Can you forfeit a lost participant's balance after a number of years? Plan document says you can forfeit, but not until age 62 or Normal Retirement. Plan sponsors agree to repay into plan participant's balance if he is located. Balance is less than $10 and the cost to maintain his account is greater than this per year. Does anyone think it would be acceptable to forfeit in a case such as this? Any other suggestions?

We have a client who established a 401k plan 1/1/98. He had an existing ps plan at the time. January 31, 1998 he terminated the ps plan. The distributions still have not been made from the ps plan but will be soon. Are there any problems here tied to successor plan rules?

Any help would be appreciated.

We have taken over an account where the client has made loans out of his IRA to non-family members. The IRA holds the notes as an asset of the IRA and the repayment of the loans are considered earnings on the investments that are contributed to the IRA. The owner of the IRA is under 59 1/2 (if this matters). Is this a prohibitive transaction?

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I work for a small insurance company who is considering converting our defined benefit plan to a 401(k). Has anyone completed this task? How does it affect employees who are fully vested and those who are not fully vested? If someone could let me know all of the "implication" of switching, please let me know. Thanks in advance!

I am aware that the combined deductibility limit for a combined money purchase plan and profit sharing plan arrangement is generally 25%. Here's my question.

The Code also says that the deduction by a company of its money purchase contribution is the "full funding limit." Say for example we have a 5% of pay money purchase plan formula, and also have a profit sharing plan. The profit sharing plan has a 401(k) feature.

Is the maximum deduction allowed 20% (5% MPPP + standard 15% deduction for PS plan) or is it 25%. The idea would be to fund a 5% of pay MPPP contribution, and make up the add'l 20% by virtue of deferral and profit sharing and match? Can this be done?

Thank you for your help!

Official cite: IRS Announcement 99-57

I have a company that has filed their taxes for 1998, but now wants to make a Profit Sharing Contribution to their 401(k) plan. May they still make this contribution, and if so, can they ammend their tax return to reflect the contribution?

A new business is established on January 1, 1998. The firm wants to implement a SEP for 1998. Must this SEP have immediate eligibility (i.e. age 21 and 0 out of the last 5 yrs employment) or can eligibility still be conditioned on age 21 and working 3 out of the last 5 years for the employer with the understanding that everyone is eligible for 1998 since the company did not exist prior to 1998? Also, in any case, wouldn't everyone age 21 with $400 in comp for 1998 need to be included in the 1998 allocation, even those hired during 1998 but after January 1, 1998?

Thanks,

Mike

Can you borrow against either a ROTH or Standard IRA? If not, can you make withdrawals prior to age 59 1/2 without penalties?

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We are a private company whose stock is valued by the Board of Directors at quarterly intervals. We added a company match to our 401k plan in 1998. The match is in the form of company stock only. (Employees can invest their own contributions in 14 different funds managed by Fidelity.)

When we were setting up this plan we were trying to determine whether or not we would need an independent valuation of the stock. Our attorneys told us this:

"An employer contributing non-publicly traded stock in the form of a match to the employer sponsored 401(k) is not subject to the ERISA section 406 prohibited transaction rules. Specifically, section 406 refers only to "acquisitions" of employer securities. A contribution of employer securities is not an acquisition of securities for purposes of section 406.

Due to the fact that a contribution of employer stock in the form of a match to the 401(k) plan is not subject to the prohibited transaction rules, ERISA does not require an independent valuation of the stock. Valuation by an independent appraiser or independent valuator as required under the ERISA adequate consideration rules is not required in this situation."

We concluded that we did not need an independent valuation of the stock and implemented the plan. All seemed fine and dandy until our annual 401(k) audit. Our auditors are telling us that we do need to get an independent valuation.

Our company does NOT want to have to get an independent valuation of the stock.

Any of you wise and wonderful 401(k) experts have an opinion on whether or not we really need one? Any ideas will be appreciated.

Thanks,

Marie

I have a client who has announced that there will be a layoff in the near future. Many participants are looking to go to school to learn new skills before they are laid off. Several have expressed that they want to go to Truck Driver Training. Does this seem to reasonably fit the definition of post-secondary education?

Here's the scenario: You have an error in a participants' investments. In order to correct it you (the TPA, plan sponsor, trustee, advisor, whoever was responsible) make up the money difference to make the participant whole. On the other hand, let's say that making the participant whole results in a "profit" for you. How do you reclaim that from the trust? Doesn't seem right that you can't. Any ideas and cites?

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Richard

If a top heavy db plan is converted to a cash balance plan, does anyone know of minimum required accruals for such a situation? I have not seen this addressed anywhere.

My spouse and I are both employed. His health plan is secondary to mine, and his pays secondary (coordinates) benefits with my medical plan. They will not, however, pay secondary on prescription coverage. Is this legal, as they do not have it stated in their spd that they will not pay secondary on prescriptions? One other note, I asked their benefits manager about this issue and she responded that "it is not in writing, but we don't pay secondary on prescriptions". I am thinking about filing an ERISA claim, but don't know if it is worth it....espicially since my spouse still works there. My ERISA claim would be that they have to provide employees with written details of the plan, etc. I received an SPD, but it indicates that prescriptions are covered, and I was issued a prescription card. Any advice from anyone?

I have an employer, the sole trustee, who wants to have successor trustees to the plan -- he wants to do this by corporate resolution. This is new to me -- has anyone ever heard of using successor trustees on a QRP? Thanks.

Has any one heard if the new tables to compute imputed income for group term life insurance will go into effect as planned July 1 or will the IRS delay the effective date?

W/ the IRS ruling 98-30 approving Neg Election in the use of 401k plans; can the states use their power to dis-allow the use of Neg Election in a 401k?

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Wm Orr

I’m searching for the federal regulations that explain health insurance discrimination. For example, can an employer establish separate classes of employees and provide one class with health insurance and not the other? I think this is more of a discrimination issue but is it covered by ERISA or the IRS? If it is a discrimination issue where is it addressed?

Steve

I have a 2 plan situation DB/DC where the top heavy minimum has been provided in the DB; I want to change this & provide the safe harbor 5% allocation under the DC only. My question- for non-keys who have a plan accrued DB benefit well in excess of the DB minimum, do I have to still give them a 5% DC allocation for the switch year? An answer with a cite would be appreciated.Thanks in advance!!

Plan fails 414(s), so it is now non safe harbor. There is no 'nondisrim' test by rate groups like for profit sharing contributions. The closest you can come is to run your ADP test using a safe harbor definition of compensation (despite the fact ees weren't able to defer on some comp)

This may cause plan to fail, and therefore require a QNEC /or refund.

Note: according to the ERISA Outline Book, some IRS agents hold that a de minimis standard can be 3% - though even that is stioll a facts and circumstance issue.

possible cite would be 1.414(s)-1(a)(2)

...even though a definition of compensation permitted under 414(s) MUST be used in determining whether the contributions (in your case, deferrals) satisfy a certain applicable provision (in your case ADP test), the plan is not required to use a definition of compensation that satisfies 414(s) in calculating the amount of contributions...

Since you failed 414(s) you are violating the MUST listed above.