I have a plan with a six month wait to get a distribution following termination of employment. The plan received from the Bankruptcy Court a "Stipulation and Order to Allow Mr. Dimmick to close out his 401k - Chapter 13 Bankruptcy Case No. ####". The stipulation states that the debtor may close out the 401k in order to purchase a vehicle to allow travel to and from work. He is in fact terminated, he just hasn't satisfied the six month wait specified in the plan document. What to do, what to do??

a client adopted the 3% safe harbor in 2002. For 2003, the client made the 3% contribution, but the safe harbor notice referenced the safe harbor match. The intent of the client for 2003 was to make the 3% contribution. Are they stuck with the match formula because that's what the notice said or can they allocate the 3% safe harbor?

Hi -

If HCEs rec'd distributions from plan in March, 2003 for excess annual additions, when is that taxable to them, 2002 or 2003?

I thought that it would be taxable for 2002; the 1099R would be issued for 2003 because that's the year the distribution was actually made, but the HCE would have included it in their 2002 tax return. Is this correct?

thanks for your help!

Can a DB Plan require a participant who has been fired, but who has met 5 year and other vesting requirements under Plan, to wait until normal retirement age to receive a benefit? In other words, can Plan force participant to forgo early retirement options that otherwise would be available but for the fact that the participant was fired and did not "retire"?

does a regular before-tax ira with a named beneficiary receive a stepped up basis at date of death? i guess another way of asking the question is how is beneficiary taxed on distributions?

Employer who got government contract some time back was required to provide $.25 of health benefits for every 1 hour of work performed by its employees. Thus each employee has $X of health benefit dollars. E/er has been allowing for reimbursements for medical expenses out of the said $x set aside for each employee. Employer has been allowing said amounts to be cumulative on an annual basis. Thus, no "use-it-or-lose-it" rule. Employer has also been allowing employees to take the cumulative amount of $$ in their "account" upon termination of employment. E/er has no written plan document and has been operating as described above for some time.

Tax-wise, there's no requirement that the plan be in writing assuming it were a straight 105/106 plan although ERISA would require a written plan doc. Given the ability of the e/ee to take the cash on termination of employment it would seem that the issue of whether or not the arrangement involves a cafeteria plan arises. I believe that a cafeteria plan is required to have a written plan doc. for tax purposes.....

Any suggestions on how to cure this thing going forward, e.g., get rid of e/ee's ability to take cash, and get a document in place for prospective benefits....?

I would very much appreciate the group's thoughts on the following scenario.

The Company has an employee who was covered by subsidized COBRA coverage from his wife's former employer and therefore did not enroll in the Company's health plan during last year's open enrollment. Now he wants to enroll and says he will simply stop paying the COBRA premiums and therefore lose coverage under the COBRA coverage.

I know the regs permit mid-year election changes when there has been a loss of coverage (1.125-4(f)(3)(ii)). It strikes me that this section contemplates losses of coverage beyond the control of the individual and not a loss of coverage voluntarily incurred by the individual. I could not find any authority on point, though.

This situation is clearly not covered by the HIPAA special enrollment rights in Section 701(f) of ERISA because that requires the COBRA coverage be "exhausted."

My inclination is not to let this employee enroll in the group health plan until either the next open enrollment or the occurrence of a true change in status. Any thoughts?

Many thanks--Julie

Does this bill include local government employers?

I am comparing two formulas that calculate EBARs (I'm a beginner).

1. ERCTBN * 1.085^(NRA-AA)/95.382/AVG Monthly compensation

2. ERCTBN * 1.085^(NRA-AA)/7.9486/ANNUAL Compensation

I'm using the UP-84 mortality table and 8.5% interest.

My understanding is that the APR of 95.382 in formula #1 = 7.9486 multiplied by 12. I'm assuming the 7.9486 is a monthly annuity rate and multiplying it by 12 converts it to an annual rate. Please correct me if I'm wrong.

The software program that uses the first formula #1 takes into account compensation from plan entry for a mid-year entrant if I want it to. For instance, if an employee enters the plan 7/1/2003 and has compensation from 7/1/2003-12/31/2003 for 120,000, the system calculated the avg monthly compensation to be 20000.

The second formula is used in a spreadsheet. If I want to use full year compensation for everyone in the plan, then I see no problem. If I want to use compensation from plan entry, I don't think the formula can handle that. If I enter compensation from plan entry as Annual Compensation, then the formula assumes the compensation I input was for a 12 period. Does this make sense? Can anyone tell me how to adjust the formula for mid-year entrants? Would I prorate the annuity factor?

Any help would be greatly appreciated!

The trustee of a defined benefit plan makes an investment in what seems to be a legitimate investment but is later revealed to be a Ponzi (pyramid) scheme. The plan was an early investor in the scheme and realizes a gain of over $30,000 in the investment.

The investment is revealed to be a Ponzi scheme and later investors bring a class action against to recoup their investments. Can they obtain recovery from the DB plan? Can the DB plan participants sue the trustee for fiduciary breach, even thought the plan made money on the investment?

If (1) a participant forfeits unvested benefits, (2) as a result the AP forfeits some benefits, (3) the participant is re-hired and restores his or her unvested benefits, then must the plan (4) allow the AP to restore the forfeited benefits?

I would like to know if there are any circumstances where a participant can limit the amount of reportable income to the amount that is paid as an installment. Example: NQ Plan is a 457(f) plan. Substantial risk of forfeiture is 10 years of future service. The funding vehicle is an annuity payable over the lifetime of the participant. The first payment commences at the first of the month following the 10th anniversary of future service.

Is a present value calculation of the annuity determined as of the 10th year of service (and the taxability determined), or can the reportable income be limited to the amount of installments received dueing the 1st tax year, then the 2nd tax year, etc.?

Thanks for any guidance.

Company blows 415 limit because RK "forgot" there were three plans. Plan goes through VCR and gets IRS approval to correct. RK, instead of allocating excess matching contributions to suspense account, distributes to participants. Full amounts reported on 1099-R. Transaction was also not reported properly on 5500.

Sometimes I wonder why I love my job.....

Is is permissible to invest in separate accounts and exchange traded funds?

I have a plan that would like to force a distribution of a death benefit. However, the amount is over $5,000 and the surviving spouse does not want to take the money right now. I recently read the following sentence in the 2004 Pension Answer Book under Q 10:55, "A surviving spouse can demand the surviving portion of the QPSA not become payable following the participant's death until such time as the participant would have attained age 62 if the amount of the benefit exceeds $5,000." Does this mean that if they spouse's benefit is still in the Plan 2 years from now when the participant would have turned 62 the benfit can be paid (forced) out without the spouse's approval and signiture?

Please help!

Are 412(i) defined benefit plans required to file a schedule B with the 5500?

A Safe Harbor 401(k) plan that only has the non-elective or the match, and no profit sharing contributions, is deemed a non-topheavy plan. If the employer also maintains a SEP with a 3-year wait, does this still hold true?

I have a question regarding FSA's when employees are laid off and receive salary continuance for their severence payout. (During salary continuance, the FSA contribution would still be taken out.)

What is the cutoff date for claims that can be reimbursed? Is it the last date of active employment or when the coverage ends? (To clarify, I'm asking about the date of the claim - not the timeframe to reimburse the claim.)

From what I read in the earlier post, as long as the ee is making deposits then they can incur claims. I couldn't find the regs on this situation.

Thanks, Greta

The 5307 form & instructions refer to both "opinion letter" and "determination letter." I have always thought these terms referred to the same document- the letter issued by the IRS to confirm the "qualified" status of a plan's written document.

Is there actually a distinction? Does anyone know why both terms are used?

Participant Terminates receives a distrib. @ 20% vesting. Forfeits the other 80% at payout. Rehired the same year; works 1,000 hours in the plan year, gets a profit share contrib. but no forfeiture restoration. Obviously the 1,000 hours bumps his vested % to 40%. In calculating the vested balance Relius is including in additional 20% from the forfeited amount.

Example:

Balance @ 01/01 is $4,000, 20% vested. Payout at 05/01 is $800. Rehired 07/01, works 1,000 hours from 01/01-12/31; gets contrib. of $2,000. At 12/31 participant is 40% vested. Relius says vested balance is $1,600 ($800 of the $2,000 plus an additional 20% on the $4,000 ($800)). Is that correct? At first blush it seems nonsensical that participant would get additional vesting on amounts previously forfeited & not restored.