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?

I have a client who has a Section 125 Plan with Medical FSA only. For the 2004 plan year they hit exactly 100 participants. Do I have to file Form 5500? They did have a previous filing in 2001. Thanks for your input

I have fielded an inquiry from a client about a potential modification of its cash balance plan, and I am pretty sure that I have heard some IRS officials (Jim Holland maybe?) expressing some displeasure about the technique at issue. I haven't been able to find anything concrete on the topic though, and I am hoping that someone out there can help to refresh my recollection before I pull all of my hair out.

I believe the idea is this: Company maintains a DC plan and a cash balance plan. Company socks away as much as possible under the cash balance plan, a plan that incidentally has an unusually low normal retirement age (say age 40). Once participants hit the "NRA," they can receive a distribution -- even though they are still working -- and roll it over into the DC plan. I think that PWC and Bank of America have gotten sued over plan designs that used this approach (among others). I probably don't have all of the particulars correct here, but the key feature of the approach seems to be an abnormally low NRA.

Has anyone heard IRS officials questioning this type of approach? Even if every other aspect of the plans was squeaky clean, this still seems like it is just a little bit too "cute" for the IRS to countenance.

I asked this question in another form a few weeks ago and didn't receive any response. Trying again but expressing the question another way:

50+ catch-up scenario-

Example: Plan maximum percent limit on pre-tax contributions is 30%, plan maximum percent limit on after-tax contributions is 30%, and plan maximum percent limit on combined pre-tax/after contributions is 30%. Eligible participant has eligible pay of $40000 for year and contributed 20% after-tax and 10% pre-tax, 10% 50+ catch-up all year.

In other words, at year end eligible participant’s contributions total:

$4000 pre-tax

$8000 after-tax

$4000 intended 50+ catch-up

Is the $4000 “intended” 50+catch-up accepted as 50+ catch-up?

This eligible participant did not reach the IRS pre-tax max ($14,000). Did he/she reach the plan maximum percent limit on pre-tax contributions?

If you interpret the plan maximum percent limit on pre-tax contributions as the stated limit (30%), then the answer would seem to be “No” and therefore the $4000 intended 50+catch-up presumably would be returned the eligible participant. Is that correct? Would seem to not be an administrative nightmare and not the spirit of the law.

If you interpret the plan maximum percent limit on pre-tax contributions as the resultant limit given the eligible participant’s after-tax contribution rate (30% total – 20% after-tax = 10%), the answer would seem to be “Yes” and therefore the $4000 intended 50+catch-up presumably would be accepted as 50+ catch-up.

I have never seen anything in writing related to guidance on this issue when plan includes pre and after.

Sorry if this question has been asked and answered thousands of times.

I have two situations with EOY valuation date. In both, there is no prior credit balance.

Situation 1:

A plan has assets of $250k @ 12/31/2004 which include advance contribution of $100k made during 2004. For S412, the interest credit on the advance contribution using the funding rate is $2,000.

So, the funding assets are: S412: 250-100-2= $148k; S404=250-100=$150k.

Normal costs under the individual Agg. method are: S412: $91,300; S404: $91,000.

EAN NC + AL @ EOY for S412 and S404 = $201k.

So the FFLs are: S412: 201-148 = $53k; S404: 201-150= $51k.

What would be the maximum deductible contribution? $53k or $51k?

----------------------------------------------------

Situation 2:

A plan has assets of $332k @ 12/31/2004 which include advance contribution of $165k made during 2004. For S412, the interest credit on the advance contribution using the funding rate is $3,000.

So, the funding assets are: S412: 332-165-3= $164k; S404=332-165=$167k.

Normal costs under the individual Agg. method are: S412: $173,000; S404: $172,500.

What would be the maximum deductible contribution? $173,000 or $172,500?

----------------------

Higher numbers feel wrong but I cannot explain to myself why except that why should making advance contribution increase the deduction?

In an acquistion situation, an existing 401(k) plan allowed for investment in employer stock. If the acquirer terminates the plan, can the participants who receive stock in their distributions use the net unrealized appreciation rule? It appears that Code section 402(e)(4) provides for distribution upon separtion from service but does not mention termination of a plan.

Also, am I correct that "separation from service" would still be interpreted under the old same desk rules since a) it is not part of section 401(k) and b) is separation from service and not severance of employment?

Thanks

Okay... maybe it's not a "must-read" question, but I was wondering whether a plan can require that participants only receive benefits via direct deposit. The practical effect would be that all participants would be required to open a bank account. I looked for guidance in connection with Code sections 410(b), 411(d) and 401(a)(4), but couldn't find anything relevant except for the rule in Treas. reg. 1.411(d)-4 that "administrative procedures for distributing benefits," are not a protected benefit. Any thoughts?

Questions regarding the 457 model amendments.

I am wondering how literally everyone is taking the 457 model amendments. Is everyone using the model amendments word for word? For example, I have the following questions and am wondering how others in the industry are writing their plans.

1. Is it really necessary to define an Employee as a natural person, whether appointed or elected, employed by the Employer as a common law employee? The list of required modifications for master and prototype plans defines an Employee as any employee of the Employer. Wouldn’t employee normally be interpreted to mean a natural person employed as a common law employee?

2. We have plans that cover independent contractors. No wording is provided in the model amendments. Is anyone else including independent contractors?

3. We have plans that provide for nonelective contributions. These contributions count towards the maximum deferral limit but are accounted for separatly in the plan document. Does anybody else write plan documents that allow for nonelective contributions? Are you concerned that the model amendment did not address?

4. Why was Includible Compensation changed to include the compensation limit under section 401(a)(17) of the Code? Should the definition say that it is determined without regard to any community property laws?

5. Does Compensation have to be cash compensation?

6. Why do the model amendments not include provisions for termination of the plan when the final regulations did allow for it?

7. The model loan provisions specify an interest rate 1% above the prime rate as published in a plan-specified nationally recognized newspaper. Do you feel that the plan has to specify the interest rate to be used or could the plan simply state that a reasonable rate of interest would be applied? The list of required modifications for master and prototype plans allows those plans to just state that a reasonable rate of interest will apply.

8. While the loan provisions seem to follow the loan rules applicable to qualified plans, there are two provisions regarding participants who have defaulted on a loan that do not follow the qualified rules. The first is the limitation on contributions prior to the first payroll period that follows by 12 months the date of repayment in full. The second is the limitation on new loans for participants who have previously defaulted. Are these required, and if so, why are the requirements for a 457 plan more restrictive than the requirements for a qualified plan?

9. Since contributions to an unrelated 457(b) plan which cause the participant to exceed the 457 plan contribution limitations will not cause the plan to lose its tax-favored status, why are the participants required to provide the plan administrator notice about their participation in other 457(b) plans? Why were the model amendments not written like the qualified plans where the participant has to claim an excess if it results from participation in an unrelated plan? Should the model amendments have included wording to say what would be considered a plan maintained by the Employer?

10. If the plan provides for distributions to be made in the form of an annuity, what wording would be needed to satisfy section 401(a)(9) of the Code?

11. Does a plan actually have to say that separate accounts will be established for multiple beneficiaries? Or was this wording in the plan to simplify the wording needed to comply with section 401(a)(9) of the Code?

12. What is the latest date permitted under § 457(b) for the required provisions? If the plan had loan provisions that appeared to meet the requirements of the regulations but didn’t have the limitations for those who defaulted, could the effective date for those provisions be a current date? What would be the latest date permitted? Could the plan be restated as of the first plan year beginning after December 31, 2001 but include wording saying that some provisions are effective as of a later date?

Thanks!