david rigby

Please rephrase the facts for clarity. What are the requirements to receive a contribution (please don't tell us what it does not have, but what it does have). Thanks.

I like the advice above from mbozek and QDROphile; "forfeit" the entire amount, but keep a record of it, so that it can be paid if he shows up in the future. Document your procedures. Amend the plan first if necessary.

Next best resource is other people with which to study.

Hmmm. Your facts do not bode well, as you have admitted that you are ignoring the most basic of all "help": time. Other resources may not be able to make up for that.

Well, yes you could. You could also deposit the entire amount in my bank account. But both might be considered imprudent.

I could find nothing in Rev. Ruling 95-31 that directly addresses this. The only Q&A in the GrayBook is 1993-3: Q With respect to a short plan year, how are quarterly contributions based on 100% of the prior year's minimum determined and when are the amounts due? RESPONSE Until guidance is provided, any reasonable method can be used.

If 415 is an issue?

I claim no special insight into deliberations of the GASB, but the last statement from vebaguru seems misleading to me. Expecting that GAS statements will be similar to FAS statements might be a bit hasty. (I doubt that anyone would state that GAS 27 looks like FAS 87.)

As usual, MGB's explanation is a good one. A minor addition: amortization most often refers to the gradual repayment of a fixed dollar amount, a mortgage or the discussion in Item 1 being good examples. Imagine a simple example, where a plan sponsor creates a new DB plan, and recognizes prior service. Immediately, the plan has created a liability, but has zero offseting assets. This fixed "Unfunded Liability" must be amortized. Most actuarial funding methods will amortize this fixed amount explicitly. Some methods will use an implicit amortization. Future adjustments to this, thru investment experience for example, will usually be amortized separately.

That would be governed by the terms of the plan document.

In many examples I have seen, the cost of giving the 100% vesting has been pretty low, so the employer just does it. The recommended procedure is a formal plan amendment that does not use the phrase "partial termination". Also, compare the cost of giving 100% vesting to cost of PLR and associated legal/auditor/consultant fees.

Many cafeteria plans that offer dependent care accounts set that limit about $5000. What do you mean by "employer's liability"?

The original post stated: "Distribution Info – Pay as soon as administratively feasible using prior valuation" Therefore, it seems unlikely that the plan administrator can unilaterally add a BIS requirement to existing account balances. My read of IRS Reg. 1.411(d)-4 Q&A1 is that the timing of distribution is protected. http://www.access.gpo.gov/nara/cfr/cfrhtml...26cfrv5_00.html

Aren't we just talking about the tax withholding on $400?

I suggest the answer is Yes.

http://thomas.loc.gov/cgi-bin/query/z?c107:H.R.5095:

Not quite. ERISA section 104. SPD's must be distributed at least every 5 years if there are significant plan changes; at least every 10 years even if no amendments.

Don't expect it back. Plan for what phase 2 will be. Probably jpod's suggestion.

The 5500 instructions include the following (page 3): "The following are among the pension benefit plans for which a return/report must be filed: ... 4. Individual retirement accounts (IRAs) established by an employer under Code section 408©. ... Do Not File A Form 5500 For A Pension Benefit Plan That Is Any Of The Following: ... 3. A Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) that involves SIMPLE IRAs under Code section 408(p). 4. A simplified employee pension (SEP) or a salary reduction SEP described in Code section 408(k) that conforms to the alternative method of compliance in 29 CFR 2520.104-48 or 2520.104-49. ... 9. An individual retirement account or annuity not considered a pension plan under 29 CFR 510.3-2(d). ...

... you might also mention to the Doc that the penalty for failure to follow the terms of a plan is disqualification. Mention the tax consequences (and PR) of that.

What does the owner/doctor say about why he/she is not administering the plan according to its written terms? Who does he/she think is going to pay the amounts that should have been forfeited? (Certainly not the other participants.) Is there any possibility of misunderstanding? For example, when owner/doctor "instructed" the broker, is it possible he/she meant to rollover "100% of the vested amount"?

Another rule of thumb: if you can hold your board of directors meeting in your bathtub, you don't have a problem.

IRC section 125 has references to "highly compensated employees" and to "key employees". There are non-discrimination issues of concern in the administration of a 125 plan. For this and other reasons, there are TPA firms that assist employers with such administration. Only the plan sponsor can decide whether that expertise is worth the price.

Why bother? Date it now. Any form of backdating can create an appearance of trying to hide something.

Automatic elections can be an additional expense to the plan. If the workforce is very transitory, then the high turnover will mean that the plan is faced with making many distributions of small amounts. Consider the implications of locating these individuals, doing withholding or rollovers, producing a 1099R at the end of the year, possibly with another address change. If the above issues are not a problem, it seems that the automatic election should be targeted to the level that is likely to help you pass the ADP test. More than that seems pretty aggressive, some might even use the term "controlling."