katieinny

Well, that explains it then. Thank you so much for clearing it up. My instincts were telling me to keep everything separate, but I guess that won't be necessary after all.

I feel pretty comfortable answering this one because one of our plans was just audited by the DOL, and the outcome was that the employer needs to get the contributions in quicker than he had been. There is no right answer because there are always extenuating circumstances and variables that come into play. But it seems to me that the rule of thumb has been shortened to no more than 5 days beyond the date the funds have been withheld from pay, and in many cases it could (and should) be done sooner than that. One of the primary reference points is how quickly other withholdings get to where they need to be. That would be a good starting point.

A plan was recently referred to us that combines a 401(k) and an ESOP under the same plan document. The 401(k) is participant directed and employer securities are an investment option. And, of course, there are the employer securities that are in the plan due to the ESOP. Are there special rules or pitfalls that I should be aware of relating to the employer securities since the two plans are combined? The employer would like to eliminate any distinction between the 401(k) employer securities and the ESOP employer securities. He would prefer to treat them all as ESOP shares. Is that do-able? Recommended? Your thoughts would be greatly appreciated.

Thank you all for your help and insights. I'm posting a new question about this client, also relating to employer securities.

A participant directed 401(k) plan permits participants to invest in employer securities among other investment options. At one point, following the Enron scandal, there was talk about passing regs that would limit the percentage of employer securities that a plan could hold, even if the employees made the election themselves. I know that there is limited 404© protection if the plan follows certain criteria, but was a percentage limit ever passed?

Thank you very much for the confirmation.

I can appreciate that the TPA will have more work to do, so I'm not totally unsympathetic to a fee increase for more frequent deposits. However, I can't believe that such an argument will get the employer off the hook during a DOL audit.

Yes, now it makes more sense and I can see what she was trying to say. Thanks for straigtening me out.

DC plan is terminating. The plan says that expenses can be paid from plan assets, but I know that certain expenses really can't be. Can expenses to locate missing participants be paid from the plan assets? Can they be charged to the missing participants' accounts? It sounds reasonable to me, but I would like another opinion.

Okay -- I'm confused. JanetM: can you rephrase your first sentence?

Your first sentence said it all. They need to be concerned about passing the discrimination tests, which won't happen if the safe harbor plan is funded at a much higher rate than the multiemployer plan.

Does the employer need to be concerned about the plan provisions or contribution levels going into the safe harbor 401(k) plan for the non-union employees, as long as the union employees are participating in the multiemployer plan? In other words, does there need to be any syncronization of benefits between the two plans?

Our client thinks that he read somewhere that the frequency of elective deferral deposits can be limited (made less often) if the TPA costs increase as the number of deposits increase. He could realistically deposit deferrals every pay period, but doesn't want to because his TPA fees will go up. I can't imagine that the IRS gives a hoot about what his TPA fees are. Any thoughts?

So "any action" means anything except make a regular contribution?

An IRA account holder died in February '05. The deceased person's spouse would like to make a 2004 contribution into the existing IRA on his behalf since he was alive for all of 2004. I've been under the impression that a contribution cannot be made after the account holder dies, even if he was alive for the entire tax year. Can anyone tell me if I can find that in writing somewhere, or if she can make the contribution after all?

I'm reading an SPD that says the plan intends qualify under 404©. The paragraph is very brief. It simply says that participants are responsible to make their own investment choices and that the plan fiduciaries are not responsible for any losses that might occur. Most of the SPDs I read go into much more detail about what 404© means. Is there any specific language that is required to be provided relating to 404©?

I think Effen is right. The issue is too subjective to be able to give a yes or no answer to our client. I guess we'll need to see a few test cases before we can tell how narrowly (or broadly) it will be applied.

I haven't seen the test results, but the actuary has been in the business for many years. I certainly hope he knows how to do the tests. He says the plan passes.

The consultant is concerned that the Gold memo applies because the annual benefit formula is so dramically skewed in favor of the older HCEs, even though none of the other abuses mentioned in the memo are present.

The plan has a favorable determination letter. The actuary does the testing and insists there isn't a problem. However, the consultant disagrees. The employer feels caught in the middle and is asking for another opinion. I'm trying to find out where other practitioners stand on this issue.

The plan is a DB plan with a formula that provides a significantly lower annual retirement benefit to the younger rank and file employees than it does to the older, highly compensated employees. The employer's work force is relatively stable. It's a small company. They don't hire short term, low paid employees or use other hiring shenanigans.

Fredman: Thank you for providing Corbel's article. I guess the issue is still up in the air until we see how the Department will proceed with this threat -- and hope that our client isn't one of the test cases.

We have a client who is worried that their cross tested pension plan is in danger of being disqualified after a consultant to the firm gave them a copy of Carol Gold's October 22, 2004 memorandum. The plan received an IRS determination letter based on the cross tested formula. We believe that Ms. Gold was not referring to cross tested plans in general, but was addressing other types of employer abuses. Unfortunately, due to the usual year end hoopla, I haven't noticed if there had been any follow-up by the Treasury Dept. to put the minds of employers at rest. Has anything further been said about this issue?

Thank you for reminding me about the 242(b) election. The client is at about the right age for that to have occurred, so I will check it out.

At first I thought the participant might have forgotten to take a distribution. Then someone reminded me that another client (also over 70 1/2 and retired) was told that he didn't have to take a distribution, but nobody can remember why.