John A

Cathy (and richard), How do you request 5500 reporting and other important plan info. (for example, officer and ownership status for key employee determination, fidelity bond for plan, corportaion status - C, S, other, possible prohibited transactions during year, etc., etc.)?

My understanding is that the only consequence of a partial plan termination is that the affected participants become 100% vested. Are there other consequences? Does the partial plan termination affect participant loans? Any other issues that should be considered?

How about this: For transfers, process the transfer first, and process the fee the next day. For distributions, process the fee first, and then process the distribution the next day. What are the pitfalls with this approach?

jkharvey, I beleive there has been informal guidance from the DOL that it would be o.k. I haven't heard anything about the IRS. If I were you, I'd go ahead and file with the crossed out and changed date. Of course, this should only be necessary if there is a short plan year due either to a change in plan year or to a plan termination. I would not do it if there was not a short plan year. [This message has been edited by John A (edited 01-12-2000).]

bzorc, why did your firm have to pay? Was it a court order? Did your firm pay in order to retain the client? Have you had situations in which the participant avoided a large loss due to the 1-day delay?

Where a participant owns part of the primary residence the participant is living in, will a loan to the participant to purchase a greater share in the residence count as a loan to acquire a primary residence? 2 people bought a house together and both count it as their primary residence. One now wants to purchase the interest of the other. Can this plan participant get a loan from the plan and amortize it for more than 5 years due to being a loan for a primary residence? At first, I thought no. Now, I'm thinking this is sort of analogous to paying off a loan from a third party that was used to purchase a primary residence. So now I'm thinking this would be o.k. I'd appreciate other opinions. Thanks.

Thanks, Chester, - temporary brain-lock!

Alonzo, wouldn't "the amount that would be determined under the plan without regard to the amendment" mean the greater of the amount using the PBGC rate and the plan rate? From this wording, it certainly appears that, until the amendment is adopted, a plan would have to use the greater of the benefits determined using the plan rate, the PBGC rate, or the GATT rate.

MWeddell's point is valid, but remember that it applies only to parent-subsidiary controlled group determinations.

What am I missing? If the expected unfunded is minus 50 and the actual unfunded is zero, isn't that a gain rather than a loss?

What about the 10% excise tax for corrective distributions after 2 1/2 months after the end of the plan year? kharris, did the VCR examiner give you an opinion on this 10% excise tax? If this excise tax does not apply, then what code should be used on the 1099-R?

If a participant has a required beginning date of April 1, 2000, but receives a lump sum on February 29, 2000, is any portion of the lump sum a required minimum distribution?

A participant received a check for a distribution from a qualified plan. He did not cash the check and has been rehired. He would now like to destroy the check like he never got a distribution. Is this o.k.? If it is o.k., what should be done about any withholding that was done from the distribution?

Did the Third Circuit get it right in Bennett v. Conrail Matched Savings Plan, 168 F.3d 671, 676 (3d Cir. 1999)?

What distribution code(s) should be used on the 1099-R(s)?

I'm confused by the following in the 1999 1099-R instructions pertaining to investment losses: First, there is a section of the 1099-R instructions that covers losses for a corrective distribution of excess deferral made in a year after the year of deferral. However, I am not sure how to interpret the instructions. What does seem clear is that the participant must report the amount of the excess deferral, unadjusted for loss, in the year of deferral and may report the loss in the year the distribution is made. What is not clear to me is: 1) Should the actual distribution be reduced by the loss, or should it be the amount of the excess unadjusted by the loss? 2)Should the amount reported on the 1099-R in Boxes 1 and 2a be reduced by the loss, or should it be the amount of the excess unadjusted by the loss? (the answer seems to depend on the answer to 1) since the instructions seem to indicate that the actual amount of the distribution should be reported) 3)How is the participant notified of the amount of the loss for tax purposes for the year the corrective distribution is made? Second, I am not finding instructions related to losses allocated to excess contributions, excess aggregate contributions, and excess annual additions. Are these losses treated analogous to excess deferral losses, or is there other guidance? I'd have the same 3 questions noted above for losses in these areas. Finally, does the answer change for any corrective distribution with an allocated loss due to when the distribution is made (before or after March 15, before or after April 15)?

Is it possible to get the assets into contracts owned individually by the participant without getting the participant's consent? The main problem here is that a handful of employees have refused to make any election for their funds. The old entity that maintained the 403(B) plan was basically merged into another entity and so has ceased to exist. The majority of "old plan" participants transferred (rolled?) their money from the investments allowed by the old plan into the new entity's 403(B) plan. If tbe participants refuse to return election forms, can the "old plan" money be 1)transferred to the new 403(B) plan, 2)cahnged to being an account owned by the participant, or 3) paid out in cash? Are any or all of these options definitely not possible, or are some or all possible? I realize there are no guarantees due to the lack of guidance. But what action can the trustee and/or the financial institution holding the assets take without participant election? [This message has been edited by John A (edited 12-30-1999).]

I agree with your analysis, but I am not an expert in controlled group determinations. Are you saying that the unrelated individual owns the other 49% of the medical practice? Also, be sure Dr. A has not been given the option to buy stock of the medical practice (attribution rules). I'd be interested in whether others agree.

Does anyone know of a good article or general outline on the issues to consider when there are multiple testing failures (for example: someone has deferred in excess of the plan's limit which will be corrected through APRSC, there is a 402(g) excess, a 415 excess, there is hanging match, ADP and ACP fail and when corrected, multiple use fails)? The solution of multiple test failures is probably way too broad a topic, but I was hoping someone knew of a good article which discussed the issues, including what is required by regs and what is document-specific.

jlf, I still intend to answer your question in your 11-22-99 post at some point, but I am not quite ready to answer right now. However, I do have some questions for you about the NJ Teachers plan: 1. Am I correct that participation in the plan is a condition of employment? If so, I would very much dislike that condition, not because I think the plan is a bad plan, but because it is difficult to see how the 5% deducted from my salary was ever "salary" if I had no choice about it being deducted. I'm beginning to think this condition is a common feature of government plans but rare in plans that are not government plans. Anyone else have any thoughts on this condition? 2. Am I correct that the NJ plan provides cost-of-living (COL) increases? If so, what are the increases provided and how much value does that add to the present value numbers you have previously provided (which I believe were based on a non-increasing single life annuity at age 65)? (If there is a COL in the plan and you specify what it is, perhaps pax or another actuary could help out with what the present value of the COL would be at age 65.) I'll try to give you an answer to your 11-22-99 post in January. In the meantime, I hope you've had a wonderful holiday season so far and that you will have a terrific New Year.

My understanding is no. I believe the seller will cease to exist.

A company with a 401(k) plan wants to sell substantially all of its assets to another company. The prospective seller would like to simply continue the 401(k) plan as if no sale had occurred. Does anyone see any problems with this? What further questions need to be asked? Thanks.

The sponsor of a 403(B) plan basically merged into another entity. The majority of participants rolled their 403(B) accounts into a plan of the new entity. The old entity was covered by ERISA and so is filing 5500s. There are a few employees who have not yet gotten their money out of the old 403(B) plan. One of these employees has a segregated account, the rest are in a pooled account. Can the trustee of the 403(b)plan force the participants to either roll the money into a new plan or take a distribution? The trustee wants to file a final 5500 ASAP.

If these questions are too broad, please let me know and I will try to narrow the focus. When a plan sponsor of a 403(B) plan ceases to exist, who has responsibility for assets remaining in the plan? What responsibility does the financial institution holding the assets have?

I hate asking this question, but what risk is an employer taking by not following the deemed distribution rules? 2 specific examples where an employer does not want to follow deemed distribution rules: 1. Participant is a few days beyond the grace period on a 3-year loan due to being out on leave. Employer would like to either reamortize loan or allow participant to double up on payments until caught up on the loan and does not want to report a deemed distribution. 2. Participant takes a 20-year loan for a principal residence. 6 months later, employer discovers loan was for property on which a residence might be built later. Employer would like to reamortize the loan over 4 1/2 years and not treat the loan as a deemed distribution. I have talked to other practitioners that don't seem to have too much of a problem with the above. Yes, I know the rules are the rules. But I would like to know what risks the employers would be taking (and should be advised of) by not following the deemed distribution rules. Is it a plan qualification issue?