I am trying to determine what interest rate must be used when an employer is late contributing salary deferrals to a plan. It seems appropriate to look for DOL Reg 2510.3-102 for guidance. That reg seems to say that the rate used must be the highest rate of any plan investment over the applicable time (or the federal rate + 3 if greater).

Let’s say a plan has only 2 investments, and Fund A earns 100% over the applicable time, and Fund B earns 0% over the applicable time, and the federal rate + 3 = 7.5%. Further, there are only 3 participants in the plan. Participants X and Y are invested 50% in Fund A and 50% in Fund B. Participant Z is invested 100% in Fund A.

Participant X is deferring $100 per paycheck, Y $200 per paycheck, and Z $250 per paycheck.

The due date for the employer depositing the deferrals was June 10, 2000. The employer missed that date and is planning on making the plan whole, including interest, as of July 1, 2000. What amount of interest, in addition to the $550 in deferrals, should the employer contribute? How is the answer calculated?

Does the answer to a question like the above differ if the plan is a daily plan or a balance forward plan? How would a balance forward plan calculate interest from say, May 29, 2000 to June 15, 2000, if valuations are only done annually?

Is there any special considerations when paying a death benefit to a minor? Can the check be made out to them or does it need to be made out to their parent/guardian?

If an ESOP has been merged into a profit-sharing plan, must the ESOP continue to provide the IRC 409 voting rights pass-through to participants with an ESOP account? Would elimination of the voting rights pass through cause a 411(d)(6) problem? Thanks for any insight. Lesley

I have a participant who left her prior employer, rolled her qualified plan account(consisting solely of employer stock) in-kind into a conduit IRA. She would like to liquidate this employer stock, and roll the cash proceeds into our 401(k) Plan. Our document says nothing that would prohibit this. Is this permitted? If so, what tax consequences, if any, should she be made aware of? Thanks for any assistance.

If a plan operates in accordance with hair cut provisions on a case by case basis, must an employer turn over assets to a participant's bankruptcy estate?

An employer employs both union and non-union employees. It sponsors a 401(k) plan just for the non-union employees. The union now wants a 401(k) but the employer maintains they will not include them in their current plan nor will they be the sponsor of any new plan the union employees participate in. There will be no "company" contributions to the union plan and apparently this is not subject to the collective bargaining process. All the members of this union are employed at this particular company. The union maintains that they can sponsor a plan. Is this correct and do they just assume all the duties and responsibilities that an ordinary corporate plan sponsor would?

I have a beneficiary of a TSA plan that is 7 years old. Can the check me made out to her or should it be made out to her parents/guardian?

Has anyone seen any authority for (or against) the proposition that a plan may, by its terms, require distributions to be made via direct deposit, where the participant or beneficiary has a checking account to which the direct deposit may be made? The anti-alienation regs permit direct deposits, but are vague as to whether a direct deposit must be initiated by the participant. I'm guessing state laws probably require the employee's consent to direct deposit, but I'm also guessing these state laws would be preempted (I think the DOL opined several years ago that state laws concerning wage withholding were preempted to the extent they would frustrate an ERISA plan's recoupment of plan loan repayments). Any thoughts on the permissibility of requiring that distributions be effected through direct deposit?

[This message has been edited by Ed F (edited 06-23-2000).]

If a minister of a church wants to roll over his plan to another 403(B) TSA, may he do so? The organization holding this account has indicated that the plan is "not governed by federal laws" and that the plan's provisions do not allow for a lump sum settlement.

I have a plan which has a max deferral % of 10%. Two participants exceeded 10% , one an HCE, another an non-HCE. They are not over 25% 415 limit, however.

The k feature was added during 1999

Does anyone see a problem with retroactively amending max deferral % to max allowed by law effective with 1/1/99?

If you do see a problem one can certainly amend in the future but how do I correct current situation? Refund deferral in excess of 10% plus interest? How would this be classified on 1099 reporting?

This may be a ECPRS issue

Thanks

One of the employers from a controlled group of corporations wants to sponsor a health FSA for its employees only. What coverage and discrimination requirements apply?

Must an employer take salary deferrals from a bonus check in a 401(k)safe harbor plan and also can bonuses be excluded when calculating the 4% on the safe harbor match? I believe it depends on the definition of compensation in the plan document but what if the definition of compensation is silent on bonuses.

Spousal beneficiary of a 401(k) plan elected to defer distributions until the April1 of the year following the date her husband would have attained age 70 1/2. The plan failed to make distributions timely so they will need to make 2 to her this year. (Query - does she owe the excise tax or the plan?) Can she rollover the account balance except for the required minimums to her own IRA at this point and can she use her own required minimum distribution date instead of her husbands? She is only 67.

The old 5500s asked you to confirm whether, for a terminated plan, a determination letter had been requested. "No" answers to this question were always viewed as an audit trigger. I cannot find this question on the new form, or the retirement plan schedules. Am I missing something?

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Here is a variation on a previously asked question from 04/06/00. Participant of split dollar policy does not have policy in trust. Upon change of carrier, participant wants to immediately put policy in insurance trust and assign all ownership rights. Does this action invoke Section 2035, three year rule?

I received a voice message from a client indicating that the client wanted assistence in preparing required disclosure about stock option or grant in excess of 1,000,000 made to an employee. I've never heard of anything like this. Any thoughts? Thanks. Ed

Has anyone ever heard of the "flip flop" technique? This seems to be a technique where the Employer can avoid the overall 25% of pay 404a7 deduction limit where they maintain both a db and a mp plan (I realize that this isn't strictly a 401k topic but it seems close).

From what I've seen, this is done by carefully orchestrating the timing of the contributions after the Employer's fiscal year end, and it requiress very careful planning. Has anyone seen an article on this topic? We may have some clients ucurious about it; any guidance w/b appreciated!

When calculating the 15% contribution limit, can forfeitures first be deducted from the total contribution and then 15% be contributed?

For example, 15% of eligible compensation is $50,000. Forfeitures of $1,000 can be used to reduce the contribution. Can I calculate a total contribution of $51,000 so the actual contribution being deposited ($50,000) does not exceed the deduction limit?

Thanks.

Does anyone have any quick references where I can find recent research in participation rates??? You can e-mail me directly if you wish...need info fast!!!

Thanks in advance!!!

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No. Even in the context of a 401(k) plan, a plan need not require employees to suspend contributions if the employer is willing to use other means to determine whether an employee has other resources with which to meet the financial need. In a 457 plan, the safe harbor of requiring the suspension of contributions is not available, so the employer must always verify whether the employee has other financial resources which could be used to meet the financial need. In doing so, the employer should consider whether the employee plans to make future contributions only insofar as discontinuing contributions might in some instances be an alternative way of meeting the need.

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