Is it necessary to file Schedule A in addition to Schedule D for pension plan's investment in a Poled Separate Account of a Direct Filing Entity? The plan lists amounts in line 1©(10) of Sch. H.

Thanks.

I have a DB participant who is currently receiving annual minimum distributions from his DB plan based on the "account balance" method. His first distribution took place in March of 2003 (RBD was 4/1/03), and I am working on his 12/31/03 distribution. Am I off base on these requirements?

1) It is my understanding that even though the 2002 Regulations are "delayed" for DB plans, the Uniform Lifetime Table in the 2002 Regulations must be used for 2003 distributions (even for DB plans using the account balance method).

2) Since he did not receive his first distribution until 2003, the 12/31/02 value is not reduced by the amount of the calendar year 2002 distribution (pursuant to the 2002 Regulations).

Thanks.

Is spousal consent required when the participant’s account is over the cash out limit, but the loan is less than the cash out limit? Example, the plan’s involuntary cash out limit is $5,000. The participant’s vested account in $11,000. Participant requests a loan for $4,000. Do you require spousal consent? I always thought that the “total accrued benefit” determined whether or not the loan was subject to consent… but, I’ve heard otherwise from other sources. Any thoughts or regulatory guidance?

In other words, how do you interpret the last sentence of the following reg?

1.401(a)-20 Q- 24. What are the rules under sections 401(a)(11) and 417 applicable to plan loans?

A- 24. (a) Consent rules. (1) A plan does not satisfy the survivor annuity requirements of sections 401(a)(11) and 417 unless the plan provides that, at the time the participant's accrued benefit is used as security for a loan, spousal consent to such use is obtained. Consent is required even if the accrued benefit is not the primary security for the loan. No spousal consent is necessary if, at the time the loan is secured, no consent would be required for a distribution under section 417(a)(2)(B). Spousal consent is not required if the plan or the participant is not subject to section 401(a)(11) at the time the accrued benefit is used as security, or if the total accrued benefit subject to the security is not in excess of the cash-out limit in effect under §1.411(a)-11©(3)(ii).

Thanks

Oscar

A colleague asked whether an IRS distribution code of '2' on an annuity should be changed to '7' when the recipient reaches age 59 1/2. I gave her my opinion ('No') but am interested if there are situations when this might occur.

Are shareholders (who own more than 2%) in an s corporation prohibited from participating in a flexible spending plan? Does this prohibition also apply to a dependent care spending account?

thanks for any help...

I am under 59 1/2. would like to withdraw some of my Roth Ira money. I would not take more than I put in at the origin of my Ira. Can I do this without penalty or tax problem?

Thanks

I need the help of some experts in 401K rollovers. Here's a situation and I'm going to talk in round numbers.

Let's assume a 48 year old person has $1,000,000 in his 401K and is considering leaving his employer and changing to a new job. Let's assume he leaves Jan 1, 2004. First question, what is a reasonable time it should take for a 401K fund manager to rollover the 401K into rollover IRA assuming it would be rolled directly to a rollover IRA brokerage account at Fidelity.

Okay, now let's assume it is mid Feb and the $$ is in a rollover IRA. Also, assume that you know of a stock(s) that has the potential to double in 2004. In the mid Feb 2004 time frame (or as soon as the $$ gets into the rollover IRA), could you convert the Rollover to an existing Roth IRA (or a new Roth IRA??) that was opened in 1998 and gradually average up if the stock(s) are indeed rising. Okay, now imagine it's the end of 2004. If the Roth has lost slightly or gained less than 20%, could you just "recharacterize" it back to a regular IRA with no tax consequences? I realize you have to keep your income below 100 K (I think) in order to roll the IRA over into a Roth.

If the Roth has gained say 60% or more during the course of 2004, then when you file the 2004 tax return you'd have to pay the tax on the 1,000,000 converted in Feb. 2004. So, now assume it's April 2005 and taxes are due. Can you withdraw $400,000 from the Roth (I know you would have to pay the 10% early withdrawal penalty) and use that $$ to pay the taxes on the Roth conversion?

If this strategy works and is legal, then there is little risk. If the Roth doesn't go up enough , you can simply recharacterize it to a regular IRA. If the Roth does go up by 60% to 100%, then you can use the profits to help pay the taxes and you then have a tax free retirement next egg.

I would appreciate comments about the overall strategy. I realize that most people would laugh at getting a 60%-100% return in this market, but for the sake of argument, just humor me on this and address the strategy.

Thanks,

Hello everyone, I'm not sure if this is something anyone will be willing to give up, but I'm wondering what your companies charge their clients get their GUST restatements completed and what they would charge to have their plan documents totally amended. For example, what you charge a client to have a GUST restatement and what would you charge to have a plan document amended from a Profit Sharing plan to a Safe Harbor 401(k) Plan?

I'm trying to figure out what is logical to charge my clients?

Thanks for your help all!

I had a CPA try to tell me that if his client puts in a 3% safe harbor employer contribution into the SEP portion of his plan, then the ACP testing and minimum 50% participation rules are thrown out. This would then enable the owner to put in his $12,000 plus $2,000 catch up regardless of what any employees deferred !

These SAR SEPS are old plans and there is not much out there on them but I don't think he is correct. Any thoughts ? Thank you.

Can a 401(k) plan be rolled into a RRSP? A participant is moving to Canada and I can not find out any information on whether this plan would accept rollovers from 401k plans.

A union health plan currently offers coverage to the employee with the option of coverage for employee +1 or employee and family. It varies among the different employers. One employer, as of January 1, 2004, will be only offering coverage to the employee and not to the spouse or any dependents. Is this a COBRA qualifying event for a spouse or any dependents currently covered by the plan?

If anyone can help, I'd appreciate it. Also, if anyone can point me towards any web site that has this information that would be great also.

THANKS!

Company A provides a 3% Safe Harbor contribution to all eligible employees. They send this in on a quarterly basis. They sent in for the third quarter in early October. One of their employees became eligible on 9-1-03 and was not included in the money sent in for the 3rd quarter in Oct. They now realize this error and are sending in the money for the missed participant. Are there any rules to indicate that the employer needs to make up interest or pay a fine as with EE deferrals??? Any insight would be appreciated. (The EE is not an HCE or Key). Thanks!

Employee A quits her job. She calls to start her termination process from the companies Safe Harbor Plan, wishing to cash out. Her company has hired someone to replace her and then quickly fires the replacement. She has been asked to come back part time for a while. She does. She has only been terminated from the company for a little over three weeks. She has not had a break in service and continues to fulfill the eligibility requirement, therefore she is entitled to continue in the Plan, but the question is... Can she continue her termination process and cash out??? Thanks for your help.

November 21, 2003

by Dave Baker

Yesterday's BenefitsLink Retirement Plans Newsletter contained links to two message theads started by Janet Krueger on a Yahoo! discussion group, which itemize her reasons for disliking cash balance plans and her view of what it would take in order to design a "good" cash balance plan.

(The newsletter is archived online at http://benefitslink.com/2003/2003_11_20_retirement.html )

A reader wrote to ask about Ms. Krueger; the links in the newsletter failed to explain who she is. Krueger is a former employee of IBM; she and several IBM employees reportedly started a web site several years ago at http://cashpensions.com (see http://www.uswestretiree.org/a47.htm and http://www.pensions-r-us.org/member_groups/ibm_employees.htm ).

Under the new 401(a)(9) regs, plan sponsors may elect to amend their plans to use the 5-year rule for all or certain distributions in cases where a participant dies before distributions begin and there is a designated beneficiary. Does anyone know how this election would interact with QPSA requirements, i.e., if a plan is amended to adopt the 5-year rule, does the 5-year rule supercede QPSA requirements, or vice-versa? Does anyone have a cite?

I have been having a running gun battle with various colleagues over the past few years about whether the Voluntary Fiduciary Correction Program the DOL operates is really worth a hoot. Don't get me wrong--I am all in favor of correcting defects of all sorts when they rear their ugly little heads. What I am trying to figure out is whether a fiduciary really gains anything substantial by using the VFCP program rather than just implementing some sort of reasonable self correction (I am not talking about "aggressive" sorts of corrections that the DOL might quarrel with).

As an ERISA attorney, I have dealt with a number of situations that were arguably fiduciary breaches. In every instance, after looking at VFCP vs. self-correction, I really couldn't make compelling case for jumping through the VFCP hoops, at least not under the prior version of the program. I noted that the DOL has reported a substantial up-tick in the use of the program over the past year, and I know another ERISA attorney who swears by it, but I can't help but think that the increase in usage is attributable mainly to post-Enron jitters rather than to the program's added value.

I suppose the obvious benefit of the program is that you get the DOL's stamp of approval on your corrective action and its promise not to come investigate you or sue for the issue you addressed. Of course, if you identify a potential fiduciary breach and correct it using a reasonable methodology, you take most if not all of the wind out of DOL's sails anyway. (I know that there is room for the DOL to challenge the methodology, but assume for present purposes that the correction you chose would pass muster with a majority of little old lady ERISA lawyers--i.e., its conservative, results in some financial pain for the fiduciary, and 4 out of 5 dentists would say that it makes the plan participants whole.)

If there is no "settlement" with DOL, the 20% penalty is not going to be applicable for a self-corrected issue. I have successfully defended a fiduciary breach charge by DOL by fully (says me) correcting the problems it identified before there were any negotiations or agreements between the fiduciary and DOL. The DOL tried to assess the 20% penalty anyway, but I backed them down on that. Admittedly, the issues were pretty straightforward and the appropriate correction methodology was obvious, but still, the fiduciary wouldn't have gained any protection from participant lawsuits if it had chosen to use VFCP instead of self-correcting (not that there would've been any traction there anyway since all participants were made whole). We just would've run up some more fees and gotten a nice letter to put in the file.

I know that VFCP allows you to dodge excise taxes for late 401(k) contributions, and I am sympathetic to the philosophy behind the program. Nevertheless, in doing a cost/benefit analysis for your plain vanilla sorts of fiduciary boo-boos, VFCP doesn't add up, IMHO.

Does anyone out there have any wonderful tales about VFCP? I don't want to unfairly malign the program, and I do offer it up as an option in appropriate circumstances. If the main benefit of the program is that it generates another piece of paper for the files and therefore helps the fiduciary sleep better at night, maybe it's worthwhile. Otherwise, if the marginal protection a DOL no-action letter provides is often outweighed by the cost and hassle of getting the thing, it is a harder sell to the fiduciary.

Are outstanding loans including the the account balance when calculating the MRD?

Should SS/Medicare taxes be taken from Section 125 deductions?

There is a retired employee receiving a W2 because she is receiving installment payments from a nonqualified deferred comp plan. It has come to the service provider's attention that she is being allowed to defer on this income and put it into the 401(k) plan. I've read that you can include deferred comp income in your definition of compensation but is there a rule anybody could quote me about only allowing "employees" to participate in the 401(k) plan, not terminated, retired former participants?

Thanks

If law school-style exams covered other subjects …

THE COMPREHENSIVE BLUE BOOK TEST

Instructions: Read each question carefully. Answer all questions. Time limit: 3 hours. BEGIN IMMEDIATELY.

1. Biology

Create life. Estimate the differences in subsequent human culture if this form of life had developed 500 million years earlier, with special attention to its probable effect on the English parliamentary system.

2. Economics

Develop a realistic plan for refinancing the national debt. Trace the possible effects of your plan on these areas: Cubism, Donatist controversy, and the wave theory of light.

3. Engineering

The unassembled parts of a high-powered rifle have been placed in a box on your desk. Included is an instruction manual written in Swahili. In ten minutes a hungry Bengal tiger will be admitted into the room. Take whatever action you feel is appropriate. Be prepared to justify your decision.

4. Epistemology

Take a position for or against truth. Prove the validity of your position.

5. General Knowledge

Describe in detail, briefly.

6. History

Describe the history of the Papacy from its origins to the present day, concentrating especially but not exclusively on its social, political, economic, religious, and philosophical impact on Europe, Asia, America, and Africa. Be brief, concise, and specific.

7. Managerial Science

Define management. Define science. How do they relate. Create a generalized algorithm to optimize all managerial decisions. Assuming an 1130 CPU supporting 50 terminals, each terminal to activate your algorithm, design the communications interface and all necessary control problems.

8. Medicine

You have been provided with a razor blade, a piece of gauze, and a bottle of scotch. Remove your appendix. Do not suture until your work has been inspected. You have 15 minutes.

9. Music

Write a piano concerto. Orchestrate and perform it with flute and drum. You will find a piano under your seat.

10. Philosophy

Sketch the development of human thought. Estimate its significance. Compare with the development of any other kind of thought.

11. Physics

Explain the nature of matter. Include in your answer an evaluation of the impact of the development of mathematics on science.

12. Political Science

There is a red telephone on the desk beside you. Start World War III. Report at length on its socio-political effects, if any.

13. Psychology

Based on your knowledge of their works, evaluate the emotional stability, degree of adjustment, and repressed frustrations of each: Alexander of Aphrodisias, Ramses II, Gregory of Nicea, and Hammurabi. Support your evaluation with quotations from each man’s work. It is not necessary to translate.

14. Public Speaking

Two thousand drug-crazed aborigines are storming the classroom. Calm them. You may use any ancient language except Latin or Greek.

15. Sociology

What sociological problems might accompany the end of the world? Construct an experiment to test your theory.

* Extra Credit

Define the universe. Give three examples.

* * For The Highly Motivated

Define law. Define justice. Discuss similarities, if any.