GMK

Am I missing anything in the following? DC plan (ESOP) previously allowed employee after-tax contributions to individual accounts with tax-deferred earnings. These accounts are part of the ESOP assets, but they are not invested in any securities of the plan sponsor. Participant contributed $8,000 (after-tax) in 1986. No after-tax contributions since then. When participant receives distribution of the account (now worth say, $22,000), participant can take the original $8,000 in cash tax free and roll over the earnings ($14,000) to an IRA (or take the earnings in cash and pay tax on that amount). Because the after-tax portion was contributed before 1987, it can be taken out separately, and the pro rata recovery rules (distributon = some contribution plus some earnings) for distributions of after-tax contributions made after 1986 do not apply to the $8,000. And it doesn't hurt that there would be no RMD for 2009. Participant would like to do this, and I would like to be sure we aren't missing something. All comments are appreciated. Thanks.

FWIW, I have generally seen fee schedules that vary by type of distribution (loan, hardship, closing). The differences appear to be based on how much administrative work is involved in each type of distribution. And more often than not, closing fees are not waived for accounts with small balances. (Edit: Typically, Jim Chad's approach is used.) It takes about as much work to close a small account as a big one. The Plan Sponsor may choose to pay closing fees (for everyone, of course) to promote good will. Plan sponsors also have to decide if they need to include loan and hardship withdrawal options in order to attract and retain good employees in their labor market. My vote would be to keep the retirement plan for retirement only and leave the loan business to others, but you have to decide what best meets your needs.

My understanding is that there is generally only one off-calendar year for determining eligibility, which is the 12-month period from the first hire date. If the employee does not have the 1000 hours during that first non-calender year period, from then on you look at each plan year for the 1000 hours of service, whether the person is continuously employed during the plan year or not. Also check the plan document for participation date. In some plans, the participation date will be the first day of year in which the person becomes eligible. For example, a person who becomes eligible on 12/31/08 may be considered a participant for all of 2008.

That's good advice from Appleby (as usual). A no cost way to get a lot of answers about Roths is to check out a book or two from the library. Basic books on investing will have a chapter on Roth IRA's, and there are books that talk about nothing but Roths. One thing you should know is that all the Roth accounts to which you contribute are treated as one Roth. You may have contributed to several Roth IRA's at one or more fund companies, but when you take your money out, they all get lumped together as if they were your one big Roth. For example, before you can take money out of a Roth free of taxes, you have to have had a Roth for at least 5 years and you have to be over the age of 59-1/2 (or disabled or dead or in some cases for a first time home purchase). So, if you started that first Roth IRA more than 5 years ago, that counts for all your other Roth IRA's. The 5 year wait does not start over for each new Roth account to which you contribute. (An important exception is that a conversion of a traditional IRA to a Roth IRA has its own 5 year waiting period.) You might find the following link useful. It has examples that make things more clear. http://www.fool.com/money/allaboutiras/allaboutiras06.htm and this link has a list of what happens in what order when you take money out of your Roth: http://www.schwab.com/public/schwab/invest...lvl2=retirement Hope this helps.

First, I'm no expert in this. It's just an issue that bothers me in the 'paperless revolution,' because there is no good answer. Right now, I think pdf is the best choice. It is a better choice than having the documents in a particular word processor file format (Word, WordPerfect, OpenOffice, etc.). Your 'rodeo' was a good idea. Long term, who knows? We're OK as long as the next versions of reader software from Adobe, running on the next generations of operating systems, are back compatible (so they can read the older files). Our tech guys think that plain olde ASCII text files are the most likely to be readable forever (no guarantees), but I don't know if text files would carry the same legal weight as a pdf file showing the original document with signatures. That would be your call. Personally, if I think a document might be useful in the future, I put a paper copy in my file cabinet. Not very 21st century of me, but I like the assurance that if the need arises, someone will be able to read it 20 years from now. This irrational obsession is reinforced whenever I have to look up account or transaction records from the 1970's or 1980's. Sorry I don't have better answer. If someone does, please post it.

As a side issue, work out a plan that will ensure that you will be able to read the scanned documents 20 or 30 years from now, or even 6 or 7 years from now. New software is not always compatible with old files. This is not meant to discourage you. It's just something to keep in mind.

I think you have to consider how you would do the calculation if there had been a gain and apply that method to the loss. If there had been no gain or loss, the current date balances would be $27k for the AP and $68k for the participant. 28.4% belongs to the AP, and 71.6% belongs to the participant. Now, if there had been a gain of $50k, I don't see how you would justify applying 92% of it to the participant's portion and only 8% to the AP? The simple calculation is to apply 28.4% of the gain/loss to the AP and 71.6% to the participant. A more 'accurate' approach would be to get out the old spreadsheet and allocate the gain/loss each time it was reported since 6/9/07, based on the AP's and participant's balances at each time the gain/loss was credited. Just one opinion, and others probably have a better answer.

Would it work to amend so that persons who are employees of the company (or active participants in the Plan) at any time after some date, say, 7/1/2009, are subject to the new vesting schedule (100%), and all others continue on the previous vesting schedule?

FWIW, when you contact the Alternate Payee's attorney include copies of the Plan's SPD and its QDRO Procedure to give the attorney a framework of what distributions the Plan allows (and the QDRO cannot require benefits that the Plan does not already offer). I would avoid offering a "sample QDRO" form, because one size does not fit all. What has worked for us is to have the attorney send a draft DRO (after receiving the SPD and QDRO Procedure). The attorney knows the settlement details and usually comes very close to wording the DRO so that it is acceptable to the Plan. Of course, it is important to have the Plan's attorney review the draft DRO. Regarding your CSI comment, at a minimum you will save yourself some administrative headaches if a document (the Plan, the QDRO Procedure, or the QDRO) specifies what happens if the Alternate Payee or Participant should die before the distribution is made to the Alternate Payee. If you haven't already done so, I suggest that you review the other posts on this QDRO board. QDROphile and others provide keen insights into the many nuances of QDRO's.

Include in your cover letter or other notice and on the distribution form that the latest distribution election applies to any and all subsequent distributions unless the participant files a new form with different elections. In addition, when a second (or third) distribution is to be made, I recommend sending a letter to the participant informing the participant of the distribution and of the fact that the distribution will be in accordance with her/his previous distribution form elections. Tell the participant to contact you if she/he would like to change her/his elections for this distribution. To those who choose to change their elections, send a new distribution form for them to complete and return. IMO, the key is to inform participants (at the time when they need to make the decision) of their options and of what happens if they do nothing. If you want to keep the 180 day limit on elections, put that information on the distribution form and in notices, so you have an answer for those who come back and claim they didn't know about it. For participants who become eligible for another distribution after 180 days, send them another distribution form for them to complete for that distribution.

Previous threads on this board have discussed deadlines for notices to employees/participants. There may be specific cases where the deadline can be extended, but off hand I can't recall which, if any. Such rules generally favor participants. They get notices without delays, and they are not short changed on time to respond or file a form. My recommendation is to deliver the notice before, and no later than, the deadline date, so you don't have to worry about it.

When you ask the consultant why this would be a good idea, also ask what accounting practices would be used to calculate the change in basis. If you wish, you could post his/her reply here. There may be reasons why it would be prudent for the client to find a different consultant (or we all might learn something new and interesting). And then send the consultant the "We are disinclined to accept your proposal" letter.

Although it may not apply to the OP, an S corporation owned by an ESOP is an example where basis can change without the sale/purchase of shares. The corporation's pass-through earnings (losses) each year add to (subtract from) the basis of the shares in the ESOP accounts. This becomes important if a lump sum distribution is paid to a participant in shares of stock that have NUA, net unrealized appreciation (= current value minus basis). In this case, the NUA is taxed at long term capital gain rates.

A 'no paper' rule is practical and in use in 401(k) plans. Some consider it prudent to exclude paper, for example, to avoid avoidable (excessive?) delays in getting the instructions executed. But considering who posted this question, I have to wonder if there is more to it.

Former President Benjamin Franklin (and on occasion, my brother-in-law).

Elaine (you know you can google anything) NO, NOT THE QUOTE THAT'S MY SIGNATURE, THE DITCH QUOTE - BLINKY

Just a reminder that it will matter at the end of the year. From Q & A-13 in Notice 2009-27: "If the loss of coverage is after December 31, 2009, the individual cannot become an assistance eligible individual."

According to Section 3. General Effective Date, etc., of CHIPRA (Public Law 111-3): "...this Act ... shall take effect on April 1, 2009, and shall apply to child health assistance and medical assistance provided on or after that date." (with exceptions for the timing of state legislation). Anyway, it looks like there is no requirement to provide the special 60 day enrollment period if the loss of coverage occurred before April 1, 2009. Or is there something I missed here? Thanks for your comments.

Employee's child lost state CHIP health coverage on March 1. Employee applied for coverage for the child and herself under company group health plan in April (more than 30 days but less than 60 days after loss of CHIP coverage). Does the special 60-day enrollment period under CHIPRA apply if the loss of coverage occurs before April 1, 2009? Haven't found any official guidance yet. All comments are welcome. Thanks.

Our understanding is that insurance and cafeteria plan contracts/documents have to be updated now to allow for the special 60 day open enrollment, but notices to employees can wait for the DOL/HHS model notices. If someone shows up with a claim to be enrolled, it might be helpful to you and the employee to have your own summary notice listing the basics for reference.

Wasn't Step 2 rescinded in like 1967 or '68?

I agree with the previous posts. I would have expected that the distributed shares are reallocated based on the "Other Assets account" balances (not the total account balances) of the other participants, because the money to pay the distributions comes from the Other Assets accounts. But that may not be what the Plan Document requires. This is not something to guess at. The Plan Document rules the day, so dig into it again, or get an expert to read it and explain it.

Notice 2009-27 has a lot of interesting information. For example, if the loss of coverage is after December 31, 2009 [not just the involuntary termination], then the individual cannot become an AEI (Q & A-13). (Maybe you all knew this already, but I miss it.)

In some cases a company will have a policy to allow a cash advance, at the employee's request and prior to the regular paydate, where the advance amount can be up to the amount earned but not yet paid. This would seem to make your earnings currently available before the regular paydates, even if you never take a pay advance. Yes? In the other cases, if no one can get their bonus/commission earlier than the one day (probably after all the numbers are in), then the bonus/commission looks very unavailable until that day. KJohnson's post #3 seems to say it all.

Thanks for the responses. So, an AEI's first 9 months of COBRA coverage after mid-February 2009 are the only months eligible for the "up to 9 months" of ARRA premium reduction, yes?