John A

A prohibited transaction occurred when a loan was given to a partner who had an interest of more than 10% in the capital or profits interest of the partnership. If the partner is unable to repay the loan, how can this be corrected? Any creative ideas out there?

Thanks, Tom. After some additional research, I came to the conclusion that I could use comp. while eligible since that is allowed in 1.401(a)(4)-12.

For the Average Benefit Percentage Test under coverage testing of 410(B), what compensation must be used? I believe 414(s) compensation must be used, and I know the plan document may control this. However, if the plan document is silent, is there a choice between full year and partial year? Can the same compensation used for ADP and/or ACP testing be used for the Average Benefit Percentage Test?

If I remember correctly, the employer made a correcting contribution equal to the deferral election for the 1999 missed deferrals, but I do not remember how the missed 2000 deferrals were corrected. APRSC documentation was done.

Does a safe harbor 401(k) plan make sense if it covers only part of a controlled group? If one company in a controlled group can pass 410(B) coverage, can it operate a 401(k) safe harbor plan as if it were not part of a controlled group? If a company in a controlled group could not pass 410(B) coverage without bringing in employees from other members of the controlled group, how would a safe harbor 401(k) plan work?

R. Butler, Thank you. I believe you are correct. You can probably always get to the result I inquired about through appropriate wording.

KJohnson, It seems clear under that definition that a contribution that is made only if the employee defers is a matching contribution. The definition says only that the match must be "on account of the deferral" and says nothing about the amount of the deferral. So would you say from this that the amount of the match can be independent of the amount of the deferral (for example, employer will contribute 3% of compensation to match source for any employee that defers 1% to 15% of pay, will contribute nothing if employee does not defer at all)?

yrbkr, By definition: The term “matching contribution” means any employer contribution made to a defined contribution plan on behalf of an employee on account of an employee contribution made by such employee, and any employer contribution made to a defined contribution plan on behalf of an employee on account of an employee's elective deferral. So a contribution that is made even if the employee defers nothing (and does not make an employee contribution) is by definition not a matching contribution. I have always seen matching formulas stated as a % that depends on the amount the employee defers or contributes (e.g., 50% of deferrals up to 6% of compensation). My question is whether the amount of the matching contribution for an employee can depend only on whether or not the employee defers, and not depend on the amount of the deferral.

Can a matching formula be independent of the amount deferred? For example: 3% of compensation contributed to match source if there is any deferral at all, no contribution to match source if no deferral. Why or why not?

The 1999-2000 ERISA Outline Book, p. 5.32, says that this issue has created some uncertainty. The IRS used the word "gains" where it usually uses "earnings." The book takes the position that it would be unfair to not adjust for losses, but does not give any support for interpreting "gain" the same way "earnings" is interpreted. What are others doing? If you have an excess annual addition with a loss, are you reducing the excess for the loss when you cut the check, or are you cutting the check unadjusted for the loss?

smm, Revenue Ruling 89-87 states that, "A qualified plan under which benefit accruals have ceased is not terminated if assets of the plan remain in the plan's related trust rather than being distributed as soon as administratively feasible" and "generally, a distribution which is not completed within one year following the date of plan termination specified by the employer will be presumed not to have been made as soon as administratively feasible." Other guidance indicates: or within six months of the issuance of the determination letter, if later. Have you filed the 5310 more than a year after the plan termination date in the past and received a favorable letter on the plan termination?

A defined contribution plan was terminated 12/31/99. No assets have been distributed. There has been no filing with the IRS. Should or must the plan adopt a new plan termination amendment? If so, what options does the employer have for the effective date of the plan termination (any date in the future, 12/31/00, etc.)?

When a safe harbor 401(k) plan is terminated, is a 204(h) notice required? If a safe harbor 401(k) plan is amended to remove the safe harbor feature, is a 204(h) notice required? Any special requirements other than a 204(h) notice?

I have the same question. I found this site: http://www.ndb.com/cs_forms/QRP_102.pdf But I can't tell how up to date it is. It lists NC under Voluntary, so it apparently does not have the 2001 update. Has anyone else run across another site that is kept up to date?

How would an employee in the situation you just described be treated?

"rank and file members only employed by the company" as opposed to what?

Has anyone ever experienced an IRS audit where the auditor requested and/or reviewed APRSC (or SCP) documentation? If so, anything helpful to share about doing the documentation?

Thank you.

Jon, Just to clarify: You recommend sending prospectuses to all participants every time a prospectus is updated?

I agree that the participants would not be required to take distributions in that case. However, the participants could choose to take distributions - would you agree? And the participants could be forced to accept a transfer to another plan maintained by the seller if they did not choose to take a distribution - would you agree?

QDROphile, Please provide a cite. Thanks.

Alf, From 1.401(a)-20: Spousal consent is not required if the plan or the participant is not subject to section 401(a)(11) at the time the accrued benefit is used as security, or if the total accrued benefit subject to the security is not in excess of $3,500. I believe the $3,500 has been increased to $5,000, but the idea is the same - spousal consent is based at least partially on the total accrued benefit subject to the security, not the total accrued benefit. The question is whether the total accrued benefit subject to the security is based on all outstanding loans. I do agree with your comment in all non-loan situations.

Participant has an outstanding loan balance of $4,000 and wants to take a second loan of $1,500 - is spousal consent required for the loan? Would spousal consent be required if the second loan was $1,000?

When a corporation sells its entire interest in a subsidiary (which I believe is a distributable event under 401(k)(10)), and there was a 401(k)plan which covered only the employees of the subsidiary, is it better to pay everyone out and then terminate the plan? Or is it better to terminate the plan first? Or doesn't it matter?

The employees are covered by both a single employer plan maintained by the employer and a multiple employer plan maintained by the union.