chris

Your statement as to the investment performance of the market may be right on. As to the question, I think that the fact that they would have lost money would tell you you don't need to pay anything in in order to correct. Based on the language in EPCRS, you clearly cannot take anything away from the participants if that were the case. Wouldn't you think the numbers would need to be run to know if correction, i.e., employer needing to pay money into the plan to make participants whole, is warranted?

Already done.

Client employed new tpa to handle 401(k) plan. All plan funds to be moved to new investment manager/company. Employer directed old investment co to cut check to move the funds. Employer sent check to tpa so tpa could get money to new investment co as per tpa's request. TPA lost the check and did not tell employer for some time. Employer talked to tpa and tpa gave excuses as to why the money had not shown up. Meanwhile, employer got stop payment orders for the checks and had the old investment co to cut a new check. The funds have been uninvested in any manner for 2 months. Also, deferrals have not been invested for that same 2 month period. The VFC Program addresses the deferrals issue, but is there anything that addresses correction of the nonivesting of the plan assets? Any other suggestions appreciated.

How would the employer go about correcting the lost earnings problem with respect to dealing with the IRS or possibly the DOL? It would appear to be a matter of restoring the participants based on the highest rate of return earned by any of the investment alternatives, but how would that contribution get into the plan in a deductible fashion and without threatening plan qualification???

Employer didn't get its hands on the funds. Individual trustee who is also an employee of the corporation got the investment companies to stop payment on the checks. Trustee has the voided checks and the money never left the investment companies since the checks were never negotiated. Trustee is getting the moneys invested in a conservative investment until correction can be made and the participants notified. As I stated before, one group of checks involved all of the plan assets. The second group of checks were deferrals that the employer had sent to the new tpa to be invested according to prior participant directed investment instructions. Both checks sat in tpa's lockbox for the duration and tpa told trustee and employer that tpa did not have the money nor know where the money was. Tpa signed off on a service agreement obligating tpa for "all costs associated with any errors or omissions" on tpa's part. Two correction issues appear: 1) plan assets -- restoring participants as to investment earnings; 2) deferrals -- restoring participants as to earnings as per DOL vfc program and 5330 filing and tax with IRS. Anything else to be done other than looking at tpa to foot the bill??

Client employed new tpa to handle 401(k) plan. All plan funds to be moved to new investment manager/company. Employer directed old investment co to cut check to move the funds. Employer sent check to tpa so tpa could get money to new investment co as per tpa's request. TPA lost the check and did not tell employer for some time. Employer talked to tpa and tpa gave excuses as to why the money had not shown up. Meanwhile, employer got stop payment orders for the checks and had the old investment co to cut a new check. The funds have been uninvested in any manner for 2 months. Also, deferrals have not been invested for that same 2 month period. Besides the tpa liability, would it be worth it to go through the dol vfc program regarding the noninvesting of the deferrals?? Also, would the IRS take the position that a prohibited transaction has occurred with respect to the deferrals??? Any other comments or suggestions appreciated.

Even though Ann. 2001-77 sets forth times when employers may be able to rely on the opinion letter of the volume submitter practitioner and not request a determination letter in its own regard, it would seem that those times may be somewhat narrow in application. We maintain a number of volume submitter plans almost all of which have had another plan covering some/all of the same participants at some time prior. However, going forward it would seem that it may be prudent to request a determination letter even with a new employer/new plan. Any thoughts on this??

Understood as to the numbers issue. But as to the volume submitter vs. prototype issue and the differences in fees to amend/restate one versus the other do you have any comment on that? Once again, I understand the non-discussion of actual fee amounts issue.

Any ideas as to the going rate to amend and restate PSP for GUST/EGTRRA including determination letter filing? Also, any differences between volume submitter and prototype plans???

Based on informal guidance from the IRS re excess deferrals, the excess and any income thereon would need to be distributed. The distribution event issue aside, it would seem that corrected W-2's would need to be issued for the years in question given that the excesses were taxable in the year made. When I asked the IRS personnel as to how to handle multiple year excess deferrals the response I got was that a "tricky question..." Any insight would be appreciated.....thanks or your help.

Update regarding the previous post...... Looks like the fact that the deferral limits were exceeded won't necessarily cause the entire plan to be disqualified (or treated under 457(f)) based on Senate Comm. Reports re TAMRA '88. In other words, since the plan contained the deferral limits within the plan document, the fact that such were exceeded won't cause the entire plan to be treated as an "ineligible plan". However, the participant who exceeded the limits will be taxable on the excess deferrals. Is it just a matter of issuing corrected W-2's for the excess?? Since 457 does not provide for distribution of such excess, I am assuming that the excess amounts will need to remain in the plan. Would that present a double tax effect upon distribution or would the employee simply need to show that the excess was included in income under a corrected W-2 and thereby be able to apply that basis to the dsitribution received??? Anyone dealt with this before????? Thanks for any help.

Is there any correction procedure such as EPCRS for 401(a), 403(B) and SEP's for dealing with excess deferrals in a 457 plan? It doesn't appear that EPCRS would apply to a 457 Plan. Is it just a matter of distributing the excess deferrals and adding the amounts to the participants' W-2's? The employer is a non-profit healthcare organization which maintains a 457 and a 401(k). It just recently found out that a number of participants have exceeded the 457(B) limit for a number of years. Is there anything from the plan side with respect to the IRS' overseeing the correction to insure qualification is maintained?

Is there any correction procedure such as EPCRS for 401(a), 403(B) and SEP's for dealing with excess deferrals in a 457 plan? It doesn't appear that EPCRS would apply to a 457 Plan. Is it just a matter of distributing the excess deferrals and adding the amounts to the participants' W-2's? The employer is a non-profit healthcare organization which maintains a 457 and a 401(k). It just recently found out that a number of participants have exceeded the 457(B) limit for a number of years. Is there anything from the plan side with respect to the IRS' overseeing the correction to insure qualification is maintained?

Check your state's law as to who can act on behalf of a dissolved entity for the purposes of winding up. In North Carolina, with respect to corporations, the directors and officers have the authority to act on behalf of the corporation solely for the purposes of winding up the affairs of the corporation. We had no problems with an exam agent as to a psp maintained by a corp that dissolved 15 years prior where the plan was still around because of the bankruptcy of an institutional trustee. We had resolutions etc... executed to terminate the plan which were effective by virtue of the NC statute referred to above. Maybe GA has something similar.

E/er has been incorporated 2 1/2 years. Employer blew safe harbor 401(k) (to be effective 1/1/01) b/c broker didn't get adoption agreement executed. E/er gave safe harbor notice prior to end of 2000. Alternative in mind is PSP with 100% vesting and fund at 3% of compensation. Get safe harbor 401(k) in place as of 1/1/02. Effective 1/1/02 amend vesting schedule of PSP to 6 year graded vesting. Issue is whether Reg. §1.411(a)-8T(B)(3) allows all employees who have been there since day 1 to elect to stay under the old 100% vested schedule? Does the Reg. actually mean what it says? Any help appreciated. Thanks

E/er has been incorporated 2 1/2 years. Employer blew safe harbor 401(k) (to be effective 1/1/01) b/c broker didn't get adoption agreement executed. E/er gave safe harbor notice prior to end of 2000. Alternative in mind is PSP with 100% vesting and fund at 3% of compensation. Get safe harbor 401(k) in place as of 1/1/02. Effective 1/1/02 amend vesting schedule of PSP to 6 year graded vesting. Issue is whether Reg. §1.411(a)-8T(B)(3) allows all employees who have been there since day 1 to elect to stay under the old 100% vested schedule? Does the Reg. actually mean what it says? Any help appreciated. Thanks

This deals more with the drafting of the document, but wouldn't the plan year for the 401(k) portion be Oct 1, 2001 to Dec. 31, 2001? And if that is the case, wouldn't the 3% be based on compensation from Oct 1, 2001 to Dec 31, 2001? Don't get me wrong, I'm not doubting the advice, but I just need to make sure the doc correctly reflects what operationally will happen. I just looked at Reg.§1.401(k)-1(g)(2) regarding compensation taken into account. I see the language "The period used....must be either the plan year or the calendar year ending within the plan year." Does the calendar year language at the end apply in the case of a short plan year ??? Once again, thanks for your help.

This post is related to my previous post entitled "3% nonelective contribution issue" . E/er's e/ee's are 1 doc and 8 employees. It appears that the 8 e/ee's will almost certainly not defer. Doc wants to add a matching contribution element to the 401(k) in addition to the 3% nonelective safe harbor such that he can put away as much the rules will allow. I was thinking of having a discretionary match limited by the 4%/6% requirements but which would not be subject to the safe harbor rules as to nonforfeitability, etc... such that the plan would ultimately have the following contributions: 3% nonelective safe harbor, discretionary match, deferral up to maximum percentage and the discretionary PSP (integrated with Social Security). Short of adding new comparability/cross-testing which wouldn't be appropriate since the doc is relatively young I think that's about as far as I can go. Anyone see any issues thus far???

Thanks, Tom. Where can I get a copy of the ERISA Outline Book? I have seen that publication cited many times before on the message boards but never thought to ask how to obtain a copy. Thanks again.

Thanks for the response, WMYER. Is the issue addressed in any commercial research/editorial services (RIA, CCH, etc...)?

Calendar year employer to adopt brand new PSP (effective Jan 1, 2001) with safe harbor 401(k) provisions (effective Oct 1, 2001). Employer wants to cover everyone who is employed as of Oct 1, 2001 for both the PSP portion and the safe harbor 401(k) portion. Clearly, nothing wrong with the PSP allocation being based on comp for the plan year (Jan 1 to Dec 31), but can the 3% non-elective safe harbor contribution also be based on comp for the plan year (Jan 1 to Dec 31) or must it be based on comp for the short 3 month plan year (Oct 1 to Dec 31) as you can't have a retroactive 401(k)??

I've got a MPPP that employer just notified me that they want to terminate as of September 30, 2001. Plan year ends September 30. Employer will fully fund for plan year ending September 30, 2001. I have just taken a closer look at 4980F contained in EGTRRA and saw the reference to the minimum 3 month notice period for amendments effective after the date of enactment of EGTRRA. Does that mean that employer will now not be able to terminate the plan until 3 months from today's date (assuming amendment to terminate signed off on today and participants given notice of amendment today? In other words, unless and until Treasury adopts regulations to address it (possibly exempting plans with fewer than 100 e/ee's under 4980F(e)(2)(A), will there always be a 3 month mandatory notice period? I will check to see if any interim guidance has been put out by the IRS which I have not yet seen which addresses this.

I see in the Instructions for Schedule Q that it is no longer required in conjunction with Form 5310. Are there any reasons for filing Schedule Q for a terminating money purchase pension plan with no significamt hidden issues???

Target benefit plan adopted in 1989. Contributions calculated pursuant to formula in document. E/er has not filed 1997 through 2000 5500's and has other defects in plan. My understanding is that TRA '86 made changes to target benefit formulas. This plan doc was never amended for those changes nor for any other required changes since its adoption. Can anyone confirm that the target benefit formulas were amended? Clearly, the correct contribution would be one calculated as per the amended target benefit formula. Also, the plan purchased an insurance policy on a participant who was ineligible for a contribution as he had already hit his normal retirement age. The plan has paid the premiums on this policy since day 1. Any insight as to correcting the defect concerning the insurance policy? Anyone know of a good resource with respect to target benefit plans in general?? Thanks.

Client wants to adopt a safe harbor 401(k) plan with a short plan year beginning October 1, 2001. Client currently maintains no qualified plans. If the plan becomes effective on October 1, 2001, then the 3 month plan year requirement will be met. As to the notice requirement, wouldn't the following language from Notice 98-52 allow for the safe harbor notice provided to employees on September 5, 2001(today) to be deemed to be reasonable: b. Deemed Satisfaction of Timing Requirement The timing requirement of this section V.C.2 is deemed to be satisfied if at least 30 days (and no more than 90 days) before the beginning of each plan year, the notice is given to each eligible employee for the plan year. In the case of an employee who does not receive the notice within the period described in the previous sentence because the employee becomes eligible after the 90th day before the beginning of the plan year, the timing requirement is deemed to be satisfied if the notice is provided no more than 90 days before the employee becomes eligible (and no later than the date the employee becomes eligible). Thus, for example, the preceding sentence would apply in the case of any employee eligible for the first plan year under a newly established section 401(k) plan , or would apply in the case of the first plan year in which an employee becomes eligible under an existing section 401(k) plan. ??? Thanks.