I've seen some articles indicating that the written agreement required under the new regulations must be entered into prior to the issuance of an updated SPD or SMM due to the specific information required to be disclosed to the participants. I've reviewed the disclosure portion of the regulations and found nothing that would suggest or require the written agreement to be executed prior to the issuance of the SPD or SMM (or even require the IRA provider to be selected at that point in time).

In general, the regs state that the SPD or SMM must include an explanation that the rollover will be invested in an investment product designed to preserve principal (etc...); include a statement on how the fees will be allocated; provide the name and address of a contact so that more information regarding the automatic rollover rules, the IRA provider and the fees can be obtained.

Does anyone know why these articles are stating that the written agreement must be executed prior to providing the SPD or SMM? Granted, having the agreement in place prior to the disclosure would make things easier.

Does anyone have an opinion on this?

Deferrals were impropertly made to a plan based on ineligible compensation, and the employer made matching contributions on those deferrals. The participants involved have since terminated employment and taken lump sum distributions. The dollar amounts are not large. How would corrections be handled in this case?

A participant loan is being paid through payroll deductions. The participant is filing for bankruptcy and the attorney is sending the plan sponsor a letter to stop payroll withholding for the loan payments.

I thought 401(k) plans were protected from bankruptcy proceedings, or does that apply to protection from creditors?

If the participant rescinds on the payroll withholding, must the plan sponsor comply?

The loan is then in default, correct? Does the cure period apply in this situation, or is the loan immediately in default?

A doctor owns 100% of his own medical practice. He also owns 100% of a business in a non-medical field. Does this constitute a controlled group?

Thanks for any responses.

My two sons inherited a part of their deceased grandfather's IRA. The amount is a little over $500 each. Since he was taking distributions before his death I have heard that they would also need to take distributions based on his situation. Since we would be talking about very small amounts each year I wanted to cash them out totally and put the money in some other non-qualified account. Is there a penalty for their early withdrawl, or is it even considered and early withdrawl?

I have two nieces, the oldest of whom is 7. I'd like to look into some ways to put away some money for their college education. Are there some plans that I can do this with, which won't penalize my nieces when it comes time to apply for financial aid?

It appears as though 403(b) must pass 401(a)(4) if they do not pass special 403(b) maximum disparity of contributions safe harbor.

What is not clear ot me is whether the 403(b) plan must satisfy the gateway minimum requirements under 401(a)(4) if the plan cross tests and if so was it effective 1/1/02 for 403(b)'s?

Any insight is appreciated!

Dee

I'm considering wrapping a bunch of insured (and possibly some uninsured) welfare benefits. A few questions:

When do you file the 5500 if the policies have different plan years?

Can the employer switch insurance carriers and not have to amend the wrap if its drafted generically enough?

Could we get away with wrapping the plans in 2005 and then doing DFVCP for past years as if it were one plan? (LTD and Disability were never filed)

What are the pros/cons of wrapping uninsured plans in as well? (e.g., the FSA?)

THANKS

I have a client who would like to set up a cafeteria plan that offers one insurance plan with better benefits and partial ER contributions to one group of employees and another insurance plan with no ER contributions to another group. There will be no Key/HCEs participating. I don't see that this is a discrimination problem under IRC 125...are there other issues? Both policies will be fully-insured.

Client wants to set up new 401k for company of he and wife, and now also a full-time employee. Client and wife want to set up plan now and max out salary deferrals and probably add match or PS into it for 2004. If employee has 1 year of service on Dec 1, 2004, but plan has semi-annual entry, can we exclude the employee from non-elective or matching contributions (participation) for this year since the employee will not be able to join plan until Jan 1 2005 entry date?

Quick question for those of you who design and maintain "sports car" DB plans (you know--the ones doctors, dentists, and lawyers like):

Broadly, this issue arises under Reg. Section 1.401(k)-1(a)(3)(iv) [(v) in the proposed 401(k) regs] which allows for a one-time irrevocable deferral (or contribution, where DB plans are involved) election for folks who are newly-hired or newly-eligible for a plan. If you touch all the bases, this election is not regarded as a CODA.

For, say, a brand new DB plan that a partnership is installing (which will be cross-tested with an existing DC plan of some sort), the practice seems to be to allow the partners to make a one-time election to participate in the DB plan. If you elect to participate, you take home less money and the amount you elect is transferred to the DB plan instead.

Leaving aside the issue of whether the one-time election option is even available in this scenario as a result of participation in an existing plan (a strict reading of the regs and related guidance suggests that it may not be), suppose this partnership subsequently fell under the spell of a consultant who promised even greater riches through more agressive cross-testing, etc. In order to be able to take advantage of said changes, the participants would obviously need to be able to revise their "irrevocable" election. Can they do it?

Despite what seems to be a pretty clear prohibition on revokable irrevocable elections, are employers actually allowing them anyway and just playing audit roulette? Has anyone gotten the IRS to approve changes to elections when the terms of the plan at issue change dramatically?

I suspect that this sort of thing is, in fact, going on, and I am trying to figure out what rationale is used to support it. Any thoughts?

Is there any way to purchase life insurance with money that is in a SEP?

Owner of a business gets a windfall of cash after closing a big deal. He wants to set up a DB plan to shelter the income from taxes. Participants in the Plan will be himself, his son and two employees.

Here's the catch: He has cancer and will likely not survive beyond a year or two.

Can he set this plan up under the optimism that he will survive the cancer?

Take it as a given that the intent is to shelter the income for his heirs.

Scenario: There currently exists an irrevocable trust trusteed by our client's brother. The only thing in the trust is a life insurance policy where the trust is the beneficiary. Client wants to gift personal money to the irrevocable trust. The trust is going to form a preferred LLC. The plan will then buy stock in the LLC which in turn will buy property. The plan will receive a fixed rate of 6% from the LLC. Is this a prohibited transaction? Is this a violation of the exclusive benefit rule? Client's attorney said West Coast law firms have been doing this and there have been court cases won regarding this. Of course he would not cite any.

This smells bad to me, of course client is going with what attorney is saying. Anybody know about these?

We have a C-Corp plan where the owner & his son are the only employees. We have been filing a Form 5500-EZ for the past 5-6 years. The rules for filing a Form 5500-EZ state the employees must be the owner & spouse only. Does anyone have any correction suggestions? Thanks!

If an employer decides to limit his personal deferral amount into his company SarSep, or to NOT defer any monies at all for Top Heavy & ADP testing reasons, is he allowed to deposit after- tax monies into his traditional IRA?

Thanks for your response.

I hope someone can point me in the right direction. We received some correspondence that said we could make deductible deposits into a Welfare Benefit Plan, let the funds grow tax free and then pay no tax on the monies at retirement. Further, this plan would not require us to include other employees, does not penalize us if we need to withdraw the money before age 59 1/2 and provides an added pre-retirement death benefit.

What type of plan is this? I would like to research it, but need some direction on where to start.

Thank you.

They have three individuals they cannot locate. They utilized the IRS forwarding system but no contact resulted. The balances are small with the largest being under $500.

What is the approved method for removing these individuals? The company is located in Louisiana (in case that matters).

Any suggestions would be great!

Thanks

Just checking on what other TPA's are doing when they administer SH Plans under the following.

Large Company who sponsors SH 401(k) Plan. Demographics are many min. wage salaried employees, few management and a few owners. Company gets SH notice out to EE's offering a basic SH Match. In addition to notice to EE's, they go through a very thorough enrollment meeting. Results - Owners want to Max out their 401(k) contribution, Managers as well. Of the 70+ eligible min. wage workers 7 sign up to defer. Here is the question. What are TPA's doing about the following:

1. Proof that the SH notice was given

2. Are you getting enrollment forms back that indicates the other 63 eligibles decline defering. If so, is that impartive

Anything else missing regarding admin to a 401(k) SH Match? My concern is about the low participation, yet allowing the owners and other HCE's to max out.

I have someone who is part of a 457 plan and wants to establish a Solo 401K plan (I guess he has a side job). He tells me he can make salary deferrals to the 457 and to the 401k which of course would exceed the 402g limit. Is this true? do you not count deferrals to 457 plans as part of the 402g limit?

Is it the same rule with 403b plans? (I know, this is the 457 board but I thought you guys would know). A CPA is telling me he has a similar situation where a client can actually end up contribution $41,000 to his 401a plan and defer $16,000 to his 403b for a total of $57,000.

Thanks!