four01kman

It seems to me the purchase of the bank stock by the plan participants is not the issue. Rather, is the offering of that stock by the Trustees as an investment option a "prudent" decision? There also is the issue raised earlier of "diversification". Isn't this again a prudency issue? That is, the trustees have selected a variety of investment options available to the plan participants. To the extent those selections represent an appropriate diversification, aren't they okay, even if a 404© election hasn't been made. I seem to recall the original line of cases on diversification (pre-ERISA) dealt with the entire portfolio available, not a particular investment.

I think the quick answer is no. The loan either has to be repaid prior to distribution or deemed distributed.

Hi Jane, So long as the plan allows for in-service distributions, it is possible the amount withdrawn is 100% of the vested account balance of the participant. I'm particularly thinking of allowable withdrawals after age 59 1/2.

An accrued profit sharing contribution is one that has been communicated to participants and is an obligation of the employer. Just because it hasn't been funded does not make the participant's account balance any less. When doing the end of year allocation, the accrued contribution should be allocated even if the amount is not contributed for another 2 1/2 months or longer (up to tax filing date). I see no reason the loan could not be 50% of the end of year (vested) account balance.

My quick reaction is to use the calendar year method of determining HCEs. This gets you to use current year income to determine status.

Let me know where you are located. I probably can refer someone to you. Jim Geld four01kman@yahoo.com

For what its worth IMHO, this is clearly a BRF issue. The amount at issue should be the amount to get into the investment option, not how much the option is worth at any point in time. If there is a minimum amount required that favors the HCEs, it certainly sounds like a discriminatroy BRF.

Generally, money taken from an IRA is ordinary income in the year of receipt. If the recipient is less than age 59 1/2, there is an additional 10% penalty tax, unless there is an exception. One of the exceptions is to take regularly scheduled withdrawals over a period of time. Check with your accountant or trusted financial advisor on the structure. Remember this exception only relieves you of the 10% penalty. You will still have to pay ordinary income tax on the amount taken.

In order to participate in the US salary deferral plan, they need to be on the US payroll. Then, even if converted to Canadian dollars, they could defer.

Brian, I have had a couple of experiences with negative 401k elections. All of them in the "fast food" industry. There was about a 50% drop-off rate among the "lowest-paid" employees. This was without regard to match and vesting. It can work better with an advance communications effort, company match, and reasonably rapid vesting.

Generally, they are paid from the account balance. Of course, you only can do this up to the 25%/50% limitation. This begs the question of what then. It would be nice if there was communication between the participant and the plan. Other options could include surrender for the cash value, if any. Or, the participant could "buy" the policy for the cash value, if any. There are old Revenue Rulings on point for the last two options

The other option would be to resign. Sounds like a client who doesn't listen to much.

Koolkid, once you fail the ADP, you can't transfer or otherwise move money from the non-qual plan. You may want to have all your HCEs who are in the nonqual plan not contribute anything to the 401k plan until the end of the year. Then test, if there is room, you will be able to move from the non-qual to the qual.

Of the 4.75% "front load" the broker who works for a "wirehouse" (one of the big national brokerage firms) will get up to 48% of the 4.75%, and then annually 48% of a "trail" of .25%. On the "B" shares, the broker payout is typically 1% per year, again the broker will get paid his/her "grid" (up to 48% for a wirehouse broker). Independent brokers can get up to 90% of the payout. Hope this helps. Of course, if you are looking for someone who always has his/her clients best interests and objectives in mind, I'm certainly willing to talk with you.

rcline you are absolutely correct! I need to be paid somehow. All I meant was that the manner of my compensation is the last thing my clients and I discuss.

What didn't happen, the participant's money didn't go where it was directed. OK! Now what? To correct it((or to get it done in the first place), the participant now has to do something. If there is a cost to get it accomplished, I only can imagine it would be borne by the plan sponsor. Other that that, I don't know what recompense would be appropriate.

But it didn't happen. The participant has not suffered a loss in value (or if it happened you haven't said). That's what I meant by "no harm, no foul". The individual simply needs to do the paperwork again to accomplish his/her goal and objective.

I agree with Appleby. This is a "no harm, no foul" event. Get the money from the "new" provider to the "old" provider's IRA account. There doesn't seem to be any "fiduciary breach" resulting in a "loss" to the participant. Paperwork wasn't done right or in a timely manner. Just get it fixed. This has never happened to anybody else in the dc field.

If you are paying an advisor a fee, the question is not whether you should buy A or B shares of a fund, but whether you can find the same (or almost the same) fund that isn't loaded. Many load funds have the same or similar funds managed by the same manager under different distribution channels. The issue isn't really load vs no-load, but finding the "best" fund and/or manager to suit your needs and objectives. Having said all that, A shares are better if you are not planning on selling the shares for at least a 6 year (i think that's the crossover point for most A / B share comparisons) period. I am an advisor and my investment recommendations are unrelated to the manner in which I get paid, my clients' needs and objectives come first.

I'm not sure this is a big deal. As I recall, the reporting and disclosure requirements for a top hat plan is to give each participant particular information about the plan. I think the earlier requirement to send DOL stuff was removed.

GOOD NEWS! The republicans seem not to be supporting the proposal. Here's an extract: A key element of President Bush's ambitious tax-cutting agenda ... has virtually no chance of passing and should be replaced with a bipartisan proposal to expand existing retirement programs, House Republican leaders have told the White House.... [A]dministration officials ... are laying the blame on Paul H. O'Neill, the recently ousted Treasury secretary. They said he developed the idea in secret and froze key lawmakers ... out of the decision-making process." (Washington Post) Reported in today's newsletter. There is a link there.

Doesn't sound like a one-man company to me. Where is the bond exemption?

Jgroves has it partly right. Low income wage earners can't afford to save, because they need the money to live. Without incentives to save from their employer, they don't save. If you go back to the original studies showing who put money in IRAs, you will find it was not the low income group. These new proposals are designed to assist individuals who can put away $15,000 per year away for themselves, an additional $15,000 for their spouse (working or not), an additional $15,000 per year for each child, and perhaps $15,000 per year for each grandchild. This does not sound like a program to help the regular working person. Oh yes! I forget all of us, mostly part of the working persons' group. How many of us would give up our qualified dc plan tilted towards us on a tax-favored basis for these new deals?

My quick reading of the final blackout rules confirms the above posts: you have a blackout and should comply.

Being an "old" practitioner, sometimes I remember things that might not be true today. It used to be that in order to "fix" the amount of the employer contribution, a board resolution had to be adopted before the end of the fiscal year, and the amount of the contribution or the manner of the allocation had to be communicated to the employees before the end of the year. It is my guess that is why the tpa is asking. I'm not sure if the accrual resolution is still required, since contributions made before the tax filing date are deductible in the year to which they refer.