R. Butler

I have been told by DOL auditor that they generally will not do anynore than call the Plan Sponsor unless more than $10,000 was involved. He said they just didn't have the resources. It may have been that guys opinion, I don't know. I find it curious that they would refer anyone to ASPA. What exactly will ASPA do?

I don't necessarily disagree with MBozek that there may be a problem here, but I'm not sure that it is all that black & white. I agree with Actuarysmith that expenses are not necessarily going be disclosed separately. It depends on the functionality of the TPA. I don't necessarily agree with mbozek that the Summary Plan Description must expressly state the fees that will be charged to the plan. In Advisory Opinion 97-03A the DOL puts forth the porsition that if the documents and instruments governing the plan are silent as to the payment of administrative expenses, the Plan may pay them. Now having said that, as mbozek points out, the employer does have fiduciary duties that may have been violated. It still comes down to cost/benefit. Is the cost of pursuing the issue more than the benefit you are likely to receive?

Relius has always confused me with loans. If a person is 80% vested and takes a loan, Relius takes the money from the total account balance and makes the person 80% in the loan. This doesn't make any sense to me. I have a terminating participant requesting a distribution. He has an outstanding loan (only about a month old.). Relius wants to distribute about $200 more than I think should be distributed. Example: Balance before loan is $3,988.85, vested balance is $3,191.08. Participant takes $1,500 loan. Relius Profit Sharing Source Balance after loan $2,488.85, vested balance $1,991.08. Loan Repayments of $119.04. Relius Profit Sharing Source Balance is $2,607.89, vested balance $2,086.31. It seems to me the initial loan should be shown as a withdrawal from the vested balance. Balance after loan is $2,488.85, but the vested balance should only be $1,691.08. After considering repayments Balance is $2,607.89, but vested balance should be $1,810.12 (3,191.08-1500+119.04). Am I missing something pretty basic? If I am not missing anything, how do I make Relius do what I want it to do (ie, Allocate loan withdrawals/repayments entirely to the vested portion of the account.

It is fairly well accepted that a firm shouldn't perform both the TPA function and the audit function. There are many CPA firms that do both. Are they just interpreting rules differently or is there is something in the setup of the company that makes it O.K. (i.e. separate divisions)?

We are submitting determination letter filings on a new comparability profit sharing plan. We are going to request a determination on the ave benefit test and general test. Does anyone have a template for Demo 5 & 6 they would be willing to share? Would it be acceptable to send in the general nondisricmination report Relius creates as my Demo 5 & Demo 6?

Assuming the 401(k) Plan document allows for rollovers from a SIMPLE-IRA and assuming the SIMPLE-IRA has been in existence for longer than two years than the participant should be able to rollover into the Plan.

Stress the tax benefits. Even if return on investment is down 10-15%, you come out ahead with the tax break. Also low to middle income tax savers get a tax credit. Having said this, Blinky's idea sounds appealing to me.

I am fairly certain it is for requests made after December 31, 2001 (EGTRRA §620(e)).

Small employer adopts a new comparability profit sharing plan, effective 01/01/01. Its a Corbel volume submitter, so we are filing a 5307. Generally we don't recommend that the Plan Sponsor pay the extra money for a determination on the average benefits test. However, it seems to me that this Plan qualifies for a waiver of the user fee. I assume that the waiver applies to the extra the average benefits test too. Is that assumption correct? If it the waiver does apply to the average benefits test, is there any reason not to request the determination letter?

I apologize, Gary Lesser is correct. I misread the Q&A. It states that they should be return by the due date of the employee's tax return. It does not state that they are returned through the employer. 408(d)(1) does apply provided that the requirements of 408(d)(4) are met. 408(d) deals with the taxation to the employee. Again I apologize, I just misread it.

Your last post seems correct. We've had to request that checks be reissued for other reasons. The investment company usually reinvests as of the distribution date. The Plan Adm. is generally responsible for any gains that would have accrued. Going back to one AndyH's posts, who gave the recordkeeper authority to do this? The recordkeepers with whom we work cannot distribute without authorization. I have seen recordkeepers send out requests to the Plan Administrator for a blanket authorization to distribute all balances under $5,000 upon termination of employment. We reccommend that Plan Administator not give the recordkeeper that authority. I would find out where they are getting their authority to distribute.

The employee deferrals are also being returned to the employer. The employer should be able to correct through the payroll.

Even if balances are under $5,000, the §402(f) Notice must be given prior to the distribution. The Notice should be given at least 30 days prior to forcing the distribution. Also, I don't see the qualification issues if the checks are reissued. If the participants lost the checks we would certainly reissue. Assuming the participants have not cashed the checks, how is this all that different?

I don't see why the employee's would have to pay an excise tax. The contributions are being returned to the employer. See IRC §408(d)(4).

Go to the ASPA website and view the 2000 IRS Q&A #36. This exact question is asked. The response was that the SIMPLE IRA is invalidated. The contributions would have to be returned by the due date of the employer's tax return. The 25% penalty would not apply.

I agree with Tom Poje, particularly if the fee charged by the money manager is significant enough that it effectively prevents participants with balances under 100,000 from attaining the service. The fact the minimum balance requirement isn't stated in in the plan isn't conclusive, it is merely a factor to be considered. Two other factors, as Thorton specifies, are the cost for services and whether reasonable alternatives are available.

See Pub. 947. A non-IRS form 2848 is acceptable, sort of. If an individual has valid POA, the attorney in fact can attach a completed 2848, along with a copy of the general POA. That would be acceptable. My concern is whether a statement in the annual data collection package is a valid POA. I am not certain, but doesn't a non-IRS POA have to be certified by the state somehow?

I agree with Alf. As long as the matching formula satisfies the safe harbor limits I don't see any basis for running an ACP test on matching contributions attributable to cath-ups.

Is there anything preventing employer with a DB Plan from adopting a SEP? I am fairly certain they couldn't use the IRS model form or a prototype, but I don't see why they couldn't have an individually designed SEP. Assuming employer can adopt a SEP, then would the maximum contrib. to the SEP be the 25% of comp. minus the DB minimum funding requirement? (Just assume all participants in both Plans would be the same.) Thanks for any guidance.

You would be maintaining the SIMPLE plan in the same calendar year as the qualified plan. I don't see that it matters that the SIMPLE plan was maintained from Jan. - July and the qualified plan from August - Dec., you still maintained a SIMPLE plan in the same calendar year.

It is my understanding that you cannot maintain a SIMPLE IRA in the same calendar year that benefits accrue under another Plan. The fact that you terminate the SIMPLE IRA and then start the qualified plan does not change the result.

Did they not give notice at all or just fail to give within 30 days? If they gave notice, but just less than 30 days prior to the start of the plan year, can you make an arguement that the date actually provided was reasonable under the circumstances? The IRS does not specifically require that the Notice be given 30 days prior to the start of the year, the IRS merely sets forth that Notice will be deemed timely if given 30 days prior. If Notice not given on a timely basis, the Plan is not a safe harbor plan for that year. The Plan would be treated in the same manner as a traditional 401(k). I agree with T. Poje as to the testing method. Notice 98-52 provides that if a Plan meets Safe Harbor, the Plan is deemed to have used the current year method for that year.

If the individuals affected are pre-dominantly NHCE's I don't see why you couldn't correct via a retroactive plan amendment. Similar to how you would correct inclusion of an ineligible employee under Rev. Proc. 2001-17.

I am trying to determine whether an Audit is needed for a Profit Sharing Plan. Plan Year is calendar year and has one entry date (01/01). Plan document provides that generally, rehired former Participants become Participants immediately upon rehire. Assume former Participants are rehired during 2001; such Participants did not have account balances at 01/01/01. Are such Participants considred participating at the beginning of the year for Audit purposes. I am hoping that since they weren't employed at 01/01 that the answer is no, however, I am bothered by the fact that the Plan has only one entry date. Are such participants deemed to have retroactively entered as of the first day of Plan Year?

If employer maintained a SIMPLE within the past 3 years that employer would not be elgible for the credit. A SIMPLE IRA is considered an Eligible Employer Plan for purposes plan for purposes of the credit. See EGTRRA §619.