We have an old ps plan with hub/wife holding assets in excess of $1,000,000. They have not made ps contributions in years. The funds were rolled in from an old DB. I realize they should have recurring deposits but that is not my issue here.

Question: Over the last few years they have hired employees. There are now 5 participants in the plan. The two HC's and 3 nhce's. The 3 nhce's have -0- balances.

There is no bond in place because the participants are not at risk. I would guess 80% of the assets are non-qualifying.

Is a bond and audit required? Again, if the intent of the reg is to protect the participants, we're fine. However, we are preparing 5500's versus 5500 EZs so I don't know if red flags are going to shoot up.

Any thoughts?

Hello, I need help with an RMD. I work for a transfer agent/IRA custodian and we can't agree on the best way to approach this situation. I have researched Pub 590 and found no definitive answers there and I have also reviewed Regulation 1.401(a)(9)-1, A-2©(1).

The Scenario:

Joe, an IRA holder is 81. Joe has been taking his RMD faithfully every year in September. His wife, Molly, is his sole beneificary.

Joe died two weeks ago before his 2003 RMD was taken out of his IRA account.

The Question:

Can we (as custodian for Joe's IRA) take his RMD directly out his account then transfer the balance of the account to Molly?

Our outside retirement services consulting firm has advised that we:

- move Joe's assets to a decedent IRA registration that includes his name and Molly's and is referenced under her tax ID

- remove the RMD from this new account

- and then move the balance to Molly's IRA (she is assuming Joe's IRA as her own)

This seems cumbersome to us.

I would like to know if we can simply take Joe's RMD directly from his existing IRA and then transfer the balance to Molly.

Since Joe was alive in 2003 he, or rather his executor, is going to have to pay taxes for him this year anyway.

Aren't IRA holders required to take the RMD beginning on January 1 and they are given until 12/31?

What if we didn't know that Joe had died and had sent his RMD check anyway?

Thanks for your help!

-- J

I have an employee who is separating and currently does NOT have his spouse on his health/dental plan. Our health and dental plans are pre-tax. He wants to add his spouse onto his policy when he enrolls in COBRA coverage at that time. Can he do that? I thought the only people who can continue coverage at the time of COBRA onset are the qualified beneficiaries (who was enrolled already before separation) or a newborn while under COBRA. Help? Can someone clarify this for me???

Thanks in advance!

KPB

I have run into a situation in which a plan has a number of defaulted loans (some defaults occurred 10 years ago and others within the past few years), but no action has ever been taken to report as deemed distributions or to offset. All involve participants who had filed bankruptcy and their files were set aside. New administrator is trying to deal with these files now. We went through VCP on some other issues recently & tried to get the IRS to bless a plan of correction, but they stayed away from the issue. I'd like any comment on correction. This is obviously a very messy situation.

I just received this from a good friend. I pass it on

................................................................................

...

Guess our national leaders didn't expect this, hmm?

On Thursday, June 26th, Darrell Scott, the father of Rachel Scott, a victim of the Columbine High School shootings in Littleton, Colorado, was invited to address the House Judiciary Committee's subcommittee. What he said to our national leaders during this special session of Congress was painfully truthful. They were not prepared for what he was to say, nor was it received well. It needs to be heard by every parent, every teacher, every politician, every sociologist, every psychologist, and every so-called expert! These courageous words spoken by Darrell Scott are powerful, penetrating, and deeply personal. There is no doubt that God sent this man as a voice crying in the wilderness. The following is a portion of the transcript:

"Since the dawn of creation there has been both good and evil in the hearts of men and women. We all contain the seeds of kindness or the seeds of violence. The death of my wonderful daughter, Rachel Joy Scott, and the deaths of that heroic teacher, and the other eleven children who died must not be in vain. Their blood cries out for answers.

"The first recorded act of violence was when Cain slew his brother Abel out in the field. The villain was not the club he used. Neither was it the NCA, the National Club Association. The true killer was Cain, and the reason for the murder could only be found in Cain's heart.

"In the days that followed the Columbine tragedy, I was amazed at how quickly fingers began to be pointed at groups such as the NRA. I am not a member of the NRA. I am not a hunter. I do not even own a gun. I am not here to represent or defend the NRA-- because I don't believe that they are responsible for my daughter's death. Therefore I do not believe that they need to be defended. If I believed they had anything to do with Rachel's murder I would be their strongest opponent."

"I am here today to declare that Columbine was not just a tragedy; it was a spiritual event that should be forcing us to look at where the real blame lies! Much of the blame lies here in this room. Much of the blame lies behind the pointing fingers of the accusers themselves.

"I wrote a poem just four nights ago that expresses my feelings best. This was written way before I knew I would be speaking here today:

Your laws ignore our deepest needs,

Your words are empty air.

You've stripped away our heritage,

You've outlawed simple prayer.

Now gunshots fill our classrooms,

And precious children die.

You seek for answers everywhere,

And ask the question "Why?"

You regulate restrictive laws,

Through legislative creed.

And yet you fail to understand,

That God is what we need!

"Men and women are three-part beings. We all consist of body, soul, and spirit. When we refuse to acknowledge a third part of our make-up, we create a void that allows evil, prejudice, and hatred to rush in and wreak havoc. Spiritual presences were present within our educational systems for most of our nation's history. Many of our major colleges began as theological seminaries. This is a historical fact.

"What has happened to us as a nation? We have refused to honor God, and in so doing, we open the doors to hatred and violence. And when something as terrible as Columbine's tragedy occurs, politicians immediately look for a scapegoat such as the NRA. They immediately seek to pass more restrictive laws that contribute to erode away our personal and private liberties. We do not need more restrictive laws.

"Eric and Dylan would not have been stopped by metal detectors. No amount of gun laws can stop someone who spends months planning this type of massacre. The real villain lies within our own hearts. Political posturing and restrictive legislation are not the answers. The young people of our nation hold the key.

"There is a spiritual awakening taking place that will not be squelched! We do not need more religion. We do not need more gaudy television evangelists spewing out verbal religious garbage. We do not need more million dollar church buildings built while people with basic needs are being ignored. We do need a change of heart and a humble acknowledgment that this nation was founded on the principle of simple trust in God!

"As my son Craig lay under that table in the school library and saw his two friends murdered before his very eyes, he did not hesitate to pray in school. I defy any law or politician to deny him that right! I challenge every young person in America, and around the world, to realize that on April 20, 1999, at Columbine High School prayer was brought back to our schools. Do not let the many prayers offered by those students be in vain.

"Dare to move into the new millennium with a sacred disregard for legislation that violates your God-given right to communicate with Him. To those of you who would point your finger at the NRA - I give to you a sincere challenge. Dare to examine your own heart before casting the first stone!

"My daughter's death will not be in vain! The young people of this country will not allow that to happen!"

..........................

Do what the media did not -- let the nation hear this man's speech.

Please send this out to everyone you can!!!

Our client is opening a 3 month early retirement window via plan amendment effective 1/1/2004; should the 1/1/2004 valuation reflect an assumed number of takers or should it reflect actual.

Also, if we go the assumed route is the change in liability an assumption or plan change ?

We are a TPA firm. In 2000, we instructed a Trustee to distribute appx $24,000 to a terminated participant and withhold $6000 for taxes. The $24,000 was paid out. The $6000 was transferred from the Trust to the Corporation (the Trust does not have a checking account and the intent was for the Corporation to in turn deposit the $6000 w/h). We just found out that the $6000 is still sitting in the Corp account.

We prepared and the Trustee sent in the 2000 1099R showing the total dist of $30,000 with $6000 withheld. No one has heard anything from anyone.

I don't know what the penalties are but I guess the proper approach would be to send the $6000 into IRS with a letter of explanation from the Plan's trustee. Are there special procedures or can someone direct me where to go to check out the late penalties. I thought maybe if the Trustee is just honest the penalties might be waived. This is a long time client and I truly think it was an innocent mistake.

Any thoughts would be appreciated.

Let's say an individually designed plan has been timely restated for GUST and a good-faith EGTRRA amendment has been adopted.

What additional amendments need to be adopted in 2003? deemed 125 compensation amendment, 401(a)(9) amendment, etc.

Thanks.

Can a controlled group make automatic enrollment applicable only to selected members (companies) of the group in a single master plan? If so how?

Does Relius perform the function of not imputing disparity on SHNECs when running 401(a)(4) general non-discrimination test?

I'm a new Datair user and I've just completed my first conversion....well, almost. I have an issue I've been unable to resolve. My PVB, NC, CL all look fine. However, the PVAB on my "Schedule of Benefits/Current" screen (actuarial equivalence basis) is $0 for all deferred vesteds (status "D"). I checked the help function and the manual and I've gone to screens 30 and 31 and input the "prior year vesting percentage" and "prior year accrued benefit", but it didn't help. Any ideas what I'm doing wrong?

Thanks in advance.

How do you handle the documentation of qualifying events for 125 Plans/Medical Insurance Plans? Typically we have not requested anything in writing (marriage certificate, birth certificate, spouse's verification of employment, etc.) unless it had to do with a legal matter such as a QMCSO. Our plan has around 500 participants and we currently accept the employee's word that they are giving us legit information.

How are other Administrators handling this?

Also, do you have them bring in tax returns if you are questioning a dependent status? Our plan defines dependent as someone claimed on your tax return.

I know that the Safe Harbor notivce needs to be sent before the plan year to all participants. But what about people who become eligible in the middle of the year? Do they have to get one, and what is the timing of that one?

For example, I have a plan that has immediate eligibility and monthly entry. If someone is hired in April, and can start in May, obviously, she wouldn't get a notice. Is one required for her for that year?

We converted our plan to a new TPA and a daily valuation platform in late 2002.

At that time, we had employer-directed profit sharing money with one investment broker, and individual 401k accounts with American Funds. The 2 partners had legacy 401k FBO accounts with the same third party as holds the profit sharing.

The TPA seems to have correctly allocated the American Funds FBOs to the participants.

Our choice was not not convert the partner's 401k accounts and leave them as outside investments.

The profit sharing investments were liquidated. The TPA mistook these funds for the partner's 401k FBO funds and split the amount between the 2 partners. However, it was actually the proceeds of the employees profit sharing funds.

Since then, one of the partners with the erroneous conversion $ in his account left the firm and took a full distribution, including the $ that is not his.

The TPA wants to partially restore the profit sharing accounts of employees with erroneous $ in the account of partner #1 who is still the owner. They want to pursue getting the $ back from the terminated partner before restoring the remaining $ to participants. There is 23K in the active owner's account that is wrong, and 28K in the terminated partner's account that he has taken out of the plan.

Is this the right way to clear this up? We suggested the TPA use their Errors & Omissions insurance to fully restore the part that the terminated partner took, and then use their own resources to get the $ back from him to repay the TPA. They said no. They said our alternative was to pony up with more employer's money.

This just does not seem right? I hope I am making sense.

Has anyone heard about a new ruling for DB Cash Balance plans? I don't have any experience with DB or Cash Balance plans but we are looking for alternatives for some of our clients.

Any information would be helpful.........

Our Health plan is governed by the 125 rules so the birth of a child is considered a qualifying event. However, if the baby is born and then the employee wants to have the baby covered under the spouse's insurance, is this request consistent with the event? The employee would then drop her child's coverage with us. Obviously it would be a qualifying event on the spouse's side as well. Is this okay to do?

a client became a safe harbor plan effective 1/1/99. Didn't separate pre-safe harbor PS contributions, and declared all participants 100% vested. Now, the client is complaining that people who left prior to 1999 should not be 100% vested.

If a terminated participant left an account balace in the plan, and the plan was amended to safe harbor status, and the amendment does not specifically mention the vesting schedule, are those participants 100% vested or not?

An employee has legal guardianship over a sibling who is diabled and over age 25. Is this dependent eligible to be covered under the employees medical and dental coverage?

I have a small manufacturing client with a 401k Plan. The plan has a discretionary match which has never been funded. No last day rule.

There are 16 employees: 1 HCE, 10 hourly employees, and 5 salaried employees.

Due to the economy, the company recently laid off all their hourly employees. They are wanting to make a discretionary match for 2003 where the hourly employees get a higher rate of match than the salaried employees. Also the HCE does not want to receive a match.

I plugged in the numbers and all ADP/ACP tests pass. Am I overlooking anything with the two rates of match between the salaried and hourly employees?

When a MPPP is merged into a PSP, those former MPPP assets then become owned by the PSP.

I had heard in the past that the PSP still has to continue to maintain a separate accounting (by participant) of those merged MPPP assets. So that someday if a participant terminates employment and wants a lump sum distribution from the PSP, the PSP must be able to tell how musch of his distribution is from the former MPPP assets.

Can any one justify why such extra recording keeping is necessary? Is the PSP really required by law to be able to know how much of a distribution is from former MPPP assets?

Can someone direct me to messages concerning this ?

thanks