October 15th is on a Saturday and we will have until Monday October 17th to mail the 5500 forms with extension for 12/31/2004 plan years. What date should be on Line 1 of the form 5558? Instructions say not more than 2 1/2 months. So, should we put 10/15/05 or 10/17/05?

For ESOPs that allow diversification per the regs, my client thinks there's a minimum amount under which you do not have to make the distribution payment. He thinks it's $500. Is anyone aware of where I might find that in the regs?

Sal Tripodi's book on the topic refers to Notice 88-56 but I haven't been able to find a copy of that notice.

Is a long term care plan subject to the 5500 filing requirements?

I had an employee that was with my corporation for 2 years (terminated in early 2005).

Per our plan documents, there are NO restrictions for participation (no 1000 hour requirement, no one year of service, etc.).

We do NOT match contributions.

This employee was never notified about participating in the plan and now there are other "salary" issues being "negotiated", so I want to know what "problems" this 401(k) issue might create.

What possible sanctions do we face for not including this employee ??

Does anyone have IRS code sections or D.O.L. regulations ??

In applying the 6 month waiting period for deferred comp distributions to "key employees" in public companies, the threshold question is "who is a key employee?" Never mind the fact that a lot of public companies probably aren't all that used to dealing with Section 416, we know that several of the Section 416(i) definitions are based on "compensation" which is ultimately defined in Section 415©(3) (via Section 414(q)(4)) -- rather unhelpfully -- as the participant's compensation for the year. However, Section 1.416.1 Q&A-T21 of the regs helpfully points out that "compensation" is defined in Section 1.415-2(d): the usual wages+non-deductible moving expenses+taxable welfare benefits+NQSO proceeds+amounts subject to an 83(b) election. Not too hard so far.

So the question is: when do you ascertain how much an employee's compensation is? End of the year immediately preceding the year of termination? Year-to-date compensation (i.e., comp for the year of termination)?

Because of the weird effects of using year-to-date compensation (e.g., non-key employee receives a NQDC distribution that transforms him into a key employee who must wait 6 months to receive the distribution that transformed him into a key employee--say that 3 times fast), it has to be year-end compensation from the year immediately preceding the year in which the termination occurs--doesn't it?

Anyone have any bright ideas about this?

Is section 457 the only choice for a 501©(3) to offer NQDC?

Thanks,

Ken Davis

A participant is past normal retirement age in a plan being tested for coverage. His benefit is the actuarial equivalent increase of the prior year benefit.

The coverage rules under 410(b) will deem this person to be benefitting even though there was no actual accrual increase.

However, it appears that under 401(a)(26) that this person could fail to get a 1/2% increase (generating a meaningful benefit) and be deemed to NOT be benefitting under 401(a)(26).

Is this a correct interpretation??

An employer has decided that it can no longer afford to make matching contributions to the 401(k) plan. The last matching contribution was made for the pay period that just ended. However, employees won't be notified for several more days. It seems to me that employees should be notified prior to the the last match so that they can stop deferring if they choose to do so. What are the employer's obligations relating to the match?

now what?

using nice rounded numbers,

required loan payments = $750,000 300,000 is principal, 450,000 is interest.

25% of eligible comp = 150,000

plan prohibits making a contribution greater than the deductibility.

so, do the loan payments release shares that are simply held in 'limbo'?

and then this is carriedforward, along with penalty for nondeductibility?

yes, this looks like some 'poor planning' on someone's part because the future will have the same problem.

When the books were reconciled in early 2005, it was discovered two deposits from early in 2004 were not made. We have calculated the lost earnings using the greatest rate of return of all fund options and are basing the excise tax on Form 5330 on this amount. Deposits were promptly made in early 2005 when discovered.

Looking at the 5330 instructions, it appears there are two taxable periods involved here, one for 2004 and another for 2005, although only one prohibited transaction, which occured in 2004. Any insight on if two 5330's must be filed? One for 2004 and the second for 2005? Or can we just report it on one 5330 using the taxable period of 1/1/04 -12/31/04?

thanks for any help

I am asking for recommendations for the problem in the daily valued plan of establishing the 50% of vested account value. In cases where the market declines, the amount of loan requested may be more than 50% of the vested account by the time the loan is processed. I have heard of several approaches including:

1. Set the maximum in the loan policy to a lower percentage such as 45%

2. Go by the value on the date the required signatures were obtained (in cases where loans require signatures as in a QJSA plan)

Where the loan requires advance approval or spousal consent, are there other options than the above?

Thank you,

I'm looking for a discussion of the issues surrounding the sham where an employer has an "understanding" with a retiring employee to rehire that employee soon after the employee receives a distribution from the employer's qualified plan. Anyone know of any secondary sources that address this sham? How about a discussion of methods used to prevent this from occurring...such as a rehiring policy?

For a 401k contribution, is a pro rata contibution required if open up a new plan at end of year? On Dec., 2004 client opened a 401k plan using the protype at a major stock brokerage company. He then made a contribution thru employee salary deferal (no employer contribution). Now employer is filling out form 5500 and the question has been raised by the CPA, must a contribution for the max. employee deferral of $ 13,000 in 2004 have been made evenly throught the year (once a month), or can it be done towards the end of the year in one lump sum? Client was unable to contribute evenly each month because the 401k program was not opened up by employer until 12-2004. This is the new 401k "uni-k" for one person "S" corps, which is why the brokerage company did not make the protype available until Dec., 2004.

Can someone tell me the rules as to what the DOL considers acceptable enrollment election. For example, can a participant change their enrollment election percentage by emailing this request to the payroll department? Isn't there a requirement that the participant complete AND sign and enrollment election/change form? Can these forms be completed electronically in any way? THANKS!

What restrictions (where would I find something...) exist on changing the timing of the deductions?

The plan currently deducts contributions for the plan year ending in the fiscal year (12/31/05 deducted on the 7/31/06 return).

How can you switch to fiscal year in the plan year? (12/31/06 is also deducted on 7/31/06 return)?

Or are you stuck with original timing for life of plan?

Thanks for any help.

We have to issue a SMM to affected participants. It's an offset plan, so a lot of eligible employees do not have a benefit because it's offset by the other plan's benefit. A lot of them may get a benefit in the future, if the other plan benefits don't grow.

Do you think we should send a SMM to eligible employees who don't have a benefit at this time?

We will be updating our SPD in the fall and furnishing it to all eligible employees, even those who don't have a benefit under the plan because of the offset.

Thanks, Bud

Jane Smith dies. She has funds in a 401(k) Plan. Her beneficiary is the "Trust of Jane Smith". She has a four children. One is the executor of the will.

Who is the check made out to, where are her assets held, how are they disbursed and why would you make it out to a trust?

Thanks

Some IRS approved plans say that the Employer MAY force a distribution if the balance is $5,000 or less. It is apparently not mandatory. This sounds a bit too discretionary to me. I am rather surprised that the "MAY" got through the review.

The question is: Since the distribution itself may be discretionary, if the distribution is $1,000 or less, it is acceptable to make the FORM of that discretionary distribution (Cash or IRA) discretionary as well.

My feeling is that the participant should know in advance the form of the payment if no election is made and the benefit distribution is forced.

However, it seems that not all potential IRA providers have their act together regarding the conditions under which they will accept a forced distribution, especially if it is under $1,000. AND providers may change. The use of a mandatory IRA disbursement assumes that the Employer can find a provider willing to take it. Therefore, it would be nice if the form could be discretionary.

Comments?

I have a SH PS 401k plan with a 7/31/05 year end. The 401k was implemented as of 8/1/04. One of the HCE's (under age 50) contributed $13,000 in 401k deferrals from 8/1/04 - 12/31/04. From 1/1/05 - 7/31/05 he contributed another $7,000 in 401k deferrals, giving him a total deferral of $20,000 for the plan year.

He did not violate the individual 401k limit based on a calendar year. Has he violated any other 401k limits based on the plan year?

Thanks.

I posted this in the Distributions Forum as well.....but just in case you missed it....

PSP holding approx. 130,000.00 due to deceased participant's two beneficiaries. One of the beneficiaries cannot be located. Plan doc. is a pre-approved volume submitter doc. that provides that after registered mail and "further diligent effort to ascertain the whereabouts of the participant or beneficiary" the amount to be distributed "shall" be treated as a forfeiture. Plan provision goes on to state that if participant or beneficiary is later located, then Plan shall restore the benefit first from forfeitures and second from an additional employer contribution "if necessary". Also, provision states that any benefit lost because of escheat under applicable state law is not treated as a forfeiture under the plan provision or as an impermissible forfeiture under the Code.....

Would sure be nice to treat it as a forfeiture, but would hate to have to restore $65,000.00 at some later date. I guess Plan and Employer could take position that based on its/their diligent effort prior to forfeiture, it is not necessary to restore the benefit......????? Anyone dealt with this befoe or have some words of wisdom? Thanks.