Randy Watson

A very small employer (3-5 employees) established a 401(k) about 3 years ago. No deferrals were ever made and no employer money was contributed. It seems like termination of the Plan would require the adoption of a very simple, non-technical termination amendment...something along the lines of "The Plan is hereby terminated effective ______, 2009". With no plan assets and no need for tax qualification why bother with the expense of adopting an EGTRRA restatement, PPA amendment etc... Does anyone feel differently?

Employer made contributions to a SIMPLE and a qualified plan last year. This was the only year in which contributions were made to the SIMPLE. What exactly happens to the SIMPLE plan now that there was a violation of the exclusive plan rule? Can distribution of those amounts be made now or must they stay in the SIMPLE until a distribution event? Must the employees recognize the amounts in income even if the contributions have to stay in the plan?

The participant is using a loan to purchase a principal residence so the term will be 15 years. What is a reasonable interest rate to use? Help!

Found a provision in an EGTRRA volume submitter doc that requires a participant who alleges failure to implement investment direction to file a claim within the earlier of 60 days after the mailing of a document from which the error can be discovered or 1 year from the date of the related transaction error. Claims filed outside that period will be limited to the benefit determined if the claim were timely filed. What allows them to put this timing restriction on claims? Does it have to do with the calculation of the claimed loss?

Plan has a mandatory matching contribution provision and a last day of the plan year requirement to receive a match. Those who retire, are disabled or die prior to the end of the plan year can recieve an allocation (if they deferred). If we move to a discretionary formula during the plan year, we can avoid making allocations because participants have not accrued a right to receive the benefit (they don't accrue a right to receive unless they are employed at the end of the plan year). I assume those who retire, become disabled or die before or after the adoption of the amendment would be entitled to a match. Is that a correct assumption? I assume those who experienced these after the adoption date would not be entitled.

Nothing...poor drafting.

Unfortunately the plan document does not specifically state that the sponsor can terminate the participation of an adopting employer, nor does it go into detail about the process for doing so. The plan states that an adopting employer can participate with the "consent" of the sponsor. Although the document is silent on the sponsor's power to revoke its consent it would make sense to me that the sponsor has that power. The only alternative would be a plan termination.

Can the sponsor of a multiple employer plan terminate the participation of an adopting employer who the sponsor feels is jeopardizing the tax qualifed status? I assume so since the sponsor's consent is needed to allow an employer to adopt in the first place.

Is there a problem with using forfeitures to make a corrective contribution (assume the plan specifically allows for it)?

Yes, the fact that those Sections clearly allow for the correction of this kind of failure makes me even less confident that I could use V.D.

I'm trying to determine whether the failure to make a distribution is eligible for correction under 2008-113. I'm looking at Section V.D(2)(a) in particular, which allows a correction of "an amount that should not have been deferred compensation under the plan" that is "otherwise treated as defered compensation under the plan and such excess amount otherwise would have been paid to the servive provider during the service provider's taxable year in which the excess amount was...otherwise treated as defered comepnsaiton under the plan". It appears that this Section was drafted for deferrals that exceeded the participant's deferral election. It does not specifically reference amounts that should have been distributed. However, an amount that should have been distributed under the plan but wasn't certainly "should not have been deferred compensation under the plan" for the remainder of that tax year. In addition, the amount was "otherwise treated as deferred compensation under the plan." Am I reaching too far on this interpretation?

Okay, assume we have a partial termination for one plan year. Who has a right to full vesting? The Code provides for the vesting of "affected participants", which seems to imply that only those who were involuntarily terminated have the right to full vesting. However, Rev. Rul. 2007-43 states that "all participating employees who had a severance from employment" during the applicable period must become fully vested. It sounds like the IRS' position is that those who voluntarily terminate during the plan year in which a partial termination occurs must be fully vested. Is that your understanding?

Are annual interest credits based on the account balance on the 1st day of the year or the last day?

The applicable period for determining whether a partial termination has taken place is generally the plan year, but it can be expanded if the RIFs that span that greater period are related to the same corporate event. If a business has been faced with economic hardship for a 3-year period and made numerous RIFs during that period, would that be enough to link all those RIFs together for purposes of determining whether the 20% threshold has been exceeded?

They were excluded until this week! I wasn't sure how to apply that example since we're not dealing with a 12-month period as they should have entered the plan on March 1, not January 1. By allowing them to defer now we would be able to offer only 6-1/2 months to defer. Would 6-1/2 months of deferrals be satisfactory if the plan allows deferrals of 100% of comp? Who knows?!

Assume a Participant should have entered the Plan on March 1, but was not given the opportunity to defer until much later. If the Participant elected to make no deferrals when they were given the opportunity is there still a need to make a corrective contribution reflecting the "missed opportunity" deferrals? No matching contributions were made under the plan for that plan year.

Not a hardship, disability or active duty. See Reg. Sec. 1.403(b)-6(b).

Is an in-service distribution of employer contributions subject to a 10% penalty if it's before 59-1/2?

PTE 92-6 allows for the sale of a plan's insurance policy to the participant covered by the policy as long as certain conditions are met. One of those conditions is that "the contract would, but for the sale, be surrendered by the plan". I'm not sure I understand what that means. Any thoughts on what the DOL might be getting at here? Thanks.

Is there any commentary or authority on the treatment of an annulment as a COBRA qualifying event (i.e. the same as a divorce)?

Thanks, jved. The problem is that this conversion took place a few years back, so we're outside any recharacterization window.

We have a failed roth conversion. If we inform the IRA provider that the IRS is taking the position that we have a failed conversion, will the IRA provider simply allow the taxpayer to move the assets out of the Roth without issuing a 1099? Do they report anything to the IRS?

Can an employer adopt a plan amendment that expands the kinds of employment that would suspend benefit payments if a retiree would not permanently forfeit the amount of payments withheld during the suspension period? I'm trying to figure out whether the Heinz decision would apply where there is no permanent withholding of the suspended amount.

What if a plan has an EGTRRA RAP that ends in 2010, but termintes in 2009. Would the EGTRRA restatement be required upon its 2009 termination?

What is the best way to deal with a plan-owned legal entity (LLC) that has no value? We'd like to terminate the plan, but really don't know how to deal with this interest. Can we divide that membership interest up by creating individual membership interests for the participants and then distribute "in-kind"? Or would it be better to dissolve the entity completely? I really have no clue here.