k man

a client has been making contributions to his Money Purchase plan but does not have compensation to justify the contributions. He has K1 income and thus is not entitled to make contributions to the MP Plan. What should he do to remedy the situation? Is this handled like a typical "non-deductible contribution." Are these contributions subject to the plan asset rule?

Phil L, do you know what the safe harbor rate of return is that should be used? ie. if the plan earned less than 10%, should we use 10% when claculating lost earnings?

Phil L, did you ever determine whether this is the correct method or whether there is some other way to calculate the excise tax?

With regard to "wrap around" plans (ie. non-qualified plan working with a 401(k) arrangment), there are a couple of PLR's out there that state that a participant must make his deferral election by December 31 of the prior plan year in order to "satisfy the 401(k) cash availability rules." what would happen if a person decided to enter the non qualified plan in the middle of the plan year without making the prior year election?

it definately creates a large adminstrative burden. the fund companies dont have participant identity. we as record keepers have the identity but then must order the correct amount of prospectuses and either send to the client (trustees) or to the individual participants. either is still a large burden.

what about providing updated/new prospectuses on an ongoing basis. every year the prospectus is changes. the regs dont seem to contemplate this.

I dont see where the 5500 asks for the specific amount of days late. Is it on the 5330 and accompanying calculations?

Has anyone filed a 5330 excise tax return on this issue and been audited as a result?

Does anyone have a form letter they send to either trustees or participants/terminees concerning the change of 401(k) providers/blackout period? If so, can you e-mail it to me?

this might be off on a tangent but if the investment is legal how is the moral issue relevant? I think of the moral issue as similar to whether or not a plan should invest in so called "socially responsible" mutual funds. when push comes to shove the performance of the investment will be compared with the performance of similar investments. Thus, I would imagine, the majority of participants would not care what there profit sharing plan was invested in as long as it was safe and the performace was good.

My point was not to defend life insurance but just that i think that they are very different investments. I cant answer the question as to whether they are actually common but we dont see or use them in any of our plans.

Absent the existence of limitations or provisions concerning this type of investment in the plan document, you would not be able to say they are an uacceptable investment, per se. However, unless the plan is an individual account plan or the assets are actually being "held" by and insurance company, it is not likely that they meet the definition of qualifying assets. Furthermore, there might be questions concerning diversification and whether the investments are actually prudent. Lastly, I do not think you can make the statement that these investments are "no worse than life insurance." They really are two different things. Viaticals are not Life Insurance. In fact, there are many moral issues concerning viaticals but they are really are not relevant in this case.

Is it a prohibited transaction for a plan to purchase property from a trust for cash where the grantor of the trust is the spouse of the plans trustee? I know it is a prohibited transaction for the plan to purchanse real estate from a party in interest/disqualified person (spouse). However, I am thinking that if the spouse is merely a grantor of the trust, whether or not there was a PT might depend on whether the beneficiaries of the trust are actually disqualified persons.

I would say no.

after some further research i agree that it is pretty straight forward. the plan document already provides for subsidiaries and i see the issues being more corporate taxation and balance sheet than anything else.

With regard to top hat plans, there are a couple of PLR's out there that state that a participant must make his deferral election by December 31 of the prior plan year in order to "satisfy the 401(k) cash availability rules." what would happen if a person decided to enter the plan in the middle of the plan year without making the prior year election?

We represent a client that is a U.S. based subsidiary of an international holding company. the US company also has several subsidiaries. The US company currently sponsors a non-qualified deferred compensation plan. They would like to expand the scope of the plan and allow some executives from other subsidiaries in to the plan. What issues does this raise in light of the fact that the contolled group rules in the code are not applicable? Can this be as simple as amending the plan so that it is open to the executives of the other companies? any information would be helpful.

It should definately be no problem "actually providing" prospectuses and other information at the time of enrollment or during the annual enrollment meeting but what about in the case of a daily valuation plan where the participant trades into a fund that he does not have or has not yet received a prospectus?

I would say they are more closely akin to investment advisory fees as opposed to management fees. i am referring specifically to asset based fees charged by an Registered Investment Advisor to the plan for assisting the trustees in selecting and monitoring the investment choices in the plan.

Does anyone see a problem with paying invesment advisory fees out of plan assets in light of the recent DOL opinion on fees?

Review the following article: http://www.benefitslink.com/reish/articles..._checklist.html you might find it helpful

If you want to apply the new rules when calculating minimum distributions, do you need to amend the plan this year, or can you take care of it when you update for GUST? The regs say you must adopt a model amendment but i do not see such an amendment in the regs.

I have three questions concerning the top paid group election: 1) In the case of an employer with more than one plan, must the employer use the top paid group election for both plans? 2) Does the employer use the totals of employees participating in both plans combined when determining who is in the top 20%? In this case, no one who participates in plan A is a participant in Plan B and vice versa. 3) For the employees with less than 6 months of service, is that 6 months of service for the lookback year or total service? I would appreciate assistance on any one of these points.

there was an item that appeared in the benefitslink newsletter that says that participant account statements can contain a legend that says something like "Please review this report and notify us of any discrepancies within 60 days. After 60 days, corrections will be made on a current basis." Is a policy like this permissable, particularly if the error was one made by the record keeper?

I think you really have one issue. That is getting the plan to actually pay the expense without having contracted as such. If the terms of the original service agreement provide that the plan will pay, you are in good shape. The bankruptcy issue may or may not be a problem in my mind depending on the answer to the above question. Pension assets or even forfeitures for that matter are not part of the "bankruptcy estate." This could be a double edge sword insofar as if you contracted with the corporation, you are really just a mere creditor and must stand in line. Another thing you could do would be to enter into an agreement with the plan today for services. if you do this, you might want to seek the approval of the bankruptcy court.