What is the proper procedure for handling forfeitures when match contribution has not yet been deposited? An employer has decided to make a discretionary matching contribution, and the match formula is defined in the plan document. The employer is planning on depositing the matching contribution after March 15. The ADP test fails and will be corrected before April 15 through corrective distributions of deferrals. The matching contributions associated with the excess contributions (deferrals returned due to the ADP test failure) will be treated as forfeitures and the plan document provides for reallocating them to other plan participants. The employer will make the corrective distributions of excess contributions before March 15, but the match will not be deposited until later. Questions: 1) Can we safely assume that no earnings will be calculated on the match treated as forfeiture? 2) Can the employer release forfeiture amounts attributable to the discretionary match from current match account balances, even though the match involved in the calculation has not yet been deposited?

Client has 125 plan for medical and dependent care expenses and medical insurance premiums. All contributions are funded by the participant.

What are the limitations on key employees? If the key employees' deferrals exceed 25% of total deferrals, what happens??

Please excuse my ignorance. I have very limited knowledge in this area.

Thanks for any help!

We are contemplating using a wraparound SPD for a welfare program, under which various duplicate provisions are placed in one tabbed section (e.g., COBRA rights, ERISA statement, claims procedures).

However, we are not sure if it is worth the cost and time associated with creating these sections, where the individual plan docs have been amended and are ready to go.

Obviously, wraparounds are a good idea in the long run, but is it worth is for smaller employers (I typically see them with Fortune 500 companies and large multiemployer plans).

Any thoughts?

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A client with a discretionary profit sharing plan failed to make the full contribution for non-HCE's on time. What are the consequences of this other than corporate tax issues? What if anything other than making the contribution must be done?

A 401(k) plan limits participant contributions to 15% of eligible compensation. What issues arise if increase this limit for nonhighly compensated employees only? Employer matches $.50 on the dollar up to the first 6% of pay.

Our company has a 401(k) Plan and a defined benefit plan which includes a 401(h) Plan.

Should the 401(h)Plan contributions be included when we test for the 404(a)(7) limitation?

I have gotten both "Yes" and "No" answers. I would appreciate any specific citations that support your answer.

Thank you,

Mike Muller

I think It all comes back to your Plan Document. I see nothing wrong with your approach, but I don't think it's something that you, as the actuary, can choose to do based on personal preference.

Most documents describe the lump sum as the value of the Accrued Benefit payable at Normal Retirement Date, but I have seen some that determine it based on the value of the benefit at the earliest possible commencement date.

I think you need to be careful not to let your "pet peeves" cause your clients to incure liabilities beyond what the Plan Document allows.

If they find your doing something beyond what the document requires, they will most likely come after you for restoration of the assets.

Would you consider adopting someone.

I am looking for citations relating to the income taxation of employer provided investment education. How much investment education can an employer provide before it becomes a taxable benefit to employees? Is there a non-discrimination requirement?

Thanks, JD Colville

My company provides a 402(f) notice nearly identical to the model in IRS Notice 2000-11 to each participant in advance of distribution. We also provide a brochure summarizing Federal tax consequences and identifying the timing for receipt of form 1099R. Most of this brochure duplicates information in the 402(f) notice, except some additional detail on capital gains, ten-year averaging and description of specific timing of when our company provides From 1099R. My co-worker calls this a 6057 notice and says we must provide it. I checked Section 6057 and didn't see much resemblance to this brochure. Can anyone point me towards a reference describing the required contents of a 6057 notice? Is my co-worker crazy? Also, we provide an explanation of the QJSA waiver and spousal consent. Are any other notices required at the time of distribution? Thanks for your time.

Has the question ever been resolved whether or not participants can be charged a distribution fee upon leaving the plan. there seems to be mixed opinions on this. some people contend that the DOL prohibits this cost being charged to participants and that it should be spread evenly among all participants. others say that the participant can be charged.

I double-listed this in the termination board:

The plan sponsor committed suicide. The trustees and participants are all gone. The company was in horrible shape. No beneficiaries have stepped forward to claim an account sitting with a bank because creditors would immediately attach the account. The bank does not want to have to continue to file 5500s and be responsible for this account. The bank wants to terminate the plan.

Can the bank step into the shoes of the sponosr and terminate the plan?

My feeling is that this may turn on state corporate or escheat law. I found a case Chambers v. Kaleidoscope which says the court can terminate and distribute an abandoned plan, but there is no other guidance.

Any suggestions? Please? Thanks.

Everyone is gone. The company was in horrible shape. No beneficiaries have stepped forward because creditors would immediately attach the account. The bank does not want to have to continue to file 5500s, etc. The bank wants to terminate the plan.

Can the bank step into the shoes of the sponosr and terminate the plan?

My feeling is that this may turn on state corporate or escheat law. I found a case Chambers v. Kaleidoscope which says the court can terminate and distribute an abandoned plan, but there is no other guidance.

Any suggestions? Please? Thanks.

I am looking for any BlazeSSI user who is using/has used the link with either manulife or Hartford. I would specifically like to know what you did or did not like about each link. If you happen to use both, which do you prefer and why. if this would take to long to type, you can certainly call me ar 1-800-414-3809.

Thanks in advance.

John Ehmig

PDC, Inc.

Greensboro, NC

What is the proper procedure for making corrective distributions when match contribution has not yet been deposited? An employer has decided to make a discretionary matching contribution, and the match formula is defined in the plan document. The employer is planning on depositing the matching contribution after March 15. The ADP test fails and will be corrected through corrective distributions of deferrals. There will be "hanging match" associated with the deferrals. The employer would like to refund the hanging match before March 15. A few questions: 1) Can we safely assume that no earnings will be involved since the match has not yet been deposited? 2) Is it possible to make the actual deposit of match net out the hanging match, so that the hanging match portion is never deposited? 3) Can the employer refund the hanging match from current match account balances before April 15, even though the match involved in the calculation has not yet been deposited?

C corp, which does not have registered securities, sponsors ESOP. C corp shareholders are considering making an S election. With respect to shares held by the ESOP, does voting on the S election have to be passed through to ESOP participants? Is the S election a "reclassification" under Section 409(e)(3)?

I am working on a 14 participant DB plan which currently has an age 60 NRA. The sponsor may want to change to an age 55 NRA, leaving the formula as is (80% x AvePay x Svc/25). Exactly one-half of the participants will go from the age 60 415 limit to the age 55 415 limit. Accrued benefits for everyone would instantly become payable at age 55. One participant (an officer) is currently age 54. The required contribution would triple (which pleases the sponsor). Is this NRA change possible as described? Any input is greatly appreciated.

An employer has an employee who is out on workmen's comp, receiving 60% of their pay. The employee is going to be eligible to join the 401(k) on April 1st. Does the employee get to enter the plan on 4-1-00 or does the employee have to wait until being actively back to work. If the employee has to wait, does the employee have to wait until the next entry date or does the employee get to start deferring as soon as the employee goes back to work? If the employee can enter the plan while out on workmen's comp., how does the employer do deferrals since the employee is not getting a paycheck?

I'm working with a client that has had a SIMPLE IRA for 1999 and so far in 2000. He would like to start a 401(k) p/s plan for 2000. Does anyone have ideas for getting around the SIMPLE exclusive plan rule? Can he terminate the SIMPLE now and start a 401(k) with a short plan year? I know it dosen't work the other way around (terminate qualified plan and start a SIMPLE mid-year), but would appreciate any ideas. Thanks.

IRC 457(e) defines an eligible employer for 457 plans as:

(A) a State, political subdivision of a State, and any agency or instrumentality of a State or political subdivision of a State, and

(B) any other organization (other than a governmental unit) exempt from tax under this subtitle.

Does anyone agree or disagree with my interpretation that entities that are organized as independent boards pursuant to federal legislation and Indian Tribes would not be "eligible employers" for 457 purposes and so would not be subject to either the $8,000 deferral limit or the trust requirement? If these employers are not subject to 457, are they then subject to the same deferred compensation rules applicable to corporate plans?

Thanks for any guidance.

Jim Colville