masteff

Yes, he's a 5% owner by the constructive ownership rules.... Sec 401(a)(9) references to Section 416 which references to Section 318.

My opinion is that statment is merely semantics.... unless you can definitively show that the participant had elected a form of benefit and was locked into that form of benefit prior to his death. But in that case, it would potentially supercede the QPSA as well. Otherwise, the spouse should be able to make an election, which you state includes both the QPSA and several optional forms.

Maybe, for once, I'm just being a bit over-conservative. I sure can't put a finger on the "disqualified person" part of it. But the differences in tax treatment between traditional and Roth have me a bit leery of exchanging assets between them. It might well be perfectly fine and merely merit thorough documentation of the valuation.

Is there some part of this that's missing? Is one a traditional IRA and the other an SEP-IRA or Roth IRA? I can do tax-free transfers between similar IRAs w/out any issue what so ever. Even if the transfer was the entire ownership of a company, I could move it from my IRA at trustee A to my IRA at trustee B. Now, if they're different types of IRAs (like a traditional vs a Roth), then the answer, I think, is yes, it's a PT and you'd need to file for permission from the IRS to do it.

These statements form a timeline, not a contradiction nor a definition of a failure. The old rate is used until the new rate is calculated and becomes effective. Unless the loan policy has a lot more specificity about the dates on which the calculation is to occur and the new rate to become effective, then I'd say that you did the calc within a time period that was administratively reasonable but just so happened to be after the loan was issued. It would be a different story if the rate you issued the loan under was 2+ months old (meaning you'd truly failed to update the rate on monthly basis).

I agree w/ Sieve that you should closely examine your definition of comp as it pertains to the section that details the match. I also agree you should talk to an ERISA atty if any uncertainty remains. Point out to mgmt that match on 7 months of comp for all of B's employees is more expensive than the cost of a couple hours for an ERISA atty. And you should be consulting one anyway to make sure you don't have any pitfalls in merging plan B into A. Nothing like having to do a post-merger correction to ruin a couple months of your work life.

Actually, instead of giving the siblings money and hoping they give part of it back... have a CPA figure out the tax burden on the distribution and then split the net. (Basically, figure the daughter's taxes w/ and w/out the distribution, subtract the difference from the distribution and then divy it up.)

No. At most it'd go on a 1099-INT and because of the type of interest, it's subject to a $600 reporting threshhold (so if less than $600, don't have to report it). See instructions for Box 1 on Form 1099-INT: http://www.irs.gov/pub/irs-pdf/i1099int.pdf

The general advice would be to not sell out of the stock market while it's down. The market is well below it's long term trend line, so when the market recovers it will move up. The problem is that no one can predict the timing of "when". Since you only recently retired, you have many years of retirement ahead of you. Life, hopefully, doesn't end at retirement (or else we've all been saving for the wrong reasons). Point being.... some part of your money should still be invested in the market so you benefit from long term appreciation and dividends. So maybe part into CDs and part into a mutual fund. Something like a blended mutual fund, that contains both stocks and bonds, would be a good option. Or even just the S&P 500 index. Remember: it's buy low, sell high... not the other way around.

As far as I know, all the "big fish" allow for a large portion of the mutual fund universe, not just their own. But it is something to consider... will they allow outside funds and how difficult do they make it to add to your investment lineup.

You'll find people on both sides of the aisle regarding Fidelity but overall I was happy with them during my 8 years at prior job. We had 4 plans, 4500 employees w/ half again as many retirees, unitized stock funds, and our own GIC fund. During the time we had two plan mergers, so I did work w/ their transition team. I found them to be very competent. My only caveat for ongoing admin (whoever you pick) is take all the time necessary upfront to get the plan's rules coded correctly. And then double and triple check it. Also work closely on the phone rep documentation so they're giving out the right info (because just as sure as they fall back to a generality, your plan will be the 1% exception). Oh, and plan to have weekly phone calls for the first 6-12 months and probably biweekly after that. And have them maintain an "issues and actions" report for the phone calls so nothing gets lost in the shuffle.

So I'm guessing that 42 doesn't work in this instance. Took me a minute to figure out the answer.... took me another four to figure out why it was right. Alternatively, using a frequency based approach... 8 appears in 1/10 of all numbers, so number of places * number of values * 1/10 2 * 100 * 1/10 = 20 3 * 1,000 * 1/10 = 300 . . 9 * 1,000,000,000 * 1/10 = 900,000,000 Which is mathematically identical... n * 10^n * 10^-1 = n * 10^(n-1)

On that same vein, the investment company where a person's 401(k) is located may also offer reduced fees on IRAs to participants in the 401(k).

From a practical standpoint (which some of you will take exception to), at the end of the day it's what in the file that matters. If the EE can come back with EOBs to show the amount of medical expense not covered by insurance, then that's what should go in the file as it's the best form of documentation for this type of hardship.

Moment I read QDRO's post I realized the conversation has been had before.... unfortunately that reg section uses the term "actual knowledge" which the employer does have in this case in the form of the statement... so as QDRO correctly asks, are the terms commercially reasonable? If so then can't allow the hardship.

The participant can make a hardship withdrawal for the amount paid for medical services (so if the credit card includes non-medical items, then exclude them). You don't really care about the status of the payment (other than that services are already rendered and all insurance coverage has been applied). The fact is was paid by credit card is irrelevant; it's sufficient that it's for medical treatment. If the person has insurance coverage, you'd really prefer a copy of their Explanation of Benefits (EOB) from the ins co which will clearly show how much was covered by insurance and what the patient's responsibility is. Edit: with further thought, I wouldn't be inclined to accept a balance forward on the statement... I'd rather have documentation of the underlying expenses. Possibly the credit company can give the participant a print out which (hopefully) may have enough detail for you to feel comfortable that actual medical exenses were incurred. Also watch out for double-dipping... such as, if the person previously took a hardship for medical but then used the credit company to pay it and now wants another withdrawall for the same expenses.

You seem to be quoting this sentence: Once an employee is a 5-percent owner described in the preceding sentence, distributions must continue to such employee even if such employee ceases to own more than 5 percent of the employer in a subsequent year. But are overlooking the words "in the preceding sentence", which reads: An employee is treated as a 5-percent owner for purposes of section 401(a)(9) as amended by the SBJPA if such employee is a 5-percent owner (as defined in section 416) with respect to the plan year ending with or within the calendar year in which such owner attains age 70-1/2. So, your sentence is only invoked if the person is a 5-percent owner in the year of attaining age 70-1/2. As your person ceased to be a 5-percent owner at age 65, then the "once one, always one" clause is not invoked. I have nothing on J Simmons 5-year lookback, but didn't look very hard.

Does the letter actually say "pay down other debt" or just "qualify for the mortgage"? If it actually references paying down other debt, then have the participant ask the lender for a revised letter that only discusses down payment and closing costs. Or even better, ask for a copy of a good faith estimate of closing costs which should show the exact amount of cash the buyer has to bring to the closing, which includes the down payment and the closing costs. A good faith estimate is your #1 form of documentation for purchase of a residence.

To expand on that just a bit... see page 67 of the IRS Pub linked above, "Ordering Rules for Distributions".... regular contributions come out first. So if you have made sufficient contributions to cover the entire amount of your withdrawal, then you have zero taxable distribution. So if you made $25K contributions, then it fully covers the $20K you want to withdraw. But if you only made $18K contributions, then it leaves $2K to come from earnings and would be taxable (and subject to penalty). The 10% penalty for early withdrawal (before age 59.5) is only on the taxable part of the distribution, so in this example it would be 10% of $2000, or $200 penalty. (See "Other Early Distributions" on page 66 of the IRS Pub)

Could you make that into a declarative statement instead of an interrogatory? "ERISA code section such&such says in part: ... This is relevant to the OP's situation because .... "

Not "parties in interest" under ERISA. Not "disqualified persons" under IRS Code. I'd go back to them with a definite sounding "no, it's not a PT" and put the burden on them if they want to argue it at all.

We'll agree there are different levels which a plan might require before accepting an eviction/foreclosure hardship. I'm apparently from the less conservative school. So back to the orginal post... The plan has a burden to have some form of documentation on file to prove you complied w/ your own plan document which says w/drwls are only allowed for X, Y and Z reasons. The consensus is some form of notice from the creditor regarding either potential or actual eviction/foreclosure proceedings. The consensus is that no, other unpaid bills that "might" cause the participant to become past due on their rent/mortgage are insufficient. The fact that someone owes $500 on their QVC credit account does not prove they will be subject to eviction/foreclosure on an unrelated lease/mortgage. My most common saying to participants in this situation is: "The IRS has a much stricter definition of 'hardship' than you and I do. The IRS's definition is very narrow and the plan is limited to only what the IRS and Congress provided as hardship reasons." People have a psychological barrier to letting their mortgage go past due when they'll willingly let multiple credit cards slide w/ exorbitant late fees; people can be counterproductive until you can get them to understand the circumstances in which the plan can help them.

"necessary to prevent" is the real issue as John notes. The full discussion of that other thread I linked discusses to what extent the risk of eviction/foreclosure must be current (ie imminent) for it to be a valid hardship reason (i.e., excess other bills making it difficult for the participant to pay their mortgage and therefore "maybe" becoming past due is insufficient to "prevent" a foreclosure; the actual threat of foreclosure must be imminent for it to be preventable, IMO). The reality is how do you apply the regs in the real world as an administrator; remember, the goal is sufficient documentation for the file to prove an eviction or foreclosure was being prevented. We relied upon letters such as those I noted above. We never required that actual eviction/foreclosure proceedings have been actually commenced before allowing the hardship. Remember that the right to evict/foreclose is a standard part of nearly every competent least/mortgage and simple reminder from the creditor of that should be sufficient to put the participant on notice. Not that it proves I'm 100% correct, but we did have full IRS and DOL audits during my time and while they questioned other items on hardships, they never took issue w/ our eviction/foreclosure documentation.

Five bucks says it's a staff level auditor working from a checklist. "Q - did the plan have any corrections? If yes, was it a PT? Do not pass Go, do not think for yourself. Document w/ 1/2 inch of paperwork."

First step of your analysis is what is the relationship of the 5 w/drwl recipients to the plan. Are they disqualified persons? This page on the IRS website gives some info that you can use as a starting reference point: http://www.irs.gov/retirement/article/0,,id=163722,00.html If you're uncertain, you can give us some more particulars on the participants and we can try to guide you thru the analysis.