I need some additional input on how ADP failures recharacterized as catch up contributions at the end of a noncalendar plan year should be handled in calculating the 402(g) limit.

I am using the 'Catch-Up Contribution Worksheet for Noncalendar Plan Year' provided by Sal Tripodi and am running into testing results which are causing 402(g) failures that I am unable to justify.

Example:

I am working on a 3/31 plan year end and have an HCE, older than 50, who has deferred the following amounts:

1/1/2001 - 3/31/2001..... -0-

4/1/2001 - 12/31/2001..... 10,500

1/1/2002 - 3/31/2002..... 1,000

4/1/2002 - 12/31/2002..... 11,000

1/1/2003 - 3/31/2003..... 2,000

At PYE 3/31/02 the catch-up worksheets were used and no failures occured on the 402(g), plan limit or 415(limit). ADP failure did occur for 624.00. There was 1000 still available and the refund was not processed and the 624.00 was recharacterized as 'Catch-Up'. Everything is fine up to this point.

The calculation provided in the worksheet for the remaining 402(g) limit (for the calendar year in which the plan ends) advises to take the limit for calendar year less deferals made up to the PYE. Which in this case is 11,000 less 1,000 indicating that 10,000 can be made for the remainder of the calendar year. When the worksheets are completed for the next years test, this is causes a 401(g) failure of 1,000 w/ 326 in catch up still available which leaves a 402(g) refund due of the 624.00.

It seems to me that if the 624.00 was characterized as catch up contribution resulting from the prev year ADP failure that it should not be also counted as part of the elective deferrals in the calulation for determining the remaining amount of deferrals left in the calendar year.

It seems unfair that the 1000 deferred from 1/1/02 - 3/31/02 was characterized as elective deferrals, then ADP failure alloted them to be recharacterized as Catch-Up and remain in the plan, to then say that on the 402(g) testing that they are included as the elective deferrals made and excluded from the catch-up available for that year which results in a refund amount of 624.00???????

Your input please.

We have a cash balance plan that permits terminated vested participants to receive a partial lump sum. We have been advised that we are probably not required to provide a 50% QPSA on the residual annuity. We're not sure we want to follow this advice. Has anyone else looked into this?

Thanks.

When a person has been reclassified as a temporary employee, thus they are no longer eligible for company benefits which includes losing eligiblity to receive the company's payment of 401K contributions, can they withdraw from 401k plan participation and rollover their 401k funds into a roth ira? The 401k plan administrator says that the newly classified temp employee can not withdraw since they are not 59.5 years of age so any information citations or references would be greatly appreciated.

Can anyone think of a way to create a report that would show participants that are deferring vs. participants that are not deferring?

When a person has been reclassified as a temporary employee, thus they are no longer eligible for company benefits which includes not be eligible to receive the company's payment of 401K contributions, can they withdraw from 401k plan participation and rollover their 401k funds into a roth ira? The 401k plan administrator says that since the newly classified temp employee can not withdraw since they are not 59.5 years of age. If the plan administrator any information citations or references would be greatly appreciated.

Is it possible to exclude one group from the profit sharing portion of a plan who are otherwise eligible to make elective deferrals?

Specifically, I have a client with non-resident aliens working in the United States. They are here from the parent company in Japan, and stay for a period of 2 to 4 years. The plan sponsor would like to be able to allow them to make elective deferrals but not receive a profit sharing contribution because that portion of their retirement benefits are actually paid by the parent company. Is this possible?

I have a 403 (b) plan that has matching and discretionary Employer contribution features. The company has been sold and needs a final return agter assets are distributed. Is there more complicated 5500 filing on a final return?

Thanks for any help.

I found this well-written article inspiring and interesting but strangely disturbing:

"If At First You Don't Succeed" - http://www.inc.com/magazine/20030701/25659.html

Do you need to file a schedule T for a 412(i) DB Plan?

Has anyone heard anything about a new IRS address for the 5558s? One of my colleagues came up with an address telling me all 5558s had to be mailed there from now on. I can't find any confirmation on the IRS website and, of course, the instructions haven't been revised yet.

I am a broker working with a client, whose medical insurance carrier is insisting they terminate active COBRA participants at the beginning of each month until their premium is received. COBRA is administered by a TPA, and the carrier does not have the capability to "suspend" claims.

Our interpretation of the COBRA law is that COBRA members are given a grace period to make payment, and are terminated after that grace perioid if payment is not received - not before.

Other than being a logistical, administrative and service nightmare, is this legal? Is there a loophole in the COBRA law that could have any attorney willing to give their blessing to a carrier to administer this way? Any advice is helpful.

The carrier is located and services employees in the state of Connecticut, though I don't think this has any bearing considering the law is Federal. Thanks.

A plan sponsor recently sold one of its three divisions that were covered under their 401(k) plan. The plan did not terminate.

The new owners established a new 401(k) plan.

All participants who had balances in their prior plan are rolling their balances into the new plan.

Is a blackout notice required?

I can't seem to find anything in the SOX regs about spin-offs.

Do you need to fill out a schedule T for a 412(i) Plan?

When must contributions be made to 403(b) arrangements?

What happens if contributions are deducted from compensation and sent to the investment company but are never received?

I'm just wondering how anyone is finding Relius version 8.0+ to be? I'm currently on 7.3 and pretty happy with it...it seems like corrections to the 8.0+ versions on the website happen almost everyday, so I've been alittle leery about upgrading. Any pros &/or cons/comments appreciated.

An individual's current election under her employer's cafeteria plan provides for family coverage so that she may cover her children under such plan.

Her ex-husband, who is responsible for paying for the children's coverage per the divorce decree, has recently changed employment and has determined that it would be more cost-effective to cover the children under his new employer's plan rather than the children's current coverage under his ex-wife's employer's cafeteria plan.

The ex-wife has been employed with her current employer since the beginning of 2003, and the couple were divorced prior to her beginning her current employment.

May the ex-wife make a mid-year election change from family coverage to individual coverage (i.e., would an ex-spouse's change in employment be included in determining a change in status?)?

Thanks!

Anyone know of an Elected Officials Retirement Plan available in any of the states? DC or DB.

There is a participant in an employer's cafeteria plan who is being denied coverage for what I think is a covered expense and I need some other opinions or even a place to go to get the answer.

The participant took tetracycline as a teenager that turned her teeth black. So many years ago she had veneers put on her teeth to correct this problem. Well last year the veneers started to break and crack. She went to the dentist who said the only solution was to put new veneers on or cap the teeth since they had already been ground down for the first set of veneers. He recommended the caps and so the participant waited until this year and just had the caps put on.

The employer is stating that the guidelines for cafeterias are very clear that teeth whitening is not covered but since her teeth had already been ground down replacing the damage veneers with new caps is not teeth whitening. Any input on this would be appreciated.

I've been reading the posting from late last year regarding the calculation of MVARs when the plan pays a lump sum.

A posting on 10/31/02 from AndyH contains the following methodology.

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So, assuming that the plan's QJSA is Joint & 50%, and using the above as a guide, I think the process is as follows:

1. Take the actual lump sum, divide that by the APR for an immediate Joint & 50% survivor annuity assuming the spouse is the same age. Then multiply that by the J&50% at the same age using testing assumptions. This I would call a "normalized" lump sum.

2. Bring that forward from AA to TA at the testing interest rate.

3. Then divide that by the life annuity APR at testing age using testing assumptions. Then divide that by testing comp and then by testing service. That is your MVAR.

This assumes of course that the lump sum is the most valuable accrual, which would be true unless there is a subsidized retirement benefit of some sort.

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If the 50% J&S benefit is not subsidized, i.e. it is determined as the actuarial equivalent of the normal form life annuity, do we need to consider this benefit in calculation of the MVAR at all? It seems to me that using the plans conversion factors, the 50% J&S and life annuity are of equivalent value.

If the plan does not pay any early retirement benefits or lump sums, don't we only need to test the normal form benefit, and if the normal form is a single life annuity, there would be no conversion?

As a corollary to my first question, why does the above process for calculating the MVAR from a lump sum that has presumable been "subsidized" by the low 417(e) rates involve conversion through a 50% J&S annuity?

Does anyone have any guidance regarding why this is the accepted methodology (which from my reading, it appears to be).