Client has Simple Ira in place now. They have made contributions during 2005. The company's fiscal year ends 8/31. Can they teminate the Simple now and start a Safe Harbor 401(k) for October 1st? Or do they have to wait until 1/1/06?

Thanks for any help...

We have a 401K client who decided to eliminate the individual self-directed accounts and transfer the proceeds to a single pooled account. My question addresses the blackout notice requirement. Are we required to provide the 30-day advance notice even though the participants will no longer be directing their investments after the transfer? Also, regarding plan loans & distributions, the document states that these requests are to be processed within a reasonable time. My interpretation is that processing these requests after a 2-week blackout period is reasonable.

Even though the blackout notice may not be required, I'm inclined to issue it anyway to give the participants the opportunity to change there investments prior to the transfer if they desire.

I have a situation where a participant died prior to normal retirement. The death benefit is described as 100 times the monthly retirement benefit. The lump sum of the retirement benefit actually comes out quite a bit larger than the death benefit.

The way the document reads, the death benefit is:

"Upon the death of a Participant prior to the Participant's Retirement Date, the Participant's Beneficiary shall be entitled to a death benefit in an amount equal to the Policy proceeds payable as of the Participant's date of death.

"Such death benefit shall not exceed 100 times the Participant's anticipated monthly retirement benefit determined as of the Participant's Normal Retirement Date. Any amounts in excess shall inure to the Trust Fund and be used to reduce the future contributions of the employer."

Further down, it states:

"In the event of a Terminated Participant's death subsequent to the Participant's termination of employment, the Participant's Beneficiary shall receive the Present Value of such Participant's Vested Accrued Benefit as of the Anniversary Date coinciding with or next following the date of the Participant's Death."

This comes from Corbel's volume submitter DB document.

I understand that death benefits are incidental in a retirement plan, but it sounds like this would tend to provide a more valuable death benefit to a young person (who would have a smaller PVAB and be more likely to get more from the insurance), than to an older person (who would be more likely to have a larger PVAB, which could be larger than the death benefit..especially with low GATT rates in effect).

Does that seem odd to anyone else?

Also, in the event of a terminee becoming deceased, do they get the larger of the PVAB or the policy proceeds? It seems that the conditions of the insurance policy proceeds simply say death prior to retirement date, and the conditions for the PVAB simply say death after termination date....both of which apply to this participant???

Anyone else come across anything like this?

Thanks all!

Participant has a normal retirement age of 69 as of 12/31/04, the valuation date I am working on. He is a sole proprietor and had a previous DB plan that was terminated, when he was 65. Full benefits were paid out as a lump sum. He is subject to the 100% comp 415 limit.

Last year his maximum benefit was calculated by updating the prior plan benefit of $6,887 from age 65 to age 69, using the plan rates and mortality in effect at the time the new plan was started. Then this updated amount was subtracted from the 100% comp limit, to determine the benefit he could have under the new plan. When the new plan was started, the plan was a 412(i) plan, so the interest rate used was 3%. The plan is no longer a 412(i) plan and the actuarial equivalent interest rate is 7.5%.

My first question is, since the plan interest and mortality rates were changed after the efrective date of this new plan, shouldn't the update in the prior benefit be using the current plan rates for the year of valuatiohn, or was the offset in effect set at the time the new plan was started.

My second question is, under the proposed regulations, to be effective in 2007, I believe that I will have to update the old benefit to the greater of the amount using 5% 1995 GAR or the current plan rates - according to the multiple annuity start date rules of 1.415(b)-2, regardless of the answer to the above. Agree?

A client wants to pay his contribution in "Kind"... wants to transfer stock to the plan to cover his 2004 employer contribution receivable. Is this fine? If so, what documentation needs to be in place to a future audit?

Thanks!

HELP!!!!! I just started work as the HR Manager of a museum that has a 401k plan (they piggybacked onto the parent companies plan). We have to get out of that plan by 12/31 and I need to decide which is better, a 401k or a 403b. I always thought 403b's were for non profits, 401k's for profits. Heck, I didn't even think non-profits could have 401k's. So, I need to know what the differences are, what the employer contributions can be like for both, and basically what do I present to my board. HELP!!!!!! I need to pick brains here!

I started working this week as the HR Manager for a museum (a non profit organization) that offers a 401k because they piggy-backed onto a parent (profit company) plan existing plan. However, the jig is up and we have to start a new plan, either a 401k or 403b as of 1/06. I need to determine if as a non profit, we can even have a 401k (I always thought non profits had to have 403b's). Basically I need to know the differences between 401k's vs. 403b's, pros and cons and if we opt for a 403b can there be an employer match, if the employee does, or does not contribute into the plan. HELP!!!!!!!!

We would like to eliminate all QJSA options but one in defined contribution plans that require the QJSA option. 1.411(d)-4 Q&A 2(e) was effective January 25, 2005 and seems to indicate that all optional forms of benefit can be eliminated as long as a lump sum option is retained (our plans are otherwise required to keep at least one QJSA option). However, 1.411(d)-4 Q&A 2(b)(2)(ii) is specific to QJSAs and states that a plan with 3 or more QJSA options may be amended to eliminate any of them, as long as the smallest and largest are retained. Any thoughts regarding if we have to keep the smallest and the largest, or does the new 2(e) allow us to eliminate all but one QJSA option?

Would it be permissible to have different eligibility rules for different classes of employees as long as it did not discriminate in favor of HCEs? Based on the fact that you can completely exclude a particular class of employees from participating, it seems like you should be able to do this.

My young daughter's company is going public. Employees may buy stock at the issue price. She also has stock options which would allow her to buy stock at a cost approximately $5 below the issue price. Management sent out an e-mail discouraging employees from exercising their options (they told employees there's a 180 day lock in period during which they could lose money if the stock price goes down, and the purchase might create an alternative minimum tax issue). It seems to me that if she buys the stock at the issue price, she could lose more money (but she'd only be locked in for 25 days if she buys stock at the issue price.)

Her options do not expire for a while, but she might leave the company to return to school (next January, before the expiration of the 180 lock in period, so it's likely she couldn't do a cashless exercise of the options). I don't have the stock option plan document or SPD but I wonder if her options might expire either upon termination or within some time period after termination, and if she'd be better off exercising her options at the lower price than buying the stock at the issue price.

Does anybody have any advice? Thank you!

I have a plan that is an LLC. Both of the partners k-1's show a loss in box 1 (Ordinary business income). Both of the partners also received w-2 income for the 2004 plan year. The company filed as a partnership. Which compensation should be used for testing??? I have not run across this situation before so any advice will help.

Carson

carson@dailyval.com

www.retirementplansolutions.com

We have had a death in one of our take overplans during transition. The participant never completed a beneficiary designation form. She has Revokable Intervivos Trust for her assets.

Because there is no bene designation, does the plan have the right to name someone else as beneficiary, not the trust. Can the plan name the children the benes - her spouse is deceased. How do I handle this??

I divorced 6 years ago. The settlement agreement allowed for a 50/50 split of the 401k. A Qdro was never developed. I have since remarried and am 18months from retirement. Do I still have to split the 401K and give half to my ex? I have been reading the boards and it appears that my ex has no rights to the 401k after I remarried. Can anyone help? Qdrophile?

The EPCRS rev. proc. indicates that to the extent an overpayment cannot be recovered from a participant, then the employer or another person must contribute that amount to the plan. In the defined contribution multiemployer context, who makes the payment to make the plan whole?

If an employer sponsors a DB and a MP, how do you adjust the 25% combined deduction limit for the liability for terminees that are not benefitting under the MP? The plan funding method is modified aggregate and the teminated participants are included in the funding calculation.

The MP document does not contain any language that would limit the MP funding in the event that the MP and DB contributions exceed 25%.

The DB also provides a life insurance benefit. Please confirm that the insurance cost is included in the overall 25% maximum.

Neither Code Section 318 nor the its regulations defines the term value. How is value defined for purposes of Section 318? I would assume it means FMV, but that is of little value when I am potentially looking at two classes of stock and only one of them being publicly traded.

An employer who sponsors an ERISA 403(b) plan would like to discontinue its current Group Tax Sheltered Annuity contract with its current carrier. When the employer discussed the idea with the rep, the employer was told that if it terminated the contract it would be liable for the exit fees, which are estimated to be quite substantial. However, this is not a situation of just wanting to switch to a new carrier but rather there are performance issues involved and the employer is unhappy with the service of the current carrier. Is there any way to transfer employee balances to a new carrier without the exit fees? Is there any way to avoid these exit fees? Any guidance would be greatly appreciated. Thanks!

Company currently sponsors a Profit Sharing Plan. As a result of an asset sale as of 05/31/05, all employees - other than the two owners - were terminated (some went to work for the entity that bought this company's assets). The original company remains in business, with two employees - the original owners.

The majority of the terminated participants were terminated late enough in the plan year so that they were credited with more than 500 Hours of Service. Consequently, it would seem that, if the company's two remaining owner participants want to make a PS contribution for 2005, there will obviously be significant "minimum coverage" issues, possibly requiring employer contributions for at least some of the terminated participants sufficient to pass the ratio percentage test (assumes the Plan doesn't pass the ABT).

Query - Any problem with adding a safe-harbor 401(k) provision, using an enhanced 6% match, effective 09/01/05 that would cover only the two remaining owner participants, allowing them to at least make a $14,000 employee salary deferral contribution and receive a 6% safe-harbor match - and forget about making a PS contribution for 2005 due to the coverage issue?

Thanks for any and all responses.

I have a PS plan terminating on 8/15/05. All of the HCE's have individual self-directed accounts. Dr. X has an old stock in his account that is worth about $10. The issuing company was going to charge $100 to $150 to change the registration on the stock from PS to IRA, so Dr. X decided to take a taxable distribution on this stock. However, the stock is still registered to the plan.

Dr. X is now asking - what if this stock miraculously goes up in value over the next few years and a dividend check would be issued. The check would go to the name of the PS Plan which doesn't exist. Also the corporation adopting the plan no longer exists.

How should a situation like this be handled? Thanks.

Ours is a hardship Q, but may be an issue for other distributions.

Non-rollover, of course.

We assume it violates anti-assignment or alienation to make out distribution check to thrid party (escrow agent for hardship on principal residence or mortgage company for forclosure).

Others have stated that since withholding goes to IRS, that it is ok to make the check out to someone esle.

Ultimately we want to prevent the participant from taking hardship money and spending it on something else and using the same hardshp reason again in the future (We know the hardship part is a different issue and have limited the number of hardships available per year to indirectly address the question).

Is the anti-alienation response too uptight?