I have a situation where a grandfathered benefit under a DB plan may be paid out as a lump sum. I understand that participant consent (and spousal consent) are required if the value of the nonforfeitable accrued benefit (grandfathered plus future benefit accruals) is over the mandatory small benefit cash out limit (say 5,000). So what if the value of the benefit is 6,000, of which 4,000 is the grandfathered piece. Should the plan be able to cash out the addtional 2,000 to the participant even though the plan does not allow voluntary lump sums on that piece? Since participant and spousal consent was obtained for the grandfathered piece-it would make sense to do so because the residual value is less than 5,000.--but the problem I'm having is that there is no lump sum option under the plan, except for the grandfathered benefit.

Thanks for your help.

This may seem like a fairly elementary question, but this is the first time I've ever had to deal with anything like this. We just found out that for the last year and 8 months an employee who was supposed to have 10% of his pay contributed to our 401(k) was accidentally omitted from our system. How do we deal with this issue? Most places I've read seem to point to the fact that we basically have to fund the money we didn't take out of his pay into his 401(k) account (approx $6,000). I would assume that we would at least have to have our trustee calculate what he would have earned on that money over the life of the term had it been invested and we would have to pay that, but would we truly have to pay his entire nondeducted contributions? It amazes me that this employee never noticed that 10% of his pay wasn't deducted every paycheck. I know this is our fault that someone didn't enter his information correctly in our payroll system, but does any responsibility fall on the employee? In essence, if we have to pay back the contributions the employee would be getting a $6,000 bonus, and that doesn't seem right. Does anyone have any advice as to what we shoud do to correct this problem? Thanks!

A client of ours is terminating their 401(h) plan, and they are not sure how to pay everyone out, in other words, must the assets be left in the plan until participants have incurred medical expenses, or can the money be forced out?

Today, an employee approached us stating that he recently found out that he's the father of a 3 year-old and he wants to add her to our group health plan.

This isn't a birth or adoption, so I don't think this would be considered a special enrollment opportunity under HIPAA, but it may be a change in the number of dependents and we could sneak it in under the revised CIS rules.

Does anyone have any advice on whether we should allow this or not? If so, what would you require for documentation - an affidavit?

Hi,

I had a question about a potentioal prohibited transaction. If an investment advisor were to provide their employees a retirement plan, would making themselves the broker of record and therefore receiving comissions be considered a prohibited transaction?

Thanks

An Employer has a couple of small welfare plans for which no 5500s have ever been filed because the number of participants have not been counted correctly. There have been (a little) over 100 eligibe employees for several years. The plans are being updated effective 1/1/05.

I am weighing the pros and cons of recommending correction for prior years vs. relying on the past "good faith" method of counting participants and just file going forward, as of the new 1/1/05 effective date. (The definitions of participant will be changing slightly in the restatement so it seems like a good "clean slate" to start with.) Any thoughts??

CFP asked me (told me he read a news-letter or was told by someone) if a person can establish a plan and rollover balances from other plans and IRAs to the new plan. There will no be any deferrals (because there is no compensation) or employer contributions. He wants to know if it can be done so he can solely roll other monies into it like IRAs or other QP accounts..

What is the ruling?... do plans have to receive active deferrals and or employer contributions?

Have a client that wants us to give him the pros & cons on default investments. Using a Money Market account versus a balanced or lifestyle investment funds in lieu of investment direction. Does anyone have anything on this issue? Would be greatly appreicated.

I would like your opinions on whether or not the following situation is a prohibited transaction:

A plan sponsor has a brother-in-law as the plan broker. The brother-in-law owns an outside business. The broker wants the plan sponsor to invest part of his own segregated account (not other participants) into the privately held stock of this company. Is this a prohibited transaction?

A Client with $300,000 in a 20 year old Plan is moving from Ohio National to another carrier. They were notified that their $146,000 fixed account will be decreased to about $120,000. This is called a market adjustment, not a withdrawel charge.

I have seen market adjustments in fixed accounts before, but this seems way too high. Does anyone have any suggestions?

If the seller in a stock sale agrees to terminate all of its ERISA plans PRIOR TO CLOSING and take responsibility for doing so in compliance with ERISA, Code and other applicable laws, does the buyer have any obligations with respect to the plans?

I assume that the buyer needs to make sure it doesnt have a successor 401k, anything else??

This information was posted 8/30/04 on the 403(b)wise website.

The NTSAA has advised its members today that the 403(b) regs are postponed indefinitely. It is not clear whether we should expect a modest delay or a longer one, but the implication seems to be that we shouldn't expect anything in the next month or two, at least.

A plan that does not require spousal consent obtained spousal consent for a plan distribution. Three interesting twists:

1) The participant also happens to be the owner/sponsor of the Company.

2) The participant forged the spouse's signature

3) He is now getting a divorce.

He has obviously already spent the money and wants to avoid the court saying something along the lines of, "well obviously the spouses consent was required... as such fork over half of the dough."

I'll settle for thoughts on the legal effect of obtaining a spousal consent when not necessary.

Any thoughts?

When you are calculating the required quarterly contribution amount, do you include a Full Funding Credit?

A client of ours is terminating their 401(h) plan and they need to pay everyone out, but they are not sure how to pay everyone out, in other words, must the 401(h) assets be left in the plan until a medical claim is incurred, or can the money be forced out before a medical claim is incurred?

Small plan (the only participant currently is the owner). the owner would like to invest plan assets in a closely held bank and he will be a director of that bank. is this a PT? i think it is a transaction with a party in interest. however, an investment is not a sale or exchange so i have some doubt.

Plan A is a 12-31 yearend 401(k) plan. The owner is selling the company to an unrealted party effective 10-01. I don't have the details on the type of sale or what the old owner and new owner want to do with the existing plan.

I do know that the current owner of plan A would like to make a final profit sharing contribution to the plan before he sells the company. Can the owner make a contribution to the plan if the plan has a last day and 1000 requirement?

Does the plan need to be amended to remove the accrual requirements in order to make a contribuiton? Does it matter that the plan is a new comparability profit sharing design? Any thoughts would be appreicated.

The QDRO states that the Alternate Payee receives 50% of the accrued account balance. The participant is 100% vested and his balance includes an outstanding loan of $8,000. How does the loan balance apply in calculating the distribution? 50% of the account balance is $11,000. I think the distribution is $11,000 and the total loan balance stays in the plan to be repaid by the participant.

Has anyone encountered a QDRO where the participant has an outstanding loan?

Client has supplimental benefits (cancer, etc.). The employees purchase individual policies on an after-tax basis and the premiums are run through payroll.

Is this an arrangement that would require a form 5500 filing? I'm pretty sure the answer is yes, but the client is arguing against it and making me second-guess myself. Any thoughts?

Thanks

Client has supplimental benefits (cancer, etc.). The employees purchase individual policies on an after-tax basis and the premiums are run through payroll.

Is this an arrangement that would require a form 5500 filing? I'm pretty sure the answer is yes, but the client is arguing against it and making me second-guess myself. Any thoughts?

Thanks