A client has been presented with a valid QDRO (already determine to meet all the rules) which states that the ex will receive 50% of the participant's accrue benefit at the divorce finalization date. So the participant's accrued benefit ($1,250) was determined and the ex has 50% of it ($625).

The valuation of the plan is now performed as of 1/1/2003. The valuation produces an accrued benefit for the participant of $1,625 which is reduced by $625 to reach $1,000. The normal form is 10 certain and life.

What benefits are used for non-discrimination testing??

a) The gross benefit $1,625

b) The net benefit $1,000

Obviously, if testing divides by years of participation / service the EBARs could be drastically different.

I am waffling BUT not leaning towards using the gross (and just accepting the fact that there is an alternate payee for $625).

Now, the spouse has the benefit 'segregated' and the valuation has to determine the value.

Does the spouse use the 10 certain and life but payable at the participant's NRD??

Is she entitled to begin payments at the participant's early retirement date BUT NOT receive any early retirement subsidy? (That seems to mesh into my reading).

Thanks for any and all comments. I just do not do these often enough to feel comfortable.

A long-time client has asked whether a defined benefit plan can be established for him and his partner. He is age 72, partner is age 68. They have had a SIMPLE Plan. Can we "terminate" and "freeze" the SIMPLE and create a new DB with a "normal" retirement age of the later of (a) age 65 and (b) 5 years of participation? If so, what issues should we be aware of? (other than ending a question with a preposition)

I have run into yet another "problem child" QDRO and am seeking some input.

We have a participant in a K plan (standard terms; no funky provisions) who designated his then-wife as his sole beneficiary. Mr. Participant and the wife then had a falling out and got divorced. The QDRO apportioned his benefits and indicated that the ex waived her rights to any further money/property of any sort from Mr. Participant. Naturally, Mr. Participant neglected to revoke the prior beneficiary designation and then departed this life.

My initial reaction (before I knew about the terms of the QDRO) was that Egelhoff v. Egelhoff pretty well resolved this issue. After reviewing the QDRO and discussing with Mr. Participant's executor, the question became whether the ex's waiver in the QDRO trumps the otherwise-valid beneficiary designation.

I can see both sides of this issue. If you rely on the beneficiary designation and Egelhoff, you pay the ex who has arguably waived her right to anything further from Mr. Participant. If you pay Mr. Participant's estate, you risk getting sued by the ex, although you can always argue that the waiver precludes her suit (although if the waiver does not preclude her suit, the argument for paying the estate goes down in flames). Note that the ex is NOT making noises about getting paid: she is (so far as we know) unaware of any of this.

What would you do here? Pay the estate or the ex?

Can someone please provide me a place to go to get more information on the Debit Cards for Section 125 Accounts? My employer is looking at making it available to our clients, but we would like to get some more information on it before putting in place.

Start with a cage containing five monkeys. Inside the cage, hang a banana on a string and place a set of stairs under it. Before long, a monkey will go to the stairs and start to climb towards the banana. As soon as he touches the stairs, spray all of the other monkeys with very cold high-pressure water. After a while, another monkey makes an attempt with the same result -- all the other monkeys are sprayed with cold water. Pretty soon, when another monkey tries to climb the stairs, the other monkeys will try to prevent it.

Now, put away the cold water. Remove one monkey from the cage and replace it with a new one. The new monkey sees the banana and wants to climb the stairs. To his surprise and horror, all of the other monkeys attack him. After another attempt and attack, he knows that if he tries to climb the stairs, he will be assaulted. Next, remove another of the original five monkeys and replace it with a new one. The newcomer goes to the stairs and is attacked. The previous newcomer takes part in the punishment with enthusiasm!

Likewise, replace a third original monkey with a new one, then a fourth, then the fifth. Every time the newest monkey takes to the stairs, he is attacked. None of the monkeys that are beating him have any idea why they were not permitted to climb the stairs or why they are participating in the beating of the newest monkey. After replacing all the original monkeys, none of the remaining monkeys have ever been sprayed with cold water. Nevertheless, no monkey ever again approaches the stairs to try for the banana. Why not?

Because as far as they know that's the way it's always been done around here. And that, my friends, is how company policy begins.

Thanks in advance to any who help out.

My wife and I are purchasing a home (we are not first-time home-buyers). We currently have about $4000 in savings, but closing costs are $9000. Our lender will not allow us to use other forms of credit to finance those closing costs. They will, however, allow us to remove money from our Roth IRA to pay the $5000 balance. January 1st of this year, I will start a new job and receive a nice bonus. I plan to use that money to replace the Roth withdrawal. In essence, I want to take a temporary loan out against my IRA. I would be withdrawing ~ $5000 and replacing it less than 4 months later. We have contributed more than $5000 to the IRA's, so there's no penalties on withdrawal. We have contributed $3000 each to a Roth this year. What I am worried about is that since we have already contributed the maximum that we would then not be able to replace the money we withdraw. Any idea what the rules are on quick removal and replacement of funds?

Thanks again!

401(k) SH Plan wants to be able to make different contributions to each of its two divisions. The allocation formula for each division will be the same. It will be a regular integrated formula. Basically what they want to do is give Division A the 3% SH minimum only. If they decide to give A a contribution one year, it will also be allocated under the same integrated formula. Division B will receive an additional PS contribution that will be allocated using an integrated formula. There are HCEs and NHCEs in each division.

I know that they will have to pass the general test. I think that they can avoid the 5% gateway minimum for Xtested because of broadly available accrual rates. Am I correct with all of this? Something doesn't "feel" right about it. It doesn't look like any of our Corbel Adoption Agreements will work and if we did this it would have to be IDP?

Can someone refer me to the regulation that spells out the requirement that employee money may not be

returned as a refund to the employer. I believe this is a requirement of the employer, not the insurer.

I seem to remember something in the mail in the past about an ibew sponsored contact program similar to 1-800 contacts. Is this correct?

My husband contributes 4% of his salary to a 401K, but the company doesn't match funds. I've been told that if your contributions to a 401K are not matched, that a Roth IRA is a better deal, since earnings are tax free and you don't pay any taxes on your withdraws. Our CPA, recommends that we continue to contribute to the 401K even though it's not matched and put extra retirement money towards a Spousal IRA or Roth IRA, for me and a Roth IRA, for my husband. My husband isn't qualified to do an IRA, because of his income and since he has a 401K. I'm wondering if our CPA is basing her recommendation for participating in the 401K from tax advantage, since the contributions are taken out of salary, before taxes. I'm wondering if a Roth IRA isn't a better deal, than a IRA, or a 401K that's not matched, because you won't pay any taxes on the Roth IRA when you take withdraws, where as you pay taxes on the amount of contributions and the earnings, 100%, when you withdraw from an IRA, or 401K.

1st employee would enter SEP 1/1/05. Would enter 401(k) 1/1/04.

3 owners have a SEP and want to have a 401(k) to max out.

In 2004 could they have a SH 401(k) and the SEP so that the employee would get only the 3% Safe Harbor Non-Elective to satisfy ADP & Top Heavy and then max out the owners in the SEP?

Thanks

What happens if the plan fails compensation test for excluded comp?

For 2003, on a Spousal IRA, is the full amount of the contribution, up to $3,000, deductible, when spouse is covered by a Retirement Plan at work, 401K?

The situation is as follows: A terminated employee, 100% vested in a 401(k) profit sharing plan wants to rollover their account to an IRA. The plan document says that "distributions will be made on the sixtieth day of the first plan year beginning after you terminate, or as soon as administratively practicable following that date".

The question: With all the new law is the plan document still legal? Is there a law requiring a plan to be timely or "as soon as administratively possible" on distribution and rollover requests from terminated employees? If the 401(k) plan is in a daily valuation environment, why would they not be able to cut checks more often than once a year?

I have been back and forth with this issue. This question has to do with the definition of restricted employee under 1.401(a)(4)-5(b).

Is it true that the "high 25" highly compensated employees and former employees are determined on a controlled group basis for purposes of this restriction? If true, then even if a plan is severely underfunded, the HCEs in the plan may still be able to take an unrestricted lump sum (that is, if the plan offers large lump sums) as long they are not part of the highest 25 within the controlled group?

Thanks.

Several of our large plans transferred their entire plan assets from Fidelity Investments to Manulife Financial during 2002. Is a custodian to custodian transfer considered when determining the 5% figure for line 4j?

The plan basically switched recordkeepers along with asset holder, are we required to report the transactions that were done to accomplish this?

Please help me--what does OPEB actually stand for? I'm working on a presentation and want to be sure.

Thanks so much!

A client with a Profit Sharing plan with about 25 participants is considering terminating his plan and shutting down his business. We are trying to help him keep his retirement plan money protected. I think he's going through some litigation of some sort. His son owns his own business, but our client would not be considered an employee and therefore couldn't roll his profit sharing money into his son's plan. Any ideas on how to keep his profit sharing money protected from litigation/creditors would be appreciated. Thanks.

A 60 year-old participant in a DB plan has been receiving annuity payments for the last 10 years after taking early retirement. The question is how to determine the maximum distributable benefit under the laws of the land under 2 different scenarios.

1 - The limiting factor is the dollar limit

2 - The limiting factor is the compensation limit

Specifically, are the past annuity payments subtracted in determining the figure?

If a participants terminates prior to retirement age, but leaves fully vested in a company's pension plan are those benefits protected and covered under PBCG in the event the plan is taken over?