lkpittman

Thanks for the feedback, QDROphile, but we won't be reducing her "pay" to recoup the amount; we plan on reducing any future benefit payable to her by the plan by the amount repaid by the employer, so that she does not, in effect, receive a double benefit. This method (reducing future benefit payments to recoup the overpayment) is okay under Rev Proc 2000-16 for failures relating to a 415 excess. Why do you think it is too aggressive in this scenario? Thanks.

Employer changed an employee from salaried to "per diem" and somehow admin/payroll or someone accidentally "coded" this person as terminated for the plan purposes. This participant was provided the opportunity to receive a distribution from the 401(k) plan, and, of course, took the money (only about $1,000 or so). There is no specific correction for this qualification failure in Rev Proc 2000-16 (EPCRS), but we have advised the client to seek repayment from the participant in the manner described for overpayment due to vesting error or 415 overpayment. The employer will probably have to put the $$ back (plus interest)--they already know that the participant won't do it. We have also advised them that they can reduce future payments to this participant to recoup the amount (as allowed for 415 corrections). Does anyone see a problem with this for a 401(k) plan self-correction? Any input would be appreciated.

Sounds reasonable to me, KJohnson. Thanks for the feedback.

Yes, the 30/90 day period is the "deemed reasonable" period for the notice under 98-52. As stated in my prior post, you could always argue a "facts and circumstances" case for a shorter notice period . . . but I wouldn't want to risk it unless I had some darned good "facts and circumstances." the purpose of 2000-2 was to provide more flexibility on the notice and amending when you are already into the plan year. The IRS didn't provide any more flexibility on the matching safe harbor. I'd be a little nervous with just 4 days notice prior to the beginning of the plan year. What would you consider good facts and circumstances to give the notice 4 days prior to the beginning of the plan year?

At least 30 days prior notice (12/01/00) would have been needed to amend for a matching safe harbor for 2001.

Notice 2000-3 does specifically refer to section V.C.2. of Notice 98-52 when explaining how the timing requirement for the initial notice is to be satisified see (Q&A-1 of 2000-3). Notice 98-52 makes it pretty clear that 30 days prior to the beginning of the plan will be "deemed reasonable." I guess you could always fall back on the "reasonable period" requirement, based on all "relevant facts and circumstances . . . " but I wouldn't risk it.

There is a magazine that might be helpful--they can subscribe to it. It is called PLANSPONSOR. Check out Plansponsor.com.

Notice 2000-3 provides the flexibility to wait until December 1 of a calendar year (12/1/01 for 2001 calendar years) to decide to adopt the 3-percent employer non-elective contribution method for that calendar year; however, in order to take advantage of that, the plan must have tested based on current NHCE ADP/ACP for the prior year (2000) and must have provided an "initial" notice to ees by 12/01/00 advising that the plan may be amended during the plan year to provide for the safe harbor nonelective contribution. See Notice 2000-3. Even if you've got a current-year testing plan, I think that you've missed the deadline for the initial notice under the new flexibility rules.

I understand that there will be "gateways" which will, in effect put a cap on the overall disparity. Probably something along the lines of--highest HCE overall allocation rate (including er discretionary, match and deferrals) cannot be more than 3x (4x? 5x?) the lowest NHCE overall allocation rate. I believe that there will be a "break" to the employer if it uses a 401(k) safe harbor--in this case the deferrals of the HCEs are disregarded in calculating the allocation rates. The regs are supposed to be coming out any day now!!! Boy--can't wait!

We are quite frustrated with our current software for calculating RMDs, pre-59 1/2 distribution options and general retirememt distribution projections for clients. I won't state which one we're currently using, but I'd like to have input from anyone out there who relies on such software for retirement/estate planning. Any recommendations?

Thanks--that's how I read the regs. Problem is we've got a poorly written amendment and the plan sponsor thinks all earnings can come out!!!!!

Thanks--that's how I read the regs--problem is we've got a document that seems to state otherwise. Actually, just a poorly written amendment . . .

May earnings on elective deferrals be included in the distributable amount for a hardship distribution? I have an institutional trustee who refuses to distribute the earnings (even though the plan document says it's okay) because he says "federal statute" won't allow it. I assume he is referring to the 401(k) regs (1.401(k)-1(d)(2)(ii), but I think he is misreading. Can anyone confirm?

May earnings attributable to elective deferrals be included in the distributable amount for a hardship distribution? I have an institutional trustee telling me that he will not distribute the earnings because there is a "federal statute." I assume he is referring to 401(k) regs, but I believe that he is misreading them. Can someone confirm for me?

I agree with LeAnn. We have a similar situation with an affiliated service group where partners participate in one plan and ees participate in another (the plans are identical and the two plans are aggregated for nondiscrimination, etc.). We still have an audit requirement for the ee plan, because we've got more than 100 ees, but no audit requirement for the partner plan, because there are less than 100 partners. This helps--partner plan assets are much higher in value and some assetsn are very "interesting" (for those that are self-directing), but we've eliminated the burden of the audit for the more burdensome plan.

Thanks for your input! I am really pulling my hair out trying to find some guidance on this one! Attorney suggested looking at pre-ERISA explanation/guidance, since the "normally 20 hours per week" rule stems from that era. I am having difficulty finding any pre-ERISA guidance in this "up-to-the-minute" computer age . . . .

We have a 403(B) client (a nursing association) that would like to exclude a group of employees from participating in voluntary salary deferrals under the 403(B) plan. These employees are called "temporary care-giver" employees and do "normally" work less than 20 hours per week (sometimes they don't work any hours for several weeks, then sometimes more than 20). They are nervous about the "universal availability rule," but it seems clear to me that they may be excluded as a class under 403(B)(12). How can I give them more comfort with their decision to exclude them? Can we "average" out their hours over the course of they year to support a "less than 20 hours per week" determination? I can't seem to find much guidance on this. Thanks.

Thank you all for the input. Ed, assets were distributed in Jan 99 (not 2000), so we're way late if we were to assume a short year. In any event, all we can do is file asap--I'm not going to indicate we have a short year--I think we'll simply file for the period ended 12/31/99. Return doesn't ask for date of final distribution, so I suppose we'll be okay until we get audited! Thanks again.

I'm sure I know this one, but can't quickly find authority and need a quick answer. We've got a client that completed the distribution of all assets on January 31, 1999, but did not let us know until after the close of the plan year (12/31/99 PYE). Actually, they just told us. Even though I've got a 12/31/99 plan year end, don't I really have a short year return with a plan year end as of the date of the final transfer out of assets? In other words, when is/was their return due? Thanks.

Thanks . . . that was my first instinct, too. But then I read the proposed regs under 401(a)(9) and got confused. Any other thoughts or info anyone can pass on from those regs? Thanks. ------------------ LKP

I have a sole owner/participant under qualified plan with a valuation date (plan year end) of 8/31/99. The plan has terminated and all amounts were rolled directly into an IRA after 8/31/99 but completed by 12/31/99. Participant/owner turns 70 1/2 on 4/24/00. Seems logical to me that I would use the 12/31/99 IRA balance to calculate the RMD for the 2000 distribution year, but I'm trying to confirm by reading the proposed regs. The proposed regs. seem to be mucking it all up for me. Am I right?

Profit sharing plan year ends 8/31/99. Participant turns 70 1/2 on 4/24/00. Plan was terminated and direct rollover to IRA of funds in terminated plan was completed as of 12/31/99. For calculating the RMD for 2000, do we use 8/31/99 plan year ending balance or 12/31/99 IRA balance? Any guidance out there? ------------------ LKP

In the case of a 401(k) plan, if the employee is eligible to make an elective contribution, he or she is "benefitting," and is considered a participant, whether or not the employee actually defers. See 1.410(B)-3(a). With respect to eligible compensation for deduction purposes, compensation for all eligible employees is considered, whether or not they are participating. If a terminated employee does not recerive a share of the employer contribution for the year of termination, such employee's comp is not included for deduction purposes. I believe you'll find this under the 404(a) regs. Hope this helps. ------------------ LKP

Thank you--this is just the sort of feedback I need. ------------------ LKP

I understand Rev Rul 81-35 & 81-36 requirement that in order for employee contributions to be considered "picked up" by the employer the ee cannot have the4 option of chhhosing to receive amounts diretly insead of having them paid to er; however, I am confused by more recent PLRs which seem to allow er "pick up" of voluntary contribution amounts (i.e., purchase of "permissive service credits" and "past service credits), so long as such voluntary amounts are contributed pursuant to irrevocable payroll deductions. (e.g. PLR 9737034 & 9832041). We've got a gov't er that has established a money purchase pension plan with a 12% employer contribution (not a picked up contribution) and, in addition, they want to have an option of allowing participants to make voluntary employee contributions which will then be "picked up" under 414(h)(2). Will this work? Did these rulings have the effect of extended the appl8cation of 414(h)(2) to elective contributions (so long as irrevocable salary reduction election is made by participant)? ------------------ LKP