Has anyone out there drafted a deemed IRA provision for a plan? If so, how did you address the 2003-13 guidance suggesting the Listings of Required Modifications for IRAs be added to the plan?

Following is a link where I address the issue in more depth.

http://benefitslink.com/boards/index.php?s...t=0entry93487

I had a question regarding the participants compensation that is used to calculate the 404 maximum employer deduction limit, if the employer's fiscal year is different from the plan year.

For example, the plan year ends 12/31 and the fiscal year ends 6/30. I believe that the 404 limit is based on the employers taxable year. I am confused over which participants are used in the 404 calculation. Do you use only the participants that are eligible as of the end of the taxable year (6/30) or do you use the participants that are eligible as of the plan year end in which the contribution is allocated and use their compensation from the taxable year in which the contribution is deducted?

Or am I just completely confusing the whole thing?

Thanks!

An auditor working on the 2003 audit is requesting copies of 2004 investment statements as part of the 2003 audit. Is this a common request? What is the reason?

The question is whether the payment of an auxiliary disability benefit or a disability pension under a defined benefit pension plan is a "distribution" for purposes of determining the earliest retirement age under a separate interest qdro so as to permit a lifetime payment to the alternate payee to begin at the participants disability.

The ugly details follow.

Defined benefit pension plan has an auxiliary disability benefit equal to the participant's unreduced accrued benefit at the time of disability. Payment requires disability and 15 years of service. If the disability continues until normal retirement age, the participant is eligible for a normal retirement pension and is provided with the joint and survivor annuity election then. If the participant recovers before normal retirement age, the participant is eligible for whatever pension then age and service will provide, and a joint and survivor election will be provided then. Essentially, I view this as a welfare type benefit paid to a disabled participant during the period of disability before normal retirement age. (Under IRS regs, the payment of an auxiliary disability benefit is not an annuity starting date, and does not trigger a joint and survivor election.)

I think the payment of this disability benefit should not be considered a "distribution" to determine earliest retirement age (under a separate interest qdro awarding alternate payee a lifetime benefit), based on the theory that the alternate payee was awarded a portion of the participant's pension benefit, and payment of a welfare type disability benefit not related to a pension benefit should not be a distribution for purposes of determining the earliest retirement age for the awarded pension benefit. Also, payment of a lifetime benefit to the alternate payee upon participant's disability arguably provides the alternate payee with a benefit of a lifetime payment not otherwise provided under the plan.

It is a closer call if if the disability benefit under the Pension Plan is a disability pension that results in an annuity starting date and form of payment election at the participant's disability. But even then, payment of the disability benefit to the participant before normal retirement age is contingent on the participant's ongoing disability. Thus, the payment of a lifetime benefit to the alternate payee without recognizing this contingency arguably provides the alternate payee with a benefit not otherwise provided by the plan. Also, even though a form of payment of election is provided to the participant, the early payment of the disability pension arguably still is not a pension or retirement benefit until the regular pension payment date, and thus, should not accelerate the lifetime payment of a pension benefit awarded to an alternate payee.

My preliminary conclusion then is not to allow payment to an alternate payee begin under a separate interest qdro until the earliest retirement age determined without regard to the payment of a disability benefit or pension (whether or not an auxiliary disability benefit). This would avoid having to address a number of issues that would be raised if the alternate payee's payment begins when the participant is 30 some years old, like (1) actuarial adjustment for early payment; (2) alternate payee's right to elect alternative forms of payment and related adjustments; and (3) impact of participant's recovery.

However, it might be permissible for an alternate payee to be assigned a part of the disability benefit or pension under a shared payment provision.

Sorry that this is so long, but I have thought about this for a while, and I am interested in other folk's thoughts.

One owner of two companies has a plan for each company. The larger company X has about 200 employees (2 of which are HCE's), and the smaller company Y only has about 4 employees (none are HCE's). He wants to make a contribution to company X plan this year, has a 3 month/age 18 eligibility period with 1/1 & 7/1 entry dates. Most of the employees fall under the statutory exclusions and the controlled group can pass 410(b) for the contribution.

Now, how do I answer the questions in Line 4 on the Schedule T if I am using statutory exclusions to pass 410(b)?

Here is what I was thinking of doing:

Line 4©(1) I put all employees of the controlled group.

Line 4©(2) I put all employees that are excluded due to not completing eligibility requirements, or had less than 500 hours plus all of those I excluded under the statutory exclusion rule.

Lines 4©(3) - 4©(6) follow from these numbers.

Line 4(e)(1) I put Statutory Exclusion Group under the Disaggregated part with a Ratio Percentage of 100% (since there are no HCE's in this group).

I was thinking of completing the Schedule T of both plans with these numbers.

Our firm has been asked to conduct a 457 provider search for a Massachusetts municipality. Can anyone provide us with some guidance as to who the best bundled/unbundled 457 providers are that we should direct the RFP to? Also, are there any recent surveys that rank the various 457 providers?

Has anyone used (or opposed the use of) the Federal Arbitration Act to compel arbitration of a dispute that the trustees have deadlocked on?

We administer a small DB plan with 10 participants. The emloyer has 13 employees. The employer just hired a very highly compensated employee and wanted to exclude him from the plan. The employee is age 49. There will be no problem passing 401(a)(4) or 410(b).

I believe ADEA only applies to employers with more than 20 employees.

Anyone see a problem with this?

Hi. I have a participant of a client that needs money as a hardship, and quickly (of course!). But she says that she may possibly be getting a large sum of money very soon from another source, and she would like to repay her hardship to avoid tax and penalty. Is this possible? I am confusing myself with all of these hardship rules, and I'd like some other opinions.

Thanks.

A spouse beneficiary is under the age of 50 and elects to keep their spouses money in a separate account in their spouses' 401k plan. If they make a distribution a few years later will the premature distribution penalty apply? Thanks for all your help!!

I have a 1-person Keogh (sole proprietor) plan, not covered by the PBGC. This is a Fidelity Prototype plan. Normally, for a DB plan termination, we amend the plan document and submit to the IRS for a determination. I am assuming that Fidelity handles thousands of this type of plan and is equipped to do this.

1) I am planning on instructing our client to tell Fidelity to terminate this plan (since that is his wish) - I am assuming that this is all that I need to do for the termination (except for (2) below)? Anyone have any experience with this?

2) The owner is looking to roll the money into an IRA. What happens if the present value of the accrued benefit is 1) overfunded, or 2) underfunded? If underfunded, it would seem silly for him to contribute money in order to fund the plan just to get it right back. If overfunded, are there any problems?

Thanks for any input.

I've got an employer that sponsors two separate 401(k) plans. Each plan satisfies 410(b) and all other tests separately (i.e., aggregation is not required). The employer wants to make a 3% non-elective safe harbor election with respect to one, but not the other, plan. Employees participate in one plan or the other; no one participates in more than one plan.

I know you couldn't make catch-up contributions available in one plan only, but it seems to me you can limit a safe harbor to the participants who are eligible in just one of the plans.

Along the same lines, do you think that one plan could be cross tested and the other not?

Any thoughts?

I believe the IRS has gone on the record to say that a sponsor can end a 3% non-elective safe harbor committment Before the end of a 12 month plan year if the sponsor terminates the plan. I've got someone proposing to terminate such a plan and immediately replace it with 401(k) plan that does not have a safe harbor.

I can't believe this is possible. There must be a rule prohibiting a successor plan. Can any one cite an IRS pronouncement on terminating safe harbor elections and prohibiting successor plans? If you can, can you also tell me what a successor plan is? For example, would that be any plan adopted within 12 months?

Thank you.

Client made a 72t election and was paid for 3 years. He then changed IRA custodians who didn't set up his annual 72t distribution. 2 years have gone by without a distribution. He is not 59 1/2 until 3/2008. Anyone have experience with IRS on this type situation? Should he just go ahead and pay the 10% tax (and interest) on the 3 years of distributions, or is there another way to handle w/ IRS?

Has anyone seen a plan document that defines spouse? If so, how has it been defined? Does anyone think it's a good idea to define it?

Welfare Plan Filings

Original Plan year is 6/1/03 - 5/31/04

Amending to change plan year as 7/1/04 - 6/31/05

Policy year is also changing w/insurance providers at 7/1/04

File a 5500 for 6/1/03 - 5/31/04

File a Short Plan Year 5500 from 6/1/04 - 6/31/04

File new 5500 from 7/1/04 - 6/30/05

Can you verify for me those are the 5500's that need to be completed???

Also, what would I request from the insurance providers for the Short Year?? Would I request just policy coverage during that time period in the month of June, 2004???

Can someone give me some feedback!!!

Thanks

DB Plan. Owner, Owners Wife and one employee. Part of the business was sold and the employee was involuntarily terminated and paid 100% vested lump sum in April 2004. The plan year ends 8/31/04. The plan is ongoing. The owner wants to amend the plan now to increase benefits. Would that be a problem? It just seems like something that smells bad to let the only rank and file ee go, pay her out, and then amend the plan to increase benefits to the owners. Thanks in advance for any advice/information.

In a 401(k) plan that has J & S annuity rules, is spousal consent required in the following situation: Participant balance is over $5,000 with no current outstanding loan balance - participant requested a loan for $2,000. My question is whether the loan amount has to be over $5,000 to require spousal consent or is spousal consent required for all loans where the participant balance is over $5,000?

Thank you.

Can a VEBA sponsored by an employer to provide funds for employee health costs contribute funds to employees' HSAs?

Owner 1 has 98% of Company A which is a holding company with no employees. Company A owns 85% of Company B which has less than 50 employees and is a new business to Owner 1/Comp. A. Company B was ready to set up a Safe Harbor 401(k) until it was discovered it was part of a controlled group.

Owner 1 owns 85% of Company C which manages apt. communities. It has 150-200 mostly lower paid employees.

Owner 1 also owns 99% of Company D which provides investment and acctg. services. Company D is a "family office" that has about 20 employees some of which are HCEs. They also have the following 401(k): one year of service, two entry dates, match of 100% up to first 1.5% deferred, 3 year vesting.

Company D wants to exclude Company C from the plan under QSLOB rules and improve the 401(k) it currently provides by possibly adding safe harbor provisions.

Since Company C has at least 50 employees, I believe it may be able to be tested separately under Sec 414®, but i do not feel it can be excluded altogether. I am of the opinion and to make administration as easy as possible and avoid problems(minimum coverage, contribution limits, ADP/ACP), that if they incorporate individual plans, each plans provisions should mirror the other.

Am i missing something? Company B who was ready to set up a Safe Harbor wanted shorter eligibility, quarterly entry, etc for its plan. now, that plan is on hold. Also, and i am not 100% sure, but I do not think Company D's 401(k) has been offered to Company C.

Any opinions?