Here's the situation - there are 2 DB plans within a controlled group - Plan A an underfunded salaried plan and Plan B an overfunded frozen plan with only term vested participants.

The employer purchased annuities for all of the term vesteds in Plan B and now wants to merge Plan B, which now has only the excess assets after the purchase, into Plan A - these excess assets will now be available for the participants of Plan A.

My contention is that under the exclusive benefit rule all assets of Plan B have to be used for the participants of Plan B and what they should do is merge first and then pay out benefits by way of , for example, a plan termination.

Does anyone agree ?

A participant receives a loan from from his 401(k) Plan 2001.

The loan re-payments were to commence for 120 pay periods (5 years).

However, the Plan has not deducted the repayment amount from the individual's payroll until 2 years after the loan re-payments were to commence.

In this case, should the Plan receive the total repayment amount and interest amount for the period from the participant?

Should the Plan receive the only repayment amount for the period from the participant?

Or is there another alternative?

1st question: When notifying a participant of his need to take a Required Minimum (RMD), are you required to send them a tax notice? For example, if you notify the participant in October that an RMD is needed by 12/31 and you give him an election form, are you required to also provide a tax notice? Since the RMD is inelgible for rollover, I wasn't sure if the tax notice requirement applied.

2nd question: Can a participant who is married and elected to use a single life factor, chose to use a joint life expectancy factor after a few annual payments have been made? If so, can the participant just elect a change, or must he have had a maritial status change?

Thanks

Can anyone help with the basics on holding FSA money?

Trust/fiduciary/audit are the three questions:

I understand that it is not reuired to be held in trust.

Is it subject to fiduciary requirements to earn interest?

Are the funds required to be audited.

Can they be kept in an account in the plan's name if it is not a trust account or does the account need to be legally titled in the employer's name?

I find conflicting numbers in different sources. Anyone know the exact number off-hand? Tx.

Mark.

With the repeal of 415(e), is it still necessary for an employer adopting a "prototype" SEP IRA, who once sponsored a now terminated DB plan covering the same employees, to file for a determination letter?

Thank you in adavance for any assistance!

If a participant continues to receive compensation while on military leave, can the participant continue to elect deferrals to teh 401(k) plan during such time? I was told that the compensation while on military leave is taxable on form 1099-R, so I am wondering what plan compensation could be used?

We have a client that is a group of companies in the medical field. One of the companies involved is 100% owned by the trust. When completing control group testing if one of the companies is owned by a trust:

1) How is this company treated? Is it part of the control group?

2) Is the trustee the owner of the trust?

As you can tell I am not real strong in this area, so please be gentle.

Thanks

My husband can not start contributing to his 401K until he has been with the company a year so we would like to start a Roth for him until then. Unfortunately we don't have a large lump sum to contribute to start. Are they any choices for people who do not have a lot to start with?

We are a TPA and as we are beginning to plan with our groups for their next renewal, we have several groups that will be implementing an HSA and running the contributions through a Section 125. My question is, currently we have groups with Section 125 plans that include PO,DC, and Medical Reimbursment accounts. When they add the HSA to their plan, the only MR account those employees participating in the HSA/HDHP can use would be one that only allows reimbursement for dental, vision and possibly some preventive care claims. Question is, can we have a Section 125 plan with PO, DC, HSA. a MR-1 for those participating in the HDHP/HSA and then an additional MR account for other employees who are not participating in the HSA/HDHP and want to continue to use their MR for all eligible medical expenses under Section 213? Can we have a different eligibility requirement for each of the MR plans and still cover it under one Section 125 design, or must we have two separate plans, one PO,DC, HSA, and MR(dental,vision, etc). and another Section 125 plan with PO, DC, and MR for alleligible expenses?

Any thoughts or opinions on this question would be appreciated...or if anyone thinks of any pitfalls with this theory or potential risks?

S404(a)(1)(D)(iv) allows a minimum deduction of "... the amount required to make the plan sufficient for benefits liabilities (within the meaning of 4041(d) ....)."

Thus one can deduct an amount equal to the total Plan PVABs (taking into account S417's minimum PVABs) less Plan Assets.

Questions:

1. Must the deduction exactly equal that amount or can it be less, eg. employer does not want to contribute the full amount of the shortfall (owners will take a hit).

E.g. Plan's funding cost is zero in the year of termination and the assets are $150k less than the PVABs. The employer wants to contribute $100k. Is $100k deductible or must the employer contribute $150k to take a deduction.

2. Is this deduction still available, if a plan is covered by the PBGC and the owners signed waivers to make the plan sufficient for PBGC's standard termination purposes?

Is there anything else one should be aware of?

I understand that (1) hardships can be used to purchase a primary residence, (2) hardship withdrawal amounts can be grossed up for taxes and penalties and (3) withholding is optional.

I have a hardship withdrawal on my desk with a Good Faith Estimate indicating that the ee needs to bring $5,480 to home purchase closing. The participant is requesting $8,000 with no withholding. The client is looking to me to bless the amount needed to satisfy the "immediate financial burden". Since no one really knows the tax liability, i.e. tax rate, until the end of the year (except the rich folks, of course) is there any guidance from IRS on the appropriate tax rate to assume when grossing up the hardship distribution for taxes and penalties? I am inclined to recommend 15% plus 10% which would put the actual hardship distribution amount at $7306.67, but I really have no basis for that thinking.

Also, not that I want to make up rules, but it doesn't seem logical that an employee can elect to have the distribution grossed up for taxes and penalties, then turn around and also elect no withholding. Of course, logic is not law or guidance for that matter!

Sal's book says "reasonable".

What would you do?

I have a company that only has two employees. They are both key employees. 2003 is the first plan year. Is the plan automatically deemed to pass the top heavy test? If it is top heavy do they need to make a min. contribution for 2004?

For purposes of determining final average comp, it has always been my understanding that all years in which a participants accrues credited service is counted, even years prior to a break-in-service, if applicable. Suppose an employee accrues credited service in years 1980 through 1995, incurs a break in service from years 1995 through 2001, comes back in 2002 and retires in 2006. The plan's definition for final average pay is the highest 5 out of the last 10 consecutive years. How exactly is final average pay determined in this case? The last 10 consecutive years would put it at 1996, where no comp is earned, so it is just figured on the last 4 years since out of the last 10, those are the only years the participant had compensation?

And will that final average pay apply to all service both pre and post break service? It has always been my understanding that the final average pay will apply to all the service (1980 through 1995 and 2002 through 2006). Any guidance, citation, authority will be greatly appreciated!!

Thanks

For purposes of determining final average comp, it has always been my understanding that all years in which a participants accrues credited service is counted, even years prior to a break-in-service, if applicable. Suppose an employee accrues credited service in years 1980 through 1995, incurs a break in service from years 1995 through 2001, comes back in 2002 and retires in 2006. The plan's definition for final average pay is the highest 5 out of the last 10 consecutive years. How exactly is final average pay determined in this case? The last 10 consecutive years would put it at 1996, where no comp is earned, so it is just figured on the last 4 years since out of the last 10, those are the only years the participant had compensation?

And will that final average pay apply to all service both pre and post break service? It has always been my understanding that the final average pay will apply to all the service (1980 through 1995 and 2002 through 2006). Any guidance, citation, authority will be greatly appreciated!!

Thanks

Our contributory DB plan terminated in 1985. The assets of the plan were distributed to plan participants in accordance with section 4044 of ERISA and the remaining assets reverted to the employer. Subsequently, the mutual life insurance company converted to a stock life insurance company and the demutalization proceeds received as a result of the demutualization remain in escrow.

My question is whether Advisory Opinion 2003-05A applies in this situation in that our plan is a contributory DB plan and if Advisory Opinion 2003-05A does not apply, has anyone made an argument that the market value of the demutualization proceeds at the time of the original reversion was zero and thus the plan participants received all that they were entitled to received under section 4044 and the entire demutualization proceeds can be distributed to the employer?

I was unable to attend the ASPA summer conference but heard through the grapevine that during the IRS Q&A, that question # 6 was going to address the discrimination in BRF when a DB plan with an insured death benefit that covers one group of employees is pared with a DC plan that covers the other employees (no two employees are in both plans).

Would someone who attended the conference tell me the outcome of this discussion?

I have a plan which, in 2003 (I think it was August) switched from being self-trusteed to having an insurance company as trustee.

Can the auditors do a limited-scope audit for the entire plan year? Or do they have to do a full-scope audit for the portion of the year the plan was self-trusteed, and a limited-scope for teh remainer?

I need a bit of help digesting how a frozen plan is able to pass the prior benefit structure test under 401(a)(26).

DB plan covers only owner and wife for many years. Over time, one employee sticks around long enough to meet the plans 2-year eligibility so the plan is frozen and amended to bar new entrants.

Wouldn't this plan fail the prior benefit structure test since only HCEs have accrued benefits?

Thanks for any help.

Any insight is greatly appreciated.

DB plan is very overfunded. Sole participant is no longer accruing additional benefits.

A suggestion has been made to purposefully disqualify the plan by adding plan language to raise/remove the 415 limit and then pay out all plan assets as taxalbe income to the sole participant to avoid the reversion/tax issue.

Thoughts?