Did the DOL or IRS issue any type of relief for correcting delinquent loans that became delinquent due to administrative error? I have been told there may have been some type of guidance issued, or someone was thinking about issuing guidance, or they would prefer to torture us....Anyway, I can't find anything anywhere.

How do you handle loans that are in default because a payroll deduction was never started? Do you deem the loan, or allow a corrective action? Does it matter if the loan was issued prior to 1/1/04? Are you tired of all of my questions yet?

Thanks!

I have a client who has been having major financial difficulties for the past few years. As a result, they are consistently delinquent depositing the 401(k) contributions. (The client has sometimes been months late with the deposits.) When this first occurred in 2001 (under Voluntary Fiduciary Correction Program (VFC)), we calculated the lost earnings (using the greater of actual earnings and IRC 6621) and the penalty amount (under IRC 4975) for the client and completed Form 5330 for their signature. They made the deposit to the plan account for the lost earnings in 2002.

Then, in 2002, the client was again delinquent depositing the 401(k) contributions. We completed the valuation, Form 5500, and informed the client that they needed to make a similar correction (but exactly the same correction) to the plan for the delinquent deposits. Due to a billing dispute, the final correction work was never completed.

In February, 2003, they came back to us and brought their account (with us) up-to-date and asked us to complete the 2003 Valuation. We are in the process of completing the valuation and (surprise, surprise) they were delinquent depositing the 401(k) contributions for 2003.

Here are the first round of questions:

1) Since we used the VFC program in 2001, can we use it again in 2002? 2003?

2) If yes, what needs to be done? Is it as simple as the calculation the lost earnings (using the greater of actual earnings and IRC 6621) and the penalty amount (under IRC 4975) for the client with Form 5330? Is there anything else we are missing?

3) If not, what needs to be done to correct the problems above?

Any help would be greatly appreciated.

I have a client who has been having major financial difficulties for the past few years. As a result, they are consistently delinquent depositing the 401(k) contributions. (The client has sometimes been months late with the deposits.) When this first occurred in 2001 (under Voluntary Fiduciary Correction Program (VFC)), we calculated the lost earnings (using the greater of actual earnings and IRC 6621) and the penalty amount (under IRC 4975) for the client and completed Form 5330 for their signature. They made the deposit to the plan account for the lost earnings in 2002.

Then, in 2002, the client was again delinquent depositing the 401(k) contributions. We completed the valuation, Form 5500, and informed the client that they needed to make a similar correction (but exactly the same correction) to the plan for the delinquent deposits. Due to a billing dispute, the final correction work was never completed.

In February, 2003, they came back to us and brought their account (with us) up-to-date and asked us to complete the 2003 Valuation. We are in the process of completing the valuation and (surprise, surprise) they were delinquent depositing the 401(k) contributions for 2003.

Here are the first round of questions:

1) Since we used the VFC program in 2001, can we use it again in 2002? 2003?

2) If yes, what needs to be done? Is it as simple as the calculation the lost earnings (using the greater of actual earnings and IRC 6621) and the penalty amount (under IRC 4975) for the client with Form 5330? Is there anything else we are missing?

3) If not, what needs to be done to correct the problems above?

Any help would be greatly appreciated.

Client has been miscoding Box 7 of IRS Form 1099-R for certain annuity distributions from their DB plan for a seemingly random group of participants. Apparently, Code 4 (distribution on account of death) has been erroneously used for normal distributions (Code 7). The recipient's name on the form is the participant (rather than a beneficiary), and this has been going on for a number of years.

Other than the fact that the form is incorrect, what are the issues associated with using Code 4 when Code 7 should have been used (e.g., are there different state withholding rules for distributions on account of death)?

A DB plan participant dies. His former spouse claims she is entitled to 1/2 of his pension during the time they were married pursuant to her divorce decree (which does say she is entitled to 1/2 of his pension); however, neither a DRO nor the divorce decree (until now) was ever presented to the plan. Do we have to comply with the divorce decree?

What are the limits for contributions to a 457(b) Plan? I seem to remember it was $13k for this year. That would include deferrals, match and/or a discretionary contribution. (I guess it's sort of a 415 limit for 457 plans, but just at $13k)

If an IRA beneficiary fails to commence required minimum distributions for a few years, discovers the error, then takes the required minimum distributions into income for the current year, what is the likelihood of the IRS assessing the 50 percent penalty if taxpayer is audited and the error is discovered? Has anyone ever had the 50 percent penalty assessed?

Father owns 100% of company. Will be gifting shares to son-in-law. They may be starting another company. Daughter is not an employee.

If the ownership of the companies were structured that there would not be controlling interest -- either father owns 100% of company A and son-in-law owns 100% of company B; or each owns 50/50, is there control?

I know there isn't attribution to each other (no double attribution). But would the daughter end up indirectly owning 100% of each and therefore there is control?

* * * * * * * * * * * * * *

Never mind -- I forgot the one essential fact that makes this a non controlled situation. The daughter is not minority aged so the father's stock would not be attributable to her. So no control unless either the father or the son-in-law has controlling interest in both companies...

A profit sharing plan has a last day rule. An employee who was not employed on the last day was given an employer contribution. The plan uses new comparibility rules to allocate the contribution. Therefore, this was just additional money deposited to the plan unneccessarily. To correct can I leave the contribution in the plan assets and use it to reduce the employer contribution for the next plan year? I don't see any reference of how to correct in the plan doc.

I have posted on the 401K board... maybe some of you have seen my posts. I have been performing TPA work for way too long. I took over a family business and now need to grow. I am activly pursuing the QKA (simply going in order) to put some initials after my name so I am taken more seriously.

My Question: Suggestions where to gain new business... plans. I am soliciting local CPAs... financial advisors. I am presently a one man TPA firm administering 35 plans. My goal is to double (or more) my workload and move on from there. My niche is the small closely held corp.. SE individual. Any suggestions ??? any small plans people want to lighten their work load of?

(This board doesnt get too much action... But didnt want to take up the 401K board....)

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

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.