Scuba 401

anyone have a procedure they follow. we also manage assets held at fidelity. our service agreement allows us to sell assets for non payment of fees but i am not sure this is allowable under ERISA. anyone have any opinions on that as well?

i was reading a note in cch pertaining to counting back in-service distributions made over a 5-year period. the note stated that in-service distributions to a key employee that are rolled over to an IRA are counted back. what if the key employee took an in-service in cash and didn't roll it over?

my view is they cant do it but was wondering if there is any authority anyone knows about. trouble is in this situation they deducted like 50% of their paycheck which of course creates a hardship for this participant.

participant incorrectly deferred too much. payroll was processed in accordance with the participant's instructions. can you refund the money once it is in the plan?

The normal form of benefit is an annuity. Plans are permitted to buy annuities and distribute them particularly coincident with plan termination. Then the participant owns the annuity and can cash out and rollover if they so desire. That's why I am asking if 415 applies

after a qualified plan distributed annuity is paid out to the participant if the participant wants to surrender the annuity and roll over the proceeds to a personal IRA can he do so without regard to GATT and 415? i would say yes but i need verification.

so the deadline for the contribution is 12 months from the last day of the plan year. what happens if the plan terminates in the middle of the year. would the deadline be 12 months from the termination date?

Good idea. While the plan is ongoing, I would "simply" pay those entitled to distributions in cash. If the asset is fairly valued, it doesn't really matter if it is liquid or not. Of course the big issue is fair value; you didn't say it directly but it's sounding to me like it is being carried at an inflated value, which is definitely problematic. This is where it gets touchy - as a TPA, I'm comfortable saying "look, you bought this for $100K and we all know it's not worth that right now. You (the trustee) need to tell me what is fair value." If you don't have that conversation, and keep using $100K because that was the original purchase price, I can see some liability (at least perceived) because it's like you are valuing the asset. (Trustee: "Hey, we bought it for $100K and the TPA just kept using that number; nobody told me we had a problem other than it was illiquid.") Ultimately it's probably best to sell it and be done with it. Unfortunately investors often cling to the idea that something is worth more than the market says it is. If you can get a PTE and get a (the) trustee to buy it, fine. Or if you can ultimately distribute it in-kind to a (the) trustee, then that is fine too...as long as it is fairly valued. do you think that paying distributions in cash causes a problem for those left with an ever increasing share of the property? conversely is it a problem if someday the asset is worth more money and they basically didnt give people their share of the property.

some alternatives were suggested and i would like you all to comment. an additional fact is that this real estate has been declining in value for the a long time and it is unlikely it will ever increase. option 1 has the plan paying out terminees in cash and reallocating their interest in the real estate to the remaining participants. option 2 has the real estate being allocated only to highly compensated participants. i have a problem with both options as they seem to violate the rights benefits and features test because of the potential for the asset to increase in value. any thoughts?

Can't remove that option - protected benefit. (Saves people from signing up for a 401k where they can receive a lump-sum payment, only to find when they want to withdraw the money that the plan was amended, preventing them from receiving their full benefits). well...lets say a participant want to receive a lump sum distribution and this plan has this illiquid asset. it would seem to be they would have to distribute something like a certificate to this real estate and i guess it has to be held in a non qualified trust.

belgrath, seems maybe you raised a good point. the plan allows for lump sum distributions. would they be able to remove that even if they wanted to? i think they would have to distribute a certificate or something as ive read in some PLR's. this would make sure they were making a lump sum distribution.

i believe the value has declined and they are hoping that something happens in the future that will make the property viable. a change in zoning or something like that.

the asset is real estate. is it a problem to tell participants no matter what the asset is that they can't have access to part of their retirement account when they reach retirement even if it is a small part of their account? in this case if they keep paying people in cash the remaining participants end up with a bigger share of the real estate. while not a great thing today someday this could be really good for those participants. in my view this could be a rights benefits features issue.

less than a lump sum is still eligible for rollover right? i can't find anything wrong with a small percentage of the participants account being held back because it is illiquid. lets say the percentage is 96% liquid and 4% illiquid.

a plan has an illiquid asset allocated proportionately to all participants. when participants terminate it wants to pay out the liquid portion of their account balance but retain the illiquid real estate until it is sold. in researching this i determined that these distributions wouldn't constitute lump sum distributions. can anyone tell me what that would mean to participants and whether this is a problem?

the designated beneficiary is the beneficiary of the trust. i know the rule is that the account must be paid out over the life expectancy of the oldest designated beneficiary. however i am not sure about the mechanics of this. does the account get rolled over to an IRA in the name of the beneficiary or does it stay in the name of the trust? has anyone actually done this?

thanks guys. appreciate the answer. yes this was for a a cash balance plan btw. will let you know if i have a follow up.

is it permissible to include COLA or similar language that automatically increases the hypothetical allocation formula in the plan automatically every year without having to amend the plan?

looking for input or experiences of those that have missed the filing deadline whichever cycle for Individually designed db plans. if the plan has no technical defects that you know about other than being a late filer, can you submit under the VCP program? do you have to come up with a defect? i want to submit the plan but i do not want to lose the ability to retroactively amend if there is a defect.

i know the order is not called a QDRO. my question is when calculating what is marital property in divorce involving a participant in a federal TSP does state law apply (eg. in florida contributions prior the marriage plus earnings are is not marital property) or is there a federal law that supersedes that when dealing with what is marital property.

client has real estate in his plan and wants to make a contribution in order to pay the property taxes due. problem is plan has been recently terminated. can he contribute after the termination in order to pay the taxes?

i don't see an annual requirement in 408. i am referring to 408 btw. i think it can't hurt to disclose annually but i don't see it in the regulations.

my reading of the regulations says that there is no ongoing obligation for service providers to disclose compensation received from the plan. rather the obligation is initially upon entering into a new contract or the renewal or modification of an existing agreement. of course you have to disclosure under the regs for all existing arrangements. can someone confirm please>?

i think the plan can deny this hardship request but still soliciting opinions here.

the plan uses the safe harbor definition of hardship. does construction of a principal residence equal purchase of a residence?