Santo Gold

Grin and bear it may work best in this situation. Thanks.

I already know the answer to this question, but wanted to see how others felt. A two life 401k plan was adopted in 2004. Plan covers owner and the only other employee. We did the 5500 and SAR for the plan. The owner calls back and says that the asset section of the SAR is a little too specific, since with only her and 1 other employee, it is too easy for that other participant to figure out the owners account balance, contributions, etc. Could we revise the SAR to eliminate the specific asset data? I can sympathize with the owner, but of course the answer is no for obvious reasons. But others in the office have suggested sending a revised SAR as requested, but stating plainly in the accompanying letter to the employer that the original SAR is required to be distributed as is and that is what we recommend doing. Still doesn't make it right, but does it help us (TPA) at all?

I did some checking and I believe you are correct Belgarath. Thanks for showing the way.

2 separate questions here for the price of 1, but both are pretty straightforward. If an employer wants to terminate a target benefit plan and they are not planning on filing with the IRS for a determination letter, what is the timing on the notices to terminate (must distribute notice within 15, 30, 45 days)? Question #2 same as above, except it is a money purchase plan. Thanks

Is there a website or other place that compiles information on retirement plan trends? Specifically, I am looking for information on company's that may have switched from a traditional 401k to a safe harbor, possibly detailed by company size. Thanks

Company adopts a standardized prototype plan in 1995 (calendar year plan). I don't have the opinion letter but I would assume it is a TRA 86 document. Nothing seems to have been done (document-wise) since then, although the admin, 5500s, distributions, seem to have been handled timely and properly. The link below answers many questions in this situation: http://benefitslink.com/boards/index.php?showtopic=26811 I wanted to quantify for the plan sponsor what has been missed with their document. Is saying that GUST amendments, RMD amendment, and involuntary distribution amendment (although still not really late) are needed, catch everything? Secondly, if going through VCP to correct, the user fee is $750 (10 employees). Is there usually other government fees or negotiated settlements that take place in this situation? Thanks for comments

Thank you JanetM. After researching this some more and looking at some old posts, I was arriviving at the same conclusion.

An employer wants to start a safe harbor 401k plan, but also wants to include union (collectively bargained) employees in the plan. For these union people, the employer wants to give them a fixed contribution, but they want it to be something less than the 3% non-elective for all non-union people. Is this allowed in a safe harbor plan and if so, does it affect the 401k test in anyway? Thank you

I believe the thread below relates to and answers my question, but was hoping for confirmation since my situation is a little different. http://benefitslink.com/boards/index.php?showtopic=25657&hl= Briefly, in April, 2005, company X is bought by company Y. X has a 401k and Y has a SIMPLE 401k. Normally, there can be no other retirement plan in place when a SIMPLE exists. But I believe the transition rule that applies to acquisitions allows both X and Y to maintain their separate plans for 2005 and 2006. Is this correct? Also, I think the intention is for X's 401k to be terminated and for the SIMPLE 401k to remain as the only plan. As long as the 401k is term'd before 12/31/06 (calendar year plans), there will not be a problem? Finally, would anything change if this involved a SIMPLE-IRA rather than a SIMPLE-401k? Thank you

Thank you Janet M. 2 more questions come to mind if we merge: Other than making elections on what new investments (if any.....I think the plans are identical in all BRF as well as investment options) they want, is there anything the participants of the "old" plan need to sign off on? If they have no options on what to do with their money, I can't see where they would need to sign off on anything. Also, it's been a long time since I handled a 5310-A; is that the only form needed to report the merger (other than the final 5550 and pertinent questions on that form) and is there a user fee associated with that form?

Thanks for the response. Does that mean that those under 21&1 folks who do not get a s/h contribution might still have to get a 3% top heavy contribution, even though they are not otherwise eligible for any other type of employer contribution?

If a company adopts a 401k safe harbor with no elibility requirements to make 401k contributions, can they still put a 1 YOS requirement on the ability to receive the safe harbor contribution? Will that jeopardize the automatic passage of the ADP test? Thanks

An employer has 2 401k plans covering 2 different groups of employees. They are considering eliminating one of the plans and have everyone covered in 1 plan. Would a plan merger make more sense than a plan termination? Are there any obvious pros/cons to doing a merger vs a termination, or vice-versa? Am I correct in that in a merger, there is no option for a participant to receive a distribution whereas with a plan termination the participants could take distribution? Finally, in a merger, accounts do not automatically fully vest, correct? Thanks for any insight!

A 40 year old participant in a PS plan (with rollover money) is looking to take a hardship withdrawal for almost all of his account balance for the purchase of a home (1st time home buyer). Am I correct that this is not an eligible rollover distribution and therefore taxes do not need to be withheld? Also, the 10% early distribution tax does apply so he could gross up the hardship amount to cover the 10% penalty. Finally, can the TPA fee be paid directly from the participants account? Thanks

So even if the participant rolls the RMD to an IRA, and then (before 12/31/05) takes a larger RMD determined on the basis of all assets in the IRA (including these newly rolled over plan assets), that still is no good, correct? Thanks

Terminated participant is age 75 and has been taking RMDs for several years out of his plan account balance. He now wants to "consolidate" his monies and move his plan money into 1 big IRA with all of his other IRAs. Question: If he currently has $60,000 in plan money, and lets say his RMD for 2005 for this balance is $3,000. Can he roll the entire $60,000 now (May, 2005) into this IRA, and take an RMD by 12/31/05 from this IRA, which will have to factor in all of the other IRA monies?

The EGTRRA tax credit of up to $500 for the first 3 years of plan operation......Does anyone know exactly where (eg what line) this is reported at on the company's tax return? In this specific case, its a sole prop. Thanks

If the employer decides to go with offering another investment option/firm and assuming all other things are equal between this investment firm and the current one, and if the only one who takes advantage of the new investment firm is this 1 HCE (there are 3 hce's total), would that be considered discriminatory?

Kirk Maldonado: The employer does not want to retroactively reduce the match back to 1/1/05. Rather, they would like to amend the formula, effective 7/1/05 (the match is deposited each month). Would these actions be sustainable?

Janet M - Thanks for the reponse; I'm a little suprised it would be that easy. I was worried that since we have a set match formula in place at the beginning of the year and to change it in mid year would mean some participants could get a smaller match as a result of the change, that this would result in a cutback of benefits. Nothing to worry about?

In a non safe harbor calendar year 401k plan, there is a non-discretionary tiered match formula. The employer would like to modify this formula in mid year (as of 7/1). I have not yet seen his proposed change, but it sounds like the match will be greater on the first 3 percent deferred, and smaller on > 3% deferred. Since the current match formula is written into the document, can it be changed in mid year if a portion of the match will be subsequently be smaller?

Currently, a 401k plan allows for full participant self-direction of assets, but restricts it to one family of funds. One of the owners recently decided that he does not like this arrangement and wants to direct his money to another place. Allowing him to do so would require giving all others this option, which could get messy. While the owners sort that issue out, he inquired about another way to achieve this via taking in-service withdrawals periodically (eg, quarterly, semi-annually, or annually). The plan does not currently allow for in-service w/d's although it could be amended. Still, this seems to not be do-able, since the money would have to accumulate for 2 years before taking it out. Also, the participant is only 45 years of age. I haven't come across a situation where a participant wanted to use an in-service withdrawal feature in such an ongoing manner and it sounds like it wouldn't work. Does anyone agree?

You can always cop-out and say that both are important and you should have both. But for more detailed and thorough answers, you have to go with the Outline Book. Our office stopped ordering the Answer Book (in favor of the Outline Book) several years ago and have not regretted it. However, for topics that you are unfamiliar with and perhaps need just a good read-able/explainable understanding of, then I think the Answer Book is the better source. It is easier to pick up on a topic's "basics", where as you can get lost in detail in the Outline Book.

We normally deal with pretty small plan sponsors and when distributions occur, our clients typically use an 8109 coupon to forward withheld taxes, usually with their bank. But recently an accountant told us that one of his clients got a $500 fine for not sending this repayment electronically, although the amount was correct and the timing was fine. Does anyone have any further information on whether electronic filing is now required?

2 large 401k plans are permissively aggregated for 401k testing. Both are calendar year plans, both have eligiblity requirements that are more lenient than 21 & 1. Plan A allows for entry on the first of the month following employment. Plan B has a 6 month wait and allows entry on 1/1 and 7/1. For the combined 401k test, do I apply the eligibility for each plan separately to determine who is in the test, or do I use the most lenient eligibility (Plan A's) and apply it to all employees, including Plan B. I think the former is right, but would appreciate and comments.