masteff

Since I'm more of a retirement plan person, pardon if this is a stupid question but... Is there some aspect of the health care reform that now prevents the deletion of dependents during a plan's annual enrollment? Has something happened that the plan now cares who is added or dropped beyond the simple eligiblity rules of the plan? Are ya'll suggesting that a person now has to be eligible to be dropped from a plan (not just to be added to it) (other than the standard qualifying event rules)?

If you have adequate security measures but still entertain as a real probability that your users are being compromised, then your website needs to be for review/information only and all actions must be done in person because you'll never be able to satisfy yourself that the person on the other end of the computer is not an imposter.

"Final regulations issued on July 19, 2000, eliminated the lookback rule." http://www.irs.gov/irm/part4/irm_04-072-009.html And here is the reg change: http://www.gpo.gov/fdsys/pkg/FR-2000-07-19/html/00-18119.htm

A keyword is "offset". From Reg 1.72(p)-1: "Q-13: How does a reduction (offset) of an account balance in order to repay a plan loan differ from a deemed distribution? A-13: (a) Difference between deemed distribution and plan loan offset amount. (1) Loans to a participant from a qualified employer plan can give rise to two types of taxable distributions— (i) A deemed distribution pursuant to section 72(p); and (ii) A distribution of an offset amount. (2) As described in Q&A-4 of this section, a deemed distribution occurs when the requirements of Q&A-3 of this section are not satisfied, either when the loan is made or at a later time. A deemed distribution is treated as a distribution to the participant or beneficiary only for certain tax purposes and is not a distribution of the accrued benefit. A distribution of a plan loan offset amount (as defined in § 1.402©-2, Q&A-9(b)) occurs when, under the terms governing a plan loan, the accrued benefit of the participant or beneficiary is reduced (offset) in order to repay the loan (including the enforcement of the plan's security interest in the accrued benefit). A distribution of a plan loan offset amount could occur in a variety of circumstances, such as where the terms governing the plan loan require that, in the event of the participant's request for a distribution, a loan be repaid immediately or treated as in default. (b) Plan loan offset. In the event of a plan loan offset, the amount of the account balance that is offset against the loan is an actual distribution for purposes of the Internal Revenue Code, not a deemed distribution under section 72(p). Accordingly, a plan may be prohibited from making such an offset under the provisions of section 401(a), 401(k)(2)(B) or 403(b)(11) prohibiting or limiting distributions to an active employee. See § 1.402©-2, Q&A-9©, Example 6. See also Q&A-19 of this section for rules regarding the treatment of a loan after a deemed distribution."

I'd agree that reads as all-or-nothing and if the participant only took 1/2 then I'd worry you may have a failure. As far as I can tell, the terms are not codified. Section 72 uses lump sum w/out cross-reference to any definition elsewhere.

ghal - Stop. You're missing part of what he's saying... the plan says both: pay period match but certain people get true up. He's not making up the true up, it's in the plan. It's perfectly fine to do a true up at year end after doing pay period match. The question is whether only giving the true up to certain people is against the rules.

ESOP Guy asked about those other things because they are indicative of whether the employee is being treated as still employed. COBRA eligiblity can be a biggie for demonstrating that a termination occurred. Your plan text is all the citation you need. The situation is almost entirely definitional and will be governed by the plan. What is employment? What is eligibility? What is eligible compensation? Does the plan refer to hours of service or hours worked and what hours are counted? Does the plan refer to leaves of absence and what does it consider to be a leave?

I disagree w/ 4/1/2014... per the Code and Regs, in the case of a 5-percent owner, the April 1 rule only applies for the calendar year in which the employee attains age 70 1/2. So even if a later year is the first year in which an MRD is due, for a 5-percnet owner, those later years must be taken by 12/31. (Note that for a non-5-percent owner, the Code and Regs include the alternate "or retires" which is why those persons might use the April 1 rule at a later age.)

You might refer to the PLR cited by mbozek in this thread: http://benefitslink.com/boards/index.php?showtopic=27680 Here's the PLR: http://www.unclefed.com/ForTaxProfs/irs-wd/2004/0453015.pdf

You always have some of the better head scratching questions. My only comment is that the reg does conform with the current Code at 401(a)(9)©(ii). "(ii) Exception.— Subclause (II) of clause (i) [retirement] shall not apply— (I) except as provided in section 409 (d), in the case of an employee who is a 5-percent owner (as defined in section 416) with respect to the plan year ending in the calendar year in which the employee attains age 701/2, or (II) for purposes of section 408 (a)(6) or (b)(3). " I suppose we could get into a weird philosophical discussion if it's a sole proprietorship because we could maybe argue over what date the proprietorship came into existence.

Sounds like a model portfolio that would fall under (4)(ii) on the last two pages here: http://www.dol.gov/ebsa/regs/fedreg/final/07-5147.pdf

The short answer on why the plan doesn't accept the husband's rollover is that it doesn't have to if it doesn't want to... see reg 1.401(a)(31)-1 Q&A-13. It would be helpful to me to understand the connection between the wife and her plan. Is she merely an employee of a company and participates in the company's plan or is she the owner of the company and wants to let her husband join the plan over which she has control? If it's the later, then she simply puts him on payroll long enough to do the rollover.

No, it's a broad term. The Code addresses certain fringe benefits that either are or are not taxable to the employee but it's not an exclusive list of what constitutes one. See page 6 of this document: http://www.irs.gov/pub/irs-tege/fringe_benefit_fslg.pdf (EDIT: opps, it's the 5th physical page, but is numbered 6 at the bottom)

Reg § 1.401(a)(9)-8 Q&A-4 (yes, the plan must distribute regardless of consent)

Refer to IRS Publication 590 starting at page 55: http://www.irs.gov/pub/irs-pdf/p590.pdf

Some states have a procedure for an affidavit of small estate. I recently helped my step-mother do one on a life insurance policy on my father. It would be the simplest and cleanest option at this point but you'd want to check w/ counsel, especially since your situation involves 2 different states.

I'm w/ Mojo. It's partially definitional... If you look at the regs in 1.401(k)-1, you find that a hardship cannot be more than the maximum distributable amount; the maximum distributable amount "is equal to the employee's total elective contributions as of the date of distribution, reduced by the amount of previous distributions of elective contributions". Since match is not an elective contribution, it is not part of the maximum distributable amount and therefore not an IRS hardship distribution. BUT, the plan language can matter. You get two different results between "suspended for any hardship withdrawal" and "suspended for hardship withdrawal of elective deferrals prior to attainment of age 59 1/2". We had this same feature in one of the plans I used to administer (I'm from the plan sponsor side). We referred to them informally as a "plan hardship" and an "IRS hardship". If you took a plan hardship (ie no deferrals), you weren't suspended. If you took deferrals, then you were. I do recall that the part of the text that explained suspensions did specify that it was the distribution of deferrals that triggered and not simply the hardship.

This is an area where the IRS code and regulations allow some variation from plan to plan; we could guess all day long and not know if we were right. We'd be more accurate if you'd ask us to guess what color shirt you're wearing. Have you tried simply asking your plan if you can take a distribution?

In which case, the employee needs to be responsible enough to update their BDF. If they want something more complex, then a trust as suggested above is the way to go. I'm not going to undertake additional work or legal expense to administer your estate planning. Actually, a basic trust isn't very expense. You do have some up front legal expense to draft the documents but there's little to no expense until the person dies and then the expense doesn't have to be very big if you have a family member capable of handling the basics. My father died this year and I'm co-trustee on his trust; I'll be surprised if it costs us more than 2-4 hours a year for legal and accounting.

If you google the right keywords, 457 beneficiary per stirpes, you get a dozen examples of 457 plans that do permit "per stirpes" designations. The only question is if your plan will accept it. The easiest way to resolve that is to turn in a designation using "per stirpes" and put the burden on them to accept or reject it. If they accept it, then they must abide by it. Edit: Actually, I'd rather you use a sheet paper as an attachment and spell out "x% to my son Tom Jones or in the event of his death divided equally between his children Larry Jones, Moe Jones and Curly Jones". This keeps me from having to spend time determining who the children are.

Not that this is the most helpful answer but the reg says something about it... From 1-72(p)-1 "Q-7: What tracing rules apply in determining whether a loan qualifies as a principal residence plan loan? A-7: The tracing rules established under section 163(h)(3)(B) apply in determining whether a loan is treated as for the acquisition of a principal residence in order to qualify as a principal residence plan loan." As to how those tracing rules work, I didn't look too far but did find this thread: http://benefitslink.com/boards/index.php?showtopic=25857 This article http://www.cob.sjsu.edu/nellen_a/225K%20Reading/N88-74.pdf says the tracing rules are in 1.163-8T. No clue how it applies to the scenario of replacing a debt that was qualified. You'd think the new debt would qualify but the devil may be in the details.

The "no hour of service" exclusion that ETK refers to is per reg 1.416-1 Q&A V-3. BUT read your plan because the reg says "not required"... this implies that it is permissible to give top heavy vesting to persons w/ no hours of service. V-3 Q. What benefits must be subject to the minimum vesting schedule of section 416(b)? A. All accrued benefits within the meaning of section 411(a)(7) must be subject to the minimum vesting schedule. These accrued benefits include benefits accrued before the effective date of section 416 and benefits accrued before a plan becomes top-heavy. However, when a plan becomes top-heavy, the accrued benefits of any employee who does not have an hour of service after the plan becomes top-heavy are not required to be subject to the minimum vesting schedule. Accrued benefits which have been forfeited before a plan becomes top-heavy need not vest when a plan becomes top-heavy.

Another thought... need to look at exactly what your plan says. Some plans paraphrase the regs and a slight change in wording can have an impact. Remember that the reg in question is merely a safe harbor for hardships. I always view them as having a grey border around them. If you step slightly into that grey area, you're outside of pure safe harbor but not living too dangerously unless you're in direct violation of your own plan document.

From IRS Notice 87-16: "A13: If only a single dollar is allocated to an individual's account for a plan year (in a defined contribution plan), or an individual accrues a benefit of only one dollar for a plan year (in a defined benefit plan), is such an individual an active pa rticipant in such plan? A: Yes"

I'm w/ jpod but could also support a more conservative stance. I would change "probably need a letter" to "must get a letter".