katieinny

A participant in a DB plan received a large lump sum distribution 3 years ago. Recently, the participant received a letter saying that nearly half of the distribution amount must be returned because there was an error made when the distribution was calculated. After all this time, he is able to return the money. I know that the plan has an obligation to try to get back the money. However, it is my understanding that the employer is responsible to make the plan whole when it is unable to recoup money from the participant. It is unfortunate that the error was discovered after so many years. Does the participant have any recourse?

I think the health information that is available in electronic format was addressed as a new HIPAA issue.

There was quite a bit of discussion about the "Use it or lose it" amendment that cafeteria plans should (but don't have to) adopt. However, I haven't seen much about amendments that must be adopted. For example. does a plan need to adopt an amendment that addresses the new definition of dependent? And does a plan need to adopt something formal that discusses health information in electronic format? Normally, I get all kinds of reminders from various sources that time is running out on required amendments, but not this time. Maybe I haven't been looking in the right places?

How are voting rights handled relating to employer securities held by a minority shareholder in his IRA? Shouldn't the custodian vote the shares?

Does an employer have a time limit for making the prevailing wage fringe benefit deposits? It's been brought to my attention that an employer is several months behind in making these deposits. I can't believe that this can go on without the employer getting in serious trouble. Has the DOL ever imposed a time limit?

Wow, your answer sure surprises me. I could understand it if the employer paid the full cost, but forcing employees to participate -- and pay half the cost just doesn't sit right. So, you're saying that existing employees who don't like the new policy could quit, and of course any new hires would know the rules before they sign on. I just talked to a person from the NY Dept. of Labor who wasn't able to answer the question.

An employer offers a health insurance plan and pays 50% of the cost of coverage. He wants to make it a condition of employment that his employees participate (employees pay the other 50%, of course). I can't believe that he can do that, but I thought I would get some opinions from those with more expertise in the health insurance field than I have.

An employer does not make the required Safe Harbor contribution for 2004. Therefore, the TPA ran the ADP/ACP tests because the plan is no longer a Safe Harbor Plan. As a result, the TPA returned excess contributions to the HCEs and is saying that tax and the 10% early withdrawal penalty is due on the distribution of excess contributions. I just did some reading (2003 information) saying that a missed safe harbor contribution shouldn't be fixed that way. According to the piece I read, missing a safe harbor contribution could cause the plan to be disqualified and the contribution should still be made, plus earnings. It sounds like it needs to go in under the EPCRS program. I wanted to get the viewpoint of other practitioners.

A DB plan has held a small amount of employer stock for several years. The stock has done fairly well and we were just told that it represents about 18% of the plan assets. The employer can sell enough stock to bring the level in the plan down to below 10%, but was there a prohibited transaction (and applicable penalties due) for the period that the employer stock exceeded the 10% limit?

An employee embezzles a large sum of money from the employer (not from the plan). The employee has a significant balance in the company's 401(k) plan, but it's my understanding that the employer cannot attach the plan. I guess the next best thing would be to have the employee sign over the distribution check, but the 20% withholding rule means that the employer will not get a chunk of what he's entitled to. The only other thing I can think of is to have the employee roll the money into an IRA and then take the distribution from there to avoid the 20% withholding. Does anyone have any other suggestions for getting the employee's money from the plan?

The employer is in the process of changing to a new trustee for the company's 401(k) plan. Prior to this change, employees were investing all over the map. For the most part, they've been able to transfer things over without too much difficulty, but there's one investment that the new trustee says they won't take on. There are significant penalties if the participant liquidates the investment now. I suppose we could set up a separate trust for that investment, but I'm wondering if the participant can be forced to sell.

An employer has decided that it can no longer afford to make matching contributions to the 401(k) plan. The last matching contribution was made for the pay period that just ended. However, employees won't be notified for several more days. It seems to me that employees should be notified prior to the the last match so that they can stop deferring if they choose to do so. What are the employer's obligations relating to the match?

Several businesses make up a controlled group. We will be dividing them into QSLOBs. Not all of the businesses have 50 employees, so we plan to combine the smaller businesses with one of the larger ones. When we're done, we expect to have 2 or maybe 3 QSLOBs. I want to make sure that such a combination is permissible. We also have a client with ownership in 3 non-related businesses, 2 of which are a controlled group. Since one of the 2 businesses consists of the client only (no employees), I don't see how we can use the QSLOB rules in this case. Am I correct?

Yes, we agree (and have disclosed to the employer) that there are risks involved in offering this type of investment in a plan. I haven't been able to find anything that specifically says how often the asset must be valuated. The issue seems to be based on what would be prudent for this type of investment. I wanted to see if other practitioners are of the same opinion.

An employer will be permitting participants to invest in non-marketable employer securities. He will have to get a bond equal to the value of the securities if that investment totals more than 5% of the plan assets. How frequently must the securities be valued? If there are no transactions in employer securities for an entire year is a new valuation required? Can someone provide a code section?

WDIK: I read through the scenario in the link you provided, but that addresses money rolled into a QP and then the plan invests in employer stock. I think there's a PT exemption that allows that as long as every participant has the same investment opportunity. But I'm not sure that there's a similar exemption that would allow the owner of a company to invest his IRA money in his own company. The phrases "party in interest" and "self dealing" keep coming up in my head.

An owner of a company wants to use his self directed IRA to purchase stock in the company he owns. The stock is not publicly traded. I'm worried about the prohibited transaction rules. Does this sound do-able?

A surviving spouse is approaching the end of the 5 year period during which she must make a distribution election. If she does not make an election by the deadline, would the automatic rollover rules apply to her?

Does anyone know if canned language is available (or will be) for the new grace period that offers some relief from the use it or lose it rule? We'd rather not reinvent the wheel if we don't have to.

I want to get back to SLuskin's question. Is there going to be a canned amendment for employer's to adopt, or will they have to have someone draft one for them?

Yes, he will get (or maybe already got) a third party appraisal. I'm just trying to make sure that he's not running headlong into the prohibited transaction rules. He's trying to raise cash for the company. I don't want there to be any self dealing issues.

It's a closely held corporation, so the stock is not publicly traded. The owner plans to purchase a substantial amount of stock. Since he's amending the plan to allow investment in the employer, the other participants would have the same option.

The owner of a company is planning on rolling his IRA assets into his 401(k) plan. Then he wants to amend the plan to permit investment in the employer. Then he will use the cash to buy employer shares. When I read the prohibited transaction rules, it seems that the above transaction meets one of the exceptions, but I would like to get opinions from other more knowledgeable practitioners.

Thank you! That's going to be my next phone call.

Kirk, I lost you. What is a common mistake where employee contributions are used to purchase employer stock? I don't know if the sale of employer stock to participants was registered with the SEC. Sounds like I need to find that out, because apparently it should be?