austin3515

The ex must consent to any distribution (or loan if a 401(k)). Sounds to me like she was awarded some sort of an interest in the 401(k). Therefore, she is allowed the right to protect her interests (i.e., not consent to a lump-sum). No studpid questions by the way! There are however, stupid answers, and I hope mine is not one of them!

Pensions are like my new hobby. If you've noticed a lot of messages from me, it's cause I'm relaxing on vacation! Pathetic, I know, but it really doesn't take that long to respond... I've learned more on these boards in the past month than on the job for a year! It's cool to hear everyone else's problems! The title of moderator is well deserved. Thanks for all your question answering.

1) Maybe. But I'd say keep it clean and get 2. 2) $5,000 cash out: DB Plan - if present value of benefit is less than $5K (including ADEC), involuntary cash out okay. DC Plan - If account balance is < $5K Involuntary cash out okay. You have two plans, so you need to administer two plans. You're getting into very gray areas here. To accomplish you're goals, I'd definitely try to legally transfer the ADEC to the 401(k). I should think its possible to do.

If somehow the DB plan and the 401(k) plan docs allow this to happen, then go for it. Otherwise, it seems to me that to transfer assets from plan to plan would require some sort of plan amendment. You definitely can't just do it because its administratively feasible. Alternatively, perhaps the money still stays in the DB plan (in a separate investment account), but is just tracked on the 401(k) plan software in a separate bucket. That might work legally. It probably raises a lot of other issues, like allocations of investment income for the TPA, and processing distributions. It probably could be set up to simplify the process. Also, don't forget the spousal waiver rules that apply to the ADEC bucket (if the 401(k) happens to be exempt.

I'd go with "scriveners error." (of course I'm not an ERISA attorney, so bear that in mind) I.e., it was never the intention to include them, and the plan doc was poorly written. Was it common knowledge that they were excluded? Especially if it was communicated in writing. Perhaps the summary plan description was accurate? Were they covered by plans at the PEO? Regardless of whether the PEO plan was a safe harbor, it would help your case of scriveners error if they actually had a retirement plan. Aggressive? Probably. But its a better answer than that they were improperly excluded... I have assumed that 410(B) is not an issue (but I think it is, although only parenthetically).

Actually, I love it! Some day I hope to take on more of a consulting role, but auditing is the quickest way to get familiar with all the issues, I think. There's also a large emphasis on training, so its been fairly easy for me to have access to self study course/seminars, etc.. Albeit most of the work is pretty dry... Thanks for the sympathy!

I perform these audits about half the year and toomuchstress said is dead on accurate!

Just curious when that was effective - the "any HCE's" are considered not otherwise excludable? If you don't know, don't worry. I just had a client whose TPA made them fail for just that very reason. It was for the 98 plan year. Was it effective for the 98 year? Also, what does it mean that you're a moderator? Do you work for benefitslink? Thanks

Does the plan mandate the form of the adoption? I guess I'm a little out of my league on this one, so don't quote me. I shouldn't think it would be to terribly aggregious to just draft an adoption agreement and sign it retroactively. There oughta be enough paperwork substantiating the adoption - notices to employees, etc. Again I'd run that by a lawyer, but that's my thought... Lets be frank, its not like we stole money from grandma!

That doesn't exceed any limits I've ever heard of. Annual additions limitation (IRC 415) is 25%. You're only at 20 (pre EGTRRA this included the 15% of deferrals - post EGTRRA you're only at 5%). Plan docs commonly limit deferrals to 15% of comp (again, pre EGTRRA), so that shouldn't pose any problems. And because they're an NHCE, they would likely not have exceeded the 402(g) limits (10,500) (If they earned more than 70K, they would have deferred more than 10,500 in your scenario.

Tom - Remember, the regs from a few years ago allow you to treat these employees as having met the requirements for ADP/ACP testing purposes only. (But NOt for 410(B) - it is a strange scenario!) Are you saying here that even if there are HCE's in the otherwise excludable category that you would not have to run ADP/ACP testing if they're the owners kid? I thought I remembered reading that somewhere actually (but never found it again), that for years after 1998, the ADP/ACP no longer needed to be run on the otherwise excludables. One other question- On Schedule T (i.e, coverage), would you have to disaggregate the "two" plans? If the Plan benefits all nonexcludables I imagine you can still check that 3d box indicating as much?

Why sponsors don't think before they act sometimes is beyond me! Well they think, but they think "what's the big deal!" Two quick thoughts - 1) Make sure that related employer wasn't already included anyway - many docs indicate that any members of the controlled group are eligible to participate. That would of course create a different problem - exclusion of eligible employees. Or maybe not, if they were newly added to the controlled group - i.e., acquisition. 2) Check out IRS revenue procedure 2002-47. I don't know what it will say about this specifically, but that is the correction program set up by the IRS. I should think this is a common problem that receives due attention in there. 3) Make sure you don't have a multiple employer plan (i.e., more than one controlled group participating). If Company A owns 60% of Company B - less than 80% threshhold), but both A and B are in the Plan this would, I believe, be a multiple employer plan. The trouble with this is all testing must be done twice - once for each controlled group.

I wonder if you read the exclusion of union employees more closely you would find that it still applies. My recollection of the terminology is that it covers a "unit of employees covered by a collective bargaining agreement, with respect to which retirement benefits were the subject of good faith negotiations." Does the status change to leased employees change the fact that they are still covered by a collective bargaining agreement? Just a thought. Also, I think employee leasing organizations often times have safe harbor plans, where, if one is provided, there's some sort of break for the customer organization.

Regarding 410(B) - wouldn't all nonexcludables benefit under both disaggregated portions? For the 401(k), all employeees are eligible, and therefore benefittin. For the match, only people who did not meet the eligibility requirements are not participating? How could you fail 410(B)?

Thanks!

So is the answer to Wyrlicks question yes? You can use dual eligbility requirements? I didn't know about that! That certainly helps cut the cost of a safe harbor plan! Thanks

The most practical answer I can give is only contribute the match once a year once you've absolutely determined who is eligible. I suspect most employees would have a hard time understanding why one day a match was there and the next day it was gone.

MGB and Bozek. What you're saying is totally jiving with me. It makes perfect sense. All the answers are already out there. Let it lie.

The price you pay to get out of ADP/ACP testing is to provide a minimum contribution to all participants eligible to defer. So the answer is no, you cannot have dual eligibility requirements - one for deferrals and one for the safe harbor match. Of course if either the safe harbor nonelective contribution or the safe harbor match were provided, then additional eligibility requirements could be attached to the other "non-safe harbor" employer contribution.

Scratch what I said about the same desk rule. That was incorrect.

Threse - Per the 401(k) answer book a partial termination occurs when either a plan amendment occurs excluding a group of people, or when there are significant layoffs. So I guess everyone's right? Also per the 401(k) answer book, in the event of such a partial termination the affected participants must become 100% vested. Finally per the 401(k) answer book, the IRS believes that if more than 20% of participants are excluded by a Plan amendment, then the existence of a partial termination must be a consideration. If more than 50% are effected, then a partial termination is a strong possibility. This is the driving question in determing the need for 100% vesting. It seems to be highly dependent on the facts and circumstances. Regardless, it seems you can request a determination letter on these matters.

I am utterly confused! Most docs I have seen provide that in the first year, if the employee works 1,000 hours in the first 12 months of employment he is elibible. They also typically provide though that if these requirements are not met, then the eligibility computation period defaults to the Plan year. This is what I believe the doc your talking about says. Regardless, once an employee becomes eligible, they are eligible forever (or until a break in service/termination). I am confused as to why people flipping from ineligible to eligible and vice versa is a common thing at this company? If the doc in question provides that in each year the participants must work 1,000 hours in order to receive an allocation of the match (not the same thing as becoming ineligible), then the match should only be made after the end of the year, and therefore no true up would be necessary. If such a requirement exists I should think funding after the end of the year would be mandatory as this would be the only way to ensure compliance with the plan doc. Finally, I would question any operation that mandated removing money from a participants account! Especially if the need for such an adjustment was part of normal operations. Maybe I'm way off base but this sounds like a disaster if the IRS/DOL ever came in!

Also, if the amounts were never withheld from the employee's paycheck, I don't think there is any issue with the DOL. The DOL is concerned with amounts withheld and not remitted.

Many plans have been updated to allow "Plan to Plan transfers" for just this type of situation. If you do a google search for "same desk rule" (which was repealed) you should get a plethora of information on the subject. I have at least one client who has a couple of Plans within the controlled group and they were amended during 2001 to allow employees who shift from one entity to a different entity within the group to rollover their money. Of course in the absence of these amendments there is no distributable event, so I would question his ability to get any distributions whatever. Presumably the administrator would be aware if these options as it is a pretty new rule.

Okay, same situation as above, except now the contributions were deposited well after the date they were due. Say a year. I used to believe that there was a clear prohibited transaction here but now I'm not so sure. According to the ERISA Outline book, and a couple of other summaries of court cases I've read, employer contributions to a plan are not plan assets unitl contributed - even if the Plan is subject to the minimum funding requirements of IRC 412. See link to an EBIA article that talks about a case regarding this matter: http://www.ebia.com/weekly/articles/2002/E...815Cadegan.html Therefore, if delinquent employer contributions are not plan assets, there cannot be a prohibited transaction because a prohibited extension of credit must include plan assets! I know, I know, the DOL would not agree, but is it a defensible position? I tend to agree with the thread above saying don't report a PT unless its clearly a PT. By the way, the delinquency was purely an administrative oversight, and management intedns to correct with earnings.