WDIK

Thank you both for your responses.

RTK: Please elaborate on your statement about the "first 5% of compensation." I'm not sure that I follow how this results in the $49.97 match amount. The participant receives two checks each pay period. If compensation is defined as W-2 wages, how do you distinguish between the two checks to determine which applies toward the first 5% of compensation? I appreciate your help in understanding this better. RCK: I think that you are right to suggest this situation be corrected prospectively. Could you please explain your reasoning as to why the prior administrator's approach was right? Thanks in advance.

Please don't perpetuate stereotypes of actuaries. Remember the 1/9/03 News Release from the Society of Actuaries where it stated that the "Portrayal of Actuaries as Math-Obsessed, Socially Disconnected Individuals with Shockingly Bad Comb-Overs [is] 97.28892% Incorrect"

I agree with you, but every time I think I'm certain about something, someone else on these boards will point out the flaw in my logic.

mbozek: Your point is well taken. However, couldn't the employer just "advance" less based on the knowledge of the upcoming salary deferral amount to avoid the scenario described?

I guess I would question why no amount is deferred from the checks made on the 5th of the month. Even if you argue that it is not required, wouldn't it help alleviate the problems faced on "reconciliation" check?

If a participant represents himself as married, is it necessary to request a copy of a marriage certificate to verify the spousal consent?

Katherine: What if the Form 5500 is being filed in lieu of Form 11-K as ircreader intimated? (I'm not familiar enough with Form 11-K to know how/if the substitution would apply). Does the Form 11-K deadline then apply?

I am inclined to agree with Belgarath on this issue. Although there may not be a problem technically with the 70-day wait, I don't think this situation passes the smell test. As Belgarath pointed out, if the presumption was that the value of the assets was going to drop, a fiduciary acting in the best interest of all plan participants should have taken steps to avoid those losses. It sounds to me like the Trustee took the chance with the hope that the investments would increase in value. Wouldn't this be considered acting in his own best interest? As a final note, a recent audit we participated in drew scrutiny because rank and file participant's were paid out first (based on the most recent valuation), while the value of investments continued to rise. The Employer was required to recalculate benefits.

The six month waiting period is an optional amendment available under EGTRRA.

The instructions to the Schedule T indicate that an employer is permitted to treat a plan benefitting otherwise excludable employees as two plans, one for the otherwise excludable employees and one for the other employees benefitting under the plan. You can then use line 4e to report the disaggregated part of the plan and either the ratio percentage of the exception.

I have never understood the purpose in having a requirement to file an application for an "automatic" extension where (as is the case with Form 5500) no tax payment is due. Perhaps it is the prospect of penalties? Sorry for the rant, but this is one of my pet peeves.

Although the money purchase pension plan was merged into the profit sharing plan at the end of 2002, this does not mean that there is not a required contribution to the MPP for the 2002 Plan year (assumes calendar year plan year). Appropriate resolutions, amendments and participant notices should have been implemented prior to participants accruing a benefit for the 2002 plan year.

We had a similar situation with a total plan balance of just a few hundred dollars. No audit was filed and the DOL went for blood ($50,000). Eventually, on appeal the penalty was reduced to $2,500.

Since your short plan year is less than 8 months, you are eligible to defer attaching the accountant's opinion until the following year. See the Schedule H instructions for Line 3b(2) and 29 CFR 2520.104-50.

Line 2a of the Schedule P is used to report the trust's identification number. This is the number assigned to the employee benefit trust by filing Form SS-4. Instructions for the schedule P indicate that if you do not have a trust EIN to enter the EIN you would use on Form 1099-R. Line 5 of the Schedule P should correspond with Line 2b of Form 5500. You may be confused because of the use of the term "sponsor." Please note that the instructions for Form 5500 Line 2a defines "plan sponsor" as the employer (for single employer plans). In your case XYZ, Inc.

I agree with Archimage. It is the "legal" date of the transfer, not the actual date.

The reduced is based on the highest outstanding balance during the one-year period, which appears to be June 19, 2002.

Mary Kay, Thanks for your reply. I understand your first two points, and they are not an issue as the situation in question has proceeded past those steps. I do not follow your third point. What do you mean that the loan interest may not be deductible? Are you referring to the situation where the participant loan is tied to the purchase of a home, so that the interest is deductible to the participant? If so, that situation will not apply to this particiular scenario. Your fourth point is duly noted, but the tax consequeses of taking a distribution can be prohibitive as well. I guess the real question is, "Are rollovers from traditional IRA's into qualified plans included in the participant's vested benefit for purposes of calculating the maximum allowable loan?"

The following excerpt is from some seminar materials I read. Has there been any official guidance on the topic? An interesting planning opportunity is the use of a rollover from an IRA to a qualified plan, followed by a loan from the plan to the plan participant. An outright loan from the IRA to the IRA owner would be a prohibited transaction, but the liberalized rollover rules mean that even non-conduit IRA moneys rolled into a qualified plan should be capable of being loaned from the plan.

The Good Faith EGTRRA amendment was adopted by the defined benefit pension plan, and only safe harbor contributions are being made to the 401(k). When making the first post, it seemed clear to me what I was saying, but obviously these issues require being very specific. Thanks for your feedback.

A pension plan terminated and all assets were distributed. Two years later, it was determined that some additional amounts were due to a number of participants. Should new elections be obtained from all affected participants, only those whose total distributions exceeded $5,000, only those whose additional distributions exceeded $5,000, or some other option?

Relating to mergers, Form 5500 instructions use the language that a final return should be filed for the plan year that ends when all plan assets were legally transferred to the control of another plan. While not the instructions for the Form 5500-EZ, I would think that the intent is the same.

Absent the indication that the "merger" and "transfer" dates were different, I assumed that the date given was appropriate to the question. This, in retrospect, was presumptious. Thank you Katherine for clarifying. Form 5500 instructions indicate that a final return should be filed for the plan year that ends when all plan assets were legally transferred to the control of another plan.

Yes and yes.