four01kman

Sure, if it is 404© compliant, it is covered, if it is not 404© compliant, it is not.

If the participant contributes the maximum percentage of pay allowed by the plan, he/she is then able (if age 50 or older) to make a catch-up contribution.

As I recall, the original revenue rulings allowing the deferral of employee dollars were based on the receipt or deferral of profit sharing contributions and/or bonuses. Of course, this was before the change in the law that added Code Section 401(k).

Generally speaking, forfeitures of a participant's account are to be used for the plan specified purposes after the participant has incurred a "break in service". As discussed in earlier posts, this could be as early as the year in which the participant terminated or as late as the completion of 5 consecutive 1- year breaks. Not to belabor the "what does the document say", but that should be your guide as to when the forfeiture becomes "available" to either reduce company contributions or pay expenses (depending on the document).

The quick answer is yes. The $40,000 annual addition limit is an individual plan limit. Therefore, the defined contribution plans of the old employer and the new corporation could both credit the doctor with an annual addition of $40,000.

I think there are two issues. The first is that regardless of asset growth or timing, 401k and other defined contribution participants will be treated less favorably than all other investors who want to buy and/or sell mutual funds. Why should this be so? The other issue is one of cost for plan providers. Millions of dollars have been spent over the years to allow plans and participants to trade on a daily basis. To change this in a wholesale manner makes no sense. If "late trading" to take advantage of discrepancies in "stale" pricing is the problem, then deal with that. Don't deal with the structure that handles the retirement assets of millions of people who haven't got the vaguest idea of what "stale" pricing is. The vagaries of the U.S. government aside, if the SEC Chairman proposes changes that are adopted by the SEC, all of us have to deal with those changes. Regardless if those rules are subsequently change by the U.S. Congress

401k and other defined contribution providers have worked long and hard to have participants on a level playing field with other investors. That is, daily transactions are allowed to be submitted to recordkeepers and other intermediaries up to the 4:00 p.m. stock market close. SEC Chairman Donaldson is going to propose a "hard" 4:00 p.m. close for orders to be at the mutual fund, not the intermediary. I have written the following e-mail to the Chairman. I hope many of you do the same. From: "jim geld" <four01kman@yahoo.com> Subject: Late Trading of Mutual Funds To: chairmanoffice@sec.gov CC: tim@camasinc.com Chairman Donaldson, It has been reported today that you are looking to create a "hard" 4:00 p.m. close for mutual fund trading. This will cause a tremendous amount of hardship for the millions of participants in 401k and other defined contribution plans that allow for "daily" transfers among plan investment choices. The trading and administrative systems currently in place for 401k and other defined contribution plans allow for the transmittal of orders (changes in their plan investment choices) from participants to their recordkeepers as late as 4:00 p.m. The recordkeepers then transmit the orders from all their clients to their bank, brokerage firm or other intermediary, who in turn transmit the orders in bulk to the mutual funds. These bulk orders may not be transmitted to the mutual funds until well in the evening. In turn, the mutual funds then process the orders (buys and sells) and transmit the confirmations to the intermediary, brokerage firm or bank, who then transmits the details to the plan's recordkeeper. These details generally are transmitted to the recordkeepers early the day after the effective date of the trade, for posting on the recordkeeper's website. To change to a "hard" 4:00 p.m. close for orders at the mutual fund will mean changing a system that has been in place for over 10 years without any violations, to the best of my knowledge. It is clear to me an exception should be carved out for participants in 401k and other defined contribution plans to continue allowing current practices to remain in place. If no exception is made, the communications efforts to inform plan participants of the changes and the software and procedural changes among the service providers would cause the unnecessary expenditure of millions of dollars. I would be pleased to talk with anyone you choose to elaborate on this topic. Sincerely, James Geld

freeERISA.com published a Practice Alert that says "Safe Harbor Notice for 2004 Calendar Year Plans MustBe Provided to Plan Participants By December 1, 2003". I thought the notice only had to be provided initially upon the Plan being adopted or the Safe Harbor Provision being adopted. Is there an annual requirement?

It is my understanding all states do not allow the "mandatory" payroll withholding to repay plan loans. If the state you are in is one of those, the employees simply may change their payroll withholding to no longer repay the loan.

In the first instance, you would give him a check for $2,000 -- $3,000 after-tax contributions minus $1,000 for the tax withholding on the loan offset. If you paid the withholding tax from the "rollover", that would be included in the taxable distribution.

Brian, You were taxed on the income used to pay the small amount of interest; then when that small amount of interest is distributed from the plan, it is part of a taxable distribution. This is why some people talk about "double taxation". I am in agreement with the main thrust of this thread which deals with the neutrality of the loan transaction. The income of the fund is going to be taxed no matter from where it comes; income on investments or interest on a plan loan.

Isn't embezzlement one of the items covered by the plan's fidelity bond? I would notify the carrier, and go from there.

I don't have a cite for you, but my recollection is that (1) if the employee after-tax contributions are "voluntary" and maintained in a separate account they may be withdrawn if the plan allows, but (2) if the employee after-tax contributions are "mandatory" and, therefore an integral part of the accrued benefit, no withdrawals would be allowed.

"Do not enter the value of that portion of an insurance contract which guarantees, during this plan year, to pay a specific dollar benefit at a future date" The cash value of an individual insurance policy guarantees the payment of that sum immediately. It is not a specific dollar benefit at a future date. Include the value.

Code Section 419(f) requires IRA contributions to be deposited no later than the tax filing date (without extension) for the taxable year. Does anyone know if this has been extended to the tax filing date, as it may be extended?

I tried to implement a program similar to what you are asking about. I contacted about 25 banks, and could never put together a pricing scheme that was competitive in that marketplace.

The object here is to maximize contributions over the next 5 years. There shouldn't be an RMD problem because no benefits are available until NRD is reached (5 years participation). Thanks for the input.

A long-time client has asked whether a defined benefit plan can be established for him and his partner. He is age 72, partner is age 68. They have had a SIMPLE Plan. Can we "terminate" and "freeze" the SIMPLE and create a new DB with a "normal" retirement age of the later of (a) age 65 and (b) 5 years of participation? If so, what issues should we be aware of? (other than ending a question with a preposition)

It is not typical for a TPA to correct "their own errors" by ponying up cash. The fiduciaries must contact the erroneously paid participant to recoup the excess funds paid. I seem to remember a recent (within the last year) ruling or court case on point. The excess that is in the current owner's accounts should be reallocated accordingly to the adversely affected participants.

If only HCEs get commissions, then you shouldn't have a problem excluding them from the compensation definition. Otherwise, Blinky is correct.

Total vested account balance is about $40,000, made up of $20,000 note and $20,000 investments. It seems there is enough to satisfy a hardship, if all the rules of the plan are met. The 50% "security" rule is met at loan inception.

Don't know if you can do this, but I've heard some plans use demand deposits. As I understand it, no money is transferred to the "checking" acount until a check is presented, then the money is transferred from the "fund". If the fund maintains a cash account at the bank that is handling the distributions, it sounds like a simple matter. If not, then the disbursing bank has to be able to draw or request funds from the fund.

Yes to all three of your questions, provided the union has no HCEs.

I would go to the IRS web site http://www.irs.ustreas.gov/bus_info/ep/current.html

Generally, by the tax filing date (including extensions).