Kevin C

I'm guessing the reason they have not been paid is that they can not be located? Does the plan have a provision for forfeiture of missing participants? Our VS document allows the forfeiture of balances that can be involuntarily distributed if the participant is missing after a reasonable search. Another option is to amend the plan to have the auto rollover rules apply to all balances less than $5,000. Although, for those with vested balances less than what the IRA provider charges for the first year, we have been forfeiting the vested balance instead of giving it to the IRA provider for fees. If the terminated participant ever shows up, the forfeited balance gets restored.

I agree with QDRO. A "one-time irrevocable election" seems pretty clear to me. I found a discussion of that rule in a preamble to final regulations published on 12/23/1994. The only thing I could find that references a one-time irrevocable election and rehire is Letter Ruling 200236047. The plan requesting the ruling provides that the one-time irrevocable election survives rehire. I know the PLR doesn't say it is required to survive rehire to be a one-time irrevocable election, but it does say that a plan including that requirement satisfies the rules.

Unless there was a VCP filing for this loan, I think wired still has a potential problem. Rev. Proc. 2008-50 says that unless a VCP filing requests a change in the tax treatment, the loan is still taxable when it should have been defaulted. I would ask if the loan was corrected through a VCP (Voluntary Correction Program) filing with the IRS.

I would be concerned about self-dealing issues, too. You might want to read some DOL Advisory Opinion Letters. ADV Opinion 2003-09A http://www.dol.gov/ebsa/regs/aos/ao2003-09a.html contains the following: ADV Opinion 1997-15A http://www.dol.gov/ebsa/programs/ori/advisory97/97-15a.htm contains the following:

The mid-year amendment prohibition is in The same rule is in the 401(m) SH regs, too. Add that to Querky's post and you have all the available guidance. As she mentioned, interpretations vary depending on who you ask.

Why would having assets at two places make it almost impossible to process loans and distributions before the blackout starts? The blackout should start a couple of days before 7/1. Anyone eligible for a distribution before the blackout starts is unlikely to have funds at both places. But, if they do, just process the distribution both places until the blackout starts. Loans may be more difficult, but is seems unlikely that anyone would accumulate enough assets at the new vendor in the month before the blackout to make much difference in their loan amount. If you are concerned that limiting loans to the existing vendor for that month creates a blackout, you could get information from both places and determine the maximum amount available for the loan so that participants are not affected by the change until the blackout starts.

So, is any of this actually in the plan document?

Can you elaborate on this? Are you saying that if $1,000 is allocated as profit sharing contributions and invested and the participant terminates, then $1,000 is removed from the account regardless of what the investment gains or losses have been on those contributions since the amounts were allocated?

Not if you also want it to be ACP safe harbor.

There is a good discussion of the 2848 vs 8821 issue on the IRS website. http://www.irs.gov/retirement/article/0,,id=224400,00.html

You can only reclassify as 2010 catch-up if the amount is treated as catch-up as of a date during the 2010 tax year. See 1.414(v)-1©(1). The timing rules for catch-ups are in 1.414(v)-1©(3). ADP testing is a plan year limitation, so the determination of catch-up resulting from ADP testing is as of the last day of the plan year. When you put it all together, you get Lou's answer.

Eligible NHCE as used in the SH regs is defined in 1.401(k)-6.

Did his business ventures adopt the plan?

I agree it doesn't look right. But I think their mistake is in the participant count. I don't see those who did not elect to defer more than $200 as being excluded from participation. They still have the option of electing to defer more than $200, so they are still participants. The plan is just making them elect to defer at least $200 for the year before they are allowed to defer. The 5500 instructions don't mention 403(b) plans, but do say that an active participant includes someone eligible to elect to defer in a 401(k). I don't see why it would be any different with a 403(b) plan. If they meet any other conditions required to receive the match, they will also be eligible employees under 1.401(m)-5 and included in the ACP test.

This one needs one of those smiley faces. The distribution paperwork is supposed to inform the participant of the available optional forms of payment. The tax notice informs her of the tax consequences of her distribution. Is there anything else you consider an option that has to be disclosed before the distribution gets paid? I agree the plan should consider whether they want to continue to use this broker. But, isn't that generally a Trustee decision, instead of a Plan Administrator decision? It may be the same person wearing different hats, but we don't know that for sure.

Unless the broker is also the ERISA Plan Administrator, I don't see how his incompetent advice means the Plan did not follow the terms of the plan in making the distribution. He didn't force her to take a distribution, he talked her into requesting one. I do like QDRO's suggestion to report the broker. Which agency would you report him to? We have participants who get and follow bad advice from others on a regular basis. It may be a QDRO distribution rolled to an IRA and then quickly withdrawn by an alternate payee under 59.5. Or, a rollover to annuity products with huge fees and large surrender charges. Call me heartless if you want, but I'm not going to make it our client's problem when a participant does something they regret with their distribution. I'm not saying you shouldn't try to help her, I just wouldn't turn it into a problem for the plan. Maybe there is more to it.

I read the OP as saying the participant was eligible for the in-service distribution and completed the necessary paperwork for the distribution. What justification would the plan have for a "correction" if the plan did nothing wrong? If a 1099-R gets changed to lessen the participant's tax liability simply because the participant changed her mind, I would be afraid the paid preparer penalties might apply. Unless the plan actually did something incorrect, I think the best option is for the participant to roll her IRA back into the plan. If she gets the funds replaced within 60 days of the distribution, she can also do a 60 day rollover of the amount she received directly. It wasn't an RMD, so she has the 60 day rollover period.

I don't really understand your question. Form 8905 is used by a plan sponsor with an individually designed plan to become eligible for the 6 year pre-approved document cycle as an intended adopter under Rev. Proc 2007-44, Section 17.04. They have to sign the Form 8905 before the end of their current 5 year cycle and adopt a pre-approved document before the end of the current 6 year cycle. If they are not at least considering changing from individually designed to a pre-approved document, I don't see that Form 8905 will help you.

Yes, in-service withdrawals are a protected benefit. What continued accrual of taxes and penalties after the loan is deemed are they concerned about? There is no further taxation for interest accrual after the loan has been deemed. See 1.72(p)-1, Q&A 19

Actually, I was thinking the plan compensation definition could be written to include severance. There is no requirement that plan compensation be based on 415©, 3401(a) or W-2. It doesn't even have to be a definition that satisfies 414(s) [see 1.414(s)-1(a)(2)]. That's why I asked what definition the plan uses. It's also possible the definition isn't clear and has to be interpreted by the ERISA Plan Administrator. We typically use 415© as the basis for the plan compensation definition in part because the regulations language is pretty clear that severance pay doesn't count.

Not exactly. I agree that severance pay received after the date of termination is not Section 415© compensation. As mentioned above, I think severance pay is not Section 415© compensation even if paid before termination of employment. Whether or not severance pay is plan compensation will depend on what definition of plan compensation the plan uses.

Look closer to the top of the reg section. Does severance pay fit any of these categories?

What compensation definition does the plan use? If it only includes the items in 1.415©-2(b), I don't see the severance as compensation regardless of when it is paid. Severance pay is paid because future services will not be performed, so it would not be an amount received for personal services actually rendered in the course of employment with the employer sponsoring the plan.

I read the question a little different. I see it as asking if they can have 90 day eligibility for everyone but the warehouse people and 1 year of service required for the warehouse people for the entire plan. Our VS 401(k) document has an option that has immediate eligibility for full time employees and requires a year of service for part time employees. It goes on to let you define what is considered to be part time. That isn't exactly what is wanted here, but it is an IRS approved provision that has different eligibility requirements for different groups of employees. It also has an other line for eligibility requirements. As long as what you are doing doesn't cause the plan to violate section 410(a), doesn't play games using short service employees to pass testing and doesn't conflict with other plan provisions, I think you should be ok. If you use a pre-approved document, your document provider should be able to tell you if what you want to do works in their document. If the answer isn't clear-cut, it's always a good idea to check with an ERISA attorney.

The plan language you reference is straight out of the DOL regs (2530.200b-2). If they are not paid or entitled to payment, it isn't an hour of service. If at some point they are awarded or the employer agrees to back pay for those hours, then the regs say to count them as hours of service.