1.401(a)-20 Q&A 10© addresses annuity starting date for disability benefits:

1. Annuity starting date occurs when payment of disability benefit begins, unless disability benefit is an auxiliary benefit.

2. Disability benefit is auxiliary benefit if upon early or normal retirement age participant receives benefit that satisfies accrual and vesting rules of 411 without taking into account prior payment of disability benefit.

Reg gives two examples based on age 45 participant who is entiled to a vested accrued benefit of $100 per month commencing at age 65 in the form of a qjsa and receives a disability benefit before age 65:

1. If disability benefit does not reduce participant's $100 retirement benefit beginning at age 65, disability benefit benefit is auxiliary benefit, and annuity starting date occurs at age 65.

2. If participant's benefit at age 65 is reduced to $99 at age 65, disability benefit would not be an auxiliary benefit because the $99 benefit at age 65 would not satisfy 411 accrual and vesting rules without taking disability benefit payments before age 65. Thus, annuity starting date occurs when disability benefit is paid.

I recently took over a db plan that provides a disability benefit that is equal to the accrued benefit unreduced for payment before age 65. The plan provides a qjsa election at disability using disability actuarial factors (that results in a more severe reduction than the normal qjsa factors).

A question has been rasied whether this db plan is required to provide the J&S election at age 65 under the above reg. The plan prefers to give the qjsa election at disability.

I am not sure of the answer. You would think I could figure this out some 16 years after the issuance of the IRS regs.

As I see it, I could avoid the whole question by simply having the plan apply a small reduction for early payment upon disability. However, before doing so, I was wondering if anyone had any thoughts on whether:

1. if payment of an auxiliary disability benefit must be disregarded under the regs in determining the annuity starting date; and

2. if offering a qjsa election at disability and imposing a disability qjsa reduction by itself would take the disability benefit out of auxiliary disability benefit status.

A labor group is negotiating concessions with a company in bankruptcy. One proposal is to accept wage reductions and freezes in upcoming increases (the wage rates and scheduled increases are set out in the existing contract).

However, the hope is to maintain the existing accrual rate under the DB plan by using the present (unreduced) wage rate and scheduled increases for determining FAE in the benefit formula.

Can this be done? Can a plan define FAE as it wishes or must the earnings component accurately reflect reality and wages actually earned for any period?

Is this required under ERISA? Are there any bankruptcy concerns? PBGC limitations? Is preservation of benefit accrual an "improvement"?

Thanks for your thoughts.

We have an employee that is interested in banking the cord blood of their child? Do you think that this would qualify as reimbursable under the medical reimbursement plan? Any help would be appreciated.

I am working on a 5500 and am having trouble with the active participant rules for Lines 6 and 7 of the form.

At BOY, the company had 105 employees with account balances - I assume this is the number of participants at BOY.

At EOY, there were 76 employees listed as active with account balances, 28 listed as terminated and 1 retired. 13 of the terminateds/retirees had a zero balance at EOY.

Does this mean I am now down to 92 for EOY count on Line 7g? What about the other 16 terminateds who are to get their money? The instructions to the 5500 say not to include "any individual to whom an insurance company has made an irrevocable commitment to pay all the benefits to which the individual is entitled under the plan". Does that exclude the group of terminateds who will get their money but haven't done so yet?

As long as the total for the beginning of next year is under 100, that is the main goal here. Thanks for the help.

Can an individual roll her IRA money into her company's 401(k) plan? Does it matter how long the IRA has been around?

Thanks

Where can I find a list of assets that fall under the non-qualifying asset umbrella?

Not my bailiwick, so bear with me

Facts

- DB plan will be frozen to new participants. Freeze not applicable to current participants.

- Match in 403(b) plan will be increased for all participants; otherwise, no changes to 403(b) plan.

- New employees (no longer eligible for the DB plan) will receive a non-discretionary DC contribution. DB plan participants not eligible for this.

- Since the DB plan will eventually have a problem with coverage under 410(b), the plan is to aggregate it with the new 1% DC account.

Question

Can the DC account be aggregated for the ABPT if part of the 403(b) plan or will a 401(a) plan be required?

My analysis

401(a) plan will be required, per Reg. 1.410(b)-7(f).

However, that Reg. was last amended in 1994. Any IRC changes that would produce a different result? Any other relevant issues? What am I missing?

I received an email from a plan sponsor who wanted to update his/her plan for GUST.... missed the deadline and didnt do anything to date. This can be done through voluntary compliance.... Anyone want to share thier experience? A direct link to the proper procedure?

Assuming a client missed the 9/15 deadline for making the profit sharing contributions so the deduction for 2003 is gone. We can still make the contribution today and it would be deductible for 2004 but considered a 2003 contribtion correct? Can we continue doing that for a few years until the deduction for the missed contribution has been recouped? IE making a portion of the contribution prior to September 15 to reach the 404 max and the rest after september 15; continuing to do this until she has "regained" her lost deduction?

If the plan was originally a stock bonus plan (not subject to diversification) and was amended to be an esop, do you count years of participation for diversification from the original plan date or from the date it was amended to an esop?

Thanks

Dee

An esop declares a dividend of $1 per share for a virtually new plan. let's assume there are 100,000 share and $100,000 is deposited into the plan's other investment account as a dividend. this was done so as to have cash available to pay out soon to be retirees.

since only 10,000 shares are currently allocated in the plan and 90,000 shares are still unallocated, can the declared dividend be allocated among the participants currently in the plan or does $90,000 need to be accounted for separately and placed in some sort of unallocated dividend account?

thanks

$8 million contribution for plan sponsor was inadvertently booked to VEBA on 9/14/04. Then offset and rebooked to pension fund on 9/17/04. Is it OK to use 9/14/04 date received on Schedule B?

May seem silly to ask, but in the SOX world....

Understand if husband dies with Roth, wife can adopt/inherit and no distribution required until her demise. Also understand she can disclaim to the Bypass Trust as beneficiary of Roth. On portion retained by wife, can she still withhold taking distribution? On the portion going to Bypass, can the three children each receive a tax free distribution based on their life expectancy, or does if defer to the age of the oldest child? Any problems I should be aware of in funding the Bypass and setting up the required Roth distributions?

I'm designing a plan for a group of emergency room physicians. The group includes physicians (all HCE), physician's assitants (some HCE, some NHCE), and the office manager (NHCE). The first try resulted in a plan the satisfied the calculation-based safe harbor. Then some of the docs asked for lower contributions, which will mean lower formulas. Will this blow the safe harbor because I no longer have the same formula, or can I still avail myself of the exception that allows for benefits of lower value to HCEs?

What is the best way to calculate lost opportunity earnings on employee deferral contributions that have not been deposited in a timely manner. Are there specific regs on how those earnings must be calculated? I can't find anything specific.

I'm a personal finance/tax guy with a client whose employer is telling us that even though he elected to begin deferals into the 401k in August, he will be receiving no match in 2004 since he had already earned $205,000 before his deferal election became effective. Company is saying that he can defer, but he gets no match.

"There is a legal stipulation by the IRS that you can only contribute for the first $205,000 that you earn to get the company match."

Doesn't seem right to me. Any thoughts?

Does anyone know where I can find easy access to the Puerto Rico 401K tax rules and regs? Other than purchasing a copy of the laws or resorting to Puerto Rican counsel?

My 401K is underperforming. I plan to reduce contributions down to 1%. My company does not match. This move will not throw me into another tax bracket. I have calculated what the after-tax amount will be to invest and plan to start a ROTH IRA. This will be my first trek into taking control of my retirement (only 15 to 20 years left to go) and I really am under-educated. Advice has been sturdy but looking for verification. Care to weigh in? Thanks!!

I have a client that is terminating their SIMPLE IRA effective December 31, 2004. Can the assets from the SIMPLE IRA plan be rolled into the new 401(K) plan that they establish?

Isn't there some rule regarding taking money out of a SIMPLE IRA before being a participant for two years?

If yes, please provide the name of the software and why it works well for you (along with any problems you have).

Thanks!