Dowist

See the flush language at the end of IRC ss 4975(d) - certain "shareholder-employees" can't take loans.

You should review the plan document. Often there is a provision that deals with this issue (payment to minors/persons with an incapacity). Arguably, ERISA would preempt any state laws regarding whom the plan can pay - the plan should be able to follow its own rules if has any - this assumes the plan is subject to ERISA. However, ideally you'd both follow the rules of the plan and get it to the right person under state law.

You'd have to read the plan, but if the employee was credited with a year of service when she left (had 1000 hours of service in her first period of employment - note she wouldn't have to be employed for a 12-month continuous period), she would still have that year (under IRS rules and ERISA)when she came back and would have to be let into the plan immediately (general rule). If she didn't have a year when she left, she starts over. Caveats: 1. If the plan was an elapsed time plan, she might not have a year of service even if she had 1000 hours if she wasn't employed for the full 12 months. 2. If the plan had a 2 year eligibility standard (as opposed to a one year or less standard), you can disregard service after a one year break in service (500 or fewer hours in the computation period), which would mean you could make her start over - but this would be unusual. Basically, I think you may be wrong and they'll have to bring her into the plan immediately (but look at the plan and the rules - IRC ss 410 - which tell you when you can disregard prior service).

It wouldn't hurt to have someone -preferably an attorney- look at the correction to see if it meets the conditions for voluntary correction. Some mistakes can be corrected voluntarily and without IRS approval - but if you take this route you'd better be comfortable that the correction falls squarely within IRS guidelines. If a correction is not eligible for correction without IRS review, it would need to be submitted to the IRS under various programs that are set up for this. (Even if it is eligible for correction without IRS review, there may be situations where you would want to get IRS review anyway, such as where you're not entirely sure if you qualifiy for the voluntary correction without review or where your correction method is outside IRS guidelines). This is a matter of judgement, and to protect yourself it would be helpful to have the attorney's letter in your files indicating that the correction appeared to be appropriate. Or the attoreny may tell you the method your recordkeeper has adopted is not appropriate, and you need to know this now so that you can get additional corrections from the recordkeeper.

A 403b plan is not subject to 411d6, but there's a similar rule in ERISA. If there was a year end employment requirement, the benefits haven't accrued yet. BUT Why was the er making contributions as it went along if there was a requirement that the ee be employed at year end? This is not a particularly good thing to do administratively, and would be inconsistent with most 403b providers investment capabilities - they generally don't have a good place for suspensed amounts (Is it possible there isn't a year end requirement? If not, the amounts have probably accrued.) But even assuming a year end requirement, what have the ees been told? Are you taking away something at the last minute that everyone was expecting? Will the employer request a refund, or will it just allocate what it has already contributed? The former doesn't sound like a good idea (pushing it). If the latter, and if there is a year end employment requirement and if the employes aren't going to get really depressed by this, it may be ok.

What regulations are you talking about? There's nothing that prohibits rolling over 401(k) contributions, provided that the plan allows payment in the first place (and the plan can allow payment only on separation from service, 59 1/2 and hardship).

What do you do with the forfeited amounts? It seems like more trouble not to 100% vest. If the forfeitures are allocated only to current participants (no new participants added because plan is frozen) you could have coverage problems. Also you'd have to allocate the contributions on the basis of compensation, which means you'd have to collect data and all of that. Theroetically the amendment itself could be discriminatory under the regs. I don'think you have a partial termination issue, but you'd better check the regulations (there is a special rule for partial terminations and pension plans).

I believe that the PBGC has the right to take over the plan and can go to court to get it if you don't make the agreement (assuming you've stopped making required payments). So far as the terms of the agreement - I would think they would be consistent with ERISA rules that apply in this situation - in other words, they would simply reiterate the responsibilities of the employer under ERISA; I would review those rules to be sure that this is the case. So far as the numbers - it's probably too early to begin negotiating the amounts - the PBGC will want to get all of your data and will probably want to work with your actuary. At some point you would be getting a bill from the PBGC and that is the point to begin negotiating.

I haven't heard of this legislation - it would be a major change because the rules are oriented towards insurance and mutual funds (the only allowable investment vehicles now).

1. The ERISA 404© regs. (self-directed plans) apparently do not require plan sponsors to automatically send out new prospectuses - I beleive the requirement is that participants get a prospectus when they first make an investment direction in a particular fund. Also, they may have a right to request a prospectus. 2. The mutual fund companies have an obligation to send a prospectus to the owner of the shares of the fund - but this would be the plan itself. 3. The participants' interests in the plan may be considered a security interest (it depends upon whether there is company stock in the plan), in which case the plan has an obligation to send a prospectus for the plan to participants.

You're right. I see no problem with limiting contributions to a certain amount - say a percentage of compensation or the C election.

I would think that your client would have the right to get assurance from the employees that the amounts contributed don't exceed the exclusion allowance, before contributing an amount in excess of that amount. If the only way to get the extra amounts into the plan is if the ees have made a special election, I would think you could condition the extra contributions upon receiving such assurances.

It depends on what you mean by a TIAA-CREF plan. TIAA-CREF is an insurance company. My understanding of a TIAA-CREF plan would be a plan of a college or nonprofit employer that the employer has decided to provide through TIAA-CREF - the plan is invested in TIAA-CREF contracts and is administered by TIAA-CREF for the employer. Under this definition a person would most definitely not have the right to direct the employer to invest the money with someone other than TIAA-CREF. On the other hand many employers have arrangements in which TIAA-CREF is not the only insurance company/mutual fund in which the ee can invest. Generally, however, in these arrangements the ee doesn't have unlimited choices of investment companies, but is limited to those companies selected by the employer.

See question 27 of Reg. ss 1.401(a)-20. As I understand the rules, your client is out of luck, and will need to get spousal consent, a divorce, or must show that "the participant is legally separated or the participant has been abandoned (within the meaning of local law) and the participant has a court order to such effect..." Don't ask me what the clause in quotes means - probably a matter of local law - and it's not clear whether the court order is required for the legal separation (it's difficult to base one's interpretation on the absence of a comma).

If the terminated plan is not a dc plan without an annuity option, the only alternative would be to purchase an annuity for him - if he never responds I don't think you could maintain the plan just for him (you wouldn't want to be responsible, and the cost would be hard to justify as compared to the purchase of an annuity). The annuity would give him the rights he had under the plan (such as the right to defer to age 65, and forms of payment allowed under the plan).

You apply the rules mechanically - if you don't have 5 or fewer owners that own 80% of both companies, you don't have a controlled group - at least not a brother-sister controlled group. If these companies are affiliated (work together or do business with one another) you might have an affiliated service group - see ss 414(m).

Do you mean that once the bonus is determined for the division, that employees will be able to defer 1/2 of the their bonus to a 401(k) plan - this is (or used to be) a common way of doing 401(k) plans. You could also do this by having a special deferral election that applies just to bonuses - this is fairly common. If 1/2 of the bonus will be contributed as a profit sharing contribution, and the bonuses are different for the different divisions, you do have some discrimination issues - but I believe it can be done if the plan is specific as to how to allocate the contributions that are made to the plan on behalf of all of the divisions - this the "definitely determinable benefits" issue, which was discussed extensively several years ago in connection with an IRS field guidance memo.

That is my understanding. The matching contributions part (and after-tax contributions) of a plan is disaggregated for coverage and discrimination testing, so it doesn't really matter which plan it goes to.

1. The plan can't pay out immediately unless the order says to pay out immediately AND the plan itself states that it will pay out immediately if ordered by a qualified order. If the plan allows immediate payout, you might point this out to the AP and suggest that he/she might want to get the order changed to provide that payment will be made immediately. Without this change in the order, I don't think you can pay out - you'd be violating the terms of the plan and the order. 2. On the after-tax contributions, again I think this is something that should be covered by the order - the order should say something like "take it all from the after-tax account to the extent available." As plan administrator, you could say that the order was ambiguous because this issue is not addressed and that you won't consider the order qualified unless it is changed to address the issue. If this is a problem, I suppose you'd have to follow some sort of administrative practice - my suggestion would be to split it up eqaully between the parties. 3. So far as not setting up a separate account for the AP, that doesn't make sense to me - it's going to be a lot more of a hassle to the plan to keep track of the earnings for the AP's portion of the benefit if you don't separate - also you get into issues like the after-tax contributions - better to take care of those up front by splitting the account.

The transfer of property to a db plan to satisfy minimum funding requirements is considered a sale of property by the employer to the plan, which would be a prohibited transaction, unless it is eligible for an exemption.

I have a couple of questions on the suspense account issue. 1. What is a suspense account anyway? Would it be defined as an amount that is unallocated after the end of an allocation period? Or after the end of the year? When is it permissable to prefund - only in the year in which the allocations occur? - or could you make a contribution in year 1 that would be allocated in year 2? I guess my real question is what is the purpose of the suspense account restriction? Is it to prevent prefunding? I suppose it is - but it would seem to me there would be a distinction - at least on the IRS audit level - between inadvertent and intentional prefunding. 2. My second question is - what are you supposed to do if you inadvertently prefund? The money purchase pension plan question is a good illustration of the dilemma. It seems like the prefunding with quarterly contributions is a good idea - certainly the rules would want to encourage early funding of employer obligations (underfunding being a much more sever issue than overfunding). And unlike a profit sharing plan, you can't just allocate the excess amount contributed - you would really have a qualification question then. This seems like one of those areas where you just have to do what you have to do to correct the problem, and try not to do it again.

The rule of thumb is that you do NOT have an exemption if either: employee elective or after-tax contributions are invested in employer securities, or if the participant has the right to direct the investment of part of his account in employer securities. If only employer contributions (including matching contributions) can be invested in employer securities and if those contributions are mandatorily invested in employer securities, you have an exemption. Obviously, this is a hugely dangerous area for a nonexpert, and you should have professional help if you are working with a plan with employer securities (if you are not yourself an expert).

1. No. An order is not an order unless it is signed by a judge. 2. What would the time limit be for? An order is either qualified or it is not. If it is not, the plan administrator says it is not, and then it is up to alternate payee to change it so that it is qualified. You couldn't put a time limit on that. On the other hand you might be asking about the 18 month rule here. If you take the position that the status of the participant's benefit is unclear while the order is being revised, the plan could suspend payments to the participant during that period (up to 18 months) to the extent that those payments would have been required to be made to the alternate payee. This is the 18 month period - the plan is required to withhold payments to the participant to the extent they would have gone to an alternate payee for up to 18 months while the confusion about the order is being cleared up. 3. I suppose that you might consider the 18 months to be a time limit on getting the order right - if the order is still not qualified after 18 months the plan can release the payments to the participant. To be honest I've never had this situation and it raises many questions as I sit here typing. Ex. if the plan makes installment or annuity payments, do you just release the payments that have been suspended for an entire 18 months, or all payments that have been held up during the 18 months? I guess that the 18 months is a period to clear up questions, but it is not indefinite - otherwise the former spouse could tie up the participant's account/benefits forever by submitting bogus orders.

Do you have a "qualified domestic relations order"? Has it been reviewed and approved by the plan? If you don't know, you need to find out - ask your attorney. If you do have a qualified domestic relations order that has been approved by the plan, the answer to your question should be in that order. If the answer is not in the order, or if it is not absolutely clear what will happen, or if you don't like what the order says, you need to get with your attorney pronto (certainly before your former spouse dies) and get everything cleared up.

ERISA doesn't apply. State insurance laws don't apply (it's not insurance). COBRA, HIPAA, etc. do apply. But is the basic law governing self-funded governmental plans simply state contract/state employment law (subject to the authority of the entity to establish such a plan)? Are there other considerations?