If I have a cash-balance plan primarily designed to max benefits for owners at their 415 limits, although there will eventually be a couple of staff employees, what should the individual benefit statements reflect for contribution credits to owners where the contribution credits result in a benefit accrual for the year that is restricted by IRC 415 ? Since I cannot fund for more than the 415 limit, or distribute more, would the benefit statement reflect the full contribution credit per the plan document or a lesser amount equal to the contribution credit that is equivalent to the 415 accrual for the year ? Not sure if this is a technical issue or more a communication issue. I hate to show a higher theoretical higher account balance than can be immediately distributed, but maybe that's what I have to do with some appropriate caveat at the bottom of the statement. Any thoughts/opinions/preferences ?

If a participant initially takes their distribution in installment payments over their life expectancy and a couple of years down the road decides to cease all distributions (assuming the plan doc allows for this), are there any tax consequences for this decision?

Has anyone seen guidance on whether an employer can base contributions on grant money? Client has some researchers who are totally paid by grant, while others receive part stipend from institution and part grant. Are there problems with treating the grant money as if it comes from the institution, for either contributions or nondiscrimination purposes?

Thanks

I discovered this forum from a posting on ValueForum.com and wanted to ask an investment question. If I were to purchase shares of a publicly listed master limited partnership in either my IRA or SEP-IRA, I know that any UBTI over $1000 will become taxable. Does this same rule apply to foreign owned trusts such as the Canadian Royalty Trusts?

Thanks

James Jarrett

Here's a different question/angle on the new regs:

Why did the IRS specificially say that a "plan" could use language that called for deferral contributions to be deposited no later than 15 business days after the end of the month? They cited that as an example of acceptable language, at least that's how I read it.

I understand that ERISA plans are still subject to the DOL as soon as practicable standard. And I understand that there's a world of difference between ERISA and non-ERISA plans from an employer's or fiduciary's standpoint. But from an employee's standpoint, I doubt that a nurse who worked for a separate department in a hospital, which had a 401(k) plan, and then goes to work for the hospital itself and is offered a 403(b) plan, sees much difference.

I don't do much with 403(b)s so maybe that's "just the way it is." But I found it curious.

Does 401(a)(31)(B) apply to government plans? The focus of that provision seems to be on the $5,000 cash outs permitted by 411(a)(11) and the provision incorporates the actuarial factors of that provision (and 417) to determine the $1,000 and $5,000 present value levels. Government and some church plans are exempt from 411. Does that mean that those plans don't have to provide automatic rollovers?

Employer has two matching "levels". One group of employees receives no match while the remaining employees receive match of 100% of deferrals up to 4% of comp. My first thought was to test this for coverage using the theory that these are separate "tiers" of matching and would need b/r/f testing. In this case, 17 of 19 HCEs are in the group that receive no match. I easily pass 70% for the zero match and the 100% match. The more I think about this however, I'm not sure this is correct. If the other two HCEs were in this group such that no HCEs benefited from a match and fewer of the NHCEs were in this "no match" group (moved to the receive a match group), they would fail ratio percentage test. If they go on and pass nondiscriminatory classification test, I should be ok, right?

If for some reason, they fail this test, would I have a situation where the Plan design is not qualified? Doesn't seem right since the situation is one in which all the HCEs are receiving the zero match. There are other NHCEs also, however, who don't receive a match.

Maybe I'm overthinking this and getting myself confused.

Every month for the past two years, I contributed to my 401k. This past month, I finally got a 401k statement from my employer and discovered she did not deposit any of the money taken out of my paycheck. After I brought it to her attention, she deposited the funds. The disagreement comes about because she insists on correcting the interest lost by utilizing the IRC 6621 method and providing only 1% interest per year. Is this right? PLEASE HELP!!

As a TPA, we're not really all that familiar with the investment companies available in the marketplace. Has anyone heard of a reputable vendor or vendors who will be handling these accounts - for ongoing plans and terminating DC plans? I just sent to PenChecks for some information - anybody know of others? And will they accept accounts of <1,000? We're just looking for the names of a couple of vendors so that our clients will at least have a starting place. Thanks.

Default of a 22k loan. Participant qualifies for an inservice distribution. Can we treat the 22k default as an inservice distribution. We are past the cure period.

I've been reading about the suit surrounding Bank of America's pension plan, and I wonder why it took so long.

This reminded me of something else suspicious Bank of America did during that same period of time (around 2001). BofA announced that they were having financial problems on the deposit side of the bank, so they were taking away benefits. One of the benefits they took away was subsidies for education. A couple months later, BofA announced that they were rolling out a new subsidy for education: not as good as the one before, but still it was something that the Bank was "giving" it's employees.

The short time frame between the take-away and the "gift" makes me very, very suspicious. I think this was outright psychological manipulation. The idea is to make employees feel good about getting a new benefit (or getting back something they almost lost) when what actually happened was a cut in the old benefit. If BofA had just announced a cut, people would have been depressed. Instead what they did is create a sense of fear of take-aways, and then management road in with some unexpected largess, pumping up everyone's gratitude and energy.

Does this sound like something that benefits managers do intentionally? Do they sit in meetings and discuss how to manipulate the perceptions of the employees through the timing of benefits changes? Furthermore, if this was a deliberate attempt at manipulating mass psychology, was it legal?

Ps. When I worked at BofA, people (including myself!) raised the question of ERISA violations during meetings to acquaint us with the changes, and the managers charged with delivering the news took the position that the people who questioned the changes were just stupid. I really wish I were there now to be in on that lawsuit!

You Burnt the Bird?

A Dozen Reasons to Be Thankful!

1) Salmonella won't be a concern

2) No one will overeat.

3) Everyone will think it's Cajun Blackened.

4) Uninvited guests will think twice next year.

5) Your cheese broccoli lima bean casserole will gain newly found appreciation.

6) Pets won't pester you for scraps.

7) The smoke alarm was due for a test.

8) Carving the bird will provide a good cardiovascular workout.

9) After dinner, the guys can take the bird to the yard and play football.

10) The less turkey Uncle George eats, the less likely he will be to walk around with his pants unbuttoned.

11) You'll get to the desserts quicker.

12) You won't have to face three weeks of turkey sandwiches

a new plan with 3 doctors will be showing no earned income and a substantial loss according to their cpa. up until it was determined that there would be no income, the 3 doctors were deferring into the plan and receiving a match. the match can be transferred into a suspense/holding account to be used later, i believe, but can the deferrals "unwind" back to the pllc before plan year end 12/31 or will that amount be required to be refunded as income? either way im pretty sure the tax consequence will be roughly the same. i am just trying to minimize paperwork at this point.

Anyone have statistics on number of people who take advantage of the partial withdrawal option at retirement??

We are contemplating changing our distribution options from LS only to LS and Partial distribution. However, the Pres, wants to know if there would be any additional cost associated with allowing the partial distributions after attaining "x" age in lieu of LS distribution. (how many people would stay in the plan so they could get $$ out sooner, thereby incurring additional admin fee while the money is in the account) as apposed to them taking it out comptletely and eliminating the mantainance feel.

I have a situation where the emloyer has no non-highly compensated employees, but rather 10 highly Compensated Employees that includes the one sole (100%) owner. He wants to put in a cafeteria plan for dependent care expenses only, in which he the only Key Employee will NOT benefit in, only the other Highly Compensated Employees. Given there is NO non-highly compensated employees do I get a free pass on IRC 129(d)(2) HCE discrimination testing ? or is this a problem since I'd fail the 55% dependent care (IRC 129(d)(8)) test ? Thanks for any thoughts/opinions.

401k Plan with 50% of first 5% deferred, capped at 2.50% - written in the document

Can the Plan be amended by 12/01/04 for 2005 for 3% Safe Harbor and Employer Match?

I currently have a profit sharing plan for my partnership (plan sequence #1) and would like to add an individual 401k. It is a prototype plan from from a brokerage firm. The 401k and the profit sharing plan will have to be terminated after this year due to a change in business entity.

I've been told that the 401k paperwork should submitted as a restatement of the profit sharing plan and the plan sequence number should be #2.

Does this make sense? Why would the sequence number change if the 401k is a restatment?

Or should the adoption agreement indicate that this is an initial adoption for the 401k and have a new plan sequence number?

Thank you for your help.

A terminated participant in a governmental money purchase plan signed a waiver (for another TPA) in 2000 "irrevocably" deferring her benefit until her early retirement date. The money just changed vendors -- she got a statement, remembered her account, not the waiver and wants her money. Can she change her mind?

We checked the document and there is nothing about irrevocable waivers of benefits. Is this an IRC rule with which I'm unfamiliar?

Any comments would be appreciated.

Plan participant in a k plan wants to take inservice withdrawal of entire account balance and roll it to IRA. He is 72 years old.

Plan has in service withdrawal provisions.

Do the 70 1/2 MRD distributions kick in for this distribution?

Hoping someone can shed some light on this. Code section 125(d)(1)(B)

states within the definition of a cafeteria plan that the plan benefits

are limited to cash and qualified benefits. Section 125(f) states that

LTC insurance is not a qualified benefit. Flexible spending arrangements

are a variation of cafeteria plans. Section 106©(1) states that an

employee has gross income if an employer provides LTC coverage through an

FSA.

So, a cafeteria plan in the form of an FSA may not offer LTC coverage and

remain qualifed, but, if it does, the employee has income. What's going

on here? Obviously, I'm missing something.

Thanks and I hope everyone has a safe and happy Thanksgiving with their

family and friends.

Ken Davis

Univ. of South Alabama