A 401k plan is currently daily valued. The plan sponsor has decided to do a daily valaution search/comparison to see if their current recordkeeper is up to snuff. An independent third party is the gatekeeper for the search functions. Are the fees to the third party (unrelated FYI) payable from plan forfeitures or do they constitute settlor functions? I tend to think they are payable from the plan, but would like some input.

Also, I assume the decision to do the search , that is any fees related to the decision are not payable from the plan. Agree?

Thanks

Dee

As we get close to the end of the year, I have a couple of GUST prototype plans that adopted the 3% non-elective ADP safe-harbor contribution. This provision is coded into the adoption agreement. However, the clients, who are top-heavy, for 2005, are interested in changing to the matching (100% of the first 3% and then 50% of the next 2%, or possibly the enhanced 100% up to 4% formula) ADP safe-harbor in order to only award those employees who defer to the plan (they are aware that no other contributions, including forfeitures, can be allocated). What is the amendment procedure?

Thanks for any replies.

I have run into a few CFPs who pick my brain on behalf of a "potential" client only to find that all the free advice got me nothing. What do people do to prevent this scenario... how do others handle these situations? Or is it the cost of doing business?

New 415© dollar limit for 2005 is $42,000. Is this for limitation years beginning or ending in 2005? In other words, if I have a limitation year ending September 30, 2005, is the limit the new $42,000, or the 2004 limit of $41,000? Reg. 1.415-6(a)(2) seems to say it would be $42,000, but that is an old regulation issued before EGTRRA and I can't find anything definitive anywhere else. Thanks for assistance.

I have a one person 401-k. I wish to terminate this plan on 12/31/04 and start a SIMPLE with some employees as of 1/1/05.

What do I have to do to terminate the 401-k? Do I have to file that huge 5310? The custodian told me to file a 5500, but I have never had to file before (plan assets about $55,000).

And since this is a self-employed situation, can I contribute to the plan for 2004 up to the filing deadline in 2005 even if I have already termnated the plan?

Scenario:

Employee worked for 10 years at Company A and terminated in 1992. The employee was paid out his accrued benefit in 1999(lump sum). The employee then rehires in 2002 and works until 2004.

Under regulations, would the employee be entitled to vesting for his prior service(1992 and prior years)?

Would the employees break-in-service go back to his original termination date(1992) or would the employees pay-out date be the "adjusted" break-in-service start date which means the employee would not have a 5, 1-year breaks in service?

Any help provided would be much appreciated!!!!!

Thanks,

Fred

Scenario:

Employee worked for 10 years at Company A and terminated in 1992. The employee was paid out his accrued benefit in 1999(lump sum). The employee then rehires in 2002 and works until 2004.

Under regulations, would the employee be entitled to vesting for his prior service(1992 and prior years)?

Would the employees break-in-service go back to his original termination date(1992) or would the employees pay-out date be the "adjusted" break-in-service start date which means the employee would not have a 5, 1-year breaks in service?

Any help provided would be much appreciated!!!!!

Thanks,

Fred

Scenario:

Employee worked for 10 years at Company A and terminated in 1992. The employee was paid out his accrued benefit in 1999(lump sum). The employee then rehires in 2002 and works until 2004.

Under regulations, would the employee be entitled to vesting for his prior service(1992 and prior years)?

Would the employees break-in-service go back to his original termination date(1992) or would the employees pay-out date be the "adjusted" break-in-service start date which means the employee would not have a 5, 1-year breaks in service?

Any help provided would be much appreciated!!!!!

Thanks,

Fred

Can a client establish a QDRO policy that, in effect, says that the amount of the benefit to be disbursed to the alternate payee will be specified in the QDRO. I've seen several that specify that the balance as of the date of marriage, for example March 6, 1992 is to be determined and the balance through date of separation is to be determined. The difference is split etc. The attorneys get upset when you explain the difficulties of this.

As a TPA, I'd like to stayout of the middle of this and keep things simple for my client and myself.

If you can do this and there is no current policy, can you establish the policy after you receive the QDRO?

ADP test for the 2000 plan year failed - but it was never corrected. Correction should have been made by 12/31/01.

Self Correction Program allows QNECs and One-to-One contribution to correct the operational failure - but only by the end of the 2nd plan year following the year in which the failure occurred. Meaning, the SCP deadline was 12/31/03.

Any thoughts on where to go from here?

Do you have to grant a total month of coverage if anly a partial month's payment is recieved? Our feeling is that you do, but we would welcome additional comments. Thanks in advance for your help!

I have a prospective client. They are on a pre-GUST prototype document prepared by The Benefit National Companies. It has a provision which reads:

"Within the time period described below, the Employer will provide written notice to each Participant that the Employer will make...(a 3% non elective safe harbor contribution)" The employer DID NOT give notice within the required time frame.

I have 2 questions, and will appreciate your input, particularly, on the second:

1. Do you think the plan is subject to a safe harbor contribution requirement? Even though the document says the employer will give notice, he did not do so. Would you agree that this would be an operational violation that can be self-corrected by applying the ADP test?

2. At the recent ASPA Annual Conference, General Session 4 involved IRS Q&As. Question 16 (from the handout materials) spoke of a truly hard wired safe harbor election. In that question, NO notice was given. The questioner asked (a) must the plan perform the ADP test, and (b) must the 3% still be contributed. THE IRS RESPONSE was: "No; You have an operational defect which should be corrected under EPCRS. This will be additionally discussed from the podium." DID ANYONE HEAR WHAT RESPONSE WAS GIVEN FROM THE PODIUM? What is the operational failure, and how is it to be corrected?

Thank you very much!!!

A client with a PYE 09/30/04 profit sharing only plan added a 401(k) feature with a basic (100% on the first 4%) safe harbor match provisions effective 2/1/04. They elected to match on a EOY basis.

What compensation should be taken into consideration when calculating the safe harbor match? Should full year compensation or compensation from 2/1/04 - 9/30/04 be used? Please note all participants were eligible before 2/1/04. They just allowed deferrals effective 2/1/04.

The use of full year compensation will give me a different result only if the participant elected a deferral rate greater than 4% during the portion of the plan year they were allowed to defer.

As it turns out, only the HCEs elected greater than 4% during the portion of the year they were allowed to defer.

They will be giving a profit sharing contribution as well. Is it possible to use full year compensation for the profit sharing contribution and compensation from 2/1/04 - 09/30/04 for the safe harbor match if all the participants met the eligiblity requirements for the plan the entire year?

Any thoughts would be greatly appreciated.

What is meant by "provide the notice." For example, would posting the notice in a central location satisfy the notice requirement?

Let's say the plan allows for installment payments as well as in-service distributions. Is there any reason an active employee couldn't set up installment payments via in-service withdrawal? It seem okay to me, but I haven't really seen it done before.

Husband and Wife real estate partners... Together they earned $225K. Husband is paid from the real estate office the 1099. Can that income be split between the husband and wife so they can each defer and share in an employer contribution? or would the 1099 have to be paid to a newly established company, the "Mom and Pop Real Estate Company" and then divided the income up amongst each other?

A followup question... when you have the partnership as described above and both hub and wife defer $13,000 each, how do you calculate SE income? and SE tax deduction? and all those wonderful taxes? Since they are hub and wife, is there one SE tax deduction?

I'm new to this. We have a nonqualified plan that allows "interim distributions". Will they still be OK under the new HR4520 (American Jobs Creation Act)?

Regarding the 401(a) limit of 205,000 - should HCE's who contribute less than 6% be allowed to contribute up to the $12,300? My understanding was that if an HCE contributed for example 4%, the maximum amount they would contribute that year would be $8200 - i.e. when their compensation reached 205K they can no longer contribute. Another person told me that they should be allowed to contribute until they reached $12,300 (205k * 6%) - regardless of the 205K.

Thanks for any assistance.

This is a new plan with over 100 participants. At the end of the first plan year (12/31/04) the only plan asset will be the employer contribution receivable.

Will an audit be required? This first plan year is not a short year.

Thanks.

All legal minds please give me a feedback on this.

A Codicil reads as follows:

I'm conveying the real property at 11 Main St., NY, by will, to create a Life Estate for my husband John Doe and create a Remainder Interest held in trust for my brothers and sisters. John Doe as a life tenant shall occupy and use the residence. He will administer, maintain and be responsible for expenses and taxation of the real property.

Upon the death of life tenant John Doe, I direct the trustee to sell the real property at 11 Main St. NY. The net proceeds of the sale are to be used to purchase a 20 year Immediate Annuity for each of my brothers and sister that agree to and receive lifetime distribution from my IRA which they are beneficiaries. If any of my brothers or sisters, that are beneficiaries of my IRA, do not agree to nor receive a lifetime distribution from my IRA, that person will only receive one dollar from the sale of the real property.

Questions?

Is a Life Estate created with the wording?

Can the trustee sell the Remainder Interest and distribute it via Immediate Annuities?

Are the beneficiaries of the IRA given an incentive to select a life distribution instead of lump sum?

Comments please specially fron New York