FormsRstillmylife

The cited letter ruling pre-dates the qualified plan provisions for nonspouse beneficiaries rolling to an inherited IRA. This is now considered an eligible rollover distribution.

The Plan Administrator would be safe to follow through on the distribution to the IRA. It is not bound to recognize the intervening event that occurred after the irrevocable election (assuming the Plan and form state or imply the election is irrevocable). In a real sense the beneficiary designation on the IRA is the participant's most recent written designation and was meant to supersede prior designations. Let the IRA custodian interplead if there is a fight.

In-plan Roth rollovers are limited to eligible rollover distributions. An annuity payable over life expectancy is not an eligible rollover distribution; therefore, it cannot be rolled over to a Roth account or Roth IRA.

COBRA governs who is covered for how much for how long. COBRA does not create a separate group health plan. There is no carrying of rights, etc. between two plans, there is just one plan.

Non ERISA church plans are subject to the Internal Revenue Code. Section 401(a) does not exempt them from the top-heavy requirements. They are subject to these rules. This prevents qualified retirement plans from being sponsored by a bogus church and stuffing the key employee benefits at the expense of the non-key.

I have a form for that. We have determined that the participant should be offered a lump sum. If married, we must offer QJSA & QOSA. The regulations say that if the plan provides or is amended to provide this opportunity after the restrictions are lifted, this is a new annuity starting date. New annuity starting date means spousal rights must be satisfied -- with respect to the spouse at the time of the original election, the spouse at the time of the current election, the spouse named as survivor annuitant on a joint and survivor distribution, and any spouse with a QDRO. Note that if the document does not provide for this distribution, the amendment adding the distribution cannot cause a liability increase issue that throws the plan back under 80% AFTAP.

The QJSA regulations issued after REA require an insurance company to enforce the spousal rights requirements. For example, if the plan buys a deferred annuity, when the participant finally retires the insurer is charged with obtaining spousal consent if the QJSA payment option is not elected. I believe the insurer would be on the hook for implementing a QDRO. Now in this case the estranged spouse may have to return to court for an order requiring 2 checks under the annuity form elected, but some form of QDRO is still possible. The money has not moved to an IRA. It is still subject to qualified plan distribution requirements -- 401(a)(9) minimum distribution & 401(a)(11) QJSA, etc.

There are now automatic enrollment provisions possible under a cafeteria plan that would coordinate with the default group health plan.

See IRS web site for its Winter 2010 Bulletin

3 months to make up 9 months of deferrals right before Christmas? There is not enough time left in the plan year to use this correction. This is intended for correction of a short period of misses.

If the employee is not credited with 1,000 hours in the initial year, the employee does not satisfy the 1,000 eligibility requirement. Deferrals should be returned to the employee as an improper participant. Otherwise, the 1,000 requirement is a smokescreen to exclude part-time employees.

We run quarterly valuations on our daily plans. We advise employers' to reject a DRO requiring segregation as of a date that is not a quarterly val date. When we receive a draft from the attorney, we give him the quarterly dates surrounding the requested date and say pick one.

What about the pesky 401(a)(11) right of the participant to an annuity distribution funded by his full account flowing from that annuity funding vehicle and the document? I am making an assumption, but I am betting it is there. Never mind the right of the spouse to a J&50%S on the full amount if the participant elects an annuity for that after-plan-year distribution.

The real question for me is whether it is OK to not mention the PSP provision in the SPD or in a Safe Harbor Notice when the text exists. I feel more comfortable amending it out of the plan when deleting from the SPD.

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Look in your MPP where it describes the employer contribution formula. There should be a section describing who is eligible to receive the contribution. It will say: anyone employed; or anyone with an hour of service during the plan year; or any participant with 1,000 hours of service. You need it to also say that the participant must be employed on the last day of the plan year. If this language is there, then you can merge the MPP into the PSP now and avoid the 7/31/2007 contribution. If there is no last day of the plan year requirement for a contribution, you have probably worked 1,000 hours or whatever lesser requiremetn there is and the MPP contribution will have to be made for this year. In this case merger would have to wait until midnight 7/31/2007.

You cannot advise the owner that this would be OK. Sure, maybe he can roll to an IRA, do a final 5500, and never hear from the IRS again; but there is no guarantee. If the IRS sees this, it will want that current plan document with all the timely amendments. It will wonder why there was no compliance program submission to cure the missed compliance amendments at the cheap rate. It will happily disqualify the plan as of the first year an amendment was required with interest. An ERISA attorney will be able to talk them into a lesser penalty in exchange for his fee, but why go there. De facto terminations are for the PBGC and IRS to find when resolving abandoned DB plans. When the owner still exists and has managed to file 5500s, they will not find a de facto termination.

But the Final 415 Regulations are not effective yet. Without this deeming regulation in effect, the plan could either define limitation year separate from the plan year or could have amended the plan to preserve a 12-month limitation year. Or, do you think the IRS has some prior guidance to point to in support of the position it took in the final regulation?

Participant loans are subject to state loan regulation. That is how plans with more than 25 loans become subject to the Truth-in-Lending disclosure rules. States regulate the period for a loan that is not collateralized by the real estate. In Pennsylvania, the limit is 120 months. We are going to be implementing this, but we also have loans that were written under plan administrator loan policies that permitted 30 year loans. The response I would give to the IRS is that its regulation did not create a limit, the state loan law creates the limit. This is not within the IRS's jurisdiction. I will research the applicable state laws Mr. Agent sir and see what they were in 1999 and now. Future loans will be granted in accordance with current state law. Past loans were granted on a nondiscriminatory basis. An error in interpretation of state law should not be permitted to work such a hardship on a qualified plan participant as to force the Plan to reamortize the loan in order to maintain its qualification. (Reamortization will probably be required, but this should not escalate to a taxable distribution to the participant in 1999.)

We have some plans that do not do participant investment election and have done annual accounting in the past. We are proposing that they comply with quarterly elections beginning with 3/31/2007 and a notice 30 days in advance of that. We are hoping for notice guidance before that and confirmation that this approach is appropriate.

Under the new law, the portion of the profit sharing account that is invested in employer securities would need to become subject to participant direction. This would leave you with communicating to the participants that they can direct all of their 401(k) account and all of their match account (due to your current plan design) and a piece of their profit sharing account that is equal to 33% (then 66%, then 100%) of the PSP account invested in employer stock -- an amount changing with Trustee investment decisions. I am thinking that for some of our clients and yours opening the whole PSP account up to participant direction is the way to go. I tried drafting the diversification notice. How can you tell the participant he should diversify if you do not also tell him what the trustee has the rest of his account invested in (as of the plan quarter he is making his decision)? The IRS model notice may make it OK not to provide plan specific investment information, but if the trustee has the rest of the account in conservative bond funds, it would make sense to tell the participant this so that he might choose to leave his account in employer stock -- what you want him to do.

We recognized similar odd wording in our document when we were doing our EGTRRa rewrite and cleaned it up to read the way we were administering. A participant shall continue to be an active participant of the plan so long as he is a member of the eligible class of employees and he does not incur a one-year break in eligibility service due to termination terminate of employment. He shall become an inactive participant when he incurs a one-year break in eligibility service due to termination terminates of employment, or at the end of the plan year during which he ceases to be a member of the eligible class of employees, or at the end of the plan year during which he incurs a one-year break in service. He shall cease participation completely upon the later of his receipt of a total distribution of his nonforfeitable accrued benefit under the plan or the forfeiture of the nonvested portion of the accrued benefit.

The new law is aimed straight at your plan, if the employer stock is publicly traded. The law will force the plan to add participant direction on a quarterly basis or cause the employer to direct the trustee to sell off the stock between now and January 1, 2007. The employer could also consider whether it should establish a full-blown ESOP to hold employer stock investments.

My notes show Notice 82-13 and Notice 83-11 reflecting a 10% of compensation limitation on voluntary nondeductible employee contributions. Regulation section 1.219(a)-5©(1)(ii) as proposed 1/23/1984 (Yes, I know proposed and old.) © Rules for plans accepting qualified voluntary employee contributions (1) Plan provision, etc (ii) If the plan document provides for the acceptance of voluntary contributions, but does not specifically provide for acceptance of qualified voluntary employee contributions, the plan qualification limitation on voluntary contributions (the limit of 10 percent of the employee's cumulative compensation less prior voluntary contributions) would apply to both qualified voluntary employee contributions and other voluntary contributions. On the other hand, if the plan document provides for acceptance of both qualified voluntary employee contributions and other voluntary contributions, the plan qualification limitation on voluntary contributions would apply only to the contributions other than the qualified voluntary employee contributions. The proposed 415 regulations that are supposed to be effective 1/1/2007 refer to the 10% limitation in examples but do not actually state the rule or provide a cross-reference. The status of this limitation is very unclear.

He is still employed with the employer. The loan is governed by its stated contract terms. I am betting it only terminates upon non-payment or employment termination. If this is the case, the loan continues in place.