401(k)guru

Tom, I did not have any of these schedules attached since the plan was entirely funded from employer assets. Wendy

I received a P-215 EFAST2 error. This is a health and welfare plan that is funded out of employer assets. The plan terminated (the final return box was checked) and the final participant count was 0. EFAST2 is generating an error saying, "Warning: Form 5500, Line B (Final Return/Report) is checked, however the criteria for termination have not been met. Review the instructions for filing a final return." There are no other schedules included in the filing. Does anyone have a clue why I am receiving this warning. The filing software did not display any errors/warnings prior to the submission.

I just wanted to issue a warning to those buying new computers. I bought a new laptop at the end of 2008 and specifically checked the Relius website and literature to make sure that the 5500 program was windows vista compliant. The website indicated that the software was updated as of 11/08 for Vista. I am not computer savvy and bought a laptop that the salesman at a computer store recommended for my needs. I was able to load all my old programs except for the Relius 5500 package. After many hours on the phone with tech support it was determined that my operating system was a 64 bit system and the 5500 software is not compatible. I was told there was no workaround and I should buy the 32 bit vista program and reinstall everything. I was led to believe by tech support that the computer store was at fault for selling me a system that is meant for "developers". I immediately did a web search and determined that most new laptops were coming with the 64 bit system installed. I sent this information to Relius over a month ago and have never heard anything back. I followed-up with them today. I also requested that they change the information on their website to specifically indicate the versions of Vista that were compatible with their programs so that people in my situation did not buy the wrong operating system. As of today, they have not changed the documentation appearing on the website.

Sorry Mike, I did not say it correctly. What I meant was that if the total value of the account was $60,000 (and this amount includes an outstanding loan balance of $10,000) then (if the loan procedures and promissory note allow) the account would be reduced by $10,000, the loan balance would become $0 and and the loan would be repaid in full. The amount remaining in the participant's account would be $50,000.

What do the promissory note and plan loan rules say about the provisions for default? Usually these documents are written so that if the money is distributable to the participant the loan will be offset against the participant's account balance and the loan will be paid off. If the documents allowed the plan balance ("the collateral") to be used to pay off the loan the issue is not just whether the 1099R was produced but whether the account balance (not including the loan) should have been reduced to pay off the loan. If the documents allowed this, then the participant's earnings in the account would have been reduced by the amount that should have been deducted.

I was happy to see the fact checking summary because I was surprised at some of the statistics that were tossed around. On another note, one of my pet peeves is trying to analyze the “true cost” in bundled arrangements which utilize “retail” mutual funds in a defined contribution plan. With all of the ERISA requirements for the types of investments in which qualified plans are permitted to invest, why shouldn’t there be a new type of mutual fund class of shares offered which is geared to only defined contribution plans? Only with this new class of shares do I feel that I will be truly able analyze the investment costs and administrative costs accurately.

My understanding is that you must use the full year compensation. I believe this information can be found in the description of compensation contained in the IRS website for SIMPLE plans. I had researched this issue for a plan that started mid-year in 2006 but do not have the references handy.

CODA stands for Cash or Deferred Arrangement. A CODA must have a cash option. Since there is no cash option there is no CODA. I am not addressing the general question of whether this is a legal arrangement.

In order to be considered an elective deferral there must be a cash option. Based on your description it sounds like this would bot be considered an elective 401(k) contribution.

I agree that the fees should be disclosed whether or not it is currently legally required. The question for me is how they should be disclosed. The original poster was questioning whether the fees needed to be disclosed as expenses displayed as dollars on the participant' statements. I was suggesting that in some cases it may make sense to disclose the fees as a percentage of the fund in a description of the fund provided as a separate document. This is similar to the way mutual funds disclose their fees.

This is a case of theory versus practice. Many plans offer a combination of pooled and mutual funds. Mutual fund fees are not shown on the statement, they are netted against the NAV but disclosed in the fund communications. When the pooled fees are shown on a statement, it appears that only the pooled funds have fees charged to the participants' accounts which can be misleading.

Ditto to MJB's comments. I am also in the New York City area and have worked with many dedicated in-house ERISA attorney's with US employees under 50,000. I tend to see them in companies that have separate plans for different subsidiaries/divisions.

I had always thought that you had to continue to file the 5500 until all assets were merged or distributed. As an example, the legal merger date is 12/31/2004 and the plan year end is date is 12/31 but the assets were not actually transferred until 2/28/2005. I thought you still had to file the 2005 5500 and it would have a short plan year ending 2/28/2005. Thoughts anyone?

I have a feeling that you may be putting your accruals on the wrong line on the Schedule H. For example, let's assume that you have a CCT with a year-end cash basis value of $100 and income accrual of $5 for a total accrued value of $105. I have always placed the $5 on line 1(b)(3) and the $100 on line 1©(9) for a total asset value of $105. On the Schedule D, I would put $100 as an investment in a CCT. If the Schedule D does not match the Schedule H for the total of CCT, Master Trust, 103-12, etc. I have found that you will get an inquiry letter. Hope that helps.

I attended a conference hosted by the DOL last month in New York. The conference had a session on VFC but also had a session hosted by an IRS representative. I posed that exact question to the IRS rep and was told that the DOL earnings calculation method was acceptable to the IRS.