ee completed two year wait, enters plan and quits same year, receives no contribution. Rehired 6 years later.

now what?

adoption agreement doesn't adress issue of rehire, the basic document uses rule of parity, which says

you lose past service if you do not have nonforfeitable right to any benefits.

ugh, ee is 100% vested in nothing when they quit. so do they lose their past service? My understanding is that rule of parity doesn't really apply to 2 year eligiblity plans since it only works with 0 vested participants.

if the above rule does not apply, they enter immediately upon date of rehire.

Does the safe harbor definition of a hardship "expenses for medical care" include dental? I am not finding anything in the EOB or the 401(k) answer book.

Thanks for your help!

What does the IRS consider a mistake of fact for purposes of returning employer contributions?

I'd be interested in any thoughts on following Q for calculating final average pay (FAP)...

Qualified DB plan provisions:

Immediate entry; 100% immediate vesting; CS = one year for each year beginning on employee anniversary date with 1000+ hrs. AB = 5% of 36 month average times CS.

401(a)(17) Limits:

1999: 160000

2000: 170000

Employee A (straightforward):

Hired 7/1/1999, termed 6/30/2000, salary $20K/mo (i.e. in excess of 401(a)(17))

Based on Example 3 of 401(1)(17) regs, it is clear that the monthly average for EmpA is 160000/12 = 13333. (i.e uses 1999 salary limit) This results in an AB of .05*1*13333 = $666.

Employee B (the grey one!):

Hired 1/1/2000, termed 6/30/2000, salary $20K/mo

Option1:

Observe that all pay is recieved in 2000. Therefore, the monthly average for EmpB is ((6/12)*170000)/6 = 14167. This results in an AB of .05*1*14167 = $708.

This gives EmpB a larger benefit than EmpA, even though he worked 6 months less and had the same salary and term date.

Option2:

"Attempt" to apply Ex3 of regs by saying that you need to use (a)(17) limit effected at the beginning of the 12 mo period ending at term date (i.e. 1999 salary limit) Therefore, the monthly average for EmpB is ((6/12)*160000)/6 = 13333. That results in an AB of .05*1*13333 = $666.

This option makes the two employees equal but seems wrong since all employement and pay was 2000.

Comments:

What muddles this for me is that I've never really understood how Example 3 clarifies the text of the (a)(17) regs...rather, the example seems to sort of make it's own rule for plans with monthly averages.

If you're still reading and have any thoughts, I'd really appreciate it!!

Thanks.

Does anyone have a Sample Employer Policy on frequency allowing changes to deferrals? Our document states a policy may be created to do so. I just can not find a sample. Many thanks.

Does ERISA or any other regulation require a company to explain in the SPDs that the retirement benefits are "different" from the benefits employees receive as actives? Specifically, does there need to be a statement to the effect that the benefits cost more and are more restrictive (cover less, higher deductibles, copays, etc.) than the benefits they received as active employees? If so, is there a specific regulation code someone can point me to - Any input appreciated!

I have been asked about a Profit Sharing Trust that owns part of an S Corp and the S Corp pays dividends to the Profit Sharing Trust. Does this arrangement sound kosher?? It doesn't to me.

My roth ira investment isn't doing so well. What are the plusses and negatives of my next roth investment going to a different mutual fund or for that matter a different brokerage house? It doesn't make sense to put my next investment into the same lousy mutual fund. What are my alternatives?

I have a client who is over 65 years old and currently receiving monthly payments from a defined benefit plan from his prior employer, where he was a common law employee. He is currently retired and does some contract work and has schedule C income. If i was to set up a Defined Benefit plan for his contract work, would the benefit have to be offset by the benefit he is currently recieving?? Thanks.

The final regulations outlining minimum gateway contributions for new comparability plans

indicate that NHCEs must receive an allocation equal to the lesser of 5% or 1/3 the rate of the highest HCE. However for

combination DB/DC plans, the minimum gateway is increased by 1% for each 5% increment the HCE rate exceeds 25%.

When these final regulations were issued, EGTRRA was not yet enacted so that the allocation rate in a DC only plan would

never exceed 25%. However, since EGTRRA, it is possible in a DC only plan arrangement for an HCE to receive in excess of

25%. Have you seen anything to indicate the increase in gateway minimum, as outlined for DB/DC combination plans, now also

applies to DC only plans?

In light of the recent stock market fiascos like Enron and Global Crossing, we are considering lifting our restrictions on company stock. I was wondering if anyone has any names of companies who have done this recent or are planning on doing it.

In 2002, can I still contribute to both my Profit Sharing Plan and Money Purchase. I know limits are up to $40k or 100% of income whichever is less but I heard something about other changes. Do I still need the 2 plans or can I just have one? Can someone help sort out the details and where does the IRS talk about this (besides Pub 560 because it doesn't get specific). Thanks.

The LTD policy in question does not offset benefits from most employer sponsored qualified plans (described as 401(k), "thrift," 403(B), governmental plans, plans that the insured "pay for entirely themselves," and IRAs). This is a particular situation where the individual is going to work for a not for profit organization ("NFP org") and the only existing plan is a straight deferral 403(B) plan (no employer match).

The NFP org can only pay the individual a relatively small amount without incurring offsets from his disability benefit. In order to make up the difference between his artificially reduced salary, and what he would ordinarily earn, they would like to institute a private pension arrangement for him.

Problem is, the only way I know how to do this for a NFP org is through a 457(B) plan, and the LTD policy appears to offset, from the disability benefits, amounts that represent salary deferrals or waivers (other than 401(k)/403(B) contributions), even if the money going into the plan is styled as "employer contributions,"

Thus, I believe the question is, is there any way to institute a Section 457(B) plan for the individual, without a de facto waiver or deferral of compensation, and, if the answer is "no," are there any other options for a private pension arrangement in this setting?

If there are no fees paid from the trust and no termination of accountans and enrolled actuaries, does a Schedule C still have to ge attached to the Form 5500 for a large plan?

I am looking for useful information or "best practices" used in various states and municipalities around the nation that effectively links employees' premium contribution with salary categories. As health care costs have risen out of control, my organization is searching for equitable strategies to spread out the increases over a range of salaries. Any feedback to what mechanisms you may apply in your organization or direction to where I may find this type of information would be appreciated.

Thank you.

Participant took HW to prevent eviction from primary residence (was in default on mortgage). Plan allows for safe-harbor withdrawals only. Participant submitted a 2nd hardship request to pay back taxes which, I believe, does not meet the safe-harbor definition. Here's the wrinkle: when the participant depsoited the HW amount in his bank, the bank froze his account due to a relative forging his name on a credit card app & charging a great deal. The bank is holding the participant responsible. he cannot access the funds to pay the mortgage lender.

With the bank account being frozen, can the plan "re-issue" the original hardship amount? My concern is that it's alrteady been paid from the plan & it may be viewed as taking more than what is needed to meet the hardship. The employer really wants to help out this participant but we don't them to be deemed as going against the safe-harbor rules & plan document. Any guidance is appreciated.

Brian

The new final 401(k) loan regulations allow a participant to suspend loan payments for up to one year while on leave of absence. However, "the suspension of payments cannot extend the term of the loan beyond 5 years." Treas. Reg. 1.72(p)-1 Q/A-9(a). I understand that participants can either increase their payments when they return or make one large payment at the end of the loan term to make up for the missed payments during the leave.

Question. Suppose a participant takes out a loan with a 3 year term. After 2 years he goes on a leave of absence and stops making payments for one year, at which point he returns to work. Upon return, can the sponsor and participant agree to extend the term of the loan for one year (total loan term is now 4 years -- still less than the 5-year limit), or must the participant pay the entire balance at the end of the original 3-year term (when the leave ends and he returns to work)?

The regulation seems to indicate that the term of a loan that comes due while on leave of absence can be extended (up to 5 years), but is unclear as to whether the original term must be reinstated upon return to work. By contrast, the proposed regulation for military leave is clear that the original term of the loan can be extended by the period of military service. Prop. Reg. §1.72(p)-1 Q/A-9(B).

Two potential problems I see are the level amortization requirement (although the dollar amount of the payments could remain the same upon returning to work, the term would be extended from 3 to 4 years), and the possibility that extending the term could be a refinancing that should satisfy the proposed refinancing reg's in order to have comfort.

Thanks in advance for any thoughts on this.

My wife received a 1099-R for excess 401k contribution. The 1099-R shows 2001 as the year with a "P" distribution code(I assume this means it is for 2000). Where do I include this income amount for my 2001 taxes? I used Turbo Tax and entered this amount and code, and it did nothing to my taxes. Do I need to file some type of amendment for 2000? Any help is appreciated...

Does ERISA or any other regulation require a company to explain in the SPDs that the retirement benefits are "different" from the benefits employees receive as actives? Specifically, does there need to be a statement to the effect that the benefits cost more and are more restrictive (cover less, higher deductibles, copays, etc.) than the benefits they received as active employees? If so, is there a specific regulation code someone can point me to - Any input appreciated!

i have a lawyer who was self-employed for part of the year (2001) and then went to work for a firm. he was not an owner of the firm. the firm had a 401(k) profit sharing plan in which he maxed out to $10,500 on deferrals and reached $35,000 with the firms additional contribution. can he now make a sep contribution for 2001 based on his compensation earned while he was self employed? if so what is the maximum contribution into the sep? any input is much appreciated.....