Takeover plan, 6 participants, Individual aggregate cost method. Benefits are projected with a 4-1/2% salary scale, but funded based on a level dollar amount rather than a level percentage of pay. I've never seen his technique before. Is it a problem?

I did some searching and have some confusion. I really have two questions.

I have a participant that has just attained the NRA. He is also the owner of a business and that sponsors a PS/401k Plan. The owner/participant wants to rollover a very large amount from a 403b plan and use this money to pay premiums in a life policy. The Owner/Participant no longer works for the Univesity and can take distribution of the 403b account. I am the TPA and not the broker.

Can the participant have a policy and pay premiums from the plan after attaining NRA? Does this rule exist for DC Plans?

If the participant can have the policy, can the premiums be paid from the rollover account? I know there is a rule about using the two year old money, but I did not see anything about using rollover accounts.

I would appreciate any help here.

Thanks

A 401(k) plan participant committed suicide. There was not a valid beneficiary designation completed. Husband filed a timely disclaimer. Under terms of plan, amounts pass to (1) spouse (N/A), (2) children (none) and (3) parents (yes). Are parents designated beneficiaries under 1.401(a)(9)-4, Q&A-1? Initiially, I thought the answer was no, but under the regs. I think they would be. Thanks. Ed

I have a profit sharing plan that has 410 problems (numerous years). If we do a VCP amendment to add participants, make the contriubtion, and the lost earnings, can the employer deduct the contribution and the earnings? I believe the proper correction method is in 1.401(a)(4)-11(g). 11(g)(5) states that the amendment adding participants is not given effect for purposes of section 404. I am not sure what that means. Also, Rev Proc 2003-44 6.02(4)(b) says that the corrective allocation is not an annual addition but that the "normal rules of section 404, regarding deductions, apply." Not sure what that means either. Does it mean that the employer can deduct as long as it is under 25%? If so, is that 25% of comp in the year of the contribution or the correction year? If they have to go over the 404 limits, will the excise tax apply? Sorry for the numerous questions but I have looked and cannot find an answer to this anywhere. I have seen the question posted several times but no responses. Any help would be appreciated.

I have a 401(k) client who is winding down their business due to law changes within their industry and one of the two partners is dying from brain cancer. They have a 4k plan which is funded to the maximum and still have 400k+ in their corporate account. All of the employees are gone except for the two partners and one nonrelated employee. Could they keep the corporation open, establish a DB plan and fund the plan in an effort to get some of the money out of their corporate account and then, if, down the road, they have no alternative but to file bankruptcy (due to non-negotiation with their landlords), would the DB and 4k assets be protected from bankruptcy court? Thank you. Donna Neuhauser Pensions Ltd (San Diego County, California)

An employee's monthly severance compensation is based, in part, on collections (attributable to the employee's services) that the employer receives after the employee terminates employment. It has been suggested to me that this "severance" is not deferred compensation for 409A purposes since there is no legally binding right to the collections and thus no legally binding right to the severance.

For example, assume Employee A works for Consulting Firm. Employee A provides consulting services for a client of Consulting Firm and the client is charged a fee in January 2005. Employee then terminates employment the next month. Client decides NOT to pay the fee and Employee A receives no severance as a result (no collections after termination=no severance pay). The bottom line is that the severance was "unilaterally reduced or eliminated by....[an]other person after the services creating the right to the compensation have been performed." Q&A 4 of Notice 2005-1. Therefore, there is no legally binding right and no deferred compensation.

Any comments? Bad analysis?

Hi, I have a multiple employer plan with 7 contributing employers in 3 controlled groups. (Group 1 with Companies A, B, and C, Group 2 with Companies D, and E, and Group 3 with Companies F, and G.)

I am reasonably sure that three Schedule Ts are needed, but I am not sure how to deal with Lines 1a and 1b (Name of Participating Employer and EIN). If I have more than one participating company in the controlled group, how do I report that? There is only room for one participating employer and EIN on that line.

Thanks for the help.

New Client with the first year a short plan year for '04, Nov - 12/31. In all the confusion of getting everyone enrolled, etc, three people deferred about $1000 each for '04 when they did not have W-2 earnings for 04 (but will for '05) - they had 1099 income. Just received year-end census data and realized their error. What distribution code should be used for the 1099-R? Thanks.

In connection with litigation over two ERISA plans, we are looking for a firm or an individual to provide expert testimony on (1) the prudence of certain investment decisions and (2) the calculation of damages to the plans. Does anyone have a recommendation?

Thanks.

Is someone aloowed to contribute to a Roth Ira when receiving a pension? His wife works and makes enough wages to be able to contribute for the both of them. The amount between the wages earned and the pension does not exceed the maximum amount of wages allowed. Thank you.

the employer is using insurance. the plan is basically an unfunded SERP, there is no rabbi trust (or any trust for that matter), and the accounts are not vested until 10 years. the employer is using life insurance and the investment returns have been less than the account balances should be. is it possible to amend the plan in order to change the benefit due each participant? the plan seems to allow for this. i was thinking however there might be some contractual obligation and that the employee would have to agree to a lesser benefit. any thoughts?

I heard recently that the IRS had "stated" that a matching contribution for a 403(b) deferral could not be made to a 401(a) plan. Of course, now that I need to look at the "statement", I can not find anything. Does anyone know where or when the IRS said this and how to find this?

Thanks!

Plan alloes a loan term for 5+ years for purchase of a principal residence. Anyone ever heard of or used a 30 year term and does that qualify as "reasonable"? The examples I have found use 15 years.

Thanks.

HI... hopefully someone can give me some insight on my situation, I got hurt on the job back in September 04..... Went out on Medical Leave in December 04.......The way they have it set up I still get a paycheck every 2 weeks from my company for full pay... but I pay my own premium for my benefits..... and the company still pays their portion of the premium.....Well about 2 weeks ago, I got a bill in the mail for my insurance premium, and on it said that as of March 13, 2005 I had been switiched over to COBRA continuatin coverage... mind you my premium is still what it always has been, has not gone up any... is $142.00 a month... from what I have been told when you go on COBRA continuation coverage your premium at minimum usually doubles...... I am not out on Short Term Disabiity or Long Term Disability.......have not been terminated, or do not stand to loose my job.... I will return to my job as soon as my doctor releases me......Now with all this said.....

How can they say I am on COBRA????

With all that said... if you need ask any further questions, please feel free...

Thank you...

Background: A trust is named beneficiary of an IRA. Upon the IRA owner's death, the trust will pay income to the surviving spouse and the trust remainder is to be paid outright to their 3 children upon the death of the surviving spouse if they have attained 30 years of age. The IRA owner dies before the required beginning date, RMD, and the children have not attained 30 years of age at the owners death.

Question: Upon the IRA owner's death, will all 4 beneficiaries be considered for purposes of determining the required minimum distribution? Keeping in mind that the surviving spouse has only a limited interest in the trust and also that the three children are not yet 30 years of age, do you use the spouse's life expectancy or can you use the oldest of the children to determine the payout? The goal is to strech the IRA payout as long as possible.

I appreciate your comments on this topic. Thanks

Are there any requirements that prevent a recordkeeper from collecting asset based fees? I work with a recordkeeper that has a sister company that is a Registered Investment Advisor which was created some time ago for the purpose of collecting asset based fees from the plan. We do not provide investment advice only recordkeeping, admistratiive types of services. We are getting deeper and deeper into many issues with the SEC due to the SEC registration that we have and I am wondering if there is a way out from underneath the SEC's scope since we are not providing investment advice.

My client has a Profit Sharing contribution receivable that they will not be depositing until July. Can my client file the 5500 before they deposit the contribution?

Does anyone have a checklist for defined contribution plan administration that is complete but concise (I hate checklists that are longer than the report I prepare) that you are willing to share?

Here is the situation. New ESOP effective 1/1/04. Sale of shares to plan, loan agreement, etc. not done until 4/29/05. First loan payment due 12/1/05, prepayment allowed. Employer wants to make a payment/contribution now up to the 404 limit for the 12/31/04 PYE and show on the 12/31/04 statements shares released as a result of this "loan payment."

Plan allocates any cash contribution to an other investment account and permits it to be used for loan payments if employer contributions are insufficient to make the payment. Otherwise the trustee has discretion over how assets are used, but the account is primarily to buy stock directly from any available source. The employer would prefer not to show the cash on the '04 statement and the share release on the '05 statement because the value of shares received will be less than the cash w/drawn.

Financial advisor says no problem w/ showing an accrued loan payment and allocating shares as of 12/31/04 as long as the loan transaction was completed w/in a reasonable time after the end of the year because at 12/31/04 everyone knew that the leveraged transaction was coming soon.

I'm having a bigger problem w/ the participant statement side of this than the loan payment part, although I don't really like either one. It seems to me that the participants are being misled by giving them '04 statements w/ shares. In addition, showing the transaction this way allows the trustee to escape scrutiny. However, I can't point to anything specific that would prohibit accounting in this manner. As far as the loan goes, they are using an '04 contribution to make payments on a loan that didn't exist then. With the first payment due 12/1/05, they can't claim employer contributions were insufficient as of 12/31/04. I would appreciate any thoughts on any part of this transaction.

We were presented with a plan design that included the combination of a Profit Sharing plan and a Cash Balance plan. The Cash Balance Plan provided a large contribution to two owners and a flat $500 contribution to the other employees. The profit sharing contribution was 7.5% and the plans were aggregated for testing (we were not provided with the testing, this is an assumption on our part).

I have only seen the "meaningful benefit" discussed in terms of a regular DB plan with a .5% accrual rate. Are there special rules for Cash Balance Plans? Has anyone seen anything from the IRS or otherwise that would imply that a $500 annual contribution would constitute a "meaningful benefit"?

My thought is that the $500 contribution would need to be converted to an accrual rate. If the accrual rate is .5% or better then it would be ok. Does everyone covered in the DB plan have to have the meaningful benefit, or just 40%?