Plan X is a 401(k) plan that permits participants to have two outstanding loans at any time, either two general purpose loans or one general purpose loan and one principal residence loan. Participant A had a loan outstanding and requested a new loan. The Plan accidentally issued two checks and Participant A negotiated both. How should the Plan correct this? If the Plan were to treat this as a distribution, there is a prohibition on in-service withdrawals of 401(k) contributions that are not as a result of a hardship withdrawal. Does this pose a problem? If not, then I think Plan X could ask Participant A to return the amount of the extra check plus earnings or be informed that the amount of the extra check could not be rolled over and issue a 1099-R. Having Plan X pay the amount of the third loan back into the plan would be a windfall to A. Any thoughts?

I haven't seen any posts on this topic in a while so wondered if anyone could give me an update on their experience.

We're looking for a non-insurance company, non-mutual fund company recordkeeper that partners with TPAs and does not restrict fund selection or require certain funds to be in the plan.

We've talked with Ceridian, BenefitStreet, and Retirement Planners & Administrators so far. Does anyone have any plans on these platforms who could give me their thoughts/comments?

What about The Newport Group, 401kASP, Daily Access or Unified Trust?

Any input would be appreciated.

I have a doctor group, where one of the doctors wishes to have the fees for his self-directed account billed to the company and have them paid as a company expense.

I have not read any thing that would prevent this from happening, but I cannot find anything in writing.

On the surface it appears that this would be some type of plan discrimination, but if the company wishes to pay this expense, wouldn't that just be a perk for that doctor?

If anyone has any regulation or documentation, please share...Thanks!

Employee has initial charge of $650 in 2003 but no payments made until 2004. Two payments in 2004 were made against initial $650 of$150 and $250

Are these payments eligible under FSA?

Thanks for your help - this is not my area

We have a client who indicates that there is a "new" regulation that allows in-service transfers (regardless of age) of one-half of your 401K money to a personal IRA account one time each year.......has anyone heard of this rule and if so where I can find the reg?

I've run into a murky situation involving the 404(a)(3) deduction limit. The actual example is really confusing, so I'll try to just present the general question:

An individual owns 100% of company A and B, both of which are adopting employers of a Target Benefit plan. There are 2 employees plus the owner all 3 of which work and draw compensation from both companies.

Let's say that the total contribution required to fund the plan for 2004 is $100,000. Company A is responsible for $25,000 and Company B is responsible for $75,000.

But the problem is that the maxumum deductible contribution for Company B is only $70,000, while Company A's max deductible is $35,000.

Can Company B deposit (and deduct) the full $75,000 since they are being treated as a single employer under 404?

There seems to be a lack of regulations on this specific topic. ERISA Outline Book (2004 ed, pg 7.410) confirmed this, while stating that you "should" be able to take the higher deduction for Company B. Does anyone have other ideas on handling this situation?

Thanks

If you have a Roth IRA with one custodian and you want to invest the next year in something else with an entirely different custodian because the first is with one fund and you want to invest the second year in another fund or stock with a different custodian, is that acceptable?

What happens when a participant is terminated and receives Severance pay for over a year.... The plan administrator withheld deferrals from his Sev-pay for all that time and then all of a sudden he receives a check from the plan stating that it was all done in error, here is your $ back. It sounds like the guy slipped through the cracks, but what are his rights? He has lost out on over a year of deferrals saving for his retirement.

Thanks

Can a Roth IRA be invested in a Mutual Fund ($3000) the first year and the second year invest that $4000 in another Mutual Fund or Stock, thus having two Roth Ira's and as a matter of information a different Fund or stock in succeeding years?

To make my question a little clearer, I understand that it would be only one Roth IRA but there would be two different investments with two different holders or Trust Companies (if that is the proper term) of this Roth IRA. This is OK?

Client has roughly 350 employees, most of which are covered under an HMO. In addition, employer is a non-profit (church) with a very generous employer contribution (i.e. after 5 years of service, church pays 100% for employee and dependents).

Problem: The average age of this group is 55, and a large percentage of the older employees are at the 100% employer contribution level. Group is hesitant to modify the employer contribution due to the negative impact politically and affect to moral. Incumbent's rates continue to sky-rocket with competing carriers declining to even bid on business. Possible incentive to seniors to go on MediCare with MediCare Supp plan is desired.

Feedback???????

It is my understanding that the following states do not conform to the IRC for HSA purposes at this time (but see posts below):

1. Alabama (doesn't use Federal definintion)

2. Arkansas (doesn't use Federal definintion) [Now Conforms, see below]

3. California (HSA legislation likely in 2005, failed 2004)

4. Kentucky (doesn't yet conform)

5. Maine (may have an add back provision)

6. Massachussetts (now conforms, see discussion below)

7. Minnesota (doesn't yet conform)

8. Mississippi (doesn't yet conform)

9. New Jersey (doesn't yet conform; but does have exemption for Archer MSA)

10. Pennsylvania (now conforms, see below)

11. Wisconsin (doesn't yet conform)

//END LIST//

Here's the situation: We recently discovered an administrative error that took place in 2003. An employee's contributions were being deducted on an after-tax basis although he had requested pre-tax. In addition to the negative tax consequences, since after-tax contributions are not matched he lost out on company match money as well. To make this more complicated, he has since withdrawn most of his after tax money so we can not reclassify his after tax contributions as pre-tax.

He has thus far been offered two solutions:

1. He pays back the after-tax money (about $13K) and the plan reclassifies it as pre-tax and he receives the company match. In this scenario he would also be issued a W2-C to correct his 2003 taxes to show less taxable income.

2. Keep things as they are and don't return the money. However, he will not get the company match.

Employee is not agreeable to either solution. He feels that he shouldn't have to take money out of his pocket to correct our error. He wants this issue to be corrected without having to make up the contributions.

Any ideas??

I was offered employment with another division of my company on 1/14/05. I accepted the offer on 1/18/05. And a conference call occurred on 1/24 to establish my start date of 3/14/05 and to confirm my salary and various other benefits. They would "get an office ready" and see me in a few weeks. I was told that their HR rep woud call me the following day to start the paperwork. On 1/28 their HR rep called me and told me that they were not offering me the job. I was stunned. I explained to her that the job was offered, accepted and confirmed. This was news to her. In order to satisfy my start date of 3/14 they knew that I had to and did begin the moving process and as such incurred costs. Do I have rights to reimbursement? Anything further? I didn't find much of anything on the internet about this type of thing. One chatboard mentioned "detrimental reliance"...?

A company maintains a 401(k)/profit sharing plan. Beginning in the '70's the plan allowed participants to purchase whole life insurance through the plan. If a participant elected to do so, 25% of his employer contributions each year were paid into a group life insurance contract through Principal, the owner of which was the plan's trust. In the late '80s, the plan stopped allowing new participants to participate in the life insurance, but participants who were already participating could continue to do so.

When a participant who is participating in the life insurance leaves employment, the cash value of his insurance is converted into paid-up insurance, meaning that he no longer pays premiums, but his death benefit is fixed. His benefit is still considered part of the group policy owned by the plan's trust, and when he dies, it is paid to his beneficiary by Principal. Currently, there are about 20 active employees paying premiums toward the life insurance, and about 100 former employees with paid-up insurance. The plan has about 1,000 total participants.

In 2001, Principal demutualized. The plan sponsor elected to receive Principal stock, but for reasons unknown to me did not allocate it. The stock has been held by the plan, and dividends have been paid on the stock, but neither the stock nor the dividends have ever been allocated under the plan. The stock has appreciated, and now the company wants to direct the plan to sell the stock and is wondering what it can do with the proceeds.

The company would like to take the proceeds of the sale of stock and use it to offset future employer contributions. Based on what I know of demutualization, I don't think this is a good idea. I believe that the stock is plan assets and should be allocated to the participants and not used to benefit the employer, which an offset would do. Further, I believe that it should be allocated only to those participants who have participated in the life insurance.

My questions are: Am I right that the proceeds should be allocated, and only to those participants who have an interest in the life insurance? If so, exactly who are those participants? Is it only the 20 or so actives, or the actives plus the 100 former employees? If the former employees should share in it, would the plan simply make a distribution to them of their share and report it as taxable income? How should the allocation be made--on a prorata basis based on cash surrender value, a per capita basis, or some other method?

Any thoughts would be appreciated. Thanks!

I have a client who made some voluntary contributions, non-deductible, way back in the '70s and '70s.

He's still in the plan, but now receiving minimum distributions.

I think that if he takes systematic withdrawals, he recovers the basis pro-rata, and if he took it all in a lump sum he would recover the basis all at once.

So the question is (if I have that right), are the RMDs systematic and subject to a pro-rata basis recovery? I'm thinking yes...

Thanks.

We have a 12/31/04 plan year using prior year testing. Can we still adopt an amendment to use top paid group for testing? I wasn't sure if the IRS had given specific rules regarding the timing of the amendment.

On the new form 5330, who do you put down as the disqualified person on line #27, if the employer remitted late deferrals? I assume you put down the name and address of the business entity, e.g. the corporation? Not the CFO, CEO, etc.?

I have a client who is 45 years old and has 4% of a company's stock in his IRA. He also owns another 20% outright (so a total of 24%). I am concerned that the prohibited transaction/disqualified peson rules may apply. I seem to recall that under 20% was fine; 20-25% was a problem; and over 25% triggered the penalties. But after review of the statute and a helpful listing in the Benefits Link, I note that a person is not a disqualified person if he owns less than 50% of the entity under 4975(e)(2).

Is there a prohibited tranaction or disqualified person problem?

Can this client purchase other stock as long as he is under 50%?

I have a scenario I need some advice on:

A Dependent Care FSA participant elects $5,000 for the Plan year. He contributes $5,000 via payroll deduction. Due to the timing issues with status changes, he has a qualified family status change that reduces his FSA to $4,500. He receives a payroll refund for the $500, but the FSA administrator had already paid out the full $5,000 in claims.

The FSA administrator attempts to collect the $500 overpayment, by March 31 of the following calendar year, but the employee does not repay.

Does the $500 become taxable income to the employee in the following calendar year, or does the employer just write this off as uncollected debt?

Thanks.

Hi, all,

I have some 4204 questions to which I'm not finding answers in the boards:

I am involved in represenation of a multiemployer seller who is selling some assets to a buyer. The assets being sold DO NOT constitute 70% of the seller's total assets, and therefore the sale does not constitute a partial cessation. Therefore, assuming we've calculated correctly, there is no current withdrawal liability.

ERISA Section 4204 allows seller to become secondary for withdrawal liability for five years following the sale, while the buyer is primarily liable.

Question 1: If the buyer goes insolvent within the five years (bringing sellers secondary liability into play) HOW DO YOU CALCULATE THE LIABILITY.

According to 4204 and case law, the 4204 transaction transfers the five-year period of contribution history prior to the sale TO the Buyer. So if there was no withdrawal liability at the time of sale, wouldn't Seller owe nothing, in this scenario?

Question 2: Since we think that the withdrawal liability is zero, how do we meet the bond requirement of a 4204 transaction? Document the fact that the amount is zero, and therefore we can't get a bond?

OR - Question 3: - should we think about not doing 4204 at all in this situation?

Thanks to anyone out there with any knowledge of this issue.