If a terminated participant receives a distribution and there is a small balance remaining in the account afterwards, do you process a second distribution? What if the balance is under $10.00? Under $1.00?

I was reading under EPCRS that there is a de minimus amount of $50 whereby the employer need not made a corrective distribution if the reasonable direct costs of processing and delivering the distribution to the participant would exceed the amount of the distribution. Would this apply in this case? Could the small balances be transferred to the forfeiture account instead?

Our company has a group life insurance policy for its employees with a $50,000 cap. During our renewal, we went below 10 employees. The insurance company is denying coverage to one employee, they want complete medical histories for a couple more and one employee wants to waive but the insurance company won't let him. Can we do individual policies with the Employer paying the premiums and still have the first $50,000 tax free?

Thanks!

MY DAUGHTER JUST GRADUATED FROM NURSING SCHOOL. SHE IS 21 YEARS OLD AND I AM TRYING TO TEACH HER HOW IMPORTANT IT IS TO START SAVING NOW AND WHAT AN ADVANTAGE SHE WILL HAVE OVER IF SHE WAITS TO START. SHE WILL HAVE 400.00 A MONTH TO INVEST AFTER ALL HER BILLS AND EVERYTHING. SHE HOPES TO PURCHASE A HOUSE IN A FEW YEARS. HER JOB IS OFFERING A 401K BUT WITH NO MATCH AND THEY MENTIONED A PENSION AFTER A YEAR. IF SHE PUTS ALL $400.00 A MONTH IN THE 401K-SHE CANNOT HAVE HOUSE MONEY OR EMERGENCY MONEY IT IS ONLY FOR RETIREMENT. I WAS GOING TO SUGGEST PUTTING 200.00 IN THE 401K AND 200.00 IN A VANGUARD ROTH INDEX FUND. WOULD THIS BE BETTER THAN EVERYTHING IN A ROTH OR NOT? ALSO IF SHE DOES A ROTH, DO THEY OFFER AN AUTOMATIC DEDUCTION OUT OF YOUR CHECKING ACCOUNT EACH MONTH? THANK YOU SO MUCH FOR ANY HELP-WE COME FROM A FAMILY WHO HAS NEVER SAVED-HER GRANDPARENTS DO NOT HAVE A DIME-I HAVE SAVED AND SEE THE BENEFITS-I DID NOT WANT TO BE LIKE MY PARENTS AND MY DAUGHTER SEES THEM STRUGGLING AND I THINK SHE IS LEARNING AND UNDERSTANDS THE IMPORTANCE. IT IS ALL SO CONFUSING AT TIMES, THOUGH AND I JYST WANT TO SEE IF WE ARE ON THE RIGHT TRACK FOR HER.

It seems to be a serious problem that banks are not accepting forgery claims. They make it almost impossible to have the pension funds returned to us. Here is one example. We had one monthly annuity participant that had her checks cashed by the estate after her date of death (for over a year). (Side note: We were never informed of her death. )We filed a claim with the bank and they informed us we had to have an affidavit signed by the estate to continue the forgery claim process. We are attempting to have this document signed, but we know there is a 99% chance they will not return the form. Who knows, the estate could have been cashing the checks. If your company or client was in a similar situation, what advice would you give them? Are we just going to be out of the funds or do we have any other options to get the funds returned to the trust? It is hard enough just trying to keep the plans fully funded with the market and now we have to deal with banks not returning funds.

I've posted this issue on the nonqualified plan board as well, but since it concerns discrimination testing, I wanted to see if anyone here has any input.

Question: Can an employee elect to defer into a nonqualified plan amounts that would otherwise be returned to him as a result of a failed 401(k) ADP/ACP test? The participant would make an election in the current year to defer any amounts that would otherwise be returned to him in the following year due to a failed test.

The IRS has sanctioned arrangements whereby deferrals are initially contributed to the nonqualified plan, then moved to the qualified plan once it is determined how much can be contributed to the qualified plan under the nondiscrimination rules, but would the approach that I mentioned be acceptable as well?

Thanks for any thoughts on this!

I have a two employee c corporation (Sep to Aug fiscal year) and since the tax laws allow contribution for the previous calendar year, the corp has contributed in August this year for calendar year 2003 earnings (25% of earnings). Can the corp also contribute in August this year itself for 2004 earnings so far?

I am hoping to make this contribution since the corp has cash available which will be taxed otherwise at the end of the year (Aug 31). Also, we are considering closing the corp by Aug 31.

If contribution can be made for year 2004 earnings would the limit of 41000 hold?

Thanks

We have a large company (over 30,000) and we lease employees from a PEO. We'd prefer to have these employees log less than 1,000 or at a maximum 1,500 hours per year.

But many of these employees like the temporary work and over the years have accumulated many 1,000 hours in different departments of the company. Since we're so big, it's easy for these employees to move from department to department. Many managers are very upset at the prospect of not being able to have their favorite temp come back or stay working for them. They are proposing that we only use them 999 hours each year. We are proposing that they hire the person if they like them so much but they counter that they can't use an FTE and that the person does not want to be an FTE or even part-time.

We do exclude leased employees from our plans and have the clause regarding exclusion in the event they are reclassified.

Are the hours measured on a calendar year basis only? or do they accumulate? Any thoughts?

Depending on what the document states, can forfeitures that occur in 2004 from a non-discretionary employer contribution account be used to fund the 2003 year end profit sharing contribution, if the contribution is not made until 9/15/2004 and the document states that forfeitures can be used in the current or following year?

My feeling is no, but everything I seem to find is unclear to me.

While nothing is final, my understanding would be:

1. The NQDC investement offering would be based upon the short list of funds the participant has direction.

2. Unless you have some special hooks in your plan, the company's fiscal year is immaterial. The participant is making a deferral election prior to 12/1 for monies to be paid to them between 1/1 and 12/31 of the following year.

3. Good question. While the regs say any participant changes can't take effect for five years, my understanding from others is the intent was to delay acceleration of benefits - converting a 10-year installment to a lump-sum. So I would doubt your request from 10-year to lump-sum, but possibly 10-year to 20-year. The next question should be who would really want to extend their unsecured creditor standing during retirement from 10 to 20 years? Having been a NQDC TPA for over 15 years I never had a single case of someone electing to extend their payout. Most elected lump-sum and most plans called for lump-sum as the default election. Most companies don't want to hassle with paying out NQ benefits on an extended basis.

4. Yes - As long as this is a plan level provision, not a participant election.

5. Yes - New participants can still come in anytime and commence deferrals 30 days later.

The next question is why would a HCE want to continue to participate in an unsecured NQDC when the new era of selective benefits are personally owned company sponsored benefits that provide greater value and none of these hassles. As well as none of the hassles or expenses for the company.

A QDRO awarded half of participant's entire investment to his former wife. Now she receives an annual investment statement from the plan each year. That's right, the statement is in her name only.

Does this mean that she is a participant entitled to a SPD? Can she request a copy of the plan document (just like any real bonafide participant can)?

She presently has no idea if the plan is an ERISA 404© plan. Is the plan required to give her something in writing which explains if the plan is 404© plan?

She called the plan's 1-800 phone number and was told that she has no control over how the plan invests her account funds. The person she spoke to said he wasn't familiar with the word "ERISA". So obviously, she didn't speak to anyone of authority or knowledge.

Here's my questions:

1) I realize that if a plan is an ERISA 404©, then such must be stated in the plan document .... but it's not required to be in the SPD (according to the DOL's list of things that are required to be in the SPD). So how does she find out if the plan is a 404© plan, other than calling the plan and speaking to a receptionist?

2) If it is a 404© plan, then must she too be afforded the priviledge of selecting how she wants her account invested .... or does she not have that right because of the way in which she acquired the account (via a QDRO).

Note: Her ex-husband is still employed by the plan's sponsor.

Anyone have an excel formula I can use to allocate the basic Safe Harbor Match contribution?

Can i sell a fund that is currently in my Roth IRA to use the money to purchase a different fund in that same Roth IRA without having to pay any taxes or penalties?

I believe the old rules required an employer contribution into a 403b to be 100% vested.

Have the rules changed? Can we have a vesting schedule in a 403(b) now? Is there an IRS pub or Rev Ruling that specifically covers that?

I am trying to locate a person willing to be the administrator for a one-person FSA for a retired clergy person who has no employees. His accountant was willing to provide this service in the past but no longer is maintaining the administrative software license after 2004. Thus, the clergy person needs to find another independent person to provide this minimal service.

Where do I look? Do I look to other accountants, a TPA (which is unlikely to want to deal with a one-person situation in a cost effective manner), a financial planner, an insurance broker, an enrolled agent, or what?

The clergy person is exceptionally thrifty so any charges will need to be minimal (as an example, he always does take out food and orders only one meal to share when traveling with his spouse, and it is never at supper time).

Thank you for any suggestions.

Theresa Lynn

Several participants have plan loans that the plan provides should automatically be made by payroll deduction. For a number of administrative reasons, the employer and the TPA either never started repayments by payroll deduction or deductions did not equal the required installment amounts. The failure has just been discovered so participants have not yet been notified. Many participants have payments that were due in the first quarter of this year or sooner but have not yet been made. (The plan does not have loan procedures so we are choosing the latest date possible for the grace period.)

At least some of these loans must be defaulted in order to comply with Section 72 but we are hesitant to do that because this is arguably the employer's fault. Instead, we propose to allow participants to refinance the old loans with a new loan (assuming they have enough in their accounts to do so and the refinancing otherwise complies with Section 72). Because we are not declaring default for the prior loans but are required to under Section 72, we would file Form 5330 and pay the associated excise tax.

Does anyone see any problems to this approach or a simpler solution? Thanks in advance for your help.

All of the private letter rulings that I have seen that address paired 401(k) and nonqualified plans state that the elected amount is contributed to the nonqualified plan, then, soon after the end of the year after testing is done, the amount that will "fit" into the qualified plan is "poured into" the qualified plan from the nonqualified plan. The IRS has sanctioned this approach. (PLR's 200116046, 200012083, 9924067, 9807027)

Would the reverse approach work? An employee who is eligible for the nonqualified plan would make separate 401(k) and nonqualified plan elections. He could also make an election to defer into the nonqualified plan any amount that is required to be returned to him from the 401(k) plan due to a discrimination testing failure. The election would be made in the year prior to the year that the funds would otherwise be returned.

It seems that the amounts returned due to the testing failure could have been contributed to the nonqualified plan if the 401(k) plan did not exist, and therefore the participant should not be precluded from contributing the amounts to the nonqulified plan simply because nondiscrimination rules prevent the 401(k) plan from accepting the contributions (assuming a timely election). Has anyone seen a ruling based on this approach?

If this is allowed, I imagine that complying with reporting requirements could be interesting, since the 401(k) is distributing amounts but they are not received by the participant.

Thanks in advance for any thoughts on these issues.

I'm assuming most folks here are using Windows XP. Service Pack 2 will start rolling on to your computers in the next couple of weeks, and I thought it might be a good idea to keep track of any issues popping up with pension software so we don't feel like lone voices in the wilderness (trust me, there will be problems).

I downloaded the complete patch and put it on our server (so we won't have 15 computers downloading the complete patch over and over again) and installed it over the weekend (on my own guinea pig computer - not on all boxes before testing!).

Observations to date:

Pension Software running

ASC Win/Val w/ Pervasive 2001

Relius 2004 Government Forms

Relius SAR

Relius Government Forms 5300

Only problem noted is with Relius Government Forms 5300. You will NOT be able to print as it gives you an error message that "Your Printer Drivers are Outdated". Tried it on a non SP2 computer and no problem (both to network printers).

Contacted Relius this morning; still waiting to hear of a fix.

A deceased participant named his spouse as the primary beneficiary and his son as the contingent beneficiary. Spouse does want the distribution and wishes to defer the distribution to their son. I assume that she can do this, correct? What form will she need to complete in order to do this?

It has been determined through an attorney we have an affiliated service group consisting of 2 clients. The one client has a 401(k) Leveraged ESOP plan and the other a 401(k) Profit Sharing Plan. The 401(k) Profit Sharing plan excludes HCEs. Our understanding is the Profit Sharing Plan will provide a PS contribution "comparable" (we assume in dollar amounts) to the Leveraged ESOP. I understand we have to aggregate the plans for testing purposes, but is there a Benefits, Rights, and Feature problem with this plan design?

We have a client that has an initial short plan year of 5/1 to 12/31. Plan document says for entry date "semiannual - first entry date: 1/1 or the date 6 months thereafter, coincident with or next following satisfaction of the eligibility requirements".

Question: What are the entry dates for the initial short plan year?