k man

Demosthenes, did i convince you or do you still disagree? the reason i ask is i am still having difficulty convincing someone in my office?

simple question - can a U.S. company with a guam subsidiary include those employees in its plan?

does anyone know whether the rules are the same for guam as they are for PR?

how does treatment of a guam company differ from a PR company if both are members of a us controlled group?

i think it is sufficent as long as you inform the participant that they must request a paper copy if they want one.

Demosthenes, i cant agree. constructive receipt is about control or use of the money more than physical custody. in this case the participant is using the money to pay a fee. or put another way, but for the money in this account, he would have had to dig into his pocket to pay the fee. why should this fee money come back to the participant tax free. i believe that if the fee comes out of the balance it must be reported. there must be some guidance on this.

assume there is a fee charged to participants for distrubutions and the money is netted from the distribution. eg. $5000 - $75 = 4925. what is the correct amount of the distribution that should be reported on the 1099. i belive it is still 5000 even though the participant only receives 4925 because he has dominion and control over the entire amount. any one agree or disagee?

archimage is correct. he can defer the full amount of the catch up due to the employer imposed plan limit.

pax, if the plan is discriminatory it is because the rights and benefits are not available to participants in the manner the regs provide. who is responsible for the fund change is not material in my opinion because it always will come back to the plan sponsor.

the key issue in a partial termination is vesting. that is that all the affected participants must be 100% vested.

tbob, that is a valid point. alanm, i am not sure it makes a difference who makes the decision. i think you have to look at the effect on participants.

one of the funds in a plan is closing to new investors. they will remain open to participants in the plan that are currently invested in that fund. this differs from the normal scenerio in that when a fund closes, it typically remains open to all participants in the plan even if one participant is not invested in the fund. do you think that the fact that some participants will have access to a certain fund while others will not presents a discrimination problem?

i think harryo has it right. the regs confirm that it would not be technically a match (A) General rule. --A matching contribution is taken into account under paragraph (b)(1) of this section for a plan year only if the contribution is allocated to the employee's account under the terms of the plan as of any date within the plan year, is actually paid to the trust no later than 12 months after the close of the plan year, and is made on behalf of an employee on account of the employee's elective contributions or employee contributions for the plan year. Matching contributions that do not satisfy these requirements are not taken into account under paragraph (b)(1) of this section for any plan year. Instead, the amount of these matching contributions must satisfy the requirements of section 401(a)(4) (without regard to the special nondiscrimination rule in paragraph (b)(1) of this section) for the plan year for which they are allocated under the plan, as if they were nonelective contributions and were the only nonelective employer contributions for that year. See §§1.401(a)(4)-1(b)(2)(ii)(B); 1.410(b)-7©(1).

there is guidance on electronic distribution but the short answer to your question is email is good but the participants must have access to a terminal and afforded an opportunity to obtain a hard copy of the spd. the intranet might be ok under the same theory. so long as you give they are aware of the spd and are given the chance to request a paper copy.

tom, can you clarrify the 6 month rule? is that total service or service during the current year? the regs seem to indicate you count the current year and the prior years service, if any,

there is no time frame. the determining factor is whether the expenses are needed to satisfy an immediate and heavy financial need. if the expense was paid for from another source and the participant seeks reimbursement, the need would not be deemed immediate and heavy. but if the situation is that the money is needed to pay the doctor i dont see how you can deny it.

one could only speculate but are you referring to an institutional trustee or an individual?

do the regs contemplate different types of medical expeses being acceptable and others not being acceptable? specifically, can the participant have elective surgery or cosmetic surgery? i think they can. our plan uses the 213(d) definition of medical expenses.

alf, i read that cite and interestingly i have never seen it. i dont think it is a clear requirement to disclose fees. it seems rather confusing as to what they really want. has anyone ever had the opportunity to interpret that erisa reg?

is there anyone out there that discloses asset based fees in the spd? i am referring to fees for admininstration, record keeping or even investment advisory fees.

from the cch pension plan guide. the document is an irs memorandum and rescinds an earlier field directive. I would not include individuals names in the classifications. i would make them generic. In a March 13, 1998 memorandum the IRS said a July 30, 1996 field directive completely rescinded a September 30, 1994 field directive that concerned whether a profit-sharing plan that provided for employer discretion to determine amounts allocated to particular groups of employees satisfied the definite predetermined formula requirement under the Code. Since the 1994 field directive was completely rescinded, the 1996 field directive applies to all plan designs. A plan would not violate the definite predetermined formula requirement if the employer has discretion to determine the amount of the contributions to be allocated to particular groups of employees defined under the plan and the plan specifies the method for allocating these amounts among the employees in each group. The memoranda for July 30, 1996 and September 30, 1994 are reproduced at ¶17,201M. Internal Revenue Service Memorandum Date: March 13, 1998 To: Robert Padilla, Chief, EP/EO Cincinnati Key District From: Director, Employee Plans Division, CP:E:EP Subject: Requirement for definitely determinable allocations On September 8, 1994, we issued a field directive concerning whether a profit-sharing plan that provided for employer discretion to determine amounts allocated to particular groups of employees satisfied the definite predetermined formula requirement under section 1.401-1(b)(1)(ii) of the Income Tax Regulations. The field directive concluded that this requirement was not satisfied for such a plan. On July 30, 1996, we issued a second field directive which rescinded the prior field directive and illustrated several plan designs that satisfied the definite predetermined formula requirement. You have asked whether the first field directive was rescinded in its entirety or was limited to the illustrated plan designs. The first field directive was revoked in its entirety. Consequently, the second field directive should not be interpreted as applying only to the illustrated plan designs, but rather to all plan designs. A plan would not violate the definite predetermined formula requirement if the employer has discretion to determine the amount of the contributions to be allocated to particular groups of employees defined under the plan and the plan specifies the method for allocating these amounts among the employees within each group. The number of people in each group or the number of groups is immaterial provided that each group is identifiable under the plan and the identity of particular employees in each group is not subject to employer discretion. It is also immaterial that the purpose for forming the groups is to satisfy the cross testing requirements under section 1.401(a)(4)-8. For example, a plan with defined groups including a group with one person (i.e. 100% shareholder) would not violate the definite predetermined formula requirement. Although the plan can provide for employer discretion to determine the amount of employer contributions for each group, the plan must require that the employer notify the trustee, in writing, of the amount of contributions for each group. This requirement does not mean that the plan must provide the specific amount of contributions for each group. Instead, the plan must provide that the trustee be given written notification from the employer as to the amount of the contribution to be allocated to each group. If you have any further questions regarding this matter, please call Mr. Al Reich of Technical Branch 5 at (202) 622-7976. Date Published: 03-13-1998

niceguy, i have 100 cross tested plans and i amended them all to contain language stating that each hce is in his or own classification. the irs says you can do this and it will not violate definately determinable as long as the employer gives the trustee a letter of direction each year. there is authority that directly supports this. i have received determination letters approving this language for all of my plans as well.

there is one exception to the rule stated above and that is if the company sponsoring 401(k) plan or retirement plan does not have any common law employees. in other words if the company has only one employee and that employee is the owner, the plan will not be considered an ERISA plan and you dont get the creditor protection afforded by ERISA.

harwood, where is that in the erisa outlines?

next question- how would you report the distribution. i was thinking you would do it like a 402(g) but i am not sure.