jkharvey

The plan document provides that forfeitures (of ER Matching contributions) will reduce ER contributions. The ER, however, has not done this and forfeitures have built to a considerable sum, $50,000. The ER now wants to use these forfeitures to pay plan expenses incurred when transferring assets from one investment company to another and amending the plan document (not SBJPA amendments). This doesn't sit right with me, but I'm not finding any specific prohibition. The plan document provides that administration expenses may be paid from the trust. My concern is also that the ER has not properly handled the forfeitures in prior years. Any suggestions?

I thought I saw somewhere (now I can't find it) that the original,not a photocopy, of the machine print version of F5500 should be submitted to DOL. Does anyone know if this is correct?

Have a client with oriental rugs and classic automobiles as plan assets. These assets have not, in my opinion, been properly appraised. The employer wants to move to segregated accounts for each participant. The HCE wants to take all of the rugs and cars into his account instead of liquidating them. I say he should liquidate these assets then create the segregated accounts. Any thoughts, comments or DOL/IRS cites would be appreciated. What about real estate in a segregated account? Any problems? This ER has actually purchased property at tax auctions with the intent that the property owners will repay the real estate taxes and the Plan Sponsor will never actually take posession of the property. One piece of property is subject to $2M in liens. I'm really concerned here.

The employer maintains 401k plan w/ ER match. The plan has a last day rule. When the plan is disaggregated for coverage purposes, the 401(m) portion fails the Ratio Percentage Test. Is this portion (matching contributions only) of the plan tested separately for the Average Benefits test to see if coverage is passed?

Thanks to both of you for your input. Additional question along this same line. How would the employer know that a QDRO is in the works, if no notice has been received? In other words, a participant terminates but the ER is not aware of divorce action pending. The terminated participant wants his/her distribution as lump sum. What kind of questions are administrators asking, if any, before issuing the distribution? Is this something that should be covered in the QDRO procedures you mentioned above?

I would like to know what other administrators do in this situation. A profit sharing/401(k) plan does not provide for annuities as a form of benefit. Per the Code, therefore, spousal consent is not required for distribution. What should be done to be certain that a participant in the middle of a divorce is not trying to take his/her distribution to avoid losing part of it in in the divorce, via QDRO, etc? What types of questions are asked on every distribution? Do most administrators require spousal consent for all distributions? If so, under what authority?

Thanks for your help. I'm still confused on one point, however. Each physician will receive an allocation that is greater than his/her 404 deductible limit. The physician's corporation will only contribute the 15% of $160,000. The corporation that employees the NHCEs will actually then contribute an amount that is greater than the total amount allocated to its employees to make up the amount due to the physicians. Am I correct?

A profit sharing plan has several adopting employers. Most of the employers are physicians where the physician is the only employee. All of the other employees are employees of another adopting employer. It seems to me that each adopting employer (Physician) has a deduction limit of 15% of eligible employee compensation. If the only employee is the physician, the limit would be 15% of $160,000. The Plan, however, has an integrated allocation formula that allocates an amount > 15% of $160,000 to each physician. Hasn't the physician's 404 limit been exceeded?

The plan sponsor, a bank, has acquired another bank. The attorney has prepared the merger agreement outlining plan details as a result of the merger. No amendment has been made to the document related to this merger or its effects on the plan. Does the merger agreement suffice in lieu of amendment or does the document need to actually be amended to reflect the changes. In particular, there are now two vesting schedules in place for pre merger money and post merger money.

Here's the scenario. Employer gave a safe harbor notice indicating that the 3% safe harbor contribution would be made into the monoey purchase plan. The MPP, however, has an integrated formula, 3% base w/ 3% of excess. The employer intended to use the 3% base as the safe harbor contribution. The employer, however, has passed the ADP/ACP tests w/out consideration of any Safe Harbor provisions. Can we simply consider our Notice as "bad" and leave the 401(k) plan as it is w/ passing the ADP/ACP tests and leave the MPP contribution as it is? Of course, the 3% base MPPP contribution should be 100% vested because of the notice to the employees. We would like to avoid the ER having to put in another 3% into the MPPP.

Our summary annual report tells a participant that they are entitled to receive a copy of the "full annual report". I am saying that this refers to a copy of the complete Form 5500 and related schedules, excluding the SSA. I'd like to know what others are providing to participants in response to this question.

I have an interesting situation. We prepare a year end valuation showing employee deferrals in a deferral account and employer contributions in an employer account. The next year, the employer wants to move the employee deferrals from the deferral account into the employer account for all employees who are 100% vested in employer accounts. The employer says that this is for investment purposes. My question is this: Do all of the employee deferrals have to be reported separately each year to participants? The Document says that each year deferrals will be allocated to the Employee Deferral Account. This is done, but then the funds are moved in subsequent years. Just doesn't "feel" right to me.

The employer amended the MPPP to "freeze" future accruals of benefits two years ago. Are there any restrictions on "unfreezing" and amending to again provide for contributions?

Can a participant take a loan from a terminated 401(k) plan? The plan has filed for a FDL on the termination but can't distribute balances until letter has been received. Employee wants a loan in the meantime. I've not been able to find any specific cite against it. Any suggestions?

The employer has a 401(k) safe harbor plan. The employer makes a discretionary profit sharing contribution allocated using an integrated formula. Question is this: Can the employer take the 3% safe harbor from the integrated discretionary contribution, as long as each participant is getting at least 3% or does the employer make a separate 3% contribution outside of the integrated allocation? My concern is that the total contribution (3% and integrated discretionary) would not have been allocated in accordance with the plan's integrated formula.

Thanks, Tom. Next question, then. The document says that ADP compensation will be 414s comp. 414s comp is then defined as compensation as defined in the ER's adoption agreement. In my case, comp in the adoption agreement excludes commissions. Sounds to me like you are saying that I should be using comp w/out commissions for my ADP test? Thanks

The plan document excludes commissions in its definition of compensation. This exclusion impacts 6 of 8 HCEs and 4 of almost 100 NHCEs. It seems that this definition would meet 414(s). Is this correct? Also, if it meets 414(s) would comp less commissions have to be used in running ADP test? The test is failed if commissions are excluded and passed if included. Any thoughts?

Thanks for the information regarding the address for Form 5500. If we have already filed F5500 (short year returns) to the old address with the IRS, should we refile to this new address?

What is the new address where 1999 F5500 should be submitted. In particular, short year returns that are using the 1998 Form with the year changed to 1999.

A client changed from a traditional 401(k) to a Simple 401(k). What do we do about filing F5500. The last F5500 filed (12/31/98) was for the regular 401(k). Now that the plan is a Simple, do we file a final F5500 for the traditional 401(k)and an initial F5500 for the Simple?

If the participant takes a loan and never makes repayments, the participant is in default and has a deemed distribution. (See 72P regulations, I think they are proposed regs.) The participant is still responsible for repaying a loan treated as a "deemed distribution".

If we file a 1999 F5500 on the 1998 Form (cross out the year to reflect 1999), do you think this will cause a problem for either IRS or DOL? We don't intend to do this for all clients, this is a particular situation for one client only.

I am trying to find out how people are handling plan language for a new 401(k) safe harbor plan. We use Corbel's document (individually designed documents) and the language provides that the employer will make an election to contribute either a matching, enhanced matching or nonelective contribution intended to satisfy the safe harbor requirements of 401(k) and 401(m). Notice 2000-3 seems to indicate, however, that the plan must be amended to state that it intends to satisfy the safe harbor requirements and the plan must specify the 401(k) safe harbor method being used. I am a bit concerned that our language is not sufficient. Any thoughts on this matter would be appreciated.

jf, thanks for your response. The problem I'm having, however, is that the 4.25% contribution is being made in a Money Purchase Plan. Can I have a separate vesting schedule for the 3% that will count for safe harbor contribution and the remaining 1.25% on a prototype document for the MPPP?

I would like to know how administrators are handling adoption agreements for a 401k safe harbor. My client wants to provide the 3% minimum in another plan (his MPPP) that will actually provide a 4.25% contribution. The ER wants to provide 100% vesting for only the 3% safe harbor contribution. The remaining 1.25% contribution will be subject to a graded vesting schedule. How can I do this on a prototype adoption agreement? What are others doing with this issue? Any comments are appreciated.