austin3515

1) Annuity Plan with no trust 2) Accepting new contributions 3) The loan application goes right to the insurance company, the loan comes from the insurance company, and the participant's account balance is collateral. However, the employer authorizes the loan. 4) Payments are made though payroll withholding, but they are not deposited to the Plan. They are deposited with the insurance company to repay the loan.

What is your deal? It was a suggestion. If you can't see the correlation between my response and his question you've got issues.

You're being.... Everything I've talked about is in the 401(k). Everything. Two completely and totally separate plans. If you haven't heard of this situation in a 401(k) plan then let it be.

Check out Rev. Proc. 2002-47. When eligible employees are excluded from a 401(k), the Procedure talks about contributing amounts equal to the ADP and ACP. You might want to tack on some earnings.

They used to have a 403(B) with the same provider. That Plan was terminated and replaced with a 401(k). Sorry for leaving out the details. Did it matter anyway?

MBozek- Thank Goodness someone else has heard of this. This Plan was initially a 403(B) Plan. Any idea if this allowable for a 401(k)? All of the money is still held by the insurance company. Does this arrangement concern you (i.e., non-403(B) Plan)?

If you don't have the ERISA Outline Book I would get it. There's tons of examples on all these crazy quirks. My recollection is that you need to pro-rate the year - i.e., if 1,000 hours required, use 500 instead (short plan year). I highly recommend the book though, especially if you work a lot with these things...

If you really wanted CYA, just qualify the whole thing by saying these are recommendations, but just like you said, I'm not an ERISA attorney, you should consult one before doing any of this. And then keep a copy of the letter...

GBurns I don't see why 76-250 needs to be revised to be applicable under a 401(k) Plan. The revenue ruling isn't specific to any sort of a contribution? It's simply specific to a defined contribution plan. Last time I checked a 401(k) was a defined contribution plan. I think the ruling makes it perfectly clear that the last day rule/1,000 hour rule is acceptable as long as coverage is still passed. The employees had two questions 1) Can you have a 1,000 hour or last day rule. My response answers that question. I did not touch upon the second one (must the employer remit every pay period), because the answer to 1) implies the answer to 2. How else would you know who works 1,000 hours and whose employed on the last day. As for the 401(a)4 comment, the ruling also discusses 410 and 411. Regardless, the point is clear that you may have a 1,000/last day rule. Leave your attitude at the door GBurns...

Not surprisingly, they say no problem. I specifically asked them for technical regferences supporting why it was not a prohibitted transaction. They gave me the loan program. I would need to go oustide of them at this point... Its starting to make me a little nervous!

Major Insurance Company does the admin. and investments. Participants take participant loans. However, the loan comes from the major insurance company and is collaterallized by the investment in the guaranteed interest account. Therefore, the participant takes the loan from the insurance company and gives collateral rights to his/her interest in their 401(k) account. This sounds to me like a PT, and an alienation/anti-assignment problem (i.e., grounds for disqualification). Any recommendations would be greatly appreciated.

Revenue Ruling 76-250.

There was a whole big discussion on this topic not to long ago. Click on search up in the top left. then just search message boards

I think if you work the phones a bit at the DOL you will get some results. Many times the first nit wit that answers the phones doesn't know much about retirement plans as evidenced by your phone conversation. It's imperative that you get past the first line of defense on the phones. Find other people in the same boat and get an attorney. For $4K, you can afford a few hundred bucks for a nasty letter from a lawyer...

Can a partnership with two partners and no employees sponsor a 401(k) Plan?

Don't forget the DOL loves these things... If you have trouble getting it, you may not even need a lawyer... Just call the DOL... That's obviously a last resort though...

Interesting... Whether its legal or not I don't know. But what an administrative nightmare. As trustee/fiduciary/administrator, the sponsor must authorize all expenses of the Plan. It is also the sponsors responsibility to act prudently with respect to such decisions. How do they monitor a separate advisor for each participant, given that they're required to monitor such service providers? You'd have to look at all the fees they charge, make sure they charge a reasonable fee, and that they are qualified. What a fiasco!

I thought that safe harbor plans were now exempt from top heavy rules?

If the IRS says its okay, then its okay, right? There are a lot of methods not included in the regulations that are set forth in 2002-47. In fact, if those correction methods were in the regs, we wouldn't need 2002-47. Just a thought...

Tom - You're initial response as hilarious! Rosemary, its hard to hear sarcasm when its typed in, but he's a good guy and will answer your questions tirelessly... Tom - why would anyone in their right mind irrevocably elect not to participate??? Something I've never quite understood...

I should say though, that I learned a great deal from reading the balance of the article!

Jon - In your article, it indicates that only Plans with a corporate trustee are eligible for the limited scope audits. Not true! Per the DOL regulations, the only requirement is that the institution holding the assets be regulated blah blah blah. Most of the major companies are aware of the rule, but once in a while, a trust company/bank that is eligible to give the certification won't do it because they're not the trustee. It's very frustrating (I'm a CPA by the way, and my firm does about 40 audits a year, several of which are limited scopes without a corporate trustee involved).

You guys are the bomb! Thanks

So for step 3, all you need to do is pass the nondiscriminatory classification test? Or does it need to pass the ratio percentage test? Also, does the general nondiscrimination test apply because people are getting different rates? Feel free not to respond, this thread is getting old...

So there's different tests - one for contributions and one for different rates? Or am I missing the boat here?