John Feldt ERPA CPC QPA

Generally, the portion of the lump sum being paid to the spouse which eligible for rollover is also subject to the mandatory 20% withholding. The part that matters is who is being paid.

You had time to set things up with that provider, you have hardware and software maintenance agreements and training to use their system - this all adds up to time costs and hard charges. Their payment is to cover this. Your fee is for ongoing administration regardless of the asset provider/system they use. Disclose these arrangements: yes. Charge appropriate fees: yes. Make a profit so you can stay in business: required.

Perhaps that was almost a thread hijacking? It's good info even if it is. Currently, under PPA 2006, I think plans may adopt the non-spousal beneficiary rollover provisions, it is not required yet the way I read it.

Yep. (thus the word "Generally"). Thanks for the upgraded info mjb! This does not change the requirement regarding statements, nor taxesquire's point to check with state law.

The 402(g) limit applies to the individual and it aggregates (combines) the 403(b) and 401(k) plans' deferrals together for this deferral limit. Thus, the 401(k) deferral plus the 403(b) deferral for 2007 (both combined) cannot exceed $15,500 for 2007 (ignoring the various catchup issues for sake of illustration). If the employee (not catch-up eligible) defers $15,500 into one of the plans, can you please provide a numerical example of this, just for fun (to show the $45,000 x 2 overall)?

Here's a few things to note: Form 5500: A deferral-only 403(b) plan that is not subject to ERISA would not have to file a Form 5500. A 401(k) plan generally must file a Form 5500. Accountant's Opinion: An ERISA 403(b) plan with (generally) over 100 partcipants is not required to obtain an accountant's opinion (auditor's report) to attach to their form 5500. A 401(k) plan (over 100 ppts) would be required to do so. These are kind of expensive and can be time consuming for you. Discrimination Testing: If an HCE is ever in the plan, the 401(k) plan must run some tests, like ADP, coverage 410(b), top heavy, and so on, but a deferral-only 403(b) plan would not have to do these tests. Coverage/Universal Availability: A 401(k) plan can have eligibility requirements such as 1 year of service and age 21 before the employee is eligible; and a 401(k) plan can choose to cover just certain employees as long as coverage passes (you always pass if you only cover NHCEs in a DC plan). Generally, a 403(b) plan must allow immediate deferrals to almost all employees (with some minor exceptions) under the "universal availability" rule - in a 403(b) plan you cannot have provisions that make employees wait for a period of time, like one year, or reach an age, like age 21, before they can defer. Because of these things and depending on your goals, a 401(k) might suit you better than a 403(b), or vice-versa.

Safe Harbor match = No, you cannot do what I call a "maybe" notice. If you want to do a safe harbor match then you must (before the beginning of the plan year) adopt safe harbor match plan provisions and provide the safe harbor match within the required time period (a reasonable period before the beginning of the plan year etc.) 3% Safe Harbor nonelective = Yes, you can give a "maybe" notice, as long as you also (generally): 1. Give a safe harbor notice within the prescribed time before the beginning of the plan year that tells the participants that a safe harbor 3% nonelective might be provided for the upcoing plan year 2. Remove the safe harbor provisions from the plan before the beginning of the plan year, and 3. If later you decide to provide the safe harbor 3%, you give a supplemental notice at least 30 days before the last day of the end of the plan year, and 4. The plan adopts the 3% nonelective provisions before the end of the year to bring in the safe harbor provisions for that year

1995 = 150,000 1994 = 150,000 1993 = 235,840 1992 = 228,860 1991 = 222,220 1990 = 209,200 1989 = 200,000 That's all !

Sal has a cautionary note on page 11.278 of the 2007 ERISA Outline Book: "It should be noted that, when the catch-up regulations were in proposed form, there was an example exactly on point, where a plan set the plan imposed deferral limit at 0%, but also included a catch-up provision. This example was absent from the final regulations issued under IRC Section 414(v). Treasury officials have not discussed their reasoning for removal of this example, or whether it represents a decision by the Treasury that a 0% deferral limit is improper, or that they simply didn't want to promote such a plan design by way of a regulatory example. Clearly, a plan could set $1 as the deferral limit and there would be no question it is acceptable, so setting a $0 limit shouldn't make a difference. Some would argue that with a $0 limit, the plan really doesn't have a 401(k) arrangement. But that argument fails to recognize that, even with a $0 limit, those employees who are catch-up eligible could make elective deferrals, so the 401(k) arrangement is still available, just not to all eligible employees." I'm not personally advocating Sal's position or Mike's (or mjb's), just adding Sal's comments. I hope that's okay to enter in here. Sal has other things to say about this in the book, but you can just get the 2007 EOB if you need.

Check your 457 plan document - see if it actually requires spousal consent (it probably does not). If not, then you should be okay unless the applicable state laws would somehow require spousal consent.

I have seen several providers where they have only given the 402(f) notice, the distribution election form that asks for the participant election and participant consent (and spousal consent). That may actually be the majority of those we've seen. Second place on the list are the providers that provide the Federal W-4P plus the applicable state income tax withholding form for pensions/annuities. Lastly, we have seen quite a few where the W-4P itself is not provided, but a subtitute form with the same options and explanations. The experience when a substitute or an actual W-4P is provided varies, but here's what's been happening: Although 85 - 90% of the forms are filled out alright, other participants attempt to select no withholding, then get upset when 20% is withheld (saying I plan to roll it over in 60 days...) Or, selecting 20% withholding when they elected a direct rollover. Or making some other combination of contradictory choices.

http://benefitslink.com/taxregs/final_403b.pdf

http://benefitslink.com/taxregs/final_403b.pdf

Man, I missed the good stuff over the weekend before the edits. fender, if you look at Austin's link and Mike Preston's comments, you'll see that we are not to discuss actual fees. However, I think a discussion of how we package our fees is probably okay (without disclosing any real amounts). Internally, we have been tossing around the idea for almost 2 years of how to better package our amendments and restatement fees. We are soon to offer clients the option of paying a "small" annual or quarterly amount to cover all IRS-required amendments. An additional option will likely be an option to pay an annual or quarterly amount that covers the next restatement as well (we're still working on those details). For example, you know the restatements are supposed to be like clockwork every 6 years for most plans, so you could take the risk to set your price now for the next restatement. Suppose you decide to charge $120 for the EGTRRA restatement (obviously, this amount is for illustration purposes only). Then the client could choose to pay you $120 / 6 = $20 per year or $5 per quarter - a small easy to handle fee. Psychologically easier to swallow for some. Easier for budgeting for others. Steadier cash flow for the receiver. All good so far! Or the client could opt for both the amendment package and the restatement package - perhaps a discount would be included . . . still working through that. Thanks Mike for directing me here! edited for the letter "i"

Man, I missed the good stuff over the weekend before the edits. fender, if you look at Austin's link and Mike Preston's comments, you'll see that we are not to discuss actual fees. However, I think a discussion of how we package our fees is probably okay (without disclosing any real amounts). Internally, we have been tossing around the idea for almost 2 years of how to better package our amendments and restatement fees. We are soon to offer clients the option of paying a "small" annual or quarterly amount to cover all IRS-required amendments. An additional option will likely be an option to pay an annual or quarterly amount that covers the next restatement as well (we're still working on those details). For example, you know the restatements are supposed to be like clockwork every 6 years for most plans, so you could take the risk to set your price now for the next restatement. Suppose you decide to charge $120 for the EGTRRA restatement (obviously, this amount is for illustration purposes only). Then the client could choose to pay you $120 / 6 = $20 per year or $5 per quarter - a small easy to handle fee. Psychologically easier to swallow for some. Easier for budgeting for others. Steadier cash flow for the receiver. All good so far! Or the client could opt for both the amendment package and the restatement package - perhaps a discount would be included . . . still working through that. Edited for the letter "e"

Easy now.

Point to the plan's D-letter and state that this letter should cover your operations at least until the plan is restated for EGTRRA. Ellen's (Sungard's) comment would indicate that such a position may be on thin ice. You never can know until the auditor accepts or rejects your argument, assuming they see the issue at all. Another way might be to amend the plan or add an addendum or something to fully disclose that the plan really is (or is not) safe harbor, which safe harbor provisions are in place, and then operate accordingly. If doing 3% nonelective "maybe" notices, then you'll amend in and out 30 days before the plan year end for which the 3% safe harbor contribution will be made.

Does your plan contain participants with account balances that were required to be subject to the QJSA requirements, such as a money purchase plan account? Back in 2002, or thereabouts, a lot of money purchase plans were merged into 401(k) plans or profit sharing plans because of the change in the deduction limits. So, if a money purchase plan was merged into this plan, then at least those accounts are still subject to the spousal consent requirements. You could remove the spousal consent requirements from the rest of the plan. There might be something else to consider, like whether or not the plan defaults 100% of the account to the spouse or just 50% - but let's see what others might say from this board about that.

Some of Sal's comments from The ERISA Outline Book 2007 edition, TRI Pension Services: on page 11.491, in #6. he indicates now that the GUST period is over, the plan must be written either to reflect that it is ADP-tested or that it is a 401(k) safe harbor plan. If the plan document specifies that the plan is a 401(k)(12) safe harbor plan, and a notice is not given on a timely basis, the employer has failed to operate the plan in accordance with its terms. on page 11.542, in the footnote, he indicates that in spite of the document requirements expressed by the IRS in the 2004 regulations, many GUST documents were approved by the IRS with more flexible language. For example, some documents allow the employer to decide on an annual basis whether or not to provide the safe harbor notice to participants. The plan provisions are triggered by the safe harbor notice, providing that the absence of the notice triggers the ADP/ACP test. Then he says the 2004 regulations are a signal that the EGTRRA documents ain't gonna get to do it that way and they'll have to conform to the regs (okay, he didn't quite write it that way exactly, but that's the gist of it). added on edit: So nothing different really from the 2006 EOB here, no mention of the pre-ramble (as Derrin would call it).

Yes, VCP would have been $750 plus the cost to prepare. Because it was a typo, we debated internally if it was really necessary to go VCP. Would the IRS (in light of Joseph Grant's comments about fines being reasonable) really think a large fine for a typo is reasonable? Hmmm. We decided to just disclose the amendment in the D letter process instead. Thus, one tale of woe. You are correct, under VCP, it would have been stamped "ok". There is more to it than just our internal debate. As you see from a prior post in this thread, the error was a computer translation issue - so now use your imagination and take a guess regarding how many plans were affected. I'll just say it wasn't merely one, and I'll say that about 15 similar plans were sent for Form 5310 D-letters before I started here, and the IRS never saw the issue, so no problems there. Plus, since the problem was identified, about five or six were amended, making the issue visible when the 5310 D-letter application was processed, agents even asked for more detail on those, but only one so far has gone to audit cap. So, VCP for each would be $750 x 20 = $15,000. Or, so far only $2,250 under audit cap. I guess we're ahead so far on the ultimate cost.

I'm not sure I'm reading the question right. 2 possibilities perhaps. 1. Has the plan filed a VCP application for a plan correction under EPCRS? If so, the errors being submitted will be the only items that the plan can be "safe" about if the plan ever gets audited by the IRS, and it is only for the years that are disclosed in the VCP submission. If that was not what you are asking about, please rephrase. 2. If you are asking about an accountant's opinion audit to attach to a Form 5500, then the determining factor regarding the need for that audit (for a 401(k) plan) is the participant count, which is not related to VCP. Hope this helps.

I don't work for Prudential, but these has been helpful for us from time-to-time: http://www.prudential.com/media/managed/co...ng_statetax.pdf http://www.prudential.com/media/managed/St...Withholding.pdf and this: http://www.sisterstates.com/ Also, http://benefitslink.com/boards/index.php?showtopic=13240

As a follow-up to my earlier post (tale of woe) within this thread, the IRS agreed to a $2,250 sanction under audit cap for the typographical error. As background, when the typo was noticed, we did an amendment right away to correct (via retroactive amendment). Technically, the typo was a computerized translation error that occurred three years before starting at this job, when the old fields from the TRA86 document were transferred into the new fields of the GUST document - one field was incorrect, but at a glance it looked right (as long as you did not read it very carefully). It sure seemed ridiculous to submit such an amendment under VCP. Now in hindsight, we are quite convinced that no IRS agent would have ever noticed the issue if the correcting amendment was not there to point it out to them when the plan terminated and submitted a Form 5310. The enrolled actuary (and his staff) also had not noticed it over any of the previous 4 1/2 years. Also, the agent indicated that if our cover letter to the Form 5310 had gone into a lot more detail regarding the corrective amendment, instead of just pointing out that the amendment retroactively amended the plan formula to match the formula before the GUST document was adopted, then they might have allowed us to submit under VCP instead of going to sanctions under audit cap. That would have been nice to know ahead of time too.

If your plan document has a provision that allows for the return of the deferrals for these ineligibles (like the IRS-approved prototype that we use), then you could refund those amounts instead of doing an amendment and submitting for a D-letter in your cycle. Check your plan document - what does it say you can do?

Yes, I believe you can adopt a resolution to rescind the prior termination. You are correct that any amendment that was made, such as making existing participants 100% vested, would still apply. You may want to make an effective date (or a special effective date) for deferrals to begin again. I don't think you'll get a free pass on ADP or ACP for the year since deferrals got stopped when the plan terminated. I'm sure there are other considerations that I have left off, let's see if anyone else has a comment.