chris

Apart from mbozek's response, you'll want to check to see if the plan has a last day allocation requirement. If so, it may still be possible to issue a IRC 4980F/ERISA 204h notice to the participants telling them that no contributions will be made for the 2003 plan year and that the plan will be terminated.

Buyer doesn't have a plan and didn't want to assume sponsorship of this one. Thus, termination.....

Plan year is calendar year. Haven't seen the document but even assuming there is no last day/1,000 hour requirement on the match couldn't the employer execute a consent to terminate the plan effective 10/01/03 thereby cutting off e/ee deferrals for October as well as any match? E/er is selling all assets in a transaction effective 11/01/03 and wants to shut down the 401(k) as soon as possible....

Since it's a calendar year plan, I think your choices as to compensation to be used for the safe harbor would be either 4/1/02 to 12/31/02 OR 1/1/02 to 12/31/02. Per an example in the ERISA Outline Book at page 11.365 regarding a new safe harbor 401(k) plan, compensation from the effective date is used. Notice 2000-3 Q-11 says compensation from the effective date MAY be used and thus it will not fail to meet the safe harbor requirements for the entire plan year. That implies that entire year's compensation could be used. However, I would also point out that the plan document should address the compensation to be taken into account. Also, I believe there may be language in the 401(k) Regs which might allow for you to use compensation for the plan year or the calendar year ending within the plan year as long as all participants are treated the same. End result is that you could probably use 1/1-12/31 compensation. Anyone else have any suggestions??

The main concern was the 10% penalty because of the subsequent distributions from the surviving spouse's rollover IRA. The surviving spouse is 55. Plan balance is around 1 MIL. The decedent's interest must be distributed by the cal yr containing the 5th anniversary of death....which ends up being December 31, 2003. I guess surviving spouse could calculate what amounts she would need expenditure-wise, kids' schooling, etc.... over the next 4 1/2 yrs and gross it up for taxes and pull that out of the plan in cash and then roll the remaining balance over into an IRA.....??? Any thoughts? Thanks for all of the prior input.....

Still dealing with this issue.... Anyone run across a custodian who has opened up an IRA in decedent's name with spouse as the beneficiary? Thanks for any help...

Cease -- The plan document would have to address/allow for a participant to elect out. I have seen doc's in the past where it could be done on a plan year by plan year basis, whereas other doc's allow for a one time irrevocable election not to participate (gets you out of the potential CODA issue).

I believe that under the VFC you have the option of paying the highest rate of return achieved under the investment options offered within the plan or a floor rate of return based on the underpayment rate in Sec. 6621 of the Code. Basing it on the underpayment rate is usually simpler to do.

The ex-spouse was also supposedly going to roll the distribution she received from former e/ee ex-spouse into her employer's plan. Both of the ex-spouses believed that there would be no tax owing to either one of them and that the distribution to the former e/ee who turns the amount over to the ex-spouse to roll into her plan scenario was getting them to the same place without all of the plan admin./legal hoops. I would think there may be potential liability for the plan if it knows there's a current divorce action and the former e/ee calls up and says I want a distribution of $X.....

I would think the spouse would have to give consent in all cases since the spouse is entitled to the death benefit by law. That would generally apply up until a QDRO is put in place and/or the participant and the spouse get divorced pursuant to a divorce decree....

Sounds like an arrangement the other partners would be sure to vote for, ie. sharing the expense of putting something in place that they don't even benefit from....

You'll get more in depth answers from others I'm sure, but short answer is no..... assuming all that's happened is that the parties have agreed and intend to live separate and apart for whatever the requisite time period is required under the applicable state law. A similar related question might be that the two parties have separated and have each agreed per a separation agreement as to what happens to the plan benefits of one or the other of them. That also would not be enough. There needs to be a court order regarding/ addressing the handling of the disposition of the couple's property.

Just to clarify.... the plan was amended to add safe harbor 401(k) provisions and at the same time the plan was also amended to provide for immediate 100% vesting? See 4.23 of the ERISA Outline Book re the application of the new schedule to all participants. At first read it seems to say that if the new schedule is better at all points than the old schedule, then the new schedule automatically applies to all participants.

From what I understand no one at the PA level knew enough about the Plan to write that letter. Thus, counsel was needed to handle it. Counsel ended up dealing with attorneys for the ex-spouse and the former employee b/c they had no clue about the QDRO process. Given that it was a plan expense the simplest thing to do would be for the PA to pay and then attempt to collect from the former e/ee and the ex-spouse.

Employer/sponsor of PSP was caught in the middle of dealing with former e/ee and ex-spouse of former e/ee where former e/ee directed plan to distribute $x of his balance to the ex-spouse as part of their divorce settlement. Former e/ee as well as ex-spouse was adamant that no decree was needed and failed to see the tax benefits of obtaining a decree or incorporating the PSP balance within the decree. Plan had to obtain counsel to communicate to former e/ee and ex's counsel regarding the tax issues involved and re obtaining a QDRO, etc..... E/er/sponsor now wants former e/ee and e/ee's ex to split the fees and expenses involved. I saw prior recent post re DOL Opinion re QDRO expenses w/r/t def. cont. plans... Would it be matter of allocating a portion of the expenses to his account and sucking it out of his account balance? Also, how would the ex-spouse be handled? Bill her for her portion and hope you can collect? Also...., how do you allocated among the three involved -- plan, former e/ee, ex-spouse....? Thanks for any help on this.

I was under the impression that if it was not a word-for-word adoption of Corbel's VS language, then you would have to submit it in order to have reliance as to the qualification of the form of the document.....

Under the §7701 Regs. a single member LLC may be treated as you said as a disregarded entity, i.e., if the owner is an individual it will be treated like a sole-proprietorship, if the owner is a corporation, then it will be treated like a division. Clearly, the entities are recognized as separate legal entities under state law, hence the filing of Articles of Organization. there may be an issue however as to how single member LLC's are categorized, i.e., does the state follow the federal view as set out in the 7701 Regs.....??

Any tax-related issues with participant naming an adult as custodian for minor child under Uniform Transfers to Minors Act as the contingent beneficiary behind the spouse in a PSP? Thanks.

My understanding is that I would in fact answer 3(g) no since the disparity allowed w/r/t cross-testing is not necessarily permitted disparity addressed in 401(l).

Line 3(g) of 5307 ask if the Plan provides for disparity in contributions....that is intended to meet the permitted disparity requirements of §401(l). The plan is a volume submitter §401(k) that provides for a cross-tested allocation formula. My guess would be to answer yes as permitted disparity is most likely used in the cross-testing formula, but there's nothing in the document(a Corbel document) which addresses permitted disparity. I recall there being actual language regarding permitted disparity in the PSP and MPPP documents. Any suggestions?

Also, I think the failure to give the ERISA 204(h) / IRC 4980F Notice re ceasing benefit accruals means the MPPP contribution is still ongoing until you cut it off whether you had an amendment in hand or not. You would also need to do a new plan doc. reflecting the fact that a merger occurred and preserving the MPPP options with repsect to the MPPP funds held in the PSP as well as restricting the PSP distribution options to the PSP funds.

You might want to post this in the GUST/EGTRRA Restatement section of the message boards as well. Don't do much with prototypes, but..... I would think that the plan could still be submitted for a letter under the 9/30/03 deadline. However, did the employer sign off on an employer certification prior to Feb 28, 2002 regarding adopting approved language of a vol submitter/prototype plan sponsor? If the employer was entitled to the extended date to submit at each step of the way, I would not think that the amendment (causing it to be an individually designed plan) would kick them out. There are others on the board who can probably give you a more definitive answer...

My understanding is that "any" change to the plan language will necessitate submission of the document to the IRS for review. For example, I amended and restated a PSP which added cross-testing where the number of classes was in excess of those allowed for in Corbel's checklist. Thus, I'll need to submit the document for approval as to the form in order to be able to rely on Corbel's volume submitter letter.

Thanks, Blinky. I actually retraced some steps and got to the 410b exception in the Regs re no highly's benefitting. I just need to verify from the recordkeeper if any forfeitures occurred in the current plan year. Per the Regs under 401(a)(4) "benefitting" only includes an allocation of employer contirbutions and forfeitures. Thus, assuming there are no forfeitures, the exception should be met. Thanks again.

I thought I had run across some provision in the Regs. before regarding a frozen plan being exempt from coverage testing. Can anyone point me in the right direction? Thanks.