Dave Baker

I've seen it, Wessex (strange but true dept.) -- the New England (Life Ins. Co.) prototype does it. The document requires at least 83-1/3 hours of service in order for an individual to earn one "Month of Service," and the employer can fill in any number of months desired -- one through 11 is perfectly OK. But it also has a "provided that" provision ... "provided that in no event shall an employee be required to wait longer than one Year of Service, defined as a 12-month period during which he or she works at least 1,000 hours of service" (I'm not really quoting here, but that's the gist of it.) Seems awfully complicated to me. So most prototypes seems to just throw in the towel and say to sponsoring employers that no hours-per-month or other hours requirement can be applied if the employer isn't using a full one Year of Service waiting period.

But is there a recent amendment to the Code (past two or three years) that says the DOL can grant an administrative exemption to the usual prohibition against loans to owner-employees (including S corp shareholders?)? Might not be a practical solution, but perhaps an option anyway.

Are you thinking of a SIMPLE IRA program, Larry M? $6,000-per-year elective deferrals by employees under a SIMPLE IRA don't count for purposes of the 15% Code section 404 limit, it's true. But employer contributions under a SEP arrangement are treated just like profit-sharing plan contributions (and the two would be added together, if both programs were sponsored in the same year) for purposes of the 15%-of-aggregate-comp limit of Code section 404. (There are no more pre-tax employee contributions under a SEP, unless it's an old "grandfathered" salary-reduction SEP arrangement.) Also, I think the "no other plans" rule only applies to an employer who's trying to sponsor a SIMPLE IRA program, not a SEP arrangement. [This message has been edited by Dave Baker (edited 08-24-1999).]

What if the plan does not meet the ERISA 404© rules? It then would seem that the ability of the participant to direct the making of the loan to a relative would be the kind of "self-dealing" that a "fiduciary" cannot engage in.

You might be thinking of a state statute or state case law that says a bank (wearing its "lender" hat) can't take as collateral from the borrower something for which it is acting as a "fiduciary" (wearing its "trustee" hat) on behalf of the borrower. I think cases in some states say that the bank is out of luck in such a situation. But maybe it's murky when the bank is only the IRA "custodian." At any rate, whether the bank later can get the IRA funds or not is not the IRA owner's biggest problem -- as Paul points out, a pledge of the IRA (by signing a collateral agreement as part of some loan) would blow up the whole IRA for tax purposes at the get-go, so I can't see how it would ever be something an IRA owner would want to do.

But once the pension funds are rolled over into an IRA, they become subject to the 10% early distribution penalty (if the alternate payee is younger than age 59-1/2 and is not disabled).

Heck, legally you could argue that the terms of the plan require distribution as soon as administratively practical (in the provisions re what happens upon plan termination) and that the document does not even permit the plan administrator to hold up distributions until a letter has been received ...

Probably unenforceable, though, and arguably a breach of fiduciary duty on the part of the plan administrator to say so ... On the other hand, if the disclaimer says that in the event of an ambiguity (not a conflict) the document controls, and that the terms of the document provide additional qualifying details that supplement the rules summarized in the booklet, then I don't think it's overreaching.

http://www.riatax.com/weekly/pension.html (click) -- this is an online weekly excerpt from RIA's Pension & Benefits Week (a paid print publication)

Who's using long term care insurance as an employee benefit? Please share your experiences.

Footnote: EmployeeBenefitsJobs.com keeps this message board and the BenefitsLink site afloat <g> -- free online resume posting for candidates; help wanted ads for employers. End of infomercial.

Interesting! I bet no RMDs are required once the money is rolled over. Even though the employee's account in the new employer's plan consists partly of rolled-over money, I don't see anything in 401(a)(9)© (defining required beginning date) that would make a distinction ... if I'm still working and I'm not a 5%-owner, then I haven't reached my required beginning date with respect to the funds in that plan. Great post! [This message has been edited by Dave Baker (edited 06-26-99).]

This note is to explain my decision to delete portions of Daily401k's message. I'm Dave Baker, the webmaster. The portion that was deleted appeared to me to be a quote of a private email sent from another party to Daily401k. To publish in a public forum the contents of a personal email without the permission of its author is a breach of netiquette and trust. Even off the net this would be offensive to many -- e.g., the proposal by J.D. Salinger's one-time girlfriend to publish his letters to her from 1972. (If only plan administration were as exciting. Perhaps that's not the best analogy.) Daily401k, I very much appreciate your participation on the message boards. I wonder if you would consider switching to a username that is your full name, though? In a forum where the livelihood and full-time job of several hundred employees is indirectly but very certainly involved -- Corbel in Jacksonville -- I think that the accountability of using full names would go a long way to making the message board more useful and constructive for everybody. It's tempting to paint them with a broad Microsoft-vs.-the-rest-of-us brush, but Corbel seems to have a great deal of competition (unlike MS) and to have every reason to want to improve its product further as efficiently as it can. A balanced and accountable discussion of areas for improvement seems to me to be likely to help make those improvements happen.

Also: Sterling Trust Company in Waco, Texas.

Corporate sponsor? Has it filed its corporate income tax return for the year ended 12/31/98?

http://www.benefitslink.com/links/19990601-001947.shtml (click)

Interesting! Must be some case law out there. Even if the resolution is a "contract" between the corp and the plan, I would think it's not enforceable by the plan unless the plan "detrimentally relies" on the corp's resolution ... basically it looks to me like a "gift" by the corporation that could be canceled any time before the money is handed over to the plan's trustee.

http://www.benefitslink.com/links/19980724...24-000650.shtml [This message has been edited by Dave Baker (edited 06-17-99).]

Think you're right about having to pocket the RMD first, at least in the view of the IRS -- Prop. Treas. Reg. 1.401(a)(9)-1, Q&As G-1A, G-1B. [This message has been edited by Dave Baker (edited 06-17-99).]

This was posted in a Q&A column on BenefitsLink, and I wanted to get the ball rolling here: "We will be implementing the new GATT rates affecting lump sum conversions effective 1/1/2000 and would like to know what other companies are doing in terms of the "look back" month and the "stability" period. Are most plans going to a 2 or 3 month lookback and a monthly, quarterly, semiannual stability period?

What would be a timely 204(h) notice here? December 16 or before?

Here's the Reish & Luftman request: http://www.benefitslink.com/reish/articles/advisoryop.html (click)

In the couple of plans I've done, I've just said that the employer must designate to the trustee by the due date plus extensions the dollar amount of the employer's contribution for the plan year, and how many of the total of those dollars plus the forfeiture dollars arising for the plan year that is to be earmarked to be earmarked to each of the categories. The consultant ends up reporting to the employer how many dollars in forfeitures have arisen, then the employer tells the consultant how many dollars it wants to contribute, then the consultant tells the employer how many dollars (out of the total of those two amounts) have to be allocated to the non-keys in order to get the key employee category up to where it wants to be (typically $30,000). The employer writes that down on a paper that it sticks in the trustee's hands, where it is filed away.

The IRS audited a hotel management client of mine, and the agent wanted to disqualify the management company's plan (which did not cover rank and file employees of the hotels managed). The management company did not get more than half of its revenues from a particular entity or group of related entities, so there wasn't a management group under 414(m). But the auditor thought somehow the arrangement must be illegal on account of the management company being owned by people who where owners in the corporate general partners of the hotels. It took over a year of letters and meetings to straighten it out, until the Atlanta appeals office agreed with me that no 414 problems existed.

CAUTION: It's not an "S" corporation for tax purposes, is it?