R. Butler

The Schedule P is not required, but as WDIK points out it starts the Statute of Limitations. Whether or not there are loans is irrelevant.

I could have told Chuck Rangel that that stradegy wouldn't work. I used to do that when I was little; if Mom & Dad didn't give me my way I would lock myself in my room. I never got my way, as matter of fact I got whipped for trying it.

We have had this issue come up several times this year. Ccassetty is right; don't be a party to this. There used to be Q&A by Nicholas Ferrigno & Frank Bitzer (it seems to have disappeared.) They suggested that if the employer participated in such a sham, the employer would be exposing itself to liability for fiduciary violations of ERISA. There was another Q&A by Martin Silfen (which also seems to have disappeared) stating that courts have held there is no separation of service if there is an understanding that the employee will return to work. Mr. Silfen cited Ford E. Wilkins, 54 T.C. 362 (1970).

Assuming no cure period or the cure period is over, based on the facts you set forth there would be a deemed distribution. A 1099-R would be issued. However, unless there is a distributable event the loan is not offset and it is still trakced as an asset.

The cite is 411(a)(5). (5) Year of service (A) General rule For purposes of this subsection, except as provided in subparagraph ©, the term ``year of service'' means a calendar year, plan year, or other 12-consecutive month period designated by the plan (and not prohibited under regulations prescribed by the Secretary of Labor) during which the participant has completed 1,000 hours of service.

It seems to me you are correct, based on the facts you have given. Always check your document, but for vesting purposes why would there be a short year from 11/1/99-12/1/99? Vesting periods must be specified 12 month periods.

The antiassignment rules are found in IRC §401(a)(13), Treas. Reg. §1.401(a)-13 and ERISA §206(d).

Blinky is correct. Its that 3rd eye it allows him to see things that mere mortals can't.

I also agree with asire2002, but as asire points out in the initial post this genrally won't be an issue because terminated employees rarely will continue to be a party in interest.

If there was already a 401(k) Plan in place it seems to me that the Safe Harbor provisions would have had to have been adopted January 1st.

This issue can be avoided. As mbozek points out if loan repayments are required via payroll deduction than a terminated employee couldn't have a loan. You probably have a default when the person terminates because there is no payroll deduction. If you want to remove all ambiguity simply state in the loan document (and the loan agreements) that payment will be acclerated upon termination of employment.

I just assumed we were talking about a post EGTRRA year. I need to quit doing that. You need to use the old definition of key employee. 1. More than 5% owner 2. More than 1% owner whose comp. exceeds $150,000 3. An officer having comp. in excess of 50% of the annual dollar limitation for DB plans in effect for the year. 4. One of the 10 largest owners having comp. in excess of the annual addition limit for the plan year.

Key employee: 1. More than 5% owner 2. More than 1% owner with comp. greater than $150,000 3. An officer with comp. greater than $130,000

I don't see anything that would preemt the Notice requirement for a spinoff. http://benefitslink.com/modperl/qa.cgi?db=...b=qa_401k&id=52

Your plan document should specify distributable events. Also see §401(k)(2)(B) for restrictions on distributions of 401(k) contributions. I am always leary of the term "temporary employee". What does it really mean? If the employee is really temporary he/she won't be employed too much longer and can probably take a distribution upon termination of employment (but always check the document). From the limited situation you describe, I'm guessing the administrator is correct and the employee isn't entitled to a distribution.

Its not hard to lead me astray. I really don't understand the initial question anymore. Blinky, were you in the movie Finding Nemo?

If thats true and you only 1 HCE you've got a nondiscrimination issue. You are effectively giving different match rates for the HCE than for the NHCE's. See 1.401(a)(4)-4(e)(3)(iii)(G).

Isn't the HCE going to forfeit the matching contributions related to the matched deferrals that were refunded?

You'd have to switch to current year testing. Your prior year NHCE% would be 0.

Forfeitures most definitely can be used to increase the disretionary match. In these cases the money is only allocated to those who deferred. The site Bob K references clearly contemplates these situations.

Let me modify this part of my previous response. If the document imposes the 21 & 1, then obviously they are excluded because they are not participants.

Otherwise exudables are not excluded from coverage or the ACP, they are just tested separately. If the document has a last day or hours requirements, participants not meeting that last day or hours requirement are not included in the ACP test. Lets look at the question: "Which of the following describes participants that can be excluded from the ACP test? a. A participant who cannot contribute due to a hardship distribution taken in the last six months -- They cannot be excluded from the ACP test. b. A participant who elects not to defer -- They cannot be excluded from the ACP test. c. A participant who is not included in the minimum coverage tests for the 401(m) component of the plan. -- To not be included in the coverage test the participant would have terminated with less than 500 hours. Depending on the Plan's provisions these people can be excluded from the ACP test. Is it the best question in the world? No, but as has been pointed out every multiple choice contains bad questions. I have taken several; I can also affirm that. The problem is that you are mixing issues. The question does not ask about the coverage test, it asks about the ACP test. They generally don't try to trick you. If you analyze the 3 choices the only one that can ever be the correct answer is "C". The fact that you have spent this much time analyzing this one question, leads me to have little doubt you will pass this test.

I plan on taking the C-2(DB) in November. Out of the required readings I am hoping I can get by with only the Study Guide. I've got the ERISA Outline Book and I'll probably look at old exams. Is this sufficient for the average candidate? Thanks for any guidance.

Gilmore now that you mention that, you are correct Answer C to Question 2 is not a true statement. The regs are pretty clear that you are considered age 50 on January 1 of the calendar year you turn 50. Good thing I don't need to take this exam again.

If a plan has a last day requirement or imposes a minimum hours requirement, employees failing to meet those requirements are excluded from the ACP test (See 1.401(m)-1(f)(4)). Thus although "C" won't be correct in every circumstance (ie for plans that impose last day or hours requirements), it is the best of the three choices. I don't really follow question 2 either. If I was taking the test I may have guessed "A" simply because B,C,&D are very definitive statements and answer A uses the word "may", but really I don't see that "A" is not true.