katieinny

A not-for-profit employer has a provision in their 403(b) plan that says in order to get the 5% employer contribution, the employee must contribute 3%. If the employee contributes 2%, they don't get any employer contribution. I think I need to advise the employer that they must amend their plan to remove that provision, or at least modify it. Or can their current provision be interpreted as a permissible match?

If I understand the Universal Availability rule, for employee elective deferrals, there can be no exclusion of certain classes of employees like in the 401(a) plan (for example, a 401(k) might exclude employees in Dept B as long as the plan passes coverage. A 403(b) plan can't do that.). The exclusions are limited to those listed in the regs. But what about for employer contributions? Can different classes of employees be excluded from these contributions?

Yup -- she found it and is faxing it over. Thanks for your help!

mjb: I forwarded the NY Surrogates Court case reference to an attorney to see if she could find it, but she says nothing comes up under that name and case number. Can you give it to me again?

mjb: I've been looking all morning for something under NYS law that says "rights of creditors of an IRA owner are terminated at death and bene takes assets clear of such claims." Can you point me in the right direction?

I'm just looking for confirmation that the rules I remember for leased employees haven't changed. My recollection is that a leased employee can be excluded from the leasing company's plan (plan in place at the company where they are performing services) for the first year, but after that they must be covered under the leasing company's plan -- unless the leased employees are covered by a 10% money purchase plan sponsored by the leasing organization (the company that leases them out). Is that still the case?

Stuartt: Thanks! I thought that program was only for late 5500s.

A company set up a Top Hat plan back in the 90s. We just found out that they did not file a letter with the DOL as required. Is there an amnesty program for this type of error? The company is willing to comply, but we're wondering what penalties might be involved.

David: As you surmised, this is a one person DB plan. I don't know the whole story about why he wanted to put the Canadian property into the plan, but what goes in must come out, and he's decided that now's the time.

Masteff: The participant is a US resident.

A participant in a US defined benefit plan has Canadian real estate as an asset in the plan. He knows that if he takes the real estate out of the plan it will be a distribution for US tax purposes. But does anybody know what the tax consequences would be for Canada?

J: Thanks for your reply. I was hoping some of these plans could be combined, too. But it seems the company has different documents, and different plan numbers assigned to each one. I also think that 5500s were filed many years ago -- perhaps before the under 100 participant rule went into effect. This is going to take some time to sort out.

A company sponsors several types of welfare benefit plans (health, LTD, life & ADD, group travel and accident and a cafeteria plan). They have typically been under the 100 participant limit for filing 5500s, but some of the plans did go over 100 participants during some years, then back down again. I can see that determining which plans went over the 100 mark, in which years, is going to be quite a hodge-podge. I was told by another practitioner that there is much less concern at the EBSA about 5500 filings for welfare plans than qualified plans. She suggested that we not try to go back and figure out which plans should have filed for which years, but start being vigilant now, on a going forward basis. I was wondering if some of you have had a similar experience and how you handled it.

JanetM -- We agree with you. Now I've got to get the IRA custodian to come around. I don't know if logic will be enough.

The beneficiary designation was filled out prior to the divorce and was not changed. The application for benefits asked for the "relationship to deceased." She entered "ex-spouse." Then the custodian said they needed to see the divorce decree, which she provided. Now the custodian says that since the divorce decree says that each party waives their right to each other's retirement assets, they have to pay the assets to the deceased's estate. Under a qualified plan she would have the protection of ERISA, but since this is an IRA, I would like to find a citation that confirms our belief that the beneficiary form prevails.

Of course we're hoping JanetM is right. Is there a citation you can refer me to? The deceased's estate has many creditors standing in line. He has an ex-spouse and children who could certainly use the money.

An ex-spouse is listed as the beneficiary of her former spouse's IRA. If it were a qualified plan, that might be enough to assure that she receives at least some of the assets regardless of what the divorce decree says. But since it's an IRA, and the divorce decree says that the plaintiff and the defendant waives any interest in the other's retirement accounts of any nature, whether 401(k), IRA, 403(b) or defined benefit plan, I'm wondering if she has the ability to get any of that account. Does she have a chance?

Blinky: It seems to be the same situation a sole proprietor has -- he or she can't terminate service. Except in the case of a sole proprietor, there's no other person blocking the way when a sole proprietor stops working. In this case, the other Member is causing problems. So how does an LLC member get a distribution if he isn't retirement age, and hasn't died or become disabled, and the plan doesn't allow for in-service distributions?

mjb -- Just to be clear, your suggestion is to replace the QDRO with a DRO, submit that to the employer with a cover letter saying that if it is not accepted we will bring an action under ERISA.

We've had more than one situation where it's impossible to find missing participants because the social security numbers were bogus, which is just as bad as having no SS# at all. Do you open an IRA with an SS# that you know is wrong?

Speaking of LLCs, I have a question about how it's determined that one member of an LLC has terminated service. One member left and set up his own business. He hasn't performed services for, nor has he had income from the first LLC for several months. He wants to move his plan assets from the LLC's plan into his new plan, but he's being told that there is no basis for distribution because he hasn't terminated service. Isn't it enough that he hasn't performed services and hasn't received income? How does any sole proprietor or partner show that they have separated from service?

We tried submitting a QDRO to an employer for a non-qualified plan. They told us that non-qualified plans are not subject to QDROs and refused to accept it. We were told that there is no access to those funds by the ex-spouse.

Appleby: It's the clause in your third paragraph -- "and processed properly" -- that worries me. Can you be more specific?

A participant rolled over his lump sum distribution into an IRA. Several months later, the employer has notified the participant that he was given too much money and the excess must be returned. The participant is willing to do what has to be done, but he is concerned that the distribution will be taxable to him. He should not receive a 1099R for this excess because the money is going back to the employer's plan, not into the participant's pocket. How should this be handled?

According to the EPCRS, the correction for a defaulted loan that is still within the repayment period can be a lump sum payment, or reamortization of the balance over the time remaining in the repayment period, or a combination of the two. I'm wondering if it's possible to start making the regular payments now, and then making the missing payments at the end as a lump sum or balloon payment?