John A

I have been comparing charts from many sources listing items included or excluded in different compensation definitions. It seems pretty clear that "Severance Pay" is included in W-2. However, sources seem about equally split between saying "Severance Pay" is included or excluded for Long list 415, Short List 415, and 3401(a). Does anyone have a strong opinion on which is correct for Long List, Short List, and 3401(a). If so, reasons and/or cites would be appreciated.

This may be obvious, but the minimum required distribution rules of Section 401(a)(9) are an exception. And I thought that a DB plan was allowed to commence payments to a participant who had reached normal retirement age under the plan, but I do not have a cite and I could be wrong. Hope I didn't muddy any waters.

We're considering ordering 2 of the resources authored by Q&A columnists: 1. The 401(k) Plans Manual by Stuart C. Harris and Kut E. Linsemayer. 2. Retirement Plan Distribution Book by Martin Silfen, Esq. Has anyone used either of these? If so, would you be willing to share any comments about them? Thanks.

Tom, We have a 3-ring binder for which updates are sent periodically that is entitled "ERIAS OUTLINES PPD Pension Library." Is this resource the same as or related to Sal Tripodi's "The ERISA Outline Book?" Have you seen both? Would you be willing to explain any differences between them? I was considering ordering the ERISA Outline book, but now I'm wondering if we really already have it. (Sorry to be off the topic of this thread). Thanks.

Thanks for all the responses. I keep thinking the logical answer should be no, but I can't seem to read the reg. to say no. Tom and Gary (and others), how would you calculate the maximum loan available in this related situation: A participant in a plan that only allows one loan at a time borrowed $20,000 in July 1, 1999 and paid it back August 1, 1999. The participant borrowed $12,000 on September 1, 1999 and paid it back October 1, 1999. The participant want to borrow the maximum available in December. Would you calculate the maximum as $30,000 ($50,000 - the highest outstanding balance in the last 12 months), or as $18,000, or as something else entirely?

A participant with a $200,000 vested balance borrowed $15,000 on July 1, 1999 and pays this off October 1, 1999. The participant wants to borrow $50,000 in December, 1999. The plan allows more than one loan. Can this participant borrow $50,000 by taking a loan of $35,000 one day and $15,000 the next?

Michael, thank you. This is exactly what I was looking for. I agree with your interpretation.

What would the maximum loan amount be in the following situation: 1-1-99 Participan borrows $14,000 - Loan 1. 3-1-99 Repays $10,000, Outstanding Balance $4,000. 5-1-99 Repays $3,000, Outstanding Balance $1,000. 7-1-99 Borrows $21,000 - Loan 2. 12-1-99 Repays $5,000 - Outstanding Balance of Loan 2 - $16,000. Participant wants to take the maximum possible as Loan 3. What would the maximum be on: 2-28-2000 2-29-2000 3-01-2000 3-02-2000 6-01-2000 Any explanations would also be appreciated.

Thanks, Tom. That's the way I was interpreting my reading, but it's really nice to have it confirmed.

Seems like a slam dunk to me. Was a Rev. Rul. really necessary?

The $10,000 402(g) limit is a dollar limit that is unrelated to salary (or at least not directly related), and is applied to the calendar year. It is really a participant's responsibility to be sure the participant does not go over this limit. As a favor to employees, it is certainly a good idea for an administrator to check with the participant about deferrals made with another company.

A 401(k) plan active participant who turned 70 1/2 in 1998 was given the option to start minimum distributions or defer to termination of employment. The participant chose to start. The required minimum distribution for 4-1-99 was calculated incorrectly. The question is: when an active participant chooses to start, is the distribution truly a required minimum distribution (RMD) with all associated characters (can't be rolled over, 50% excise tax applies if amount is not made or if amount is too small, etc.)? Or can the distribution be treated more like an in-service withdrawal (can be rolled over, no excise tax applicable, etc.)?

We're considering ordering 2 of the resources authored by Q&A columnists: 1. The 401(k) Plans Manual by Stuart C. Harris and Kut E. Linsemayer. 2. Retirement Plan Distribution Book by Martin Silfen, Esq. Has anyone used either of these? If so, would you be willing to share any comments about them? Thanks.

While it focuses on one narrow topic, I do consider the book "Who's the Employer?" by S. Derring Watson, Esq. a "must have." He does the Q&A column under the same title.

We have a 3-ring binder for which updates are sent periodically that is entitled "ERIAS OUTLINES PPD Pension Library." Is this resource the same as or related to Sal Tripodi's "The ERISA Outline Book?" Has anyone seen both? Would you be willing to explain any differences between them?

A plan failed the ADP test and the plan document calls for forfeiting the match associated with the deferrals that will be returned to the one HCE causing the failure. The plan also failed the ACP test and will do a corrective distribution to pass the ACP test. Since the amount returned to pass the ACP test exceeds the amount of associated match, can the associated match provision be ignored in this case?

MWeddell, Thanks for the response. Since a hardship distribution or withdrawal is not a protected 411(d)(6) benefit, why must the hardship standard be specific enough to not give the employer discretion? Everything I see in the regulations says that there cannot be employer discretion pertaining to 411(d)(6) protected benefits, but nothing about employer discretion with respect to benefits that are not protected benefits. There is a 5500 in our files that reports a 1991 determination letter, but I do not see a copy in our files (hopefully we can remedy that deficiency in our files and get a copy). Would you agree with the following reasoning: Announcement 94-101 notwithstanding, 1.411(d)-4 does not state that a plan may not have a "catch- all" hardship category. What 1.411(d)-4 addresses is the amendment of a plan to modify or eliminate the hardship distribution standards in a plan. Further, 1.401(k)-1 says that the existence of "an immediate and heavy financial need is to be determined based on all relevant facts and circumstances", which seems to contradict 94-101. And, while administrator discretion is generally prohibited, the "relevant facts and circumstances" language suggests that the standards for determining the existence do not have to be stated in the plan document. However, 1.411(d)-4 says that the employer can retain the authority to determine whether objective criteria specified in the plan (e.g., objective criteria designed to identify those employees with a heavy and immediate financial need or objective criteria designed to determine whether an employee has a permanent and total disability) have been satisfied. It does not state that those objective criteria must be in the document. The administrator could adopt a written policy that will be used in determining that a hardship exists, so that the appearance of discretion is removed.

A plan terminated and there will be no further employer contributions to the plan. There is still money left in a forfeiture account. The plan document calls for using the forfeitures to reduce employer matching contribuitons. Our first thought is that the forfeitures should be used to offset plan expenses and we believe the plan document does allow this. But what happens to any forfeitures if there is still something left after offsetting all expenses? Can or must it be reallocated to participants?

Can the safe harbor and facts-and-circumstances tests for determining whether a hardship exists and for determining whether a distribution is necessary to meet the hardship be mixed in the following ways (that is, can a plan document be written to allow for the following): 1) The hardship is for funeral expenses (a facts-and-circumstances hardship) but the safe harbor is used for determining whether or not the hardship is necessary (that is, the sponsor does not check other resources of the participant, but does suspend deferrals for 12 months, etc.) 2) The hardship is post-secondary school tuition (a safe-harbor hardship) but the plan sponsor checks the resources of the participants to determine if the distribution is necessary to meet the hardship (that is, does not suspend deferrals, etc.) I am confused as to whether there is one set of safe-harbor rules which must always work together, or whether there is a separate set of safe-harbor rules for each of the 2 tests that can be used separately. Any cites would be greatly appreciated.

According to Announcement 94-101, a plan is not permitted to have a "catch- all" hardship category. One plan document I've seen lists "Other heavy financial need of the participant or the participant’s spouse or dependents" as a hardship category. Is this an impermissible provision? If so, is it enough to simply never use this provision?

A company with a 401(k) plan is 100% owned by a trust. Two employees of the company and one non-employee are trustees. What effect does this have on the 401(k) plan and how is ownership determined in this situation?

Topics related to this issue have been discussed on these message boards before. I'd sugggest doing a search using "top heavy contribution deadline" or "late top heavy minimum contribution". However, my short answer would be that you need to be careful about checking deduction limits and timing.

In practice, does anyone have a de minimis policy or policies pertaining to returning excess contributions, excess aggregate contributions, excess deferrals, or other items? Or does everyone distribute the excess, even if the excess is 1 cent?

Retirement Plan Distributions Q&A 194 seems to indicate that, if the plan document allows for it, a non-5% owner who reaches age 70 1/2 while actively employed could make an annual election of whether to take the amount that would be an RMD for a 5% owner, or to defer receiving a benefit to a later date. It also seems to indicate that a participant in this situation could choose to take the distribution one year, defer the next year, and then start distributions again the third year. In practice, does anyone send elections to take a distribution or defer annually? Or does everyone have participants complete a one-time, irrevocable election to either commence distributions or to defer distributions until termination of employment?

Just curious if anyone knew of any court cases in which a plan sponsor tried to recover an overpayment to a participant in a defined contribution plan?