned benefit is 50% of amount earned during

life of the marriage--No problem.

2. Alternate Payee may begin receipt of her benefit

on earliest retirement date of participant and must begin

by time the participant retires--no problem.

3. No mention of the appropriate measuring life--worrisome.

4. AP has preretirement survivorship protection to extent

of her benefit--no problem.

5. If AP predeceases the participant, order provides for

a reversion back to participant--ok.

6. AP has post-retirement survivorship protection to the

extent of her benefit. This is where I am stuck. This

clause and #5 lead me to believe the order is not designed

as a separate interest QDRO.

Ordinarily, under the separate interest approach, the

death of the participant after the AP is in pay status

should have no effect on the administrator and the

AP. Her benefit would be governed by the selection

made at the time she applied for an annuity.

Questions are...

-Assuming this is a stream of payment order, can

an AP begin receipt of a stream of payment

benefit prior to the date the participant goes into

pay status?

-What form of benefit could the AP elect if she wanted to

begin receipt of a benefit under the earliest retirement

age rule? Per #6 above, a "60 month certain" option

or any other benefit above and beyond an annuity

based on her ex-husband's life would seem to violate

the order.

I realize this is confusing, but input from any QDRO

gurus is appreciated.

I read (somewhere) that under the new rules an employer may include the amount of a minister's housing allowance in the determination of the employer's contribution to a 403(b). In other words, the employer's plan document may define compensation to inlcude the housing allowance. The employee, however, must exclude the allowance in determining the maximum combined contribution (employee and employer). Does anyone have additional information or a reference?

Can anyone direct me to a brief synopsis of the changes affecting pension plans - on a law by law basis - for all new legislation passed since ERISA?

Thanks!

An S-corp starts a Simple-IRA. The corp has 4 employees .....1 owner employee & 3 regular employees. All 4 of them meet the eligibility requirements. The owner is the only active participant. The other 3 employees declined to participate in the plan for it's 1st year. Prior to the plan's first year, the owner walked through the office and informed each employee that the corp will match 3% for each eligible employee who elects to defer in the plan's first year. None of them choose to participate. So the owner was the only participant (he deferred $9,000 and the corp matched him at 3% in the 1st year).

The plan's 2nd year began 01/01/05. Again, none of the employees choose to participate in the second year. But the owner never informd the employees if the corp would match 3% in the 2nd year for participating employees or contribute 2% in the second year for all eligible participants.

How is the corp penalized for not having pre-informed eligible employees about the 3% or 2% requirement ?

Will such failure prevent the owner from receiving a match ?

A direct rollover was made from a tax exempt 457(b) plan to a traditional IRA. This rollover was made within the last two months. At this point, I believe the transaction can merely be reversed without any consequences. Is that true? Does anything have to be filed with the IRS?

Under the restricted distribution regs, there is a reference to Rev Rule 92-76 which describes escrow accounts that can be set up to allow for a HCE to receive his/her distribution if the plan is not funded sufficiently to allow for the distribution.

The Rev Rule also says the following:

"The plan also provides that the obligation of an employee under the repayment agreement alternatively can be secured or collateralized by posting a bond equal to at least 100% of the restricted amount. For this purpose, the bond must be furnished by an insurance company, bonding company or other surety approved by the U.S. Treasury Department as an acceptable surety for federal bonds."

Does anyone know what type of bond they are referring to? Is it like a fidelity bond (with a relatively small annual premium). Or is this like an investment type bond??

Thanks a million!

Dennis

Client has terminated a Profit Sharing Plan which was merged with a previous Money Purchase Pension Plan.

Participant with a $56000 account balance has been missing since 1995. We have done several several including sending mail to last know addresses, which all come back undeliverable.

What can we do?

what is the best way to handle overpayment of loan repayments?

Could someone please assist me with this question?

In the event where a participant nominates a beneficiary but the beneficiary is deemed not to have fallen within the definition of a designated beneficiary (for example a named estate or a corporation), what will be the consequnces of this?

I recently learned about section 4975 (prohibited transactions) and am curious to find out if there is any case law or formal guidance on the definition of "Plan assets" as mentioned under the section. This gets complicated, but I'm hopeful...

Hypothetical Scenario:

Plan participant X who has his IRA or 401(k) account with a "plan administrator" as defined by ERISA directs that plan administrator to send an investment to a common investment fund (specifically, a Limited Partnership operating as an investment company, but exempt from the ICA 1940 due to the number of investors, and issuing interests therein exempt from registration with the SEC by compliance with Reg D of the '33 Act).

So my questions are:

1) In this scenario, I understand tht ERISA(US Dept of Labor) does not generally term a collective investement fund as a "Plan" until such collective investment fund has at least 25% of its capital as IRA, 401(k), ERISA plan or other similar types of accounts. Is this correct?

2) In the scenario above, does the IRS agree with ERISA in its determination of what makes a collective fund "plan assets"? i.e. does IRS allow exemptions from section 4975 in a collective fund if less than 25% of invested capital is from such retirement-type accounts?

Any ideas who is going to be offering these? I'm think about a small business in particular. I know several large brokerages offer small employer plans; Fidelity Investments, Vanguard, etc....

I've not heard much about them considering they're authorized in 2006.

I am a 72yo, self-employed sole proprietor, still working (hopefully 3 more years or so). I have some large IRA's and a Solo 401(k) which covers only me and my wife.

I wish to a) reduce current taxes from MRD's;

b) avoid reducing my pension savings till I stop working, and

c) continue to grow them tax deferred.

My tentative plan is to take my IRA MRD's, with no tax withheld, and to use that cash to fund my 401(k) contribution (within the limits allowed by my compensation). Otherwise I do not have enough available cash flow to fund the maximum contribution by Oct. 15th (my tax filing date with extensions).

It seems to me that this would essentially allow me to defer tax on the MRD's till they are later withdrawn from the 401(k).

Is this a feasible plan? Some have said since I am using "post tax dollars" to fund

the 401(k) they would be subject to double taxation.

I need some expert feedback, which would be much appreciated.

I see nothing in the instructions that asks us not to include any blank pages in this filing. How are others preparing this form for clients, are you including all pages or only the page(s) associated with the tax?

thanks

I have a client that the trustee left the company under bad feelings. He is the only trustee on the plan. It is doubtful that they can contact him and get a signiture on Schedule P. What are the options??? Help!

I do very little with DB plans, so I'm hoping to get some verification on this.

It is my understanding that a DB/DC combo. is elgibile to cross-test if it "is primarily defined benefit in character". A plan will be primarily defined benefit in caharcter, if for more than 50% of benefiting NHCEs, the normal accrual rate for the NHCEs under the DB exceeds the equivalent accrual rate under the DC plan for the same employees.

We are looking at a combo plan where there are 63 NHCEs. 33 benefit under the DB plan; 30 benefit under the DC plan; no NHCE benefits under both plans. If I am understanding correctly this would be considered "primarily defined benefit in character". Does this sound correct?

Thanks in advance for any guidance.

Hi,

I am the managing partner of a small real estate development firm. I am hiring my first employee. He told me that he got a retirement contribution equivalent to 10% of his salary at his last job. I would like to match it.

I am technically a consultant to my company. I get a fee for my services paid yearly. I then have to pay all my self-employment taxes and I'm doing a SEP-IRA. An attorney friend cautioned me that I may have some kind of liability to my new employee as far as some kind of non-discriminatory pension plan arrangement. He suggested that my new employee's pension had to be equal to mine, or something like that.

Before I make this offer, I want to make sure I'm not going to get myself into trouble. Is there some kind of regulation that I must comply with? If so, what's the best route for me to take?

Thanks.

Aaron

Washington, DC

Will individuals with Roth IRA balances be able to roll those balances into a qualified plan with the new Roth 401(k) feature starting in 2006?

We have a situation where we terminated coverage for an individual retroactively. The person has now requested a certificate, however, it is well past the 63 days since the coverage was terminated. Any ideas on how to fix this?

I am proposing 2 plans. The 2 HCEs are in the DB plan and the 3 NHCEs are in the DC plan. The plan passes 401(a)(26) because 40% of the nonexcludable employees are in the DB plan. The plans together pass 410(b) because everyone is in one plan or the other. The plans together pass 401(a)(4) because the NHCEs have the 7.5% minimum gateway for DB/DC plans and each of the two rate groups is over 70%. The DC allocations are converted to accrual rates using 8.5% and 1983GAM. Everyone is tested at the plan's normal retirement age of 56.

Did I miss anything?