Please help -I am trying to determine if this participant can take a second loan

Vested balance in November $55,000

New loan in November $25,000

No loan payments have been made yet.

Balance in January is $30,000 + loan of $25,000

Participant wants to take second loan

We do not use the $10,000 limit, where you can exceed the 50 percent if the loan amount will be $10,000

My calculation says no second loan allowed. I used the following formula

Participant may borrow the lesser of A or B.

A = $50,000 – Highest Outstanding Balance (HOB)

B = (.5 x vested balance(VB) - Outstanding Balance (OB)

A= $50,000- $25,000 + $25,000

B= (.5 x $30,000) - $25,000

$15,000-$25,000 = -$10,000

This suggests that the participant is not allowed to take an additional loan.

Here is my question, should VB be $30,000, or should it be $55,000 (where $55,000 includes the outstanding loan balance).

Please help!!

Thanks

The 1099-R instructions indicate that a permissable additional code for "1" is "L" and for "L" it is "1". It doesn't say that we can combine 7 and L - I don't see why not - what do you think?

For 1/1/04 to 12/31/04 testing,

Participant termed in October of 2003. They received stock options that was paid to them in 2004 - and they were issued a 2004 W2 for that amount.

Does this person need to be included in the Total Participants for coverage?

Thanks for any help.

In December, we sent instructions to the plan sponsor for distributions to terminated participants. Many of those checks were not cashed by December 31st.

The business was sold and the assets were transferred to the acquiring employer's plan except for the cash representing the distribution that were still outstanding as of the end of the year.

One position here is that if the cash was not distributed/rollover by December 31st, it becomes a 2005 distribution and we file the final 5500 for 2005.

The administrator wants to send 2004 1099R's to all the participants and file a final 5500 for 2004.

Any guidance?

Employer X has a sales force that participates in its cafeteria plan and is primarily paid by commission. Certain low-producing salespersons are not receiving paychecks for certain pay periods because their production is non-existent during some portion of the year. X wants to direct bill salespersons in this situation and then terminate coverage if their premiums aren ot paid for a specified period of time. The IRS Proposed Regs. at Section 1.125-2, Q&A-6((e) clearly authorizes the plan to termination coverage upon cessation of required contributions. This poses the following issues: (1) is there a minum amount of time an employer has to give the employee before his/her coverage is terminated during the remainder of the year?; and (2) can the employer require the employee to repay the defaulted premiums prior to the termination of coverage as a condition to being permitted to re-enter the cafeteria plan?

I am doing a true-up match calculation for a plan that changed the match formula mid-year. I have compensation, deferrals, and match for the first 8 months (old formula) and the next four months (new formula). What is the correct way to calculate the true-up for employees that exceeded the compensation limit of $205,000.00 in the first part of the year? For instance, an employee makes $400,000.00 in the first 8 months and contributes $7,000.00. He makes 400,000.00 in the next 4 months and contributes $5,000.00. Can I prorate the cap to $136,673.50 for the first 8 months and $68,326.50 for the next 4?

Or is it correct to prorate the two match formulas for all employees? This is difficult since the formula for the first 8 months was 50% up to the first 6% deferred, while for the next four it is 100% for the first 2% deferred, and 50% on the next 6% deferred.

Thank you.

My father passed away recently. Reading his journals it seems he may have purchased IRAs.

Is there a way to find out if he had any IRAs other than from his old income tax records? Most of his paperwork is missing.

I am 65, single and in good health. I can afford to speculate up to $10,000 in option trading. Does the IRS prohibit me from opening a commodity trading account and contributing up to $3,500/year? If not, where can I obtain the papers to start an account?

I was always told that if a plan required less than one year of service (ie six months of service) then they could place no requirement on the hours worked. I confess I never took the time to do the research.

But I am reading a document that says "An Employee must complete 1000 Hours of Service within the 6 month time period following the Employee's Employment Commencement Date. If the Employee does not complete the stated Hours of Service during the specified period of time, the Employee is subject to the One Year of Service Requirement."

I'm not comfortable with the law firm that drafted the document because a previous MPP document they did reportedly allowed in-service withdrawals.

Is this provision ok?

Is it correct that if a plan is going to either discontinue mandatory distributions or lower the limit so as to avoid the automatic rollover regs, that the plan needs to be amended before 3/28/2005? That is, the amendment deadline relief in Notice 2005-5 only applies to plans that are intending to follow the new regs?

Thanks.

Are there any conferences or seminars out there that deal primarily with NQ plans? TIA

Have a client considering the addition of 401(k) safe harbor language to his existing top heavy PSP. He is concerned about the financial commitment in lean years. Question: If we design the plan and the notice to commit the Safe Harbor contribution to only NHCE's, can we amend that provision during and/or after the plan year to include the HCE's?

As a solely safe harbor plan, appears that we don't have an issue with the HCE non-key employees not receiving a top heavy contribution in a plan year in which the HCE's are excluded from the safe harbor contribution.

We have a bunch of operating units participating in a 401(k) plan and a DB plan. To date, nearly all those units have been 100% owned by us with a few stragglers that are in the 90% range. But in any case, all well over 80% and therefore part of our controlled group.

We are on the verge of an acquisition which would result in an operating unit that we own 75% of. Our preference would be to treat these people like everybody else, and put them in both existing plans. The Plans as they stand have well in excess of 120 participants. The new location would have (say) 50.

So based on my research from searching threads here, calling my auditor, and reading code would give me the following implications:

• We now have multiple employer plans.
  
• We need to amend each plan to include the new location, and make the plan a multiple employer plan.
  
• We should get a new IRS determination letter.
  
• We would file a single 5500 for each plan.
  
• We would include in each filing two Schedule T's--one for the controlled group, and one for the new location.
  
• We would not need a new audit, and there would be no impact on the plan's financials.
  

Questions that I have not figured out yet, and could use some guidance on:

• Do we have to perform separate ADP/ACP tests?
  
• What about 415 and 402(g) limits if someone transfers in or out of this location?
  
• What else am I missing?
  

RCK

I am probably going to have about 100 questions on this topic, but I will start with the following:

Is the Fiduciary responsible for seeking recovery for all overpayments from the plan, no matter how they occurred? I have read through many posts on this topic and found a great deal of information. I read that for overpayments under $100, the fiduciary must notify the party of the overpayment, but is not required to see recovery.

So, does this apply to situations where a dividend was double posted, a price was incorrect at the time of payment, etc. It seems to me that you must attempt recovery and let the participant know that those funds are not eligible for rollover. You must then correct the 1099-R correct?

Does anyone have any comments or insight they would like to share?

I've a client who sponsors a Health FSA plan that is funded via pre-tax ee deductions and employer contributions. This client wants to pull back all funds that it contributed if the employee terminates and elects to continue Health FSA coverage under COBRA.

First, is the employer permitted to revoke its unused funds upon an employee's termination? Secondly, is an employer required to continue making contributions to a COBRA participant's HFSA?

Hello. I've been reading the posts here for awhile but haven't seen

this addressed.

We have a self funded plan that is subject to ERISA. Our plan document allows the plan administrator to amend the plan from time to time as necessary.

1. Can these changes only be made at renewal?

2. What prohibits a plan from making a plan change that would target a specific employee? For example an employee needs a type of organ transplant and the plan administrator amends the plan to not cover this type transplant. All I can find is that the employees must be notified within 60 days of such a change. Is there a law that prohibits an employer (plan administrator) from doing this?

Thank you.

Is it still the case that a payment at termination for unused vacation (accrued from prior years) is not includible compensation and therefore not eligible to have deferrals taken from it?

As many of you know, the Treasury Department has extended until the end of 2005, for states to enact legislation providing for HSAs. While states do have authority for state tax policy, and they do have authority to regulate licensed insurers - states have no authority to regulate the structure of ERISA plans. For example, if a plan sponsor wished to offer an HSA along with the qualifying HDHP, he can do so.

The only benefits that are mandated for ERISA plans are the four benefits mandated by the federal government. Aside from these requirements, any state mandated benefits are completely preempted by ERISA.

Because of this complete preemption, licensed insurers need not be concerned about legal ramifications for providing only those benefits asked for by the plan sponsors.

While required to offer all state mandated benefits, the plan sponsor can pick and choose which to accept, if any, and be charged only for those benefits he contracts for.

Any thoughts?

Don Levit

1099R instructions don't seem to allow for using 2 as the distribution code for a QDRO. Alternate payee was under 59 1/2. Do we use 1? or 7?

Newbie here. I've decided to open up a Vangaurd Roth IRA who charge an annual $10 fee on account balances under 10K.

If I do my 2004 contribution now, my 2005 contribution after April, and my 2006 early next year, will I only be charged the $10 fee once? (at the end of 2005).

Also, if I have 3 funds with 5K each, they won't charge me $10 for each fund, right? The way I read it was that they charge you if the total of all your funds is under 10K.