Is it possible for a safe harbor 401(k) plan to make a hardship distribution from the safe harbor employer match or the safe harbor employer QNEC? Also, can the plan make a hardship distribution of earnings on various sources of money? I have a safe harbor 401(k) plan document that says hardships can be taken on all money that is 100% vested.

Thanks.

New to section 132 & FSA programs.

With that said, my company has an issue. We rolled out a (pre-tax only) transportation reimbursement incentive program effective 1/1/03. We are now in discussions with the outsourcing vendor for the 2004 program year. They have informed us that per the new IRS guidelines we must provide vouchers if they are "readily available." However, the vendor is going to a purchase card to satisfy the IRS requirements. If we choose not to go this route, we must sign a hold harmless-type agreement.

My questions:

1) Can someone help explain the "readily available" and 1% financial rules a little bit better?

2) We are a NYC employer. Must we do this? I'm not seeing the upside of changing our process for what is still a new program for us. Our vendor has confirmed that ee's will lose out since the cards cannot be distributed before mid-Jan 2004.

3) Does anyone know where I can find the reg reference? I've tried the IRS website, and the Code of Fed Regs to no avail.

Thank you one and all.

I apoligize if this has been covered on the boards before...and I know this should be simple...

I have a safe harbor 401(k) Plan - no eligibility requirements, entry is date of hire. Employer uses safe harbor match formula. Employee hired in March of 2003, but does not begin deferring until July. I know the safe harbor is 100% up to 3% deferred and 50% of the next 2% (4%-5%). When I run the discrimination test at the end of the year, (immediate eligibility), the test will look at deferrals from July - Dec, but compensation from March - Dec. This will make the employees annual % lower than it actually is, of course. How do I compute the safe harbor match for this employee, based on the amount deferred/associated compensation or on %tage deferrred/associated comp? As an example, let's say the employee is deferring 4% beginning in July. Their comp is $10000 from Jul - Dec, so they defer $400. At year end, total comp is $18000. Annual ADP % = 2.22%.

Is the safe harbor match due $400 (100% up to 3%, participant at 2.22%) or $350 (100% of 1st 3% deferred and 50% of next 1%). Assume the Employer is depositing the match annually. Again - I know this should be easy, but I've gotten stuck here and can't get past it. Thanks in advance for input.

Are any of you familiar with any deemed IRAs, whether traditional or Roth, being created as an adjunct to any existing qualified plans, 403(b) plans, or government 457 plans? Are they successful? Are employees using them to make voluntary contributions? Have any of you seen any plan administrative materials or plan documents for the same (or than the IRS sample amendment language)? I have trouble seeing the advantages of any of this, but hope to see some articles or other materials that educate me on all of this.

Thanks!

IF a plan needs to be amended for the new regulation which is effective January 1, 2004, should an amendment be adopted before the end of the 2003 plan year or the 2004 plan year?

Thanks!

In a SIMPLE IRA, we understand that if the Employer chooses a non-elective contribution it must be made for all eligible participants. If they choose a match, please confirm that it is only made for the employees who actually have salary deferrals. A CPA is stating that all eligible employees get the match regardless of whether or not they defer.

I am looking for a 1996 Form 5500 (not C or R). Do you know where I can find an electronic copy? Thanks.

Does the code allow for participant loans from Simple 401(k) plans?

Hello,

Looking for opinions on the following:

If a 403(b) plan is subject to ERISA and has a formal plan document, would protected benefit rules apply? For example, would protected benefit rules apply to eliminating optional forms of distribution or changing normal retirement?

Thanks

I would like to hear comments and experiences for those that are using the Web/Internet module for Relius.

We are going through analysis of various recordkeeping platforms and a functional web module is a critical requirement (since we are focused primarily on daily plans).

Any and all information is appreciated.

How is the 404 limit determined if the LLP has three partners each with $300,000 of income? Is $600,000 the compensation amount for determining the 404 limit or is compensation reduced by the adjusted net business income fraction? Thanks

If an Employer files under Chapter 11, how does this affect the 401(k) plan? Are there any circumstances when a participant's account can be used to pay legal fees? If so, is there a cap on how much can be deducted from a participant's account? If fees can be deducted from a participant's account, can the account be held hostage until all bankruptcy work had been completed and all fees are paid? If there a governmental agency that can give some guidance on this please advise which agency.

Thanks.

I have a DB plan that was restated in 2000 and, according to the first page of the plan, does not include RRA 98 or CRA. Are there any amendments required for RRA 98? Can I just adopt the 132(f)(4) amendment and not restate the entire plan? I am submitting to the IRS.

Can a child of a deceased participant in a 401(k) plan Rollover the money to an IRA or must they take the entire distribution.

A recent thread on the Cafeteria Plans board noted the informal IRS position that an employer whose only employees were HCEs could not have a cafeteria plan because it would fail the non discrimination test. Has anyone considered whether the same reasoning might apply in the case of a self-insured medical expense reimbursement plan or MERP?

IRC Section 105(h) and the underlying regs seem to require a non discrimination analysis based on the terms of the MERP, rather than an operational test. The BNA Tax Management Portfolio #389 also takes this approach, stating that "Discrimination is determined by reference to benefits available under the plan, not to amounts actually paid." However, after another review of the regs, I'm not so sure.

In our case we have an employer with only HCEs and a MERP that, by its terms, provides the same benefits to all participants and has the same eligibility requirements for all employees. Obviously, I'd like for BNA to be correct. Any thoughts?

Thanks.

 Termination of an Underfunded DB Plan

Here is the fact pattern: Sole practitioner, the only employee, retired two years ago so little or no income is generated on Schedule C. The DB plan is underfunded just before termination this year, so $50,000 is required to be funded but is not deductible under 404(a)(8) because of the income limitation on sole proprietorships. The $50,000 represents the final contribution under the minimum funding standards of 412 for the year of termination. The Code and the Regs specify what cannot be deducted, but not what happens to the amounts that are required, but not deductible.

The benefits attorney has suggested two options:

Alternative One: Do not make the minimum funding contribution for the 2002 plan year. Proceed with the plan termination. As sole participant in the plan, and as a "substantial owner", agree to waive enough of the accrued benefit so that the plan assets equal the reduced benefit liabilities. The actuary will calculate how much will need to be waived. At the same time, request a waiver of the minimum funding requirement for 2002. When the plan is submitted to the IRS for a favorable determination letter on plan termination, disclose what is proposed. The attorney feels the IRS would be agreeable. Any reaction?

Alternative Two: Deposit the 2002 contribution requirement of $50,000 by the funding deadline of 9/15/03. Proceed with a standard termination of the plan and submit it to the IRS for review. Once a favorable determination letter is received, distribute the plan assets and treat the non-deductible contribution as "tax basis" and report this amount as a non-taxable distribution on the 1099-R. Can the non-deductible amount become a basis in the assets in the DB trust, or is it lost forever?

Now that this is in place... what about current plan years? Can participants begin to claim OTC's now? Can they go back to service dates earlier in the current plan year or only service dates on or after the announcement date?

I have a potential client that wishes to install a DB plan for 2003. The DB contribution would exceed 25% of total payroll. The company has one owner and one employee. The problem is there is an existing 401(k)/PS plan which has a safe harbor 3% non-elective contribution. The 401(k)/PS plan is a calendar year plan. The intention is to turn the 401(k) plan into a deferral only plan once the DB is adopted. Is there any way to amend out the 3% safe harbor requirement for 2003 or at least have the owner waive the 3%? Any input is appreciated.

We are establishing a new cash balance plan that provides for full and immediate vesting and immediate benefit accruals. Also, some participants will have opening account balances based on previous service. For the initial short plan year the beginning asset balance will be zero even though the plan will be fully funded by the end of the plan year with respect to accrued liabilities.

I think it is clear that we must pay a variable rate premium as well as the flat rate premium for the initial plan year. Does anyone agree or disagree? Are there any exceptions I am missing (the plan is not a 412(i) plan)?

Thanks for your help.

May a participant loan be assigned to an alternate payee pursuant to a QDRO? The participant is an active employee and the alternate payee is the soon-to-be former spouse. The plan does not require repayment of the loan upon termination of employment.