david rigby

Yeah, and that $10,000 bonus is not too shabby. http://www.cognex.com/hr/recognition_rewards.asp

And don't forget that more states are jumping on the withholding bandwagon. This is a pretty good summary: http://www.cigna.com/professional/pdf/CPA_iidw0201.PDF But it may be out of date. For example, now NC and VA both have 4% withholding.

My suggestion would be to find a competent and experienced ERISA attorney.

I wonder if the 1997 contribution was deductible.

We have considered it before, but if the limit is exceeded before the end of the year, perhaps a negative deduction can be applied in the next paycheck. Not sure if this is valid, but it sure is nice from a mechanical perspective.

Hmmm, I wonder if the plan *could* take it back, plan provisions and/or admininstrative practice being the guide, but is there anything that would prohibit that? (It seems unlikely that the plan would want to tackle this if we have crossed over December 31.) A different wrinkle might be if the EE has been rehired, perhaps somewhere in the controlled group, could the plan have provisions that permitted the dsitribution to be reversed? especially if the rehire actually occurred before the date of the check?

Right, which is why a T-H 401(k) is the least desirable plan. The exception would be if there is another plan that already does the T-H contribution.

Well, if a top-heavy test is very close to 60%, you might consider whether a closer inspection is in order, especially with respect to the 5-year lookback. Remember that a T-H percent rarely changes much from one year to the next. If it is not close, you don't have to spend much effort with fine-tuning. But detail can be important if your test is close, to make sure you caught all applicable payments in the past five years. Also, if you have former EEs who have been gone for 5 years and have NOT been paid out, then the account balance should not be included in the T-H test.

This might be a start to getting some more information from the DOL. http://www.dol.gov/dol/pwba/public/pension.htm

Cool! Let us know if this works.

Well........ I think the lump sum will depend on the date of payment. The amount of the benefit is determined at the date of termination of employment. Also, the reference to "prior plan monthly pension benefit" leaves me skeptical about whether the entire accrued benefit is subject to a lump sum optional form, or perhaps just part of it.

Prior discussions might be helpful: http://www.benefitslink.com/boards/index.php?showtopic=7164

At the risk of saying something stupid, the 415 issue might need another perspective. If the correction of such a small percent (with imputed earnings) causes a 415 problem, there must also be another plan. What do the two (or more) plans say about co-ordinating with each other with respect to the 415 limit? (I'm not sure this is even relevant; any comments?)

I agree with last two comments by R. and Hans. Of course, the plans in question must be within the controlled group.

Another point, if in fact the plan is being terminated, is what language the plan has about "deemed distributions".

My understanding is that Proposed Reg had an effective date of 1/1/1990. However, I don't know if there is any guidance since then. Also, since that portion of the reg was issued after the change in IRC 411(B)(1)(H) [changed was in OBRA 87 I think, to be effective i/1/1988], the emphasis was to recognize benefit accruals and service after NRA. And it was considered to have retroactive effect for any participants over NRA (of course excluding any whose benefit had already commenced).

IRS Proposed Reg. 1.411(B)-2(B)(4) indicates that if the notice is not given and if the benefit does not commence, then the plan must define the benefit at "late" retirement date as the greater of: the benefit accrued using service after NRD, or the actuarial equivalent of the NR benefit.

I'm no expert, but it sounds right to me. Even if it were paid (rather than using the problematic word "assigned") to another party, I think the Participant would be taxable recipient.

Disagree. There may be dishonesty, perhaps fraud. But that is between the ER and the EE, not the plan. The plan does not define "legitimate employee". The plan relies on the plan administrator to supply DATA in the determination of an eligible employee, then the plan uses that data to determine which employees are eligible. Just because there was fraud does not mean that the person was not an employee. If that person somehow "illegitimately became an employee", the employer cannot reverse that action, reverse paychecks, reverse the filing of W-2s. BTW, just because the person supplied a "false SSN" in the process of getting hired, does not mean that this SSN already belongs to someone else. Might be a non-existent number.

The orginal question posed a situation where there were employees supplying false data. That, in itself, is not an ERISA issue. It very well might be an employment issue, but the qualified plan is unaffected until the employment status changes. What if the EE is fired? If not vested, no big deal. If vested, then the ex-EE is probably entitled to the benefit earned. Looks to me like that person was a legitimate participant.

Fair enough. Regular users of this site would probably agree with my assesment that BenefitsLink is the best information sharing website in the Employee Benefits arena. Therefore, an easy way to begin addressing your question might be to do a search on the Message Boards. You could also do a search on the entire website: http://benefitslink.com/ Perhaps some of these will help. Then Message Board users will be glad to try helping with more specific questions. Hang in there!

I agree with philip. To me, common sense says that giving false SSN (or any other data) does not change the employment relationship, and hence would not alter whether they are participants.

And here is a brief online article (requires Adobe Acrobat Reader): http://www.grsnet.com/rr990401f.pdf

Most important question is whether the plan was also amended to freeze, both accruals and new entrants.

This might also be useful. http://www.benefitslink.com/qa_columns/eso...sop/index.shtml