2muchstress

I am trying to find a DOL reference on what fees can be paid from plan assets. I am aware of the Kansas City DOL opinion of a few years ago, but remember reading somewhere that they relaxed that opinion somewhat. I cannot find anything that actually states what fees can be paid from plan assets though. Also, have client that is upset because he cannot make the participants pay their own distribution fee. The client would like to charge everybody a one-time initial setup fee instead. That setup fee would be transferred from the participants account and placed in a forfeiture account. It will later be used to pay the distribution expenses. What is the groups opinion on this. Thanks for your help.

I agree that the document should define eligibility computation. In my experience, it has always been the date that service was first performed. Although, who knows? There may be some caveat that we are not aware of... In our documents, if eligibility is less than one year, we us an 83.33 hours per month. So the 500 hours during 6 months could be okay.

I believe this was also covered in an ASPA webcast which supported Mike's answer. You may wish to check the ASPA home page and review the webcasts. I believe Joan Gucciardi was the presenter.

This is an ERISA plan. Our firm's action was to refer client to an ERISA attorney. What most of you are saying is that a marriage will automatically negate any prior beneficiary designation. I am not sure if it matters, but the participant was only married to spouse #2 for 7 months before he died. What implications, if any, would the length of this marriage have on the determination of who gets the money.

Interesting. We obviously have opposing opinions on the matter. We have similar situation with another client, and the ERISA attorney is advising that benefits go to named beneficiary. My understanding that the spouse is automatically a beneficiary unless waiving that right is a concept of community property, and would then be left up to state law. However, ERISA issues would preempt any state law, and thus negate that particular concept. However, Mbozek mention on a previous thread something about ERISA stating that the spouse must be beneficiary. I cannot find anything to that effect. If anybody has a link, that would be great. Thanks again.

Without answering your question, I just wanted to make you aware that the employer could use either current year testing or prior year testing during the amendment period for GUST. My guess is if they haven't filed anything since 1997, then they have not updated their documents as well. If this is the case, be sure to use both testing methods to get the best results, and then reflect that method in the document restatement.

Thanks. I agree that this is a matter for an attorney. The reason that I asked the previous question was because the bene des form was not dated. I am not sure if a date is really a necessity or not, unless there were multiple forms (which in this case there isn't).

Mike, When you say that we should confirm that the bene des form was "valid when executed", what do you mean? What would make a bene des form not valid, other than not being signed?

Participant named spouse as beneficiary when he initially enrolled in plan 8 years ago. He divorced approximately 2-3 years ago and never changed beneficiary. Remarried in January and passed away last Wednesday. Account balance is nearly 30K, so worth some discussion. Am I correct in saying that the named beneficiary (ex-spouse) gets the $$$$?

MJB- Obviously my assumption was just that, an assumption. Regardless of whether he passed a Series 7 or Series 6, I strongly believe that anybody who represents themselves as being a financial advisor, a financial planner, a retirement planner, etc, etc. should have a better understanding of how qualified plans work. Everyday of the week I hear of brokers/advisors giving bad advice about the operations of plans. My humble opinion is that they either need to be required to learn about qualified plans during their studies, or stick to advice on investments.

I understand the benefit from a participant standpoint, but could you explain how this would benefit a plan sponsor?

The 500+ plans I have seen do NOT have this provision. Some plans may allow for an in-service withdrawl of rollover money, some may allow for an in-service withdrawl after the participant reaches a certain age, or becomes 100% vested, or only for those funds that are 100% vested. But this is very few of them, less than 5% (probably like 1%). I would be very curious to read a plan that allowed for annual withdrawls. There is absolutely no reason to put that in a plan and it makes no administrative sense. If I ever administer a plan with such a provision, you can rest assured that my fee schedule would definately factor in the charges for all the additional work, notices, filings, etc. Plans can be written to say almost anything, but there should definately be some thought and foresight into the planning. After all, we are dealing with RETIREMENT plans.

I'm not necessarily sure if there is a maximum, however all loans must be established pursuant to a written loan policy. The loan policy must state the maximum term available. I have seen many that use 15 years and many that use 20 years. Just make sure it is in the loan policy.

Does anybody else think that qualified plans (especially distributions from) need to be tested heavier on the Series 7? But not to digress any further, I would say that it seems like you will be stuck with the funds that are offered in the plan. However, trustees have a fiduciary duty to monitor the plans investments. If you are unhappy with the investments, you may not be completely powerless to get them changed. Your wife should discuss her concerns with the appropriate people and they may be willing to change investments or add new ones. Sometimes it just takes one employee to get the ball rolling.

I'm administering a traditional balance forward 401(k) plan with employer stock as an investment option. The client called me with questions regarding the Form 4 filing. The Form 4 reports to the SEC and transactions of employer stock by the directors. Apparently there is a new requirement by the SEC that this form be filed within 2 days of the transaction. How is it possible to obtain this information timely enough to file the Form 4? Have any others come across this? Would transactions in a qualified plan be exempt from this filing?

I'm a TPA considering increasing the setup fees for participant loans. I am curious as to how much other TPA's charge for this service. I currently charge a $100 fee. By the time the documents are prepared, funds liquidated, trustees are tracked down for signature, checks issued, numerous phone calls from participant, etc... it seems like I spend 2-3 hours setting up every loan (not to mention the extra time to administer throughout the life of the loan). How do others handle this dilemma? Thanks in advance for your responses.

Okay, I found my ASPA binder from 2001!!! The workshop I was referring to was Workshop #16 "Participant Loans - Dealing with Practical Questions that are Not Answered in the Regulations" presented by James C. Paul, APM, Esq., Chang, Ruthenberg & Long Law, Gold River, CA. The following is directly from the presenter's material, it is not my own. Hope this helps. "A plan may suspend the obligation to repay a loan while a participant is in military service. In this case, the suspension will not cause a loan to be a deemed distribution even if the suspension of repayments exceeds one year and the loan term is extended. However, upon completion of military service, the loan must be repaid in full by the end of the original loan term extended by the period of military service, and the frequency and amount of installments following military service may not be less than the frequency and amount provided under the terms of the original loan. Proposed Treasury Regs. section 1.72(p)-1, Q&A 9(B). ASPA Comments to IRS: The Proposed Regulation provides that the obligation to repay a participant loan may be suspended during military service without causing a deemed distribution. Following suspension of the payment obligation, the term of the loan may be extended so long as the loan is paid in full by the end of the period equal to the original loan term plus the period of military service, and the frequency and amount of payments are not less than required under the terms of the original loan. Although the term of the loan may be extended to include the period of military service, the Proposed Regulation requires that interest accrued during military service must also be repaid within the extended term. This necessarily means that the amount of each loan payment following military service must be larger than the payment prior to military service. This could work a hardship on serviceman if they are not able to make larger payments on a participant loan following a return from military service. We suggest that the Proposed Regulations be modified to allow the term to be extended following military service for the period required to pay the loan in full (including interest accrued during military service), assuming payments are made with the same frequency and in the same amount as before military service. " Sorry for being lengthy and repetitive, but those were not my words. It would seem to me that you would not have a loan default at all if the participant is serving in the military. You would just carry the loan on the books until they return.

Good Riddance to Nationwide. I am a Nationwide PPA and I can't stand working with them. I had 5 plans with them, 4 large and one small. One large plan has left Nationwide to use another investment provider, two are actively looking. The other large plan is frustrated with Nationwide and probably will start looking soon. The only plan that doesn't care has only seven participants. I have taken Nationwide off my referral list, and every new client or broker that comes my way, the first thing I say is that we will not work with Nationwide. Too many mistakes and they put all the blame back on the TPA. This is good news to me. I hope they terminate my contract. I have absolutely nothing nice to say about them.

This was discussed at length in a session of the ASPA Summer Conference for 2001 in San Fran. I don't remember the speaker, nor can I find my notes (Mondays, ARGH!) But if anybody else attended that conference, that might be a good place to look.

It would depend on the relationship the plan sponsors have with the recordkeeper. Sometimes plans switch recordkeepers very often, other times a plan may stay with a recordkeeper forever if they feel the service is good. What's the basis of your question, if you don't mind me asking?

How 'bout 0% for the first six months, the a standard rate of 9.9% plus prime. Seems to be the commercial rate in my mail everyday.

It was late when I posted last, so let me clarify. States with income tax usually do have some sort of withholding requirement on gross income. I was referring specifically to distributions from qualified plans. I also must claim that I practice in the Northwest, and am familiar with the way things are done in the west. I fully understand that there is a huge difference between the East and West on many things. However, not to digress any further, my point was that there is no reason to withhold from a return due to an ADP failure. How big can the return actually be, $10,500 at max. If that's the case, then a qualified plan is probably not the best idea for these folks. If a return of excess conts. is going really mess up somebody's tax standing at the end of the year, then they should fire their accountant.

I have heard, read and seen many times that the most influential group in politics is the elderly. Why? Because they vote. Younger generations discount the role of voting and take it for granted.

EGTRRA allows for the creation of Roth 401k's effective in 2005. It seems a little too soon for Congress to be changing laws just recently passed, though this is Congress we are talking about. I don't believe the Roth is going away in the near future. Long term, too hard to tell.

I don't understand why anyone would give an employee the option of withholding when a return of excess contributions is being made. If it is not eligible for rollover, withholding is not mandatory, and would only create more work than necessary. Also, state withholding is not mandatory for most states. California and Oregon residents must opt out, so most TPA's that I am aware of are no longer offering state withholding. To answer your question, if I understand it correctly, any distribution in which state tax is being withheld, you would calculate the state tax on the gross amount of distribution. Unless you live in CA, then the state w/h is calculated as a % of the federal w/h.