When a plan terminates and distributes benefits, do the distributions constitute mandatory distributions that are subject to auto rollovers to IRAs?

I'm reading an SPD that says the plan intends qualify under 404©. The paragraph is very brief. It simply says that participants are responsible to make their own investment choices and that the plan fiduciaries are not responsible for any losses that might occur.

Most of the SPDs I read go into much more detail about what 404© means.

Is there any specific language that is required to be provided relating to 404©?

The Corbel VS plan we have is silent on whether an ADP test can be corrected via a combination of a QNEC and refunds. It would seem to me that since the document does not say that one method precludes use of the other, I am thinking a small QNEC could be made that would reduce the refunds almost 75%.

Does anyone else use this method?

Thanks

Lori

As an employer, in the hospitality industry, how are you handling the 2% HMO tax which was recently enacted into law? Are you:

1-passing the cost onto the employee 100%

2-splitting the 2% via on the company contribution level

3-as the employer, absorbing the 2% until the renewal period

4-Other??SUCH AS???

I have been presented with a 419 welfare benefit plan.

The benefit is only a life insurance policy.

419 says that the employer can deduct the "cost of insurance" and the remaining cost for the premium is considered W-2 income to the participant.

The policy is a life insurance policy with a cash value build-up and a guaranteed interest rate of 2% and a higher assumed interest rate (say 6%) in the illustration

The actuary must determine the level premium cost of insurance and has the authority to make this calculation using assumptions he deems reasonable.

Some of the materials out there on this type of plan indicate that it is expected that 75% of the premium would constitute the cost of insurance. However, based on my calculations it would require close to a 2% interest assumption and an available mortality table to me (namely IAM83).

My question does anyone have an opinion (and reason for it) as to what are appropriate assumptions regarding interest and mortality for such an analysis?

Thanks.

In the MPP document that I am reviewing, the normal form of benefit payment from is a monthly qualified joint and survivor annuity. If a terminated vested participant is being reported on Schedule SSA (account balance greater than $5,000 and has not made an election with the plan administrator), is it OK to enter the vested account balance and indicate that it is a single sum (Code A) and the payment frequency would be lump sum (Code A), or am I required to report the vested account balance in the form of a QJSA (Code G) and the payment frequency would be monthly (Code E)?

The Schedule SSA seems to be looking for an account balance for defined contribution plans.

Thanks for any assistance on this.

I inherited my mother's 401(K). She died in 2004, but I have not recieved the proceeds yet. I will receive them sometime in 2005. For which year will I receive a 1099R and have to pay income tax on the amount? 2004 when I inherited it, or 2005 when the funds are actually disbursed to me.

Also, is there any way to defer or avoid paying income tax on the distribution? It seems that had it been an IRA, I could recieve distributions over a period of years, however, I don't see anything to indicate I can do this for a 401(k) distribution.

Section 72(t) permits a modification to SEPPs prior to the later of 59-1/2 or 5 years for reason of death or disability.

If a participant takes a distribution on account of disability, do SEPPs continue? If they continue, do they continue at the same amount as before the disability distribution (assuming that the SEPP was based on the amoritization or annuitization method)?

Or, should SEPPS be discontinued?

Or?

The following 1.401(a)(4)-4(b)(2)© gives an automatic pass of the benefits, rights, and features test for mandatory cash outs:

"In the case of a plan that provides for mandatory cash-outs of all terminated employees who have a vested accrued benefit with an actuarial present value less than or equal to a specified dollar amount (not to exceed the cash- out limit in effect under Sec. 1.411(a)- 11©(3)(ii)) as permitted by sections 411(a)(11) and 417(e), the implicit condition on any benefit, right, or feature (other than the mandatory cash-out) that requires the employee to have a vested accrued benefit with an actuarial present value in excess of the specified dollar amount is disregarded in determining the employees to whom the benefit, right, or feature is currently available."

The above can be read not to give an automatic pass where optional forms of benefit other than a lump sum are unavailable to employees whose accounts or benefits are $5,000 or less and more than $1,000 and are not subject to mandatory cash out (because the cash out limit has been lowered to $1,000).

Any thoughts?

I have searched this forum and found this question asked before, but nobody answered it the first time.

We have to amend a 5500 for an incorrect Employer EIN. Amended returns are to include Form 5500 and any affected schedules. Since each schedule has the Employer EIN on it, should I conclude that all the schedules filed with the original 5500 must also be filed with the amended return?

Thanks.

Kate Smith

Hi,

I have a partnership with no other employees that maintains a profit sharing plan 3 years old and a 401k plan just started last year whereby I am the only one contributing to the 401k. My partner (much older than me) always pulled out his profit sharing contribution every year except for about $100. We have not had to fille a 5500 because the plan assets were less than $100,000. I am about to make Profit Sharing contributions for both of our accounts for 2004. I am also in the process of terminating the partnership as my partner died in 2004. My questions are as follows:

1. I will be paying out his plan balance after I make the contribution and paying mine out to be rolled over into an IRA in 2005. Do I need to file a 5500 EZ terminate the plan?

2. If so, would it be a 2004 5500EZ or a 2005 EZ as the contribution and withdrawals will happen in 2005?

3. Anything else I should be aware of?

Thank you for your help.

Steve.

Company matching contributions to a 401(k). This is from the FAQs on the company website.

You gain ownership in the Company's matching contributions at the rate of 20% for each plan year of service you complete. That means you will be 100% vested after five years of service. You will be credited with one plan year of service for each complete calendar year that you work for the Company, beginning with the calendar year following your date of hire. All years of service are credited on the last day of each plan year (December 15). If you are actively employed on that date, you will receive vesting credit.

Qustion:

If your DOH is 11/26/2001 and DOT is 12/6/04 then according to the above you are only 40% vested (credit for 2 years of service 2002 and 2003). You get no credit for 2004 - even though you worked more than 1000 hours that year. Does this definition of YOS violate ERISA?

thanks

Would a person's normal W-4 withholding information apply to a 457 plan distribution from a tax exempt org, or does the person have to complete a separate form?

I was wondering how practitioners in general are doing rate banding for DC 401(a)(4) testing (non cross tested) for large plans. Is there a standard way of doing this? How much flexibility is there in setting up the rate groups?

For example, do you take the highest HCE allocation rate as the starting point and use that as the minimum of the top rate group or as the midpoint of the top rate group? And then, for the next rate group, do you repeat this procedure based on the next highest HCE allocation rate that does not fall within the first range? Let's say I have HCEs with accrual rates of 3.0%, 2.8%, 2.4%. Would my first rate group be 2.75%-3.25%? And then would my second rate group be 2.25% to 2.75%? Or, could my first rate group be 2.5% to 3.0% and then my next rate group go from 1.9% to 2.4%?

Has anyone looked at something called the "Rainmaker Plan" that is being promoted as a way to use qualified plan assets to finance a small business? It doesn't appear to be an ESOP. Thoughts?

We recently came across a money purchase

plan that offers both loans and hardship withdrawals.

The process is identical to that used by a 401(k)

plan.

Is this legal? I thought these plans were not permitted

to make in-service withdrawals.

Once a participant takes a hardship withdrawal, should his salary deferral start back up automatically after 6 months, or should the participant be contacted to complete another election form? Is there any problem/issue with the administrator starting the deferral back up automatically?

Hi,

I rarely have plans that use the prior year testing method so I want to confirm that is there was NO match made in the prior year, all match amounts for the current year must be returned to HCES? Seems like a faulty document design. Can anyone confirm? Thanks so much

Can a cafeteria plan be effective prior to formal adoption by the corporation? For example, can a cafeteria plan be effective (i.e., the written document executed by an authorized corporate officer) as of January 1 but not formally adopted by the board until February 1? I'd appreciate any insight.

I understand that a "wrap" plan can be advantageous to an employer who's been filing several 5500s every year. However, I have a plan sponsor who wants to create one plan for their self-funded health and dental, life, LTD and flex benefits. The only problem is that the health, dental, life and LTD are 10/31 plan year ends, and the 125 plan has a 12/31 plan year end. They have not been filing on the Health Reimbursement Account as it did not meet the participant threshold. It will however, for the 1/1/04 - 12/31/04 plan year. Is it allowable to keep the 125 plan on a 12/31 basis and yet report on it as a 10/31 if it is included in the wrap plan? Which document overrides, or does the 125 plan just have to have the same plan year end under the wrap plan provisions?