When do they occur?

I don't mean when does the law take effect, but what triggers them?

Is it simply that an ee quits with a balance/PVAB less than $5000 you have to do it 'immediately' , or the famous 'when administratively feasable' - e.g. the administrator doesn't even know who quits until the annual census info comes in.

After an unfruitful search, participant (formerly located) cannot be turned up. How are the 1099-Rs issued? I'm favoring company address for Payee's address.

We have a professional corporation with a terminating DB plan. Assets are appoximatley 60% of accrued liabilities on a termination basis (assets are approximately 70.5% of Vested Accrued Benefits, this is important to the question).

The plan has been around for 4 years, so most participants are 60% vested, with a couple at 40%. The owner is 100% vested due to reaching the Normal Retirement Date.

The owner does not wish to make further contributions or waive benefits in order to pay participants 100% of their accrued benefits. Using RR 80-229, we are proposing to terminate and pay benefits at 60% of the accrued benefit amount (vesting ignored).

The owner asked whether or not it is possible to pay benefits prorata based on the percentage of Vested Accrued Benefit that is funded.

Example:

Total Assets 240,000

Total Accrued Liabilities 400,000

Owner Accrued Liability 250,000

Non-Owners Combined AL 150,000

Total Vested AL 340,000

Owner Vested AL 250,000

Non-Owners Combined VAL 90,000

All benefits are in PCs 5 and 6.

Based on RR 80-229, I think the nondiscriminatory allocation should be $150,000 to the owner and $90,000 to the non-Owners (prorata based on Accrued Benefit).

Using the funded Vested Accrued benefits as an allocation basis would produce, $176,470 to the owner and $63,529 to the non-owners (prorata based on Vested Accrued Benefit).

Is there any basis for allocating the assets based on the Vested Accrued benefits rather than the total accrued benefits? When paying benefit amounts that are less than 100% of the Accrued Benefit, is it prudent to file a 5310?

I have a situation where the client established his unincorporated business on 9/1/2004. He will have Schedule C income of about $200,000 this year. To simplify, assume his net compensation after the social security tax deduction and defined benefit plan contribution is $150,000.

We know that for 401(a)(17) purposes, we must pro-rate the $205,000 limit for the short plan year. But what about comp for 415 purposes? Does the whole $150,000 count as part of his three-year average for 415 purposes?

Are there any survey out there which shows what other multi-employer funds are doing as far as benefit accrual rate reductions? I am interested in the magnitude of the reductions that other funds are adopting.

If not, do you know of any funds that had adopted a benefit accrual rate reduction, and what's the magnitude of the reduction?

Just wanted to alert the SEP forum about this topic's current discussion over on the 401(k) plans forum and invite input from those who watch for such a topic here.

Thanks and I wish you all a Merry Christmas (or a Gratifying Solstice Event as the case may be).

[CLICK HERE: Link to 401(k) forum response

I am curious if others out there are running into issues where clients are asking what are permissible investments because the underlying prototype document does not really give good guidance in terms of entity type of investments.

When it comes to investments in various entities I am getting confused about these DOL rules governing when a plan invests in an entity and whether or not those investments are considered plan assets....

Can anyone shed some light on this for me? I am rather confused and surely am mixing things up a little. Where can I go for more information on permissible qualified plan investments as pertains to these entity type investments?

Partnership set up SIMPLE IRA a few years ago. An employee became a partner in June of 2004. Are salary deferral contributons made for 2004 before he was a partner OK? Also, can he contribute to the SIMPLE IRA after he became a partner? If so, would the contributions after June be based on his "earned income " while a partner? And, should all contributions be aggregated to ensure the limits were not exceeded?

Consider a controlled group of companies A, B, C, D, E and F.

Each company has a separate 401(k) plan (no HCE in any plan) and separate investment providers for each plan.

If an employee of company A transfers to company B, can the employee's loan in Plan A be transferred to Plan B (trustee to trustee transfer not a rollover or distribution) if the employee's remaining balance remains in Plan A?

Clearly the plan documents, loan programs, and promissory notes would have to contain appropriate language and plan sponsors or trustees would have to accept the tranfers, but is this possible under regulations and code?

Mr. T is an employee of a large corporation and participates in their 401(k) plan. He is under age 50 and maxes out with the 401(k) contributions ($13,000 for 2004). Mr. T has also owned a small business for himself with 1 other employee. Financial Guy wanted to set up a retirement plan for Mr. T's small business, and accidently set up a SIMPLE rather than the intended SEP. Mr. T has had his first Elective Deferral withheld from his pay for the SIMPLE, when it was realized he had no room to put any elective deferral money into this plan (maxed out in the big company's 401k). Although withheld, the money has not yet been deposited anywhere. The other employee has not contributed anything.

What are his options in this situation. For starters, can he keep the SIMPLE and not make elective deferrals, just use the ER contribution portion of it? What to do with his withheld money since it is not deposited yet. Is it OK to simply "reverse" that last paycheck of his to get the money back to him? Any other ideas?

Thanks

We are a TPA which requests client distributions directly from the mutual fund company, they wire the funds to our non-interest bearing checking account (strictly for distributions) in which we issue the checks and complete the 1099r entry. Our policy is to release the funds 7 - 10 days after the checking account receives the assets from the mutual fund company.

My question is what year is used for the 1099r issuance? If the funds are requested and distributed from the mutual fund company on 12/27/04 but we do not issue the check until 1/4/2005 is the distribution technically in the 2004 or the 2005 year?

The mutual fund company nor our firm is the Trustee of the assets. Any help would be greatly appreciated.

Recipient under age 59 1/2 is getting a monthly annuity. Distribution code 2 is being used in box 7 of 1099-R.

After receipient reaches 59 1/2, should the distribution code change from a 2 to a 7?

Thanks

Under the DOL regulations [sec. 2520.104b-10(d)(4)], we add the following SAR language when it's applicable:

...Of the total insurance premiums paid for the plan year ending (date), the premiums paid under such “experience-rated” contract(s) were ($ ) and the total of all benefit claims paid under the(se) experience-rated contract(s) during the plan year was ($ ).

I can't find any guidance about the definition of "total of all benefit claims paid". I'm guessing that this is the number found on Form 5500, Schedule A, Line 8b(1)?

Any thoughts?

Anyone who uses them have a suggestion for short plan yr issue:

if i want to not pro rate the 415 limit for the first, short plan yr- could i use 5(b) "Other" --for limitation year -and insert "calendar year ending on or within the plan year"?

thanks

3 companies have merged. The entities offer identical plans and thus have no problems merging the plans and operating under one document. The problem is that each entity would like to maintain current investment options/provider ( A couple of mutual fund programs and a group annuity.) Is there any problem with this other than having to offer all 3 providers to all participants? Can we limit participants to one provider and still have 404© protection?

Am I going crazy... I thought you could not contribute to a SEP and a QP in the same year. IRS Pub 560, page 7 says you can. Am I missing something?

IRS Publication 560

Company A buys the assets of Company B on 1/1/2004. Company B's 401k plan is merged with Company A's on the same date. Company A plan is a 9/30 plan year end and Company B is a calendar year plan.

In determining HCE's for the 9/30/2004 plan year end, shouldn't we be looking at the compensation from 10/1/2002 thru 9/30/2003 for the Company B employees, since that is the determination (lookback) year for the HCE determination in the Company A plan? If the client makes the calendar year election, wouldn't it apply to all employees in both A & B?

Understand on an IRA in the Bypass, RMD are distrubted to the Trust on the life expectancy of the oldest beneficiary.

Is the surviving spouse by definition going to be considered the oldest

beneficiary, or is there a way in framing the Bypass Trust language to only

use the children for determination of oldest?

If we use surviving spouse, and there life expectancy is 10 years and they only survive for six, I assume that the Trust has four more years to take distribution.

Is there any way the children at survivor's death can inherit the IRAs and

take distribution over their own life expectancy?

If an employee elects an individual HSA (debit card operated) and leaves the company with a $1200 balance... He goes to an employer who has no HSA, can he

1. Continue to put pre-tax contributions from his current employer into the HSA that is still being "administered" by his former employer?

2. If he chooses not to put any more money into the account, can he pay for his son's orthodontia expenses with his $1200 balance even though he originally elected the HSA for an individual?

We don't do HSA's... so I couldn't answer this question which came from a business associate. I told him I would put it on the "magic board"

Thanks in advance for replies...

I was provided with a "draft" copy of a DRO which indicates that the alternate payee is to receive a 1/2 of the account value as of a specific date but then they are also to receive 30% of each years contribution to the plan and applicable earnings.

Has anyone even seen a stipulation put on future contributions. What's to stop the individual from deferring or if the individual is quits or is laid off and contributions cease?

Can a garnish be put on future deposits that may or may not be made?

Any feedback would be appreciated.

Thanks