four01kman

I agree with mbozek. Where is the plan's attorney in all this. This is not the kind of issue where a fiduciary doesn't want to know what is going on. The obvious fix in this situation may not be palatable. Limit the the number of brokers, or specifiy that a particular broker be used.

Safe harbor is not the issue. Plan design is. A regular 401k will generate up to $12,000 that is not counted in the 25% of pay limit. So whatever number gets you to the maximum ($40,000 for 2003) will dictate the overall plan design.

Wait a minute! You have time to dream. It just shows that the more we know, the less we know.

The 20% rule might have caused you problems if there was discrimination in favor of HCE. That is, an HCE would be able to get a "larger" loan than a non-HCE because of the repayment restrictions. Removing the limitation does not run afoul of any rules I'm aware of. In fact, I would recommend not having any such limitation.

What's the problem? Do the forfeiture at year end. The forfeiture amount shouldn't have anything to do with the mid-year allocation. Arguably, the failure of the ADP test doesn't occur until year-end, so the forfeiture doesn't occur until year-end.

415 governs the maximum limitation on contributions and benefits. A single individual in both a money purchase plan and a 401k plan cannot have an annual addition greater than $40,000 for 2003. So the quick answer is yes, you have to look at the total annual additions to participant accounts.

Without checking, I don't remember if the IRA money retains its character once its in the qualified plan for loan purposes. Sorry.

It is my understanding they are to be treated as if they were a "conduit" IRA.

SPD only should do the job. As I recall the Labor regs say the claims procedures must be in the SPD.

Just to give you an idea of how money accumulates (I found my HP 12C) Initial deposit of $5,000, grows at 6% for 30 years equals $28,717. Growth at 8% equals $50,313 $5,000 annual deposit for 30 years, growing at 6% annually equals $419,008. Growth at 8% equals $611,729 Roth IRAs for you and your spouse grow retirement funds for you. 529 Education plans accumulate college funds for the twins. Both accumulate funds on a tax-deferred basis and provided tax-deferred growth, provided the money stays in the plans long enough. The key for you is to start saving now. There is no way you can make up for the loss of time in accumulating money.

Maybe I'm missing something here. My argument on not imposing a distribution charge on the participant is that distributions from the plan are a settlor function. You cannot operate a qualified plan without having distributions.

All the admin forms I've seen have a check box on the enrollment / change of contribution form to provide for those employee/participants contributing at the maximum, they may make a "catch-up" provided they are age 50 or older in that year.

Having done this in the past more than once, I know it is an okay transaction, blessed by attorneys. What you might want to do is specifically ask your attorney(s) the specific question regarding the broker-dealer paying the "old" fund the amount of the CDSC as a "plan expense".

Yes. The key here is the money in the Rabbi Trust does not "belong" to the employee until distributed. The $8,000 or $12,000 in your example would be taxed as ordinary income.

Until the distribution is made, no amount is "owned" by the participant. Accordingly, the amount distributed is taxed as ordinary income in the year of receipt, or when "made available". No gain or loss is recognized to the participant. Any realized gains or losses (including interest or dividends) is taxed in the year they are earned to the sponsoring employer.

Not talking about commission rebate. It is possible for a broker-dealer to "reimburse" a plan for plan expenses, not settlor expenses. This is not done by the broker but by the broker-dealer.

That's right. Sometimes (maybe not this time) the reason for the new investment is the failure of the old. If a broker received a commission on the old, and is about to receive a commission on the new, doesn't it make some sense for the CDSC to be paid out of the "new" commission"?

I'm with MWayatt on the best approach with the most reasonable dollars going into the plan. I have a real concern with the permanancy requirement for a short-term db plan. Not something I have seen the IRS address in recent years (it seems they have had other fish to fry), but years ago this was something they really looked at on plan termination.

Why not have the broker (broker-dealer) pay the CDSC out of the new commissions?

You can make this work by having 3% of the profit sharing contributions immediately vest. Then you will satisfy the "safe harbor" rules under 401k/m.

It seems to me the employee left Company B before the transaction. Therefore, the vesting would be based on the terms of Company B's plan at that time.