I'm trying to determine the appropriate correction technique for an improper distribution. In my case, the employer treated employees as terminating employment when they were transferred to another division/classification that was not eligible to participate in plan. There does not seem to be any doubt that these participates did not have a true termination of employment and therefore, should not have received a distribution. Does anyone know what the proper correction technique would be? I'm sure we can start by requesting the participants to return the distribution with interest perhaps. However, I suspect that many of them may refuse. If so, then what can the plan sponsor do? Sue the participant? I think I read somewhere that the IRS has treated the plan as being disqualified as to the participants who don't return the distribution.

Kurt

A controlled group has an ownership change so that it is no longer a controlled group. The transition rules for 410(B) should apply as this is a disposition.

How is the plan affected if this is a prototype document? Is there a transition period to complete the plan spin off and establishment of a separate plan, or is the plan automatically a multiple employer plan on the date it ceased to be a controlled group?

Any cites are appreciated.

third party administrator will charge $50 to calculate rmd, can this expense be charged to the participant rather than treated as a plan-level expense?

A bank holding company sponsors a profit sharing plan. Each of the six participating employers elect to contribute an amount from 0% to 15% of participants' compensation. While the employer will cross-test under 1.401(a)(4)-8, how does the plan satisfy 410(B)? I seem to recall something that said a plan with more than one allocation rate would be treated as separate plans. Or does the plan "automatically" satisft 410(B) and the stumbling block would be 401(a)(4)? Any advice? Thanks. Ed

Thank you for your response. I have a further question. If I convert from a 403b to an IRA then to a Roth IRA is there a minimum amount of time that the money must stay in the traditional IRA before I convert it to a Roth?

A cash bal plan defines AB by saying that the account is projected to age 65 at 8%. Then converting the amount to an annuity that is increased each year by the rate of 8%. i.e. a COLA of 8%/yr.

The Plan says if a lump sum is chosen, then the account bal at termination is projected at App Int Rate (PBGC rate) and the COLA is the App Int Rate.

Can they change the projecting interest rate and the COLA just because the lump sum option is chosen?

To me it doesn't seem right. In other words it appears that they are changing the AB, which seems that it s/b the same weather the pension is an annuity or a lump sum payment

Any thoughts?

I'd be interesting in hearing real-life experiences with "bridge" loans on termination of a 401(k) plan (i.e., to avoid loan offset, a short-term loan is made to pay off the plan loan, the account is rolled to a different plan, and a loan from the second plan pays off the short-term bridge loan). If you've used it, were participants advised to find their own outside source of funds, or did an employer lend the funds for the "bridge" loan? If the latter, did you have collection problems? DOL or IRS problems? What if participants with loans are disproportionately HCEs? Did you consider simply grossing up regular comp for the tax hit? Any other problems/issues?

Thanks for your comments.

I'd be interesting in hearing real-life experiences with "bridge" loans on termination of a 401(k) plan (i.e., to avoid loan offset, a short-term loan is made to pay off the plan loan, the account is rolled to a different plan, and a loan from the second plan pays off the short-term bridge loan). If you've used it, were participants advised to find their own outside source of funds, or did an employer lend the funds for the "bridge" loan? If the latter, did you have collection problems? DOL or IRS problems? What if participants with loans are disproportionately HCEs? Did you consider simply grossing up regular comp for the tax hit? Any other problems/issues?

Thanks for your comments.

A profit sharing plan has several adopting employers. Most of the employers are physicians where the physician is the only employee. All of the other employees are employees of another adopting employer. It seems to me that each adopting employer (Physician) has a deduction limit of 15% of eligible employee compensation. If the only employee is the physician, the limit would be 15% of $160,000. The Plan, however, has an integrated allocation formula that allocates an amount > 15% of $160,000 to each physician. Hasn't the physician's 404 limit been exceeded?

Other than revocation, is there any procedure to correct an error on an IRC Section 83(B) election if you are still within the 30-day window for making the election?

I have a 401(k) plan that uses american funds within the plan. We used to use met life and all the employees had contracts there. We kept our contracts with met life but started putting new money in american funds. I want to roll my funds that are in american funds to the met life contract. can I do this? The met life contract is a individual retirement annuity and the american funds money is mutual funds.

I am considering converting my 403b to a Roth IRA. Can I do this directly or must I first covert it to a regular IRA then to a Roth.

A controlled group has an ownership change so that it is no longer a controlled group. The transition rules for 410(B) should apply as this is a disposition.

How is the plan affected if this is a prototype document? Is there a transition period to complete the plan spin off and establishment of a separate plan, or is the plan automatically a multiple employer plan on the date it ceased to be a controlled group?

Any cites are appreciated.

[This message has been edited by Dawn Hafner (edited 06-15-2000).]

I am VP of HR for a samll community bank with offices in 5 different counties across the State. We are considering offering some type of employee assistance program(i.e., acces to legal advice, psychiatric counseling, substance abuse counseling, etc.)I am interested in information anyone can provide along this area --do you have one?how does it work? provider information, do employees use it and appreciate the benefit? etc. Thank you.

I have a 401k plan that consists of deferrals and employer match only. The plan became top heavy during FYE 5/31/00. Does the employer have to make a 3% non-elective contribution to all eligible employees for the 5/31/01 plan year?

If the plan adopts a Safe-Harbor formula for FYE 5/31/01, can this 3% top heavy contribution also be used to safisfy the 3% Safe-Harbor non-elective contribution?

Has anyone dealt with the issue of whether an ESOP trust can pay a controlling/majority value for a transaction in which the shareholders sell their shares in stages(i.e 48% in year 1 and 5% three years later). We are looking at this and there appears to be quite a bit of controversy between trustees, lawyers and valuations folks. Everyone who says its OK appear to be hanging their hat on the proposed 3-18 regs. Whereas everyone else seems to think that since those regs may or may not have been pulled, that there is no support for this proposition. I would very much appreciate your comments.

An employer is terminating a plan. His plan does not currently permit lump sums, if the lump sum would exceed a certain amount. The employer considering whether he wants to add the lump sum option for all employees.

In the meantime, the employer is sending out Notice of Plan Benefits (as required by the PBGC). The Notice going to the employees who are over the lump sum threshhold says nothing about lump sums.

Does the fact that the employer has sent out an NOPB that says nothing about a lump sum option cause the employer problems, if the employer later decides to add the lump sum option?

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Sub A is 50% owned by Parent B. Both A and B have their own 401(k) plans. Sub A is sold to another company and 15 ees transfer to Parent B. Will these ees be able to receive a distribution of plan assets from Sub A's 401(k)?

How much time does the code give the plan administrator to made the determination that a (DRO) order is a QDRO? I thought it was 18 months from the date the first payment would be required under the order.

A unit benefit plan provides that the NRD is the 1st day of December nearest the the 65th birthday. The normal form is a joint & 100% survivor annuity. The plan did not elect to come under GATT prior to 2000.

Questions:

1. May the lump sum actuarial equivalent be based upon the plan's normal form or must the AE be a life only?

2. The employer is tax exempt and also sponsors a non ERISA 403(B) (employee deferrals only) - are the 415 limits on the lump sum effected?

3. If the lump sum is not paid until 3 months later may the plan pay interest on the lump sum - if so, what rate may be used? (The retireee's 65th birthday is after the 12/1/99 NRD).

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W.J. Parks, Jr., CLU, ChFC, JD, LLM