John A

Thanks, [Pat M]. I agree. So the question becomes: Is the employee I describe a "beneficiary" of the plan due to having an account in the plan? I realize the employee described is not the typical "beneficiary" (who receives death benefit if participant dies), but where is "beneficiary" defined for plan loan purposes?

A plan had a short plan year from 1/1/99 to 8/31/99, so the 1999 5500 was due 3/31/00. A 5558 was filed to extend the due date to 6/15/00. Without the 5558, the plan would qualify for the automatic extension to 10/16/00. What is the correct due date for the plan at this point?

Dawn, thanks for the response. Yes, these are office employees of the temp agency, so they don't work for other companies. The temps that do work for other companies are excluded from the plan. And no, the HCEs are not currently covered under another plan, although the agency would like to explore how to provide retirement benefits to HCEs.

A temp agency wants a plan that covers only office employees that are NHCEs. The plan will not cover any of the temps and will not cover any of the office employees who are HCEs. Does anyone see problems with this? Would this fit on prototype documents that you've seen? In general, if a plan covers only NHCEs but not all HCEs, are there any areas of concern? Thanks for any opinions.

Many plan documents provide for accepting rollover money prior to an employee becoming a participant. Can the plan document or loan policy provide for loans from this rollover money prior to the employee becoming a participant?

Does Reg. 1.401(m)-1(a)(3) mean that ACP testing never applies to collectively bargained plans? Or could someone give me an example of when an ACP test would be required for a collectively bargained plan?

Thanks, sdolce. I have heard from 2 sources that the DC plan would have until 6 months after the determination letter if later than the one year from the plan termination date, but I have not been able to find the 6 months in any published guidance. Any ideas?

Is there any guidance about how soon after receiving a favorable determination letter on a plan termination that a defined contribution plan must make distributions? (It appears to me that it is currently 120 days for a DB plan in a standard termination, but I have not seen DC plan guidance).

I've talked with some other TPAs and there seems to be some disagreement over what would be a violation of the "substantially level" loan requirement. Would any of the following be a violation: 1) A person making loan payments of $200 per month decides to start making loan payments of $400 per month to pay the loan off faster. 2) A person making loan payments of $200 per month makes a one-time additional payment of $2000 and then resumes making payments of $200 per month until the loan is paid off. 3) The promissory note and amortization schedule are written to provide that payments will be $200 per month for 3 years and $500 per month for the final year. Are there court cases or other guidance that show instances where there has been a violation? What are the consequences if there is a violation?

One of the alternative methods of satisfying the actual deferral percentage (ADP) test is to “recharacterize” elective deferrals made by highly compensated employees as nonelective, after-tax, contributions. This has the effect of lowering the ADP for the highly compensated group. Has anyone ever used this method? Why was this method used (what made it preferable to other correction methods such as distribution of the excess contributions)?

Age 70 1/2 required minimum distribution calculations for a participant have been done based on his and his spouse’s ages, recalculating. The participant recently died and it has now been discovered that the spouse signed off for the daughter to be the beneficiary. How should distributions be calculated at this point?

PPD/Corbel said that the section for what to do with forfeitures that result from less than 100% vesting also would apply to the "orphan match." To me, that is not the way the adoption agreement or plan document read, but it's their document, so we will use their interpretation.

Is there any reason that in-service withdrawals (that are not hardship withdrawals)cannot avoid the mandatory 20% withholding by being directly rolled over to a traditional IRA? Or does the 20% withholding always apply to in-service withdrawals (that are not hardship withdrawals)? Can in-service withdrawals be rolled over after the 20% withholding?

Kip, thanks for the response. I am talking about a DC plan, but a years certain option was a bad example. I was thinking more in terms of a DC participant who is taking installment payments of, say, $500 per month (until the money runs out of course, not a period certain) and wants to change the amount of the installment to $300, and 2 months after changing to $300, wants to change the installment amounts to $700. Most DC plan documents I've seen do not specifically prevent this. I was wondering if plan sponsors and/or TPAs could adopt a policy to prevent this. What do you think?

Thanks, pax. It is another confirmation, but I was hoping to find a cite that was closer to a more permanent nature. Instructions to forms tend to change fairly often. The regs for eligible rollover distributions make it clear that additional withholding can be elected, but I couldn't find anything equivalent in the regs for nonperiodic distributions that are not eligible rollovers.

The only cite I can find for a participant being able to elect more than 10% withholding on a nonperiodic distribution is IRS Publication 15-A - January 2000 Employer's Supplemental Tax Guide." Does anyone know of a more permanent cite (like an IRS requlation)?

When a participant with an outstanding loan from a 401(k) plan discontinues loan payments because of 1) bankruptcy (bankruptcy court not allowing loan payments to be made to plan), or 2) approved leave of absence, what are acceptable choices when the participant 1) is out of bankruptcy, or 2) returns from leave of absence? Should of can loan payments be "doubled up" to "catch up" on the loan so the loan is repaid within the amortization schedule? Should or can the loan be considered in default? Should or can the loan be reamortized? Can participants coming out of bankruptcy be treated differently from participants returning from leave of absence?

If the plan document is silent on the issue, what rights do participants in defined contribution plans have to change the amount or form of the benefit they are receiving? What rights do a plan sponsor, or a TPA, have to set policies preventing or limiting the changes, or the frequency of the changes? For example, suppose a DC participant elects to receive a 10 year certain form of payment, gets payments for 2 months, then decides a 5 year certain form would be better 2 months later, then decides the 10 year certain form was fine 3 months later. (The plan document allows both forms). Can a participant do this if the plan document is silent? Can a plan sponsor or TPA adopt a policy not allowing this?

A part-time employee had slightly over 1000 hours as of 12/31/99 and should have been allowed to enter the 401(k) plan as of 1/1/00. The employee was never given the deferral election forms. The employee has since terminated employment. The plan sponsor does not make a Profit Sharing contribution but does have match that is deposited concurrently with salary deferrals. Is there any way of getting this corrected prior to doing the actual ADP testing for 2000? Or is the only proper way to do the correction to have the plan sponsor make a contribution equal to the ADP for the NHCEs for 2000 plus associated match and associated earnings on both? Either way, an APRSC would be done.

The adoption agreement for the PPD/Corbel prototype plan for a client has a section for what to do with forfeitures that result from less than 100% vesting, and a later part of the same section for what to do with forfeitures that result from ACP test failures (forfeited excess aggregate contributions). However, the adoption agreement and the plan document seem to be silent about what to do with forfeitures (sometimes called "hanging match" or "orphan match") resulting from ADP test failures (the ACP test is passing). It is not that the client left a section blank - there is no section for choosing what to do with this type of forfeiture. Is this a PPD/Corbel plan document defect? The plan document does seem clear that the match related to the corrective distributions of excess contributions need to be forfeited. We cannot find any guidance or any adoption agreement choices presented as to what to do with the forfeitures. The amount of the forfeitures is relatively significant. Any suggestions?

A 401(k) plan would like to raise the Normal Retirement Age from 60 to 65. I would think that any current participant would have to retain the age 60 NRA. Can the plan change to 65 for new participants?

Thanks, Brett. What if both the TPA and the Trustee used the same tax ID#?

Some employees in a union 401(k) plan have compensation and deferrals in the plan during a plan (and same) tax year. During the year, they transfer to non-union status and have compensation and deferrals in the non-union 401(k) plan. Normally, full year compensation is used for determining the deductibility limit. Is full year still used for both union and non-union deductbility limits? How do the deferrals in each plan affect the deductibility limit for each plan?

For qualified plan purposes, when has an owner officially terminated employment? An owner would like to take a distribution from the plan, but would like to be sure they can be considered terminated. In-service withdrawals are possible, but not for the full amount of the account. The owner has not taken any compensation for more than a year, but the owner does still share in the profits. 1) Can an owner retain ownership but terminate employment? 2) Can an owner still be considered an active employee even though no compensation is taken? 3) Can an owner be considered terminated even though the owner shares in the profits? 4) What date would an owner be considered terminated? Thanks for any thoughts on the issues.

Try using Search on something like Withholding deposits. If anyone has come up with any simpler solution than those that have already been suggested, I'd be very interested.