A client who is well over the age of 70 1/2 and retired has not been taking distributions from the Kodak 401(k) Plan -- otherwise known as the Kodak SIP. Does anyone know if the Kodak plan is exempt from the RMD rules?

I have a problem. In my firm there seems to be some differing opionions on this matter. We have a 401k plan (9-30pye) that amemded on 7-1 to exclude hourly employees and HCE's. Some administrators are now saying that previously eligible ee's (who have not deferred into the plan) are now ineligible. I say no way. Once you meet eligibility you are in, whether you participate or not and all new hires going forward can be excluded if the they meet the exclusion requirements. I haven't been able to find anything concrete one way or the other. Who do you think is right?

We have a prospect who did not timely amend his (one-man) money purchase plan for GUST/EGTRRA. He had been using a prototype sponsored by his financial institution and was sent the documentation to amend the plan, but never completed the paperwork.

We understand that he will need to submit under VCP and pay the applicable user fee. However, we are debating as to whether the submission of Form 5307 is also required in conjunction with the VCP submission. He will adopt a prototype plan that would otherwise not require submission to the IRS.

We are looking at the language in Revenue Procedure 2003-44, section 10.06 and are stumbling on the language referring to the "adoption of a prototype or volume submitter plan for which the Plan Sponsor has reliance . . . ."

I feel the additional submission of the 5307 is required, but I (and the client ) would be happy to be proven wrong. Thanks.

We are administering a KSOP for a closely held company. The employer profit sharing and matching is made in employer securities. The securities are leveraged and as the loan is repaid the securities are released. The salary deferral side of the KSOP has a menu of mutual funds plus the employer stock. Can the plan buy the stock from participants in their salary deferral account and use the proceeds to purchase the mutual funds? This would be done at the participant's direction.

A client has called and said they want to establish a plan with a normal form of J&100. The benefit formula is flat at $1,000/ month.

They wish to provide that if any participant terminates (married or not) that their lump sum is calculated as $1,000 times a life annuity and then discounted to attained age.

This seems to be minimizing the lump sum but it sure smells funny?? Is there anything wrong legally with this??

I would think that the single participant in this case 'must' get an actuarial equivalent increase (let's say $1,200). Then the lump sums would be equal in value.

A similar issue arises where a plan specifies that the benefit is paid as a 10C&L if single but J&100 if married. Doesn't this create a problem because lump sums are totally different based on marital status??

Is this the same situation??

Most of the cases I have seen have the life annuity as the normal form and all other settlement options are actuarial equivalent.

Thanks for any and all responses.

Company's tax year and plan year ran from May 1, 2003 - April 30, 2004 They are changing both to a calendar year. So they will have a short Plan year for 2004.

1. The $13,000 (+$3,000 Catch up) Runs on the Calendar year regardless of Plan year or short plan year - correct?

2. But...the $43,000 maximum limit - is that Pro rata from May - Dec? Using a Pro rata comp? Or can they defer the entire $43,000 for the short plan year?

Thanks!

Company wants to do away with their defined benefit plan due to the expensive nature of maintaining/funding the plan. They will establish a 403(b) plan for their employees, as a new option.

Any advice on the best way to achieve this while keeping the employees happy is greatly appreciated. Also, any comments/concerns with the options that I have come up with is also greatly appreciated.

1. Terminate the DB plan and move everyone to the 403(b) plan - no choice. (not the best choice because ees will likely not be thrilled)

2. Give every ee a choice between remaining in the DB plan or switching to the 403(b) plan (not the best because it may not help company achieve its goals).

3. Provide all ees based on age participation in the DB plan (a sort of grandfathering) and move the rest (and new ees) to the 403(b) plan.

4. All vested ees (with certain age or service amount) could choose - the rest go to 403(b) plan. Must determine the vesting rules.

Of course, my main concern is that the latter two options create some age discrimination issues under ADEA, etc. Any other options that anyone has would be greatly appreciated.

Thanks!

First please forgive me if i seem a little ignorant regarding Nqdc's.

My main question is regarding this point:

Any provision that permits acceleration of the timing or form of benefit will result in immediate taxation of the entire account balance. This would include, for example, a provision that permits a participant to elect to switch from installment payments to lump sum. (i'm summarizing from a bulletin I received.)

Now I have an employer funded plan who has a nqdc plan set up as follows:

say a participant has a 5 year average salary of 100,000 at time of termination. They then project it 5 years at lets 6% interest and the employee receives a cash amount equal to what they would had they worked for the next five years.

Now according to my understanding of the new law, an employer can't give a lump sum like that.

Any answers or do i need to clarify?

Thanks,

Andrew

If an employer has a safe harbor matching contribution and allows for an additional discretionary match (based on deferrals not exceeding 4% of comp) subject to some vesting schedule, is this additional match subject to Top Heavy rules? My understanding is that this design would not be subject to ADP/ACP but not sure about whether the Top Heavy rules would apply to this discretionary piece.

Is it permissable to start a DB plan and fund the max. allowed in that year and then terminate it the following year? Reason for terminating is there is no more consulting wages going forward.

Much appreciated

S Corp, 4 employees, all over 50. For 2005, it appears that we can put away $46,000 each on salary of $112,000. We'll do this through 14,000 of deferrals, 4,000 catch-up, 4,480 match, and 23,520 from a 21% profit sharing plan contribution. Is there anything wrong with this? Is there a better DC plan option, that will keep these four equal? Thank you for your help and ideas.

Would modifying a participant loan policy be a "cut back" if the cure period for making up a missed payment is reduced? The 411(d)(6) regs state that the availablility of a loan is not a protected benefit. Any thoughts?

I have a client with a 401(k) plan which covers union and non-union employees. In the past, all employees received a pro-rata profit sharing contribution. The union has changed the contribution to 35 cents per hour worked up to 1920 hours. The employer would like to be able to offer their union and non union different rates of contribution. I contacted my document support about how to go about doing this and his recommendation was to keep the current plan for the non-union employees (it's a nonstandardized prototype) and to set up a volume submitter plan for the union employees. Has anybody else set up plans like this? Any information or suggestions would be helpful & appreciated.

This issue keeps popping up and we keep telling clients there is a significant tax issue. Retired executives get continued health coverage not given to other retirees. If this is under a self-insured plan, the benefits, not just the premium value, is included in income under 105(h). Under 105(h) regs, retirees are tested as a separate group and this program results in discrimination in favor of highly compensated.

Possible solutions -

1. buy individual health insurance coverage for the retiree executive to take it out from under the self-insured plan.

2. Give the retiree extra compensation during the COBRA period and let the retired executive elect COBRA under the self-insured plan. At end of COBRA buy the retired executive individual health insurance.

Obvious problem. What if individual is uninsurable? Many state laws provide for some mandatory pooling arrangement in some circumstances, but this is not always comparable coverage and may be very expensive.

Anyone else dealt with this and do you have any different take or solution?

A single shareholder owns 100% of a S Corp. The S Corp owns 100% of a C Corp.

The C Corp wants to establish an ESOP and the S Corp wants to sell its shares of the C Corp to the ESOP and elect 1042 treatment. Is the S Corp a qualifying seller under 1042? I realize that C Corp gain is not eleigible for 1042 deferral, so would the negative pregnant be true?

There is a question on the 5310 that asks if the distribution will be made in any other form beside cash. This question has been answered "no" (so only cash distribution) on a termination of the plan. We have received a determination letter based on the information on this 5310. A IRS reviewer has said that this question has no relevance and the plan should still follow the terms of the plan and allow in kind distribution if it is in the document. I would like to find out my colleague's opinion about that.

Company wants to do away with their defined benefit plan due to the expensive nature of maintaining/funding the plan. They will establish a 403(b) plan for their employees, as a new option.

Any advice on the best way to achieve this while keeping the employees happy is greatly appreciated. Also, any comments/concerns with the options that I have come up with is also greatly appreciated.

1. Terminate the DB plan and move everyone to the 403(b) plan - no choice. (not the best choice because ees will likely not be thrilled)

2. Give every ee a choice between remaining in the DB plan or switching to the 403(b) plan (not the best because it may not help company achieve its goals).

3. Provide all ees based on age participation in the DB plan (a sort of grandfathering) and move the rest (and new ees) to the 403(b) plan.

4. All vested ees (with certain age or service amount) could choose - the rest go to 403(b) plan. Must determine the vesting rules.

Of course, my main concern is that the latter two options create some discrimination issues, etc. Any other options that anyone has would be greatly appreciated.

Thanks!

I am trying to advise a friend of mine. Her husband was a middle manager (NHCE) in a large company. They are both 57 years old. Two years ago the company's pension plan was converted to a cash balance plan.

His position was eliminated, but he is due a $496,000 lump sum or a $3,300 J and 100% SS immediate annuity.

I searched the open annuity marketplace and could not find a better deal for him. There are two questions that I could think of, though. First, if he took the LSD, rolled it over and took the hit in an annuity purchase, would any of the LSD be subject to recapture by the PBGC if the plan terminated. How long is this exposure out there? Second, what is the maximum monthly J and 100% SS monthly pension that the PBGC would guarantee at age 57? He did receive significant salary increases in his final two years of employment. The question is how to minimize his exposure.

Any thoughts would be appreciated. Thanks in advance.

Is an ERISA 403(b) plan required to prepare a Summary Annual Report? Since the Summary Annual Report summarizes the Form 5500, and the Form 5500 for a 403(b) plan does not include any financial schedules, what exactly would a Summary Annual Report summarize for the participants?

Also, does an ERISA 403(b) require a named Trustee to the plan document?

We are considering consolidation of three companies with common ownership, but not a controlled group. Each of the three employers would participate in the Plan and could raise the plan's eligible employee number to 120+. If we exceed 120 on a plan basis, but no single employer has 100 eligible, must the Plan attach an audit and do we still file the Long Form? Under the old format (multiple 5500's with only Sch. T) that was clear. Anyone have any experience with this scenario yet? I realize we file one Form 5500 and a Schedule T for all participating employers, but how does the audit requirement change?