austin3515

Errors more then three years ago probably are not an issue because the years are closed for IRS audit purposes...

I think with employer stock, the prudent thing to do is to limit their investment to a percentage to force some diversification. I have had clients in the past where once the balance of er stock exceeds 25%, future purchases are simply not allowed. What happens in the future is not relevant (similar to reviewing loans for the 50% security). I'm with mbozek though, with employer stock, 404© is by far the lesser issuer. You'll get nailed on the appropriateness of the investment in the first place--Of course imposing a cap is in my opinion a very good demonstration of prudence which will outa help quite a bit in your defense...

1) 404© is blown if you pull them out of a fund and map them to a new similar fund. OF course if this fund is better, perhaps the related liability wouldn't be such a scary thing. But because you picked the fund, and not the participant, 404© does not apply. 2) This one is much more gray (I think). Again, you don't want to be the one making decisions about investments (except of course for selecting good funds to put on the menu!).

If the employee (former employee!) has any sense at all, he'll leave the money right where it is, safe from anyone who wants, including the people he stole from.

One source ALWAYS unless it absolutely cannot be avoided! No, it does not have to be accross all sources. I always look at the plan to see which makes the most sense. Certainly fully vested comes first.

Participant in a real cash crunch. State Law (CT) requires the employees authorization for payroll deductions, and the employee can revoke the authorization. Does anyone have any concrete cites for whether or not payroll deductions can/should cease if the participant rescinds the authorization? I realize of course the loan must still be repaid, and that therefore the sponsor must try to get payment from the participant via personal checks or whatever. Also, I think the sponsor should never lend them money again, but is that where it ends? All money is in individual accounts.

I don't think the issue is limited to $ elections vs. % elections.

There's a few options - one is test the companies totally separately, the other is to aggregate and test together. This gets pretty complex, there's a nice write-up in the ERISA outline book. You should definitely take a look before issuing anything.

How bout amending the plan to add in-service distributions?

Right...

Both the DOL and IRS came out endorsing fees to terminated participants on the grounds that if they rolled to an IRA, they would be paying fees anyway. DOL had a field assistance bulleting, and the IRS had a something... Google it with "fees to terminated participants IRS and DOL" and I bet you'll find it. We use Corbel documents and I asked them their thoughts on the need for plan amendment and the document specialists felt that the document was vague enough intentionally such that no amendments were necessary to charge only termed participants a fee. I'd check with your document provider or the drafting attorney for more support. If doing it quarterly is too burdensome, just do it annually? Also, the money does not need to be escrowed. Just have the money sent directly to a service provider without being tainted by the sponsor's grubby paws!! We charge $18/TV/Yr., so we would just deduct that $18 from the part's account and have it sent directly to us. Mind you we have never done this in the past, but have looked into it in the future, particularly with lower cash-out limits.

I just can't see how your gonna pass nondiscrimination testing... What a bear! Presumably the higher paid people will get the highest dollar AND the highest percentage of pay, so unless the more valuable people are much older, and unless the gateway requirements can be satisfied (i.e., you need to cross-test), your idea won't work in a qualified plan. You COULD do this in a non-qualified plan, but then you have exited my area of study...

EI must be $168K after subtracting SE tax AND the $42,000 (42,000/168,000 = 25%).

Limit the keys to avoid top-heavy?

For the 5330, you pay the greater of fair market value or the amount actually paid. So let's say the underpayment rate exceeds the FMV rate (i.e., the rate the plan would have earned in arms-length loan). You still pay the excise tax based on the underpayment rate, because the amount paid (based on the underpayment rate) exceeds the fair market value rate. Let's say the fair market value is greater than the underpayment rate... But wait, are you really going to take the position that you paid participants less than fair-market value? Certainly not when the DOL has endorsed the underpayment rate as a pseudo-safe-harbor rate of interest.

What I think is that the DOL came out and said if your filing under VFCP, this calculator is the minimum we will accept. Therefore, it stands to reason, that they believe the model to be sufficient, fair and accurate. The "best performing fund" method came from the original VFCP program, and people used that regardless of filing under the old VFCP. I think it's fair to pretend that the "best performing fund method never existed...

Should point out that you did not need to use the best performing fund. I think you were working off the old VFCP, not the new which came out I think in May? Anyway, the DOL's got a web-site and everything to calculate the lost earnings just based on the underpayment rate.

I think that makes the most sense as well. That makes 2x I got the same answer AND the same explanation. On top of it, it makes sense to me! THANKS!!

Participant terminates in 2002 and is rehired in 2004. Participant has been reported as a B (simply to revise the balance information) for the last couple of years. In 2004 would you report her as D? Or simply leave her off the SSA? Or something else altogether?

Tough quesiton, and I think you could make 2 different conclusions: 1) The 3% SH is a component of the nonelective portion of the Plan. Therefore the 3% would apply to the full year, because PS (and nonelective) was in place for the full year. 2) Some plan documents are worded that compensation is recognized "while a participant in the portion of the plan for which the definition is being used." Based on this, you could argue that the portion of the Plan is the SH which means that you could use a short plan year. In support of this, it seems illogical to require the 3% SH for a period during which the Safe HArbor relief is not being sought. If your plan is not explicit, I think you need to choose between the 2 above. Recognize of course that your more apt to need to defend decision 2 then decision 1.

I've seen it before...

That's a different question, and yes they can (depending on the prototype). Most will allow this because your situation is not uncommon. It's called a multiple employer plan because two controlled groups (i.e., two employers) are in the same plan. Although there's one plan, most of the qualification requirements, such as coverage and nondiscrimination, are performed separately for both employers.

It is also possible that the plan is written to exclude overtime. Why anyone would do that in the EGTRRA world is beyond me, but not everyone eliminated the old provisions. (i.e., pre EGTRRA, there was incentive to limit the amount of deferrals because they were in included in the tax deduction limit for pension contributions, so limiting deferrals was common).

After spending a lot of time thinking about this and researching, I'm inclined to agree with you... I think most of my experience has been with Plan's that a 3rd party bank do all the withholding anyway...

Life is easier that way. I've never seen a separate TIN for a plan. Is having separate TIN's the norm?