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.

Our plan has both a health care reimbursement account and a dependent care account - can we just elect the grace period for the health care portion.

I retired from the Texas Department of Corrections in 1989, it was a forced medical retirement. at that time the code they used, texas administrative code chapter 34 title 73.17 stated that if I could not return to my original position or an equal paying state position, I must take a disability retirement. I tried to get re-assigned and was told that I coud not, I had to take the retirement (I was 28 at the time). I took the retirement, went to school and learned computer repair.

In 2001, chapter 34 title 73.17 was changed to read if I could not return to my original position, or ANY position of equal or greater pay, I must retire.

In 2005 I get a letter from the retirement system telling me that I make more money than my original position and I have to pay back benefits. I called and tried to explain that I had retired under a different rule, and that I had never been notified of the change which would require me to notify them of employment and wage status.

They basically said that it doesn't matter what the rule said back then, I have to submit wage reports from 1989 to 2005 to determine how much I have to pay back.

Can they do that?, I have been trying to get a lawyer, but cannot find one in my area that does administrative law, I will have to get one in Austin and travel back and forth (which I can hardly afford to do, my boss now will fire me, and I will loose all income.)

Any Ideas, sugestions?

Thanks

Clint

We know that one of the 404 limits is the 412 minimum.

The question is:

1. Should the minimum funding under 412 as it applies to 404, include the credit balance or ignore the credit balance?

So for eg.

Say the minimum is 100,000 before application of the credit balance and the credit balance is 20,000, resulting in a minimum of 80,000. Assume that there have been no carryovers to date.

For purposes of 404 is the minimum max tax (i.e. the 412 override) equal to 100,000 or 80,000?

Thanks.

I recently became responsible for a DC plan for a QSLOB. I am wondering if the QSLOB demonstration needs to be repeated after the first filing? Looking at the regs. I see that notification is only necessary once but must the QSLOB continue to meet the requirements on an ongoing basis? If so is the requirement daily, annual or what.

I hope this is just a coverage question -- not a plan defect -- but I couldn't find a better board and you all are the greatest!

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.

Say a self employed has earned income of $600,000 (net of 50% SS taxes) carried over to the 1040. The person implemented a DB plan for that year as well.

My understanding is that the $600,000 is divided between income for pension purposes and the pension contribution (deduction).

Say 1st year val results are:

pension compensation of $200,000

max deductible contribution of $200,000

ERISA FFL of 800,000.

The individual decides to contribute 400k to pension where 200k is deductible.

Then my understanding is that 400k is taxable compensation.

Now for the 2nd year val results are as follows:

hypothetical scenario 1:

self-employed earned income is $150,000

say they choose 120,000 as pension comepensation and contribute 30,000, in cash where the minimum was 0 due to large CB and the max tax was say 160,000.

Clearly the 30k is deductible.

1. Is there any way they can deduct more than 30k (using 120k as pensin comp)?

i.e. deducting some of excess from prior year.

2. Or do they have to choose a lower pension comp (perhaps as low as $0) to deduct a larger amount (perhaps up to 150k) and have the available income?

Of course in this situation I believe the max deduction is 150k, based on $0 comp, even if the limit were higher than 150k.

Look forward to other views.

Thanks.

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?