Is it a common plan design to require lump sum distributions below a certain dollar amount (for example, $10,000) and installment distributions above that amount? I'm not aware of any problems with this arrangement, but would appreciate feedback.

I have a terminated participant in a Plan who rolled both her plan balance and her loan balance to her new Employer's Plan. (Yes, her new Employer's plan accepts loan balance rollovers and ok'd the transaction). For 1099-R reporting purposes, would you simply prepare a 1099-R form with code "G" for her entire balance including the loan? It seems unnecessary to prepare 2 1099-R forms when both would be coded "G". I looked in the 1099-R 2003 instructions, but it only says that a loan balance could be an eligible rollover, not how to code it.

I am new to form 5500 and have a basic question. The client's plan and fiscal years run from 1/1/03 to 12/31/03. The client deposited his '03 PS contribution on February '04 and took the deduction on his 2003 tax return. None of the 2003 YE supporting materials provided by the DFE account for this PS contribution b/c of its date of deposit. For Form 5500 and Sched. I, would I simply add the '03 PS contribution to the 2003 YE trust total or would I just report the amount when I file the 2004 5500?

If an employee is on a High deductible plan to be used with an HSA, and they have dependents on that plan who are not tax dependents (say step-children who live with another parent), should the employee be able to receive distributions from the HSA for the step-children's medical expenses?

I am raising a question that has been touched upon in previous posts but not directly related. Assume a 501©(3) non-profit, non-governmental organization that brings in good revenue and has never had UBIT or been part of a controlled group with a for profit entity. I am trying to find out if there are any obscure rulings out there that discuss limitations for qualified plan contributions.

Since the 415(e) limit has been repealed, it seems possible to max out a defined contribution plan and a defined benefit plan. It doesn't appear that the deduction limit under 404(a)(7) would apply since we have a tax exempt. It seems that as long as we stay within the 415(b) and 415© limits, we could max out both types of plans.

I am familiar with the Intermediate Sanction rules under 4958. Let's assume for the moment that there is no excess benefit transaction partially because we offer the same benefit to all employees and we are staying within the massive rules under 401(a), et al.

Can anyone come up with some arguments as to why we wouldn't be able to max out a dc plan and a db plan or at least not be worried about the combined 25% limitation?

I have a client that has a cafeteria plan document that has not been updated since 1988. Are there any requirements to have cafeteria plan documents updated similar to qualified plans for GUST, etc.?

We have been withholding the 20% on IRA rollovers for participants who have

defaulted on loans.

Example:

Account balance 100,000

Loan 20,000

net 80,000

If the participant wants to rollover the 80,000 and default on the $20,000 loan we

have been rolling over $76,000 and withholdng $4,000 for the defaulted loan.

We have recently been told that is incorrect. Please advise.

The new IRS regs re QJSA explanations, as applied to money purchase pension plans, require that information be provided on the "financial effect" of a purchased annuity contract as well as other available forms of benefit. The explanation can be based on "reasonable estimates of amounts that would be payable under a purchased annuity contract." It sounds to me like prose alone isn't enough to meet the requirement--some rough numbers should be provided.

Has anyone drafted an explanation of the financial effect of a purchased annuity contract in a MPPP for the new regs? Or even thought about what this requirement means?

If the plan document allows for loans, must a participant take a loan before a hardship distributions?

I have a 74-year-old 403b participant that is currently taking RMD from an IRA. He is currently working and contributing to his 403(b). He would like to roll his money from the IRA to the 403b and cease taking RMD.

There should be no problem with this considering that EGTRRA allows for pension portability and money rolled takes on the characteristics of the new plan.

Where does it say that?

The IRA company will not roll the money until it is proven.

Any help would be great!

We have a situation where an employer would like to increase the max coverage for organ transplans from 100K to 1 million, but wants to limit it in that employees who have had a transplant or who are on the list to receive a transplant fall under the 100K limit. This seems to violate Regulation 54.9802-1T(b)(2)(i)©. Does it? Or is this acceptable? Thoughts?

If I have several more than 5% owners who earned less than the HCE dollar threshold in the lookback year, and I want to apply the top paid group election, I believe the owners are still HCEs. If I have nine HCEs by ownership and compensation, and I have 23 total employees, what is the # I include in the top paid group?

A plan that uses the EAN method for funding is amended to enhance everyone's accrued benefit to date by giving an extra year of servce - this type of amendment is utilized frequently with "window" programs for a targeted subset.

Question : we are accustomed to defining the amendment base as the difference of a "before" vs "after" EAN Accrued Liability where the Accrued Liability is defined in terms of the projected benefit ; but where the amendment deals with an accrued benefit, I'm not sure how the base should be defined ?

Any thoughts are appreciated !!

We currently give our field reps auto allowance checks ranging from $400 - $600 per month depending on the size of their territory. With the increasing cost of gas, they are asking for an increase. Does anyone know of a website which compares company allowances or a method of calculating allowances fairly? I understand the reps concerns, however, I also don't want to be paying more than I have to.

For all you QDRO experts, this may be old hat, but I found it interesting. ( I believe it was by someone named Tony Novak but I'm not positive about that. However, I'm unable to access this PLR, and when I do web searches, I come up with this one and another with the same # (the other one supposedly deals with minimum distributions.)

First, is the number listed correct, and if so, do you know where I can access a copy? Second, if not correct, do you know the correct number? And finally, do you have any experience with this type of QDRO, and are you aware of more people using it? Thanks!

The IRS recently approved a qualified domestic relations order (QDRO) in a divorce settlement that surprised tax planners and was previously thought to be not possible. Typically a QDRO is used to divide a retirement account between divorcing spouses without having the retirement plan lose its tax-advantaged status. A retirement plan can normally not be used as security for a debt. If this happens, the amount of assets in the retirement plan could be disqualified and become subject to immediate taxation plus additional tax penalties.

But in this case, a spouse wanted absolute security for money that was owed to her by her spouse, but the couple did not wish to liquidate his retirement plan. The local court issued a QDRO securing the debt with the retirement plan and the IRS approved of the arrangement. (Letter Ruling 200252097). The IRS reasoning that was the QDRO allowed under Section 401(a)(13)(B) override and satisfies the anti-alienation restrictions that normally prevent a retirement plan from being used to secure a debt.

The implications for tax planning are significant. Frequently a divorce settlement necessitates the liquidation of assets like a house and other investments. Even in situations where one spouse has a strong likelihood of high future earnings, these future earnings normally are not usually useful in negotiating a secure divorce settlement. The letter ruling allows a spouse to say "Instead of liquidating our (pre-tax or tax deferred) investment assets that we prefer to continue to use and keep intact, I will pay you $xx dollars per month from my (after-tax) earnings and my promise to pay will be secured by a court-issued lien on my retirement plan account." From a tax planning perspective, this strategy allows the couple to postpone otherwise taxable events and continue to benefit from tax-free compounding of internal value of assets. There are numerous other planning possibilities. The ultimate effectiveness of this tool will be determined by divorce attorneys' willingness to complete non-cash settlements that are based on secured promissory notes between spouses.

An old PS plan that has had no contributions for years is going to terminate. The client has another plan (I think DB plan). Does he have to offer the participants the option to roll their $ into the remaining plan if they want?

Plan has a prototype document from a major brokerage firm. The brokerage firm is the "custodian." The plan sponsor missed the GUST deadline and has filed under VCP to get approval for the late-adopted document. Meanwhile, the brokerge firm has "frozen" all plan assets and will not make any distributions to the participants until the plan sponsor receives IRS approval of the document. What authority does the brokerage firm have in this matter? The letter of understanding betweenthe plan sponsor and the brokerage firm states that the brokerage firm has no administrative responsibilities.

401(k) Plan established in 2001 with a discretionary profit sharing component. The Board of Directors voted to make a profit sharing contribution for 2001. No employees made 401(k) contributions in 2001. When the plan was amended and restated for GUST the TPA used a plan effective date of January 1, 2002 (they say because there were no contributions for 2001). (the search for a new TPA will be done soon)

Problems with CFO, CFO leaves in late 2003 and new CFO in early 2004 finds that the 2001 contribution was not made, the plan amendment was never signed (no Board votes authorizing the amendment and restatement) and there was no 2001 5500 because the TPA says there was no plan in 2001 although we do have a signed document.....( we will use DFVC to address the 5500 issues)

Company wants to make the missed contributions plus earnings. Any thoughts on using EPCRS to get the IRS to bless the profit sharing contribution issue since we have to go in to address the failure to timely amend.

Plan is a standardized prototype. Company is a small 501© that wants to do the right thing. Thank you in advance for comments.

When designing a plan, do many of you use a match formula more often than others? Recommend one over another? (I realize there are certain variables that dictate what a plan's formula should or could be) Have you found certain formulas (besides SH formulas) are better with regards to passing non discrimination testing? Finally, what is a good source for plan design?

Thanks!

I am relatively new to 401(k) plans and had the following question, please excuse my overall lack of knowledge.

A 401(k) plan defines compensation as W-2 wages increased by elective contributions. John Doe employee receives $30k compensation of which $5k is bonus pay. The $5k of bonus is not deferred against. Is this a violation of plan provisions? I am having trouble finding any guidance, thanks in advance for any assistance.