namealreadyinuse

Yes, the IRS is processing applications under the new system. Remember that the match is still on 100% of the ADP though (kind of tricky).

No.

I agree that trusts cannot participate and agree that there are several ways to attack it (no comp, service, ERISA definition, etc.). But what technically happens with PCs are involved. Do PCs adopt the plan for the owners they employ so it is not an issue of the PC participating?

The represendtation is that it is necessary to satisfy the need. That is only one requirement. The other is that it be an immediate and heavy financial need. That is what the documentation is for.

Definitely don't request the MSA. It is not the plan administrator's job (or business).

I think 404 allows it if an affiliated group exists because there is one employer for deduction purposes.

I'll add that a well drafted solo-k plan will require one or two years of eligiblity for this precise reason. It at least buys time to fix things if new employees are hired.

I don't think that the DOL (or court) has ruled on preemption of state payday laws. I have always assumed that a participant could withdraw or repudiate her written authorization for payroll deductions and, depending on what state they are in, the employer would really have to look at the preemption vs. payday law issue carefully.

It is a deemed dist., not an actual dist. There should not be any prohibited transaction or violation of plan terms if the offset is not made until a distribution event.

It is much cleaner if the merger is papered as of 12/31 (or midnight on 12/31), isn't it? We would treat the merger as having occurred after close on 12/31 and avoid the 5500. I can't think of any way to argue that participants are affected as long as you give effect to the LDY of the plan that is going away. It would take a pretty mean agent to raise a stink, imho.

POSTED ON 401(k) BOARD YESTERDAY (but hardships may be appropriate here as well) - Anyone have experiences/thoughts about adopting or administering this provision. We are worried about a run on hardship distributions if it makes it too easy to avoid plan loans. Final 401(k) Reg Section 1.401(k)-1(d)(3)(iv)(D) provides "Employee need not take counterproductive actions. For purposes of this paragraph (d)(3)(iv), a need cannot reasonably be relieved by one of the actions described in paragraph (d)(3)(iv)( C ) of this section [insurance reimbursement, asset liquidation, stopping elective deferrals, other currently available distributions and nontaxable loans] if the effect would be to increase the amount of the need. For example, the need for funds to purchase a principal residence cannot reasonably be relieved by a plan loan if the loan would disqualify the employee from obtaining other necessary financing." We have participants who can't afford loan repayments. They want to argue that loans would drain their cash flow and create more future hardships (or alternatively that loans would be defaulted and that would create tax liens and new hardshipt). What do people think about how broadly to interpret this new provisions of the final regs?

Thanks, Jim. We have a bunch of participants who just want the money without having to deal with the cash flow issues associated with loan repayments.

Anyone have experiences/thoughts about adopting or administering this provision. We are worried about a run on hardship distributions if it makes it too easy to avoid plan loans. Final 401(k) Reg Section 1.401(k)-1(d)(3)(iv)(D) provides "Employee need not take counterproductive actions. For purposes of this paragraph (d)(3)(iv), a need cannot reasonably be relieved by one of the actions described in paragraph (d)(3)(iv)© of this section [insurance reimbursement, asset liquidation, stopping elective deferrals, other currently available distributions and nontaxable loans] if the effect would be to increase the amount of the need. For example, the need for funds to purchase a principal residence cannot reasonably be relieved by a plan loan if the loan would disqualify the employee from obtaining other necessary financing."

You mentioned vesting in the original post. Only vested money can ever be distributed. It would take a spin-off or merger to get nonvested money moved.

Yes, didn't they just get busted as an EGTRRA nonamender? They certainly aren't very lucky, but that is the law and how an IRS audit should play out probably.

Great answers (and cite Becky), thanks! Any ideas if using PCs established by the individual partners changes the answer?

That is a great help, Jay, thanks! That makes perfect sense if the partnership has a plan, but how can I prove the folllowing: I don't think that (a)(26) is the issue fro a uni-DB plan is it? Thanks again for the help!!

Ok, this should be a very easy question to shoot down, but I searched this board and didn't find anything. Partner of a service partnership gets K-1 and "friends" have told him he can set up a uni-DB plan with the self employment income. Partner particpates in the partnership 401(a) plan. Assume no income other than the k-1, but does that matter? Is it a 415 problem or an affiliated service group, etc. issue? I know it can't be possible because everyone would do it, but can't figure it out this morning. Thanks!

Trust us, it just is. The cite to the Rev. Proc. was dead on. Your plan says EEs can specify the percentage of salary to be deferred and when they do that, but the employer ignores it or messes it up, it is a qualification defect that the employer has to fix by making up the contribution. It is essentially the exclusion of an eligible employee.

Don't you need the TRA '86 Act restatement? I doubt that was covered in a 1991 determination letter.

This was our understanding as well, but we never knew why. These are great answers to the original post!

This does happen a lot. The problem is failure to hold plan assets in trust and the technical fix is to treat the original investment as a distribution to the participant, but nobody actually does that. Do what you can to clean it up and get the assets retitled in the name of the trustee. The 5500 / audit issue is a great point that hopefully is on your side.

They are correct, but I think that is pretty basic. If you have family coverage, the family deductible has to be met under the IRS rules.

They are currently due by 12/31/06 for provisions that will be utilized or are mandatory. Even for the EGTRRA changes, good faith amendments are required in the year used. I would expect an extension or some band-aid IRS good faith model amendments by mid year.

Thanks. We are now stuck on the plan document issue I guess and waiting for the final regs on that. Between the SPD and Participant Directed Investment Procedures, I guess 404(c ) can be satisfied in form at least.