FundeK

Yes. If the loan policy states that payments must be made via payroll deduction, it eliminates terminees, beneficiaries, and anyone who is not receving a paycheck.

Does anyone have a weighted average formula (or any other formula) you use when determining earnings for a QDRO split?

Thanks Katherine! Are there any recordkeepers out there that can tell me what your policy is regarding overdrafts?

Contact the participant and ask them for the $$ back. If they refuse, threaten legal action.

Check your loan policy to determine is she is allowed another loan. The first loan should be deemed a distribution. The 1099-R would be issued for the year in which the loan is actually deemed. A deemed loan is treated as an outstanding loan for all loan limit purposes, so if the loan policy only allows one loan, she is not able to take an additional loan. Also, your loan policy may specifically state that if a participant has a loan in a deemed status, they are unable to take another loan.

From Sal's ERISA Outline book, Chapter 14 PTE 80-26 permits interest free loans to the plan by a party in interest to be used for the payment of ordinary operating expenses, or for a purpose that is incidental to the operation of a plan. If it is for incidental expenses, it can not be for more than three business days. The DOL did cite an overdraft as being incidental. QUESTIONS: What happens if the trust is overdrafted for more than three days? What about excess cash? Should it be treated the same way? Is there any other cites/articles/anything that deals with this issue? How does your company handle overdrafts?

M. Martin - This is great!!!! This is exactly what I was looking for. I did a search in the Q&A columns, but I did not read them back to 1999. I am so glad you did! Thanks! One more question for all of you experts..... If a participant receives a third loan (loan policy only allows 2) and that loan causes the total outstanding loan balance (1+2+3) to exceed 50% of the account balance, which correction method would be appropriate? 72(p), or the one M. Martin posted?

I agree with BobK, there is no longer a distibutable event. So the participant is not entitled to a distribution.

False alarm!! I was just informed that it has to be paid from the Trust. Now, don't I feel silly!

We are being asked to cut a check to pay UBTI tax today. Is it okay to pay this tax with plan assets?

Yes, I meant that we treated the balance as a taxable distribution. In the situation I had before, the third loan actually caused the participant to exceed the 50% limit as well as the # of plan loans allowed. In that case, I felt comfortable that the proper correction was to "deem" the loan. Now, as I am creating procedures and policies, I am not sure how to handle a loan that exceeds the maximum number allowed, but does not exceed the 72(p) limits. I thought maybe I could use the same logic that when a limit had been exceeded, whatever amount that caused the limit to be exceeded should be treated as a "deemed distribution". I do think the additional loan is a prohibited transaction, and I am not sure how it would be corrected. I read in Trea. Reg. 1-72(p)-1, Q&A 16 that deeming a loan does not correct the prohibited transaction. This of course makes sense in this situation because a deemed loan is considered an outstanding loan for all loan limit purposes so deeming the third loan wouldn't solve anything as you would still have 3 loans outstanding! Can you consolidate with another loan if the loan policy allows? Can you "reclassify" as a distribution if the document allows? Do you think a plan should file indicating there is a prohibited transaction if a participant accidently recieves one too many loans?

Can anyone provide a cite or a reference that would detail how to handle a error where the participant's # of outstanding loans exceed the terms of the loan policy? For example, loan policy allows 2 loans, participant recevies 3. I am trying to type up acceptable correction methods for various scenarios, but would like to provide cites and/or PLR or something to support my policies. I have posted about this issue in a prior post and in that situation decided to deem the third loan. Would you view each scenario differently and either consolidate, allow the participant to pay off the extra loan, or deem the loan? Or, is there one correction method that should apply in all circumstances?

Sorry for the confusion. I wanted to know if we each could contribute $3,000. We both make under $150,000 and unfortunately, when we combine them it is still under $150,000!! But I guess that is good for contributing to a Roth. Thanks for your responses!

So if you have your ASPA CPC, QPA, and QKA designations, would there be any reason to consider getting a paralegal certification?

I think I like MoJo's response better!!

How would one go about becoming a paralegal with an ERISA specialization? Also, is one of the different paralegal certifications better than another? What would you expect an "ERISA paralegal" to do or where would they normally work?

Yes, the participant can take a hardship after taking the loan. They only need to satisfy the adequate security requirement at the time of origination. Subsequent distributions do not affect the loan's qualified status.

I would like to open a Roth for both my husband and myself. We both contribute to our company's 401(k) plans. Can we both contribute $3,000 if our AGI is less than $150,000? We can't open traditional IRAs right?

Can a married couple filing jointly, who make less than $150,000 each make a $3,000 contribution to a Roth?

I don't know how correct this is, but when I handled plan terminations at my previous employer, we were often directed by the company to restore forfeitures to anyone how took distributions in the 6 months prior to effective date of the plan termination. (If you want the thought logic behind this, let me know.) This often cleared out the foreiture account without amending the plan to allow for reallocations.

Does quinn the car fixer get a nomination?

If the current plan allows loan rollovers. In my experience, this is not a common occurrence.

Is this a prototype by any chance? Could there be additional clarification in the Adoption Agreement .

A hardship withdrawal, regardless of what it is used for, it not an eligible rollover distribution. A distribution that is not eligible for rollover is not subject to the mandatory 20% withholding. In answer to your question, yes, the participant can elect to have less than 20% withheld. Of course, if they have a hardship, and take a distribution without any withholding, they may find they have an even bigger hardship come tax time!

Can a participant pay overnight charges to have a loan check sent Fed Ex or UPS from their retirement plan assets? It would, of course, be up to the participant to choose this option.