FundeK

A professor stood before her Philosophy 101 class and had some items in front of her. When the class began, wordlessly, she picked up a very large and empty mayonnaise jar and proceeded to fill it with golf balls. She then asked the students if the jar was full. They agreed that it was. So the professor then picked up a box of pebbles and poured them into the jar. She shook the jar lightly. The pebbles, of course, rolled into the open areas between the golf balls. She then asked the students if the jar was full. They agreed it was. The professor picked up a box of sand and poured it into the jar. Of course, the sand filled up everything else. She then asked once more if the jar was full. The students responded with a unanimous --yes. The professor then produced two cans of liquid chocolate from under the table and proceeded to pour the contents into the jar effectively filling the empty space between the sand. The students laughed. "Now," said the professor, as the laughter subsided, "I want you to recognize that this jar represents your life. The golf balls are the important things - - your family, your spouse, your health, your children, your friends, your favorite passions - - things that if everything else was lost and only they remained, your life would still be full." "The pebbles are the other things like your job, your house, your car." "The sand is everything else - - the small stuff." "If you put sand in the jar first," she continued, "there is no room for the pebbles or the golf balls. The same goes for your life. If you spend all your time and energy on the small stuff, you will never have room for the things that are important to you. Pay attention to the things that are critical to your happiness. Play with your children and grandchildren. Take time to get medical checkups. Take your partner out dancing. Take riding lessons. There will always be time to go to work, clean the house, give a dinner party and fix the disposal." "Take care of the golf balls first - - the things that really mater. Set your priorities. The rest is just sand." One of the students raised her hand and inquired what the chocolate represented. The professor smiled. "I'm glad you asked. It just goes to show you that no mater how full your life may seem, there's always room for chocolate!"

I attended a seminar today and this issue was discussed. The presenter said that you can retroactively amend to include only certain individuals. He also mentioned that he has amended to include a specific participant by name. That seems discriminatory to other who haven't yet joined the plan. I would think that the IRS would view an operational failure as more of a problem than forfeiting money from an ineligible participant. In my experience, we always forfeited employer money for participants who entered the plan to early (and returned deferrals).

Does the plan allow for more than one loan? If it only allows one outstanding loan then the participant can not take a new loan, the defaulted loan is considered an outstanding loan until it is repaid.

Does this plan use the safe harbor standard or the general standard in determining the hardship? If the safe harbor is used, then no, the participant would not qualify. It is not being used for the purchase of a primary residence because he has already completed that purchase, and it can not be to prevent eviction as he does not live in the old house. If the general standard is used, then there is a bit more flexibility as the Plan Sponsor is determining if there is an immediate and heavy financial need. Of course, if the plan allows loans, the participant needs to take a loan first. (unless the loan would create more of a hardship) Could the participant take a loan?

I am reading in Sal Tripodi's ERISA outline book that..... The amount of withholding required is the lesser of a)20% of the total taxable distribution ($1,000 in this case) or b)the non-loan-offset portion of the taxable distribution ($0 we do not have a taxable distribution other than the loan offset int his case) Does this mean that as the withholding agent in this scenario, you do not have to withhold 20%? Thanks!

How would you withhold (20% mandatory tax) for the the following scenario? Total account balance = $38,000 After tax basis = $3,000 Loan Balance = $5,000 (to be offset at distribution). The participant chooses to receive his after tax basis in a check payable to him, offset the loan, and rollover the remainder. Would you send the participant a check for $2000 (basis - $1,000 tax liablity), or send him a check for the $3,000 (basis) and withhold the tax liability from the rollover portion? What if we replace the $5,000 loan offset with a distribution of employer securities to the participant. Does that change anything? Thanks!

I would use the same logic here as I would when determining whether a loan is for the purchase of a primary residence (to be conservative). See 72(p)(2)(B)(ii) which defines a principal residence as a dwelling, which, within a reasonable time will be used as the participant's primary residence. Land would not qualify as a dwelling in my opinion. I am actually hesitant to even allow a hardship for the construction of a principal residence, so I definitely would not allow a hardship for the purchase of land!