chris

Participant has also provided a letter outlining their financial situation. Appears that husband's salary has significantly decreased and bill collectors have begun to call them regularly within the past few months. Although not expressly mentioned in the letter, foreclosure may be forthcoming, and that in and of itself would be a permissible need. I understand that the participant is a very good long time employee and not one to even entertain such a request without giving serious thought. It does appear to be a legitimate request.

Participant wants to apply for hardship distribution under PSP that uses the 401(k) safe harbors to establish heavy/financial need, i.e., medical expenses, tuition expenses, funeral, purchase of residence, prevent eviction (+) need that would apply to all participants in a similar situation. Participant says needs distribution to prevent having to file bankruptcy. First, assuming participant provides sufficient info. to back that up and assuming other participants similarly situated are later allowed to apply for hardship distribution on the same basis, then need may be OK. Second, the PSP allows for participant loans. Wouldn't the language in the Regs. allow for the participant to not have to first get a loan in the maximum amount available on the basis that doing so would put them in worse shape as to their need? Thanks.

May depend on what type of plan it is. For example, if it were a Money Purchase Pension Plan, then the plan doc should be amended to reduce the employer contribution to 0% of compensation. That way if for whatever reason all assets are not distributed as soon as administratively feasible and the IRS says it's still an ongoing plan, then the e/er is not NOW on the hook for a contribution.

I have a safe harbor 401k with a 3% nonelective safe harbor contribution and a required match of 100% of first 3% and 50% of next 3%. Both appear to meet the safe harbor requirements. Anyone see it differently? Thanks.

Any guidance from IRS as to when an amendment needs to be made to implement the changes in the final regulations? Last I heard was that the doc's would need to be amended prior to 1/1/2006...... Thanks in advance.

Skimmed through and didn't see it....???

Participant in PSP applied for a hardship distribution in June '04 on basis that house payment was behind and bank might foreclose. Participant again applied for a hardship distribution on the same basis in january '05. Now participant is back again presumably for another hardship distribution for the same reasons. The plan doc does not contain any restrictions on the number of hardship distributions that one can apply for. Assuming the participant can produce some documentation to the effect that the bank is going to foreclose or that the house payment is otherwise late, does anyone see a problem with the plan making the distribution? The only restriction that would be applicable is that the PSP is holding funds from a merged MPPP and no hardship is allowed from those funds.....

If I recall correctly, the 3 months deals with the requirement of there being a minimum 3 month short year in order for the safe harbor to apply unless it's a new entity that was created (that is sponsoring the plan...). The notice language in 98-52 can be read such that the latest date the notice can be given is Oct. 1 which is technically the date the e/ee's will become eligible for the safe harbor 401(k). Forgive me if I've garbled the details but I believe that is the gist of it. End result, you get the plan in place by Oct 1 and you hand out the notice on Oct.1 as well......

Sometimes prisoners have a power of attorney in place naming someone "on the outside" who can handle their affairs. You may correspond with him initially and see if that is the case or you could just send all the forms to him and ask him to notify you if he has an attorney in fact you should be dealing with instead.

Don't do much actual administration work, but the DOL would probably argue that you should be able to segregate them out just as quickly as you deal with the payroll taxes. I have advised clients in the past to dump the monies into an interest bearing account in the name of the plan and then get them to the broker as soon as possible. I believe the rule requires segregation from the general assets and does not say they must be invested within the time frame. Others probably have additional more hands-on advice......

Does the current plan doc. address what to do with a missing participant's account? The plan doc's we use have language addressing such a situation, e.g., certified letter to last known address, diligent effort to locate and contact participant......and if cannoyt find then forfeit the balance. In that regard, I recently sent a letter to the SSA letter forwarding service as well as the IRS letter forwarding service to be sent to a missing participant in an ongoing PSP. If your document does have such language, I would think you should follow the plan doc.. If your plan document is silent, then I don't see how you can make a distribution if the plan doc. does not provide for the method of doing so. In short, you would probably need to amend the plan doc......

How will adding the language to the document affect your determination letter? Are you filing a Form 5310 with respect to the termination? If so, the IRS could bless the amendment during the course of the issuance of the determination letter regarding the termination. If you are not filing a Form 5310, then I guess you could amend the plan document with the language and hope that the IRS would not have a problem if they audited it...?????

I would think you would start with the plan doc. to see what your initial options are.

I apologize for the misleading topic name....

Actually, Sec. VII. a. of NOtice 98-52 states that contributions can be made "from time to time during the plan year"...

I just took a look at Sal Tripodi's ERISA Outline Book at p. 11.450. He points out at 7.a. that an employer may make the safe harbor nonelective contribution during the plan year so long as the aggregate contributions allocated to an eligible employee for the enitre plan year equal the appropriate amount under the safe harbor contribution formula. As an example he states that an employer may want to deposit the safe harbor contribution on a monthly basis. Assuming you used the true monthly compensation numbers and did not base it on a projected comp. number, then all of my issues listed above would seem to go away.....assuming there is no prohibition in the plan document. Any reason to disagree with Sal....??? Thanks for the response.

Employer has asked if it can front-load the 3% safe harbor contribution. Without looking at the plan doc a number of issues come to mind. 1. 3% of what number? 2. what if participant terminates early in the year or their comp. for whatever reason is less than last year's comp. ? E/ee will want all $$ earmarked for him/her 3. if total comp. is less than last year's e/er can't get the money back 4. plan doc. issues Anyone looked at this previously or have other issues? Thanks.

Plan allows for directed investments for participants no matter what the vested percentage. Plan to be amended to provide that 100% vesting required in order to direct investments. Any protected benefit issues? If allowing directed investments is not a protected benefit, then it would appear that the conditions for being able to so direct would also not be protected. Thanks.

Does "reincorporate" mean that it previously dissolved? If so, can you have a plan without a sponsor, i.e., orphaned plan issue.....?

Was the IRS personnel clear that an amendment had to be made...? I know the e/er has to notify the trustee each year of what the allocation will be for each group. Maybe that is what they are referring to......

What does the Plan doc. say re locatinga lost participant or beneficiary? Our plan docs. specify that the account is to be forfeited and reallocated to other participants if ben/part. cannot be located after sending certified letter and after other diligent efforts to locate. The "other diligent efforts" to locate will include on-line search, letter forwarding service of IRS (in case ben. filed tax returns recently) and the SSA (in case ben. is employed). That should do it....but check plan doc. re what happens to $$$ if cannot located the part./ben.....don't just roll it over to an IRA b/c that's sounds good....

The quoted "further diligent effort" language in my original post is the language in the Plan document. As far as I know, other than talking to missing beneficiary's brother, the Plan has not undertaken any further steps to ascertain his whereabouts. Clearly, under the Plan terms the Plan should send a letter certified mail return receipt to the missing ben's last known address. Also, I would advise Plan to do an online search (costs only .25 per search) to try to locate. Lastly, I would advise the Plan to use the IRS Letter Forwarding Service. I have used that in the past with good success. Also, I know that family members adopted minor child of missing ben. b/c missing ben. left child with family members at the mom's funeral and he and his wife never came back. Those same family members later adopted the mnor child. I would advise checking the court papers for that adoption to pull address information from that. I guess what constitutes "further diligent effort" remains to be seen............. Matbe Plan could hire a private investigator and pull that fee from the missing ben's 65000.......????

Mbozek, I found the Reg. Still looking at the caselaw (if any). Thanks.

Thanks mbozek. What is the cite for the Reg.? Looks like a forfeiture will take place since the plan language makes it mandatory assuming beneficiary does not turn up after sufficient "further diligent effort". I guess the Employer/Plan would just need to carry that as a contingent liability which may materialize in the future...??? I read your posts in the thread in the Termination Forum. Are you aware of any suits against a Plan/Employer in a lost participant situation where the Plan wasn't already terminated? Thanks.

I posted this in the Distributions Forum as well.....but just in case you missed it.... PSP holding approx. 130,000.00 due to deceased participant's two beneficiaries. One of the beneficiaries cannot be located. Plan doc. is a pre-approved volume submitter doc. that provides that after registered mail and "further diligent effort to ascertain the whereabouts of the participant or beneficiary" the amount to be distributed "shall" be treated as a forfeiture. Plan provision goes on to state that if participant or beneficiary is later located, then Plan shall restore the benefit first from forfeitures and second from an additional employer contribution "if necessary". Also, provision states that any benefit lost because of escheat under applicable state law is not treated as a forfeiture under the plan provision or as an impermissible forfeiture under the Code..... Would sure be nice to treat it as a forfeiture, but would hate to have to restore $65,000.00 at some later date. I guess Plan and Employer could take position that based on its/their diligent effort prior to forfeiture, it is not necessary to restore the benefit......????? Anyone dealt with this befoe or have some words of wisdom? Thanks.