Two corporations in the same controlled group want to merge their two separate cafeteria plans into one plan. The two plans are similar in many respects but I haven't seem them yet. I know we should consider discrimination issues. Any thoughts on discrimination issues or any other issues you can think of?

I know it's the norm to not allow it. By whom? The IRS? Is it the IRS that says "it is against the law to create a 401k plan that allows distribution during employment." ? What publication discusses that? Or is that determination made by the plan sponsor?

Can the company make that decision? If not, why not? Can my company (who will be switching sponsors soon) say to the new sponsor "in creation of our new 401k plan, you will allow distribution of funds to an employee at their request" ?

This all assumes that in doing so, the employees get all the education they need with respect to the penalties, withholding, and roll-over timeframes (and much more) that are not only required, but just plain common sense.

Thank you in advance - Phil

I've perused hundreds of web sites including irs.gov and can't find the answer anywhere. I've read where you can contribute your Trad IRA funds a little at a time to ease the tax consequenses, and I'm fully versed in the pros/cons of Trad vs Roth; "you must mind your personal circumstances, Roth dollars are bigger, you must take into count tax brackets, depends on current age and expected retiring age..." all of this I know.

Here's why I ask. Yearly, I plan to build a Traditional IRA, and at each year's end, roll it over into a Roth. After a reply or two, I'll gladly explain why I would not just contribute all to the Roth in the first place.

You see, for me, a Roth makes the most sense, and it will for many years to come. Therefore I wish to convert each year's newly created Trad IRA money into my Roth. Where can I find sites / publications that cover repeated conversions (over several years and with several subsequent Traditional IRAs)?

Thanks in advance! - Phil

Is there a time requirement, in days, for the administrator to begin processing of a properly documented claim?

Assuming "timely" or "reasonable" are the time limits, have there been any cases where the administrator took 2 months and 3 weeks to begin and that was not "timely"?

Thanks

This issue is in regard to a DB plan. The SSA instructions refer to termination of employment and break in service years, and say to delete a participant when they cease to be entitled to a benefit. The references to employment would seem to refer only to an employee participant, and when someone dies they are no longer entitled to a benefit -- although one or more beneficiaries may be. However, Form 5500 Item 7 asks for a count of deceased participants whose beneficiaries are receiving or are due future benefits.

Upon death of a participant with a beneficiary due to receive future benefits, should we:

1. delete the participant from Schedule SSA if previously reported, and not to add any beneficiary for SSA reporting. So even if death benefits are still payable, the participant has been deleted and no beneficiary added;

2. when a participant dies prior to commencing benefits, if they have been reported previously on Schedule SSA, they are left on, and if they have not been reported they are added. No beneficiaries are added. When the LAST death benefit is paid out to a beneficiary, the participant is deleted from SSA on the next report. Under this process, the deceased participant remains on SSA and SSA "Notices" would be mailed to the deceased participant until ALL death benefits had been paid out. A difficulty with this process is the the beneficiary records have to be linked to the participant's record;

3. delete the participant and add the beneficiaries to SSA. This would allow SSA notices to go out without linkage being required to the deceased beneficiary for each participant. But this method does not seem to be called for by the instructions; or

4. Something else?

Thanks for any guidance.

My company recently acquired another company and assumed the pension administration for the acquired company. The files were transferred to us and we have found many problems:

1. Copy of property settlement agreement in the file which awards an interest in the DB pension plan to the non-employee ex-spouse. The one I found this morning is from a dissolution in 1994. EE claims to have no knowledge of ex-spouse's address. Attorney who handled divorce advised me "I will not draft a DRO". Participant applied for benefit for 9/1/04 commencement.

What do you think we should do? Should we put ourselves in the position of hunting for the ex-spouse/attorney? If we segregate an amount for the ex-spouse for 18-months, then pay it to the employee, have we fulfilled our obligation?

2. Many DROs with defects not corrected. AP is missing in action, attorneys who won't reopen files.

Same questions as above.

We recently added a cash benefit contribution account to our pension plan. In addition to its own terms, the contribution account is also governed by the terms of the pension plan. The pension plan provides for an involuntary cash out of accrued benefits that are $5,000 or less. If an individual has an overall accrued benefit of $7,500, but $1,200 of that amount is in the contribution account, can the trustees involuntarily distribution the $1,200 to the individual?

Does the individual have to been given a benefit election form, either for the pension plan or cash balance plan, if he is the receipient of an involuntary distribution or can the plan simply cut him a check?

Thank you in advance for your help.

We currently have a client (a bank) that offers proprietary mutual funds in pooled accounts. We are trying to locate a company to write a daily valution program for the bank that would enable them to offer a 401(k) daily val platform of their own to their clients.

In the end, they would like to be able to offer a product similar to other investment companies daily recordkeeper products.

Does anyone have any suggestions, or ideas of where I could look for other suggestions?

Thank you.

Here is the situation: We employ a nurse in-house solely for the benefit of employees. We are not in the health care business and the nurse is not affilated in any way with our health plan. If she only uses faxes and voice messages (in additional to paper) when performing her job, will she be considered a "covered entity," specifically, a health care provider who transmits health information in "electronic form" as defined in 164.102? It doesn't appear that "electronic form" is defined in the privacy rule, and I'm not sold on relying on the definition of "electronic media" in 164.103 which excepts fax and voice messages.

I appreciate any and all thoughts!

A loan was issued incorrectly in the following manner. A participant had a vested balance of 32,000 and an outstanding loan of 9,000. The participant wanted to refinance the loan and the new refinanced loan was issued for the amount of 10,000 (9,000 of old loan and 1,000 of new addition). This would be over the limit of the available loan amount.(19,000>16,000) How is this corrected?

Hello. Lately, I have been reading about roth ira accounts. Most articles I read say that roth ira's have a return between 8% and 10% a year. What I neeed to know is where can I find out the rate of return that each bank/investment co. has? I have bank accounts with National City, so I would like to setup a roth with them, but only if they have a high rate of return. Basically, I want to know if there is a website that will list the average rate of return on a roth ira account for all companies. Is this a good idea on how to choose company? Should I just go with my local bank and assume their returns are high?

please let me know as I am new to this.

thanks

I have a 412(i) client who is being audited by the IRS. The auditor asked for the "promoter's" original proposal. Here is my problem. It appears that the first-year contribution was made based on the proposal. However, the proposal provided for a 12-month plan year. We, at our client's request, drafted the plan to provide for a 9-month initial plan year.

The plan sponsor is a charitable foundation, so it is tax-exempt. But does anyone have any ideas about what the IRS is after, or what I can do for my client at this point? Any suggestions would be appreciated. Thanks!

Plan 1 with a lump sum survivor benefit.

The participant dies in her mid 40s with an age 65 sla that she could have accrued limited to $160,000. The calculation of the lump sum survivor benefit in the Plan assumes the participant terminated employment at the end of the month following death and received payment immediately (even if earlier than the earliest commencement date otherwise available). The lump sum is calculated at her age of death. For the 415 test, we convert this hypothetical lump sum to a sla at age of death. We then reduce the $160,000 limit to a limit at her age of death and if the limit is exceeded, we reduce the hypothetical lump sum until the sla equivalent equals the limit. From that sla (reduced if necessary), we compute the lump sum and pay the beneficiary.

Plan 2 with a qualified preretirement surviving spouse annuity (qprssa) feature but no lump sum survivor benefit and the qprssa is not available until the participant would have been age 55 or older.

Same scenario as above with respect to age of participant at death. The participant's 415 limited age 65 sla is fixed at death at no more than $160,000. Not knowing if the spouse will take the benefit at age 55 (or later), we can't run the 415 test as of the date of death of the participant. The spouse decides to take the benefit at the participant's age 55. We would develop a hypothetical scenario where the participant terminated just prior to death and elected a 50% J&S with the spouse as beneficiary commencing at her age 55 and died right after commencing the benefit. We would reduce the $160,000 limit to the limit at the participant's age 55. If the life annuity that would have been paid to the participant under the hypothetical 50% joint and survivor exceeds the reduceed limit, we would reduce the participant's hypothetical benefit until it was equal to the reduced 415 limit. The spouse (beneficiary) would be paid a life annuity equal to 50% of the participant's 415 limited hypothetical lifetime benefit.

Does all of this sound correct? There doesn't seem to be much (any?) authoritative guidance on this unless someone can direct us to such. 415 is a limit on a participant's accrual but testing is done on a a benefits delivery basis and teseting is done at the participant level, not the survivor (we think).

A plan uses actual hours to meet the 1000 hours requirement for a year of service. There are several salaried employees on staff, which means that no one keeps track of their hours. Should there be something specifically listed in the employees salary package indicating that he or she is considered a full time employee?

Can an employee receive a hardship distribution from the portion of her account representing employer match $?

Employer A has a "program" by which it pays the employee's spouses portion of the premium for family coverage health insurance sponsored by the employee's spouses employer. (employee is covered under the family coverage)

Employer B has a "program" by which it reimburses $400 of a $1000 deductible once the employee has had to pay that $1000 deductible.

Are either or both of these ERISA plans? (plan fund or program established or maintained... that does not meet the voluntary employee payall excepetion because there is an employer contribution?)

THANKS!

Does anyone know of a court case against a bundled service provider who failed to timely deposit an employer’s contribution. We have a possible takeover client whose prior provider has been holding a 1M check for quite some time and has just now made the deposit (still not allocated into participant’s accounts). Thanks.

I have a client who adopted a 401(k) plan in 2003 administered by another TPA. They have a separate profit sharing plan which my company does the third party administration.

The 401(k) plan has immediate eligibility - the profit sharing plan has age 21, 1 year of service eligibility.

When we prepared the combined top-heavy testing for both plans - they are top-heavy for the 2004 plan year.

The owner of the company has already deferred the maximum in 2004. When I explained that the company would be required to make a 3% top-heavy contribution for the 2004 plan year to everyone who is eligible to participate in the 401(k) plan and the profit sharing plan, they said that their 401(k) TPA told them that the owner would be able to take back his deferrals that he has already deposited into the plan in 2004.

Isn't this a prohibited transaction? Does anyone have anything in writing that states you cannot do this?

Thank you for any input.

I'm having a hard time laying my hands on the tax brackets for Unrelated Business Income Tax. I thought it used the Trust Tax rates which I thought was about $7500 for the highest tax bracket. I'm not sure if anything has changed on this in recent years and was wondering if anyone knew the highest tax rate is for UBIT and at what threshold (net income) it kicks in at ? Thx for any help.

An employer is leasing some employees who are covered by the leasing organization's plan. The employer's plan has a slightly better contribution formula than the leasing organization's plan, so the employer will give the leased employees the difference.

Does the employer also have to be concerned about meeting a benefits, rights and features test for the leased employees? In other words, does he have to compare his plan to the leasing organization's plan to make sure there's no discrimination for provisions other than the contribution formula? For example, distribution options?