How does a non-participant go about researching the details of a specific 401(k) Plan?

A plan includes both pre-tax and after-tax assets. The participant receives a partial distribution from the plan. How is the distribution taxed? Must the distribution amount be determined on a pro-rata basis, similar to IRAs?

Thanks in advance

Jane

A participant retires from a DB plan with a 50% QJSA. He then runs off with his ex-secretary and divorces his wife. Absent a QDRO, does the divorce cancel any benefit the ex-wife would have been entitled to?

Our TPA firm has advised that their initial calculations reveal we will fail adp and acp tests this year. Rather than giving a qnec or forfeitures after the end of year, they suggested we have the hce's scale back contributions to X% (based on their calculations) for the remainder of the year, at which point, they project we'd pass.

However, among HCE's, most of the very highest paid maxed out their contributions early in the year. Therefore, the HCE's that would be scaling back their deferrals would be the bottom tier of HCE's.

The net result of this strategy might get us to passing, but, there seems to be a level of unfairness in forcing middle management to suffer while upper mgmt takes full advantage of the benefits available.

Having said that, I can't find any reason why this would NOT be a permissible way to correct (or rather avoid having to correct after year end). They might not be the highest paid, but it looks like where the code is concerned, an HCE is an HCE.

Here's the question in a nutshell, "Can a company force HCE's in middle mgt to limit contributions, to ensure the company passes testing, while allowing upper mgmt to take full advantage of contribution limits by virtue of the fact that they are paid enough to max out early in the year? Or would such a reduction have to be voluntary on the part of those mid mgmt HCE's?"

My company will be emerging from bankruptcy soon and they are starting a profit sharing plan. The new plan will have each employee vested 20% each year for five years. This seems perfectly fine if you were a new employee but what if you have been with the company for 10 years? Should an old employee get vesting of 100% immediately if he has 5 or more years already?

This is a salary group and not covered by a collective bargaining agreement. Another thing to consider, there will be new owners.

Maybe I should just be thankful I'm still employed.

A client with a 401(k) plan has discovered various issues. The first set had to do with non-filing of Forms 5500 since plan inception in 2001. An easy fix under DFVC. However, now the client has discovered something else, and I'm wondering if there are any thoughts.

There is currently and historically has only been 1 participant. It turns out this participant was not really eligible, as he did not turn 21 until just recently. So, the only asset the plan has ever had has been pre-tax deferrals from this incorrectly included participant (there is no employer contribution under this plan). First, under voluntary compliance, does anyone know if disgorging the contributions is the correct answer? And if so, would it be 2003 taxable income, or would you have to go back and restate income for 2001 and 2002 (and is it a 1099-R from the plan or a W-2 from the employer issue). Finally, if you disgorge, the client would like to say the plan never existed, i.e. there was never really a trust corpus. I cannot see how that final answer would work, as the plan had eligible participants who were deemed to benefit, although none elected to do so, and there was an actual asset in the trust, even though it would (under what we now know) show up as a payable back to the participant.

Any thoughts would be appreciated.

Participant receives hardship and deferrals are suspended for 12 months. The participant, however, starts deferrals only after 4 months into the suspension. What to do?

We are planning to implement domestic partner coverage effective 1/1/04. Currently, our premium structure is just 2 tier--single and family.

If an employee who already has elected family coverage for covered dependent children elects to add his/her DP, can we tax the entire portion of premium attributable to family coverage?

Or, must we tax some determined amount of the family portion that may be attributable to the DP portion of coverage? Again--we only have 2 tiers. How would we determine what the portion of premium is attributable to the DP and which portion is attributable to the dependent children?

What do you do when you have a 401(k) plan and a terminated participant with less than $5,000...

You send out the necessary distribution election forms (balance over $200), but you never get a response even after sending another term packet certified mail.

I see that in section 6.9 it talks about this, but does it only apply to those participants who have reached normal retirement age...here's what it says:

In the event that all, or any portion of the distribution payable to a participant or beneficiary hereunder shall at the later of the participant's attainment of age 62 or normal retirement age, remain unpaid soley by reason of the inability of the administrator , after sending a registered letter, return receipt requested, to the last known address, and after further diligent effort, to ascertain the whereabouts of such participant , the amount so distributable shall be treated as a forfeiture pursuant to the plan. Notwithstanding the foregoing, if the value of a participant's vested benefit does not exceed $5,000, then the amount distributable may be treated as a forfeiture...

This paragraph goes on to say that for terminating plans, the portion of the distributable amount that is an eligible rollover distribution may be paid directly to an individual retirement account described in code section 408(a)....

Okay, here are my questions:

1) does this paragraph only apply to those terminated participants who have either attained age 62 or normal retirement age? Or do you apply this to those that are terminated participants under normal retirement age or 62.

2) What do you do if you have someone that is not at retirement age, who has a benefit over $200, but under $5000 that has not responded to the distribution election forms. Do you just pay them out anyway? Or use the above paragraph to deal with it (apply to forfeitures).

3) When the doc talks about benefits under $5000 and how the administrator needs to pay the benefit in a single lump sum without regard to the participant's consent (section 6.4(a),4th paragraph). does this mean that you just cut a check? Or do you still need to get their election on whether or not they want it in cash or a direct rollover. In other words... if your benefit is under $5000, you cannot leave it in the plan. The administrator still needs to receive an election from the participant as to whether they want it in cash or direct rollover.

I thought the cash out rule meant that under $5000 the participant has no election to keep the money in the plan until a later date. They must take a distribution. They still need to elect a cash payment or direct rollover.

Any help on this matter would be appreciated...

Thanks

A company's bylaws provide that shares of the employer may not be held outside the ESOP. As such, the ESOP document indicates that terminated participants are required to put their shares back to the employer.

Question: What is the tax implication to the participant of the "put option?" Which of the following scenarios are anything resembling correct? Can a plan provide for either scenario? Any help would be greatly appreciated.

1) John Smith holds 100 shares (market value $10/sh; cost basis of $3/sh) of ABC Company in his ESOP plan account. The ESOP distributes the 100 shares to him as a "distribution" - - as such, he is subject to income tax on the $300 (lower of cost or market) and the trustee of the Plan prepares a Form 1099-R reflecting a $300 distribution with $700 of NUA. He immediately sells the shares to the employer and receives the $1,000 cash. He now has a taxable capital gain of $700. The $1,000 cash he received from the employer cannot be rolled over.

2) Kathy Smith holds 100 shares (market value $10/sh; cost basis of $3/sh) of ABC Company in her ESOP plan account. Before a distribution is made to her, the ESOP buys the 100 shares from her and replaces it with $1,000 cash. The participant is then provided an opportunity to elect what to do with the $1,000 of cash in his ESOP account - - rollover to IRA, rollover to QP or distribute to participant. To the extent that it is paid to the participant, there is no NUA and the participant is subject to income tax on the full $1,000.

Hi,

Sorry for the basic question, but I have been out of the welfare plan area for a few years. Our client received Schedule A information from Blue Cross showing the premiums paid and the number of subscribers for the period 6/1/02-6/1/03. The number of subscribers are over 100.

It is my understanding that a Form 5500 would need to be filed since the plan is fully insured and covers over 100 participants. A Form 5500 never hs been filed before, but they had filed for the POP plan through 2001 when the filing requirement for 125 plans still applied.

We asked the client for the plan document for the welfare plan so we could get the plan name, plan year and effective date. The client said they do not have a plan document that he is aware of.

Questions:

1) Are welfare plans required to have plan documents like retirement plans?

2) Am I correct that the plan needs to file a Form 5500. The client thinks they don't have a "plan", just a contract with Blue Cross. Is this possible?

Many thanks for anyone's help!

Employer wants to add optional benefit to its health plan extending coverage to retirees on a self pay basis. Retiree can elect to continue coverage under health plan by paying the entire monthly premium attributable to that coverage. Eligibility would be based on years of service (10) and age (55).

Any problems with this arrangement?

Is a plan document required?

Any problem with a subsequent termination of the program?

Thanks for your input.

There's an old Revenue Ruling (Rev. Rul. 58-230) which says that a participant incurs a 6 months' suspension from participation under the plan if that participant makes an in-service withdrawal. Does anyone know if this Revenue Ruling is still in effect?

Would it depend on the plan document and could a plan be written with a longer suspension period, such as 2 years?

And if such a suspension is allowed, is the employee still required to get a top heavy minimum and as such the cross-tested gateway?

Does anyone know of any legal requirement to have a medical conversion plan for people that have exhaused their COBRA months?

Does anyone happen to have the 403(b) elective deferral limits since 1973? Basically, this is what I've put together so far:

2003 - $12,000

2002 - $11,000

2001 - $10,500

2000 - $10,500

1999 - $10,000

1998 - $10,000

1997 - $ 9,500

1996 - $ 9,500

1995 - $ 9,240 (? - not real certain of this one)

1994-1973 - ?

Can anyone help?

For a calendar year plan the normal deadline is 7/31 and the extended deadline is 10/15. I understand that there is a one month extended deadline for nonprofits. Does that mean that the normal deadline is 8/31 and can be extended to 10/15 or that the extended deadline is 11/15?

Thanks.

Have a client who is in a non-ERISA 403b. She is looking to see if (& how) she can get her funds. Here's the facts:

1. She has congestive heart failure but is still employed (albeit in a very limited capacity).

2. She declared bankruptcy a year or so ago.

3. She is 55 years of age

Questions are as follows:

1. Does she qualify for a distribution due to disability? I know the IRS guidelines state that person must be "unable to engage in any substantial gainful activity". Because she is working only a few hours per week does that disqualify her. It's interesting that the custodian sponsoring the 403b only requires a physicians statement that the person is or will be disabled for 12 months or longer. I'm always inclined to caution clients if they don't follow the full IRS definition.

2. If she can't take funds due to disability how about finc'l hardship? I know bankruptcy in & of itself doesn't qualify unless you meet one of the 4 IRS criteria. 3. I went over this info with the employer - they really want to help this person out. They brought up this idea: what if they let the person go (in which case they've separated from service & could take a distribution) & then hired them back a few months later? I don't believe 403b's have any break in service requirements that a qualified plan might have. Never heard of this being done before.

4. Because this is a non-ERISA plan what liablity might the employer have if the employee takes a distribution that possibly is later found through an audit to have been done impropoerly? I know that the employee is on the hook for penalties but am not sure about the employer. How about the custodian (especially under the disability distribution where the physicians statement does not follow the IRS definition).

Thanks!

Question: Does each participating employer under a multi-employer VEBA have to file a separate Form 5500, and if so, if a participating employer is considered as having a large plan, does an audit have to be filed as well? This is the information that the "Trust" is telling each participating employer. The "Trust" files one return and attaches the "Trust" audit.

If a loan is deemed distributed and is later offset by rolling it into another qualified plan (which I believe is permissble thanks to EGTRRA), can the participant take out a new loan to repay this rolled-over loan? If so, it seems like the "repayment" portion of the new loan would create basis in the participant's plan account (i.e., part of the pre-tax loan will create post-tax dollars in the participant's plan account). What do you think?

Shoudl a sponsor obtain a board resolution for its profit sharing contribution?

Are there any requirements out there regarding how to prove the intended contriubion, other than looking at the actual deposit.