FundeK

Here is a link to the 2003 Cram Session materials. Please let me know if it works. http://www.aspa.org/archivepages/conferenc...annual/cram.htm

The participant is eligible to make catch up contributions for the 2004 calendar year since she will turn 50 in that year. Whether the plan treats the $ as catch-up will be determined at the end of the plan year. She can treat the $ as catch up for her own individual limits, and the plan may or may not treat it as catch up. If she exceeds a statutory limit, or a plan imposed limit by more than the catch up limit, you will have to correct.

Since a loan offset is eligible for rollover, and a minimum distribution isn't, how would that work?

R Butler: From your post on Sept 10th I was thinking that the Client was concerned with extending the loan beyond the maximum statutory limit of 5 years, not the maturity date. Where does it say you can't extend past the maturity date if the loan was not issued for a term of 5 years? Can you convince them that the last payment can extend past the maturity date if it is made within the cure period, not to exceed the 5 year maximum limt? Good Luck!!

The original post indicated the loan was issued in May 2000 and had a maturity date of June 2004 (4 year loan?) If so, does your loan policy allow for refinancing? If the loan is still within the cure period, why not refinance and allow the participant to make up the two missed payments. Just extend the loan 2 months, you will not be extending it past the 5 year limit. Would the attorneys allow this?

From the IRS & ABA Section of Taxation May Meeting 2003 Question: §72(p) – Taxation of Plan Loans Employer maintains a defined contribution plan that provides loans to its participants. The plan provides for a sixty-day cure period for missed installment payments. An employee takes out a five-year plan loan, and fails to make his last installment payment. Would permitting the employee to cure the missed payment after the five-year term but within the cure period for the loan violate the requirement of §72(p)(2)(B)? Proposed response: No. Curing a missed payment after the term of the plan loan but within the cure period provided by the plan and within the limitations prescribed by Treas. Reg. 1.72(p)-1, Q&A-10 would not violate the requirement of §72(p)(2)(B) of the Code. Payments made within the cure period are deemed to relate back and considered made on the day the installment payment was due. IRS response: The IRS agrees with the proposed answer. The plan can use a cure period even at the end of the sixty-month period.

If you have a Profit Sharing/401(k) plan with an annuity requirement, and a participant would like to use his account balance to purchase an annuity,how do you code the 1099-R showing the funds are being distributed from the retirement plan? Or do you even need to issue a 1099-R?

A 1986 amendment to the loan regs specifically removed wording relating to a construction loan; therefore I would assume a construction loan does not meet the definition of a principal residence. The principal residence loan exception states that the loan must be issued to acquire any dwelling unit that will be, within a reasonable time, used as a principal residence of the participant. I would not allow a loan for a construction. However, if the participant can prove the unit will be dwelled in within a reasonable period of time (90% constructed) I would approve it. Perhaps conservative, but it never hurts to CYA.

If that is the case, why are plans allowed to choose from 1. Reallocate to participants 2. Reduce Employer funding 3. Pay plan expenses? If the reduce option is really reallocating, why even have the option?

Is there any reason that you would not be able to accept a copy or fax of a death certificate? Any administrators out there want to comment? Do you require an original?

But, the forfeitures aren't being reallocated, they are being used to reduce ER funding. How would it be discrimination?

From the Reish, Luftman, Reicher & Cohen website: Technical Tip 119: The following question and answer were from the IRS Q&A Session at the 2002 ASPA Annual Conference: Profit sharing plan is terminating. Many of the account balances (which include forfeitures, etc.) are under $15. Is there a di minimus amount that the plan administrator is allowed to ignore when going through the distribution process? The postage and handling would be more than the amount of the distribution for many of the participants. Response: There is no di minimus rule.

If the document states "IN the current year", not "FOR the current year", I am sure. If is states IN the current year, that would lead me to believe that the $ can be used currently (for any year's cont), not that it has to be used FOR the current year's Profit Sharing contribution. Does that make sense?

I have seen documents that state: "Forfeitures are to be used to reduce funding of current year or future year employer contributions" If tman's document states this, I do not believe the plan can use the current forfeitures to fund a contribution from a prior year. However, if the plan document mearly states that "Forfeitures are to be used to reduce the funding of employer contributions" then they could use it to fund a prior year's contribution.

You can now rollover any IRA contributions (other than after-tax) to your retirement plan if the plan allows. There is no time limit that I know of. What time limit are you refering to? Maybe the 60 day window for a Conduit IRA? That really doesn't apply after the passage of EGTRRA.

I think it depends on how the document is worded. If it states that forfeitures are used to reduce employer contributions, and does not specify for the current year, or future years, then I think you might be alright. Can you post the actual plan language?

Well said pmacduff!!

From the Reish, Luftman, Reicher & Cohen website: Technical Tip 119: The following question and answer were from the IRS Q&A Session at the 2002 ASPA Annual Conference: Profit sharing plan is terminating. Many of the account balances (which include forfeitures, etc.) are under $15. Is there a di minimus amount that the plan administrator is allowed to ignore when going through the distribution process? The postage and handling would be more than the amount of the distribution for many of the participants. Response: There is no di minimus rule. At my former place of employment, they chose to always pay out $ attributable to employee deferrals. If the balance contained any deferrals, it was paid. If the balance was all attributable to match or PS, and we under $10.00 it was forfeited. Was that right??? Who knows....

I have done extensive research regarding loans and have never run across anything that would indicate a participant couldn't make loan repayments past NRA. They are allowed to make deferrals, why wouldn't they be allowed to make loan repayments?

Back to the original poster's question I am saying that an issue with a QDRO drafted this way is that there is a good chance the recordkeeper will not be able to accomodate the earnings calculation, and the QDRO should not include a date from 1999 with earnings gains and losses.

If a plan changes recordkeepers once or twice, it is very difficult to track down earnings from 5 or 6 years ago if you are the current recordkeeper. Also, certain information may be purged off of the recordkeeper's systems after a set number of years. The information can be retrieved at a very large cost, which is why a more current date should be used.

Yes, if the 401(k) plan document allows for it.

Sure does.....or an attorney approving them, or the Plan Sponsor, why?? I was just at a conference where "QDRO" experts presented information about approving DROs. They indicated that if you have a "compliance manual", that outlines exactly how you approve DROs, and that "compliance manual" states that you will not accept a DRO with an effective date prior to "X" date, you can send the DRO back for rework.

One major issue is that there is a good chance the TPA firm recordkeeping the plan will be unable to calcuate the gains/losses because it is going back to 1999!!!! Big administrative burden!!!! Also, some firms will not "qualify" a DRO with earnings calculations back to 1999.

If forfeitures aren't used in accordance with the terms of the written plan document, you have an operational failure, which of course, is a bad thing. Did your document have a back-up, such as the forfeitures are used to reduce, any remaining after the end of the plan year are used for expenses or reallocated?