k man

is there any reason- regs or otherwise - that prohibit or restrict and employer from having an integrated DB and an integrated DC plan?

once again i am reviving this issue. has there been any revelations as to electronic delivery of prospectus in order to satisfy 404©?

if a 5500 is filed on time but with a missing scedule (CPA audit report), what are the ramifications? the cpa report will be filed eventually but it is currently not complete. would the DOL consider the 5500 in fact filed or is an incomplete 5500 mean a late 5500? Is there anything that can be done besides filing the CPA report to minimize the damage?

What would be the consequences of the following: Participant defaults on loan and does not cure within the allowable grace period; TPA does 1099's at the end of the year; prior to 1099 being issued, participant decides to bring the loan current; TPA allows this and does not issue a 1099. Could this cause a problem for the plan or just the participant/Taxpayer if the IRS catches this on audit?

when completing the 5330 (line 26a(a)), what is the date of the prohibited transaction? is it the taxable year it occurred or is it the date the deferrals where late or something else? Also, when calculating the lost earnings and using the underpayment rate, do you divide the rate of return by the appropriate amount of days?

I have always interpreted the "amount involved" to be the lost earnings or interest that would have been earned. That would be your base for the excise tax.

Does anyone have an opinion as to whether or not sponsors should be submitting prototype plans for determination letters in light of IRS Announcement 2001-77. Typically we deal with clients that sponsor either garden variety non-standardized 401(k) and/or profit sharing plans as well as some cross tested plans which we will be restating under the volume submitter program. As 2001-77 gives extended reliance that the plan satsfies the form requirements, is there any meaningful reason to submit these days?

I think there are many arguments that can be made and there really is not alot of case law on the subject thats why i suggested getting an order from the bankrupcty court. here is an excerpt from the case i mentioned. it was actually out of the 6th circuit. In addition, the court found that while the bankruptcy code exempts a debtor's interest in a qualified plan from the bankruptcy estate, this only applies to the funds already in her account, including the amounts she repaid on the loan prior to filing for bankruptcy. It does not apply, however, to money to repay the loan in the future. As a result, the bankruptcy plan was required to treat the loan repayments as part of the participant's disposable income in the bankruptcy estate and available to creditors, the court said. see In re: Robert H. Harshbarger, et al., United States Court of Appeals, Sixth Circuit, No. 94-3090, September 19, 1995 (CCH cite ¶23,915Z)

well whether or not they meet the definition of voidable preferences as such does not change that the ninth circuit is on the record as saying that the participants in bankruptcy cannot make payments to themselves at the expense of other creditors.

how much time is necessary for review? is their a time period required by the regs or ERISA?

medusa, i think you have a problem on this one. the loan payments are what is known as voidable preferences. the participant is essentially favoring himself when paying back the loan to the detriment of other creditors. thus, i would immediately stop taking them in light of the pending bankruptcy proceedings. however, the money already in the plan is another question. on the one hand it was improperly contributed to the plan; but on the other hand it is a plan asset now so you have to be careful about taking it out. Consequently, before taking any participant money out of the plan, I would request the the trustee obtain an order from the bankruptcy judge directing you one way or the other.

we use the plan document of a major provider and it covers all the issues. the problem in this office is in interpreting the law (new and old) and the proposed regulations. can you help with this?

I am in agreement although the authority on the issue only comes from a couple of federal circuits. I would tend to agree that the participant's repayment would be a preference not allowed by the bankruptcy court or trustee.

someone please help settle this disagreement concerning distributions. a 40 year old participant in a 401(k) dies. his beneficiary is a designated non-spouse. which rules apply? it is my contention that the new proposed regs apply. specifically the rules concerning a participants death before required beginning date. someone else says this is not applicable since the participant has not reached 70 1/2 and that there is a window period between 70 1/2 and the Required beginning date. in this case i believe the beneficiary has a choice under the new rules to receive payment in a 1) lump sum; 2) 5 year payout or 3) the beneficiaries life expectancy. is this correct?

great so is there any type of formal notice required for this cost sharing or is it something that can be accomplished via a memo to employees with an election form for the amount of salary the employee wants deducted.

well all good points. could you give me the cite for the reg? i am referring to a premium conversion type account so the participant is seeking to spend the money on their health insurance coverage and the cost is the cost. there is no choice.

do you need to obtain a salary reduction agreement from an employee in order to take money out of there paycheck for health insurance costs (pre-tax)?

due to the increasing cost of health insurance, an employer would like to shift more financial responsibility for health insurance to employees. currently, the employer pays 100% of the cost for the employee. the employer has a flex plan with a premium conversion/salary reduction component used for dependent care, health insurance for dependents etc.) Would it be permissable to make such a change (ex. employer pays 85% employee pays 15%) and allow the employee to use the premium conversion/salary reduction plan to accomplish this so the employee can use pre-tax dollars?

does holding a promissory note for a benefit plan qualify as having custody within the meaning of kennedy and the SEC

I know 2001-17 outlines several methods concerning how to allocate lost earnings when utilizing various correction methods; however, what about losses? Obviously in light of current market performance, a participant would have been hard pressed to earn a positive return (at least for the past 18 months). Do you just give them a money market rate of return or do you use the statutory rate similar to the DOL method?

Does anyone know anything about the laws in different states concerning authorizing payroll deduction electroinically for a paperless plan loan?

My opinion is yes the plan has a "favorable letter." The basis for my opinion is Rev. Proc 2001-17, Section 5 (Definitions), .01(4)(a). "....a plan has a favorable letter if either (a) the Plan has a favorable determination letter....that considers TRA 1986."

2001-17 states that the sponsor cannot use VCR if they dont have a determination letter. can this be rectified by simulatenously submitting the plan for a determination letter with the VCR? There is a considerable difference in fees for plans with 300 or more participants.

A Plan Sponsor chooses not to hire an investment advisor or an investment consultant to assist in selecting investments, but rather appoints an investment/advisory committee (employees of plan sponsor) to select and monitor the investments. The plan has individual trustees that are also employees of the company. In this case the trustees are different from the committee. Clearly, the trustees are fiduciaries. The question I have is does selection, monitoring and evaluating investments make the members of the advisory/investment committee fiduciaries as well?

IRS GCM 39310 holds the following: 1. In the case of a qualified plan which provides that participants who separate from service will be paid their vested accrued benefits, a participant who separates from service and is paid his vested accrued benefit need not become further vested if the plan terminates before he incurs a break-in-service. 2. A partially vested participant who terminates service and who will not suffer a forfeiture of his nonvested accrued benefits under the terms of a qualified plan until he incurs a one-year break-in-service must be vested in his accrued benefit, to the extent funded, if the plan terminates prior to his incurring a break-in-service.