chris

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.

May not be applicable at all but we had a case where it was a single participant plan, the doc. died and no filings of any kind had been made for 8 years. Insurance company holding assets came up with a convenient way of using the plan assets to buy an annuity for the decedent's beneficiaries. Per the ins. co. there was no reporting b/c of the fact that all plan assets were used to purchase an annuity for each of the doc's beneficiaries????? Executor of estate signed off on all required amendments as of date of annuity purchase and plan deemed terminated at that time. Sort of iffy????? but the ins. co. legal/tax counsel seemed to think it would work.......

Plan has reached point where annual audit is required. Client is looking for CPA to handle. CPA is saying he has to go back to year 1 to follow balances up through present. Plan was set up in 1979. He says initial fee for doing so would 25K to 30K. Thereafter, CPA says it would be 7500 per year. Question is do audit requirements really require going to year 1 of the Plan? Thanks.

The Q&A in the Regs. under 401 refer to the spouse's legal guardian if the spouse is incompetent and there is no mention of an attorney-in-fact......however, maybe someone else can dig something else up which may help....... What about having Attorney-in-Fact execute a disclaimer/renunciation of her 25% of the proceeds when/if the time comes......?????

The former employee would be the one to change the beneficiary designations not the Attorney-in-Fact under the Power of Attorney for the mother........... Unless I read your facts incorrectly....... However, I guess you're asking as to whether the Attorney-in-Fact for the mother can waive/consent to husband's naming a beneficiary other than her............?

Notification to atty b/c terminated participant has sued former employer (our client ) over a wage issue. Client may or may not pursue broker issue....

Update.... turns out broker is terminated participant's personal broker and will "be leaving" once terminated participant's assets leave the plan. Thinking is to send terminated participant's atty. a letter notifying him of unauthorized distribution as well as fact that plan will withhold the required fed. and state withholdings (that were not able to be withheld first time around) on the remaining balance that will be distributed once 6/30 valuation date passes. Also, will demand a hold harmless/indemnification from the terminated participant as well.

Seems there are roughly two options -- 1) withhold all amounts from the back end distribution and attempt to get a hold harmless from the participant and deal with broker; 2) contact broker and let broker resolve it all as well as address the unauthorization issue....???

Regarding having the broker replace the 10K distributed, how do you prevent the participant from getting a windfall as the plan will eventually distribute out the participant's account balance which would then include the 10K from the broker to make the plan whole? I assume the broker would be stuck with getting the 10K back from the participant.....? and it's up to borker to deal with the windfall issue....????? Also, wouldn't you still have the 1099 issue w/r/t the 10K unauthorized distribution?

mbozek -- I was suggesting having the particpiant execute the hold harmless with respect to her request/receipt of the 10K unauthorized distribution not as a condition to receiving the balance of her account. The "..two payments in one taxable year..." aspect sort of/kind of gets me to a lump sum payment, however, what about the 20% mandatory withholding? Can the plan administrator withhold on the second distribution the 2000 that should've been withheld on the unathorized 10K distribution as well as the 20% on the remaining account balance? Also, what if participant says she wants to rollover all of the remaining balance? I guess plan administrator can withhold 2000 (20% of 10K unauthorized distribution) and then treat the rest as a direct rollover.....??? Thanks for all the suggestions thus far.....

How about demanding that the participant pay back the "unauthorized" distribution and having both broker and participant sign off on a hold harmless/indemnification agreement....?

What type of entity might it be?

Employee terminates employment 12/31/04. Anniversary date of PSP is 6/30. Plan says terminated participant's account balance will be distributed as soon as administratively feasible after anniversary date coinciding with or next following date of termination of employment. Broker was notified in writing that no distributions were to be made without authorization from Plan trustees. Terminated participant talks to broker and broker distributes 10K out of terminated participant's account in March 2005 without communicating with trustees. From the dollar perspective there won't be a problem b/c participant's account balance is sizeable enough that the early distribution of the 10K won't create an issue of trying to get money back from the participant. However, it seems there is an operational defect as well as a reporting problem that has to be dealt with. Not only has the distribution been made prior to the distribution date in the PSP, but now distributions will be in two different Plan years. Also, the Plan only allows for one lump sum payment. I understand from the accountant that the coding on the distribution will be an issue. It won't work out the immediate issues but would an indemnification/hold harmless type agreement from the broker and possibly the participant as well suffice as to the consequences of the operational issues? Need some suggestions.... Thanks.

Employee terminates employment 12/31/04. Anniversary date of PSP is 6/30. Plan says terminated participant's account balance will be distributed as soon as administratively feasible after anniversary date coinciding with or next following date of termination of employment. Broker was notified in writing that no distributions were to be made without authorization from Plan trustees. Terminated participant talks to broker and broker distributes 10K out of terminated participant's account in March 2005 without communicating with trustees. From the dollar perspective there won't be a problem b/c participant's account balance is sizeable enough that the early distribution of the 10K won't create an issue of trying to get money back from the participant. However, it seems there is an operational defect as well as a reporting problem that has to be dealt with. Not only has the distribution been made prior to the distribution date in the PSP, but now distributions will be in two different Plan years. Also, the Plan only allows for one lump sum payment. I understand from the accountant that the coding on the distribution will be an issue. It won't work out the immediate issues but would an indemnification/hold harmless type agreement from the broker and possibly the participant as well suffice as to the consequences of the operational issues? Need some suggestions.... Thanks.

Thanks for the replies thus far. I suppose requesting an SPD may tell me more....?????

I'm looking at medical coverage issues. I've got the Schedule A's which basically show two different life insurance companies' information -- one company appears to handle the life insurance portion and the other company handles long term disability. However, there no Schedule A's which identify an insurance company which handles health, stop loss, HMO or PPO contracts (referring to Line 7 Part III of the Schedule A. To clarify my original post.... does the fact that the employer/plan sponsor has checked the box for "general assets of the sponsor" mean that the plan is self-funded/self-insured as to the health/medical coverage? and not self-funded/self-insured as to the life and disability portion since it obviously has insurance coverage in place for those aspects of the plan....? Thanks.

I'm trying to determine if a health plan is self-funded by looking at the 5500 information. The benefits provided are noted at Line 8b as 4A (health), 4B (life) and 4H (disability). Line 9a notes the funding arrangement and benefit arrangement (9b) as (1) 'X' Insurance and (4) 'X' General assets of the sponsor. Is the response in Line 9(a) and 9(b) generally determinative as to whether a plan is "self-funded" or not. Any help would be greatly appreciated. Thanks......

What does the purchase agreement say about stock vs. assets and how does it address what happens to Company B's plan? If the plan is terminated by whomever then outstanding loans would be treated as distributions and be taxable to the participants. Just my 2 cents.....

Is there a line item on the 5500 or accompanying Schedules to find that out? Thanks.

Actually the Sch T numbers are 0 b/c on one Sch T the plan benefitted all NHCE's and on the Sch T for the other plan the box for no HCE's benefitted is checked. Thus, I guess they meet an exception for running the coverage tests...? Thanks..

uhhhhh.....stupid question, maybe....??? Good thing I don't ask very many of them...... Is there any prohibition against a member of a controlled group maintaining a prototype 401(k)? I noticed one of the plans is a prototype and one is not..... Thanks.

The controlled group issue would just require the multiple entities to be treated as one entity for certain plan qualification issues, e.g., coverage, eligibility, nondiscrimination, etc..... and would not mandate that a participant of Corp.s T's plan also be a participant in Corp. U's plan.....

Seems pretty straightforward but just wanted to check with all of you... Individual A owns 100% of the shares of Corp T. Corp T owns 100% of the shares of Corps. U, V, W, X, Y and Z. Looks to be a parent-subsidiary controled group under 1563(a)(1). However, wouldn't recent 5500's for each corp's qualifed plan (401(k)'s) show the same number of active participants, etc..... if they are properly being reported as a controlled group???? Thanks for the help.

Check the plan document. In the provision regarding self-directed accounts, there should be language to the effect that the self-directed account will have its own losses and gains as well as bear its own expenses. If so, then the expenses needed to be charged to the Dr.'s self-directed account.....

Why not just take the "wait-and-see" approach, i.e., issue the notice that e/er MAY meet the safe harbor by providing 3% NEC, then issue the notice prior to year end as to whether or not the safe harbor contribution will be made....??? Also, what's the difference between having to fund the top heavy for all e/ee's and having to fund the 3% NEC for all e/ee's? (Could be that only non-key's receive the top heavy under the plan terms whereas all e/ee's would be entitled to the 3% NEC assuming you drafted for HCE's and NHCE's???? if so, the difference in funding would be 3% of the key HCE's compensation...???)