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A participant wants to take out a hardship distribution for a lease / purchase of a primary residence. We've got a copy of the lease / purchase agreement where it looks like it is a lease agreement for the first 12 months with the option to purchase the residence after 12 months. Does this qualify for a hardship distribution for the reason of purchasing a primary residence even if the purchase will not take place until one year later?

We have an LLP (taxed as a partnership). For 2005, the owners received a W2 and Schedule K1 income and are looking for us to add the two amounts together to get the plan compensation. We think the W2 compensation should be changed from W2 income to schedule K1 income. Is this correct? What should be used as plan compensation?

When Employer stock is taken from a qualified plan as in kind distribution, the participant only pays taxes on the basis value of the stock until the stock is cashed by the participant. Do the same rules apply if ER stock is held in a SEP IRA?

A plan sponsor is in the business of issuing mortgages – they loan money to real estate purchasers in need at above market rates. The retirement plan is also heavily invested in similar mortgages (they are heavily secured, low loan-to-value ratios, well documented investments that have performed very well with a minimum of risk). The plan does not participate in any loans with the plan sponsor. However, it was recently noted that the family trust of one of the Trustees is a co-investor in a few of the mortgages. The family trust did not purchase the mortgages from the plan. The mortgages were issued with the plan and the family trust both participating (at the same terms) in the investments – essentially as if 2 acres of real estate are for sale by a third-party and the plan buys one acre and the Trustee’s family trust buys the other. Do you believe this to be a prohibited transaction despite the absence of a transaction between the plan and the party-in-interest? Do you see any arguments against P/T status if audited?

Our TPA has been asked to takeover a client from another firm that clearly is having major service issues. The most significant concern is that the (prospective) client cannot locate a copy of their 401(k) plan documents and the current TPA has not provided a copy after repeated requests. The plan has been in existence since the late ‘90s. We have advised the client to hire an attorney if necessary to get the document from the current TPA, but there is a concern that the TPA may not have a copy to provide. The client wants to make things right. Can anyone advise as to the proper way to handle this issue (VCP, etc.)?

Yes, the payroll company is waiting to wire the funds.

Payroll company is the recordkeeper. They pull the 401k deposits from employer’s account on date of payroll but do not deposit with the custodian until 6+ days later. Does the employer have full responsibility for late deposits?

I have a client with a 6/30/05 fiscal year-end. An HCE deferred the maximum $14,000 from 1/1/05 through 6/30/05. The ADP/ACP testing failed for the 6/30/05 PYE and this HCE had to take a $14,000 refund and received this prior to 9/15/05. Is there any way for this person to make any additional deferrals from his paycheck in the 2005 calendar year?

Plan has a terminated employee who cannot be located. He had a loan balance for which he should have received a 1099R for a defaulted loan in 2000. To date a 1099R has not been issued. For plan audit purposes is this considered a reportable event?

For audit purposes, would Lincoln Life be considered a party in interest if they are the fund entity sponsor and the fund is called LL Balanced fund? (other example – John Hancock entity sponsor and John Hancock Conservative Portfolio).

Yes, company A is still in a separate plan. Thanks for the info.

Company A was purchased by Parent Company XYZ on 8/30/04. Company A sponsored a 401(k) plan with a December 31 plan year end. Parent Company XYZ also owns Company B which sponsors a 401(k) plan also. For 2004 ADP testing purposes, can the ADP test include just company A employees?

Under current regulations, you cannot cross test in an ESOP. Could you merge an ESOP with a cross tested 401(k) Plan? Would you then be able to continue to allocate profit sharing contributions using a cross-tested allocation and then perodically purchase company stock with the profit sharing balances?

We have a controlled group that will no longer be a controlled group effective Feb. 2005 (half of one corporation is being sold). Per Derrin Watson’s book, we can test both companies separately, but can we terminate one of the companies from the plan?

Partnership and C corp are owned by same 3 persons (related). Partners cannot participate but owners of C corp can. Does having them together taint the 125 plan? Or can the owners defer from W2 comp even though the employees of the partnerhsip are also in the 125 plan?

A partipant took out a loan and loan payments were made through payroll deduction. However, the employer failed to transmit the payments to the trust account. Should a 5330 be filed? What should the plan sponsor do?

Because they were no longer part of the controlled group. Also, they are not considered an affiliated service group. They have been making premium only payments to the health provider.

2 companies were part of a controlled group in 2002. In 2003, the ownership percentages changed and the 2 companies were no longer a controlled group. There is a section 125 plan in which both companies participated in 2002 and 2003. Company B was no longer part of a controlled group and was told after the fact that it couldn't participate in the section 125 plan. Can company B still participate in the section 125 plan? If not, what happens to the payments that were made on behalf of the employees for 2003?

Does a bottom up qmac have to be made to participants who have terminated, or can it be made to the lowest paid employees who are still employed?

A deceased participant named his spouse as the primary beneficiary and his son as the contingent beneficiary. Spouse does want the distribution and wishes to defer the distribution to their son. I assume that she can do this, correct? What form will she need to complete in order to do this?

The participants will not receive distributions. The stock will be sold.

Company currently sponsors a KSOP and is in the process of being sold. Company stock in plan will go away after the sale. As long as the stock is sold at the current fair market value, there is no problem replacing the stock with cash in the plan correct?

Does anyone know of a court case against a bundled service provider who failed to timely deposit an employer’s contribution. We have a possible takeover client whose prior provider has been holding a 1M check for quite some time and has just now made the deposit (still not allocated into participant’s accounts). Thanks.

Recently we were involved in a discussion regarding how to fix a plan that had made non safe harbor formula contributions to a profit sharing plan. It was discussed that a corrective amendment could be prepared for 401(a)(4) testing for all three years (2001, 2002, 2003) as long as the amendment was signed and dated before Sept. 2004. Does this sound correct to anyone? Thanks

For vesting purposes only.