Erik Read

The other issue in amending the documents to "not include a discretionary PS provision" is that in the event of ADP/ACP failure, you would lose the QNEC/QMAC option for correction - not just Top Heavy issues. I always recommend leaving the discretionary PS language in, and adding the CODA provisions for those that want the 401(k). The document can also be written to maintain trustee direction of the Profit Sharing assets, and allow the participants to direct their deferrals and any company match that may be made on their behalf. We've done this where the trustee, doesn't trust the decision of the employees to manage their retirement in their best interest, and want's to maintain liability for a portion (if there is such a thing) of the assets. Hope that's not too confusing.

We're looking to inform plan participants of the benefits of using Mutual Funds (diversified) vs. individual stocks to help avoid the Enron situation - at least as much as can be controlled. Has anyone seen a communication piece that can be purchased from a publisher - newkirk / communi-k - that targets the benefits of Mutual Funds? PS - I've check both of the mentioned publishers with no positive results. Thanks.

BFree is correct - if a plan is "disqualified" then the assets become taxable to the participants, and the employer loses any deduction status for contributions to the plan as well - VERY UGLY - don't recommend anyone try it. Pretty rare that a plan would actually be disqualified, the IRS and DOL prefer to have the plan file for what's call CAP, and levy some fines but maintain the qualified status of the plan.

I'll go one further and say we need a little more information - are you the TPA working on the plan or a participant/ex-employee looking for your funds? If TPA, then you need to go the route of finding the trustee's or getting a new trustee appointed to make decissions and sign documents on behalf of the plan. Search the message boards for "orphaned plan" and see other discussions on similar topics. Good Luck.

Some documents also require as part of the rehire elig. to repay the portion distributed, and for the employer to restore the participants non-vested balance as of the previous valuation. Let's check the doc and be sure we know what it says first - as mentioned by Tom Poje.

I'd disagree to some extent. Sounds like your mad about the Profit Sharing contribution not being made on a regular basis. However, there is probably a vesting schedule attached to the contributions, in which case your not lossing the money, just as you mentioned the interest over the period of the year. If the notice was posted to your intranet, that can be construed as "written notice" to the participants in this day and age of electronic notices, this is a grey area, and I'm sure someone will disagree with me. Just my opinion on e-notices and paperless world. If however the decission to withhold the contributions is your deferral contributions, then they have a big problem, deferrals are required to be deposited as soon as they can be segregated from the other employer assets - in some cases perhaps 3 business days, but in no event more than 15 days after the month in which they were withheld from the payroll. Looking forward to other comments here.

If it's reported as W-2 wages and not shown as "Bonus" then yes - it needs to be included.

The loan provision may be the first course of action however, if the participant is looking to take a hardship, my assumption is that they have exhausted their ability to get a construction loan from a bank (another option that needs to be looked at before the hardship is approved). If a bank has denied the participant a loan, then the Investment/Loan committee may have a hard time approving a loan from the plan - credit worthiness and all - which then puts the participant back at the hardship provision. Hope I've laid that out well, and didn't confuse anyone.

I would also say - how is the employer reporting the severance for tax purposes - all in the 2001 W-2 or will the employee receive a W-2 in 2002 for the 4 months of severance?

Thanks for the reply. We're not sure who drafted the original document, that is a looming question. I'll post updates if they occure and I think they're worthy, otherwise, we'll see what happens.

Thanks Larry - that's what I was looking for. I had actualy just thought about doing a resolution/amendment on our end the same time that your reply came through. Now - on to the topic of "finding" documents, if they were filed with the IRS for determination, would someone be able to get a copy from the IRS as a source? Just a thought. Thanks.

Thanks Janet - I'm more concerned about what to do with the no document issue than the calc of the contribution. With all the RA's that are going to need to be done soon - and no document to know what needs to be changed, I'm concerned we'll put the plan into a disqualified state. Any one have ideas? Thanks

I'd check with the wire house or brokerage. Most of them will not allow qualified plans to buy on margin or short unless the plan holds the shares long first. I'd also check the investment policy - since you know he has to have one, and see if that will allow for margin or short sales. Good luck.

Okay - worst case scenario - you are a financial institution, not a TPA, you have a client who opened an account with you in 1997 by signing at that point a document that "certified" the trustee powers, and indicated that their plan was established in 1988. Now - the client has changed CPA firms, and the new CPA would like to perform the annual calculations, but needs the document to follow the formula - YOU DON'T HAVE A COPY, the client seems to have lost their's if they ever had one, and the prior custodians seem to think that the docs are the responsability of the new custodian (you).... now what? Has anyone ever had a situation where you cannot find the plan documents as originally drafted? Client is a sole-prop and files 5500 EZ each year. Idea's? Suggestions? In the event we need to go to the IRS or DOL - who would be named in the filings as the original preparer if we are not absolutly sure ourselves? Thank.

Thank you - there is the Q&A link that I needed. Thanks all - mod - you can close this thread now.

Sorry PAX - thanks your right it's 401(a) -11 if edited the original to show that. I've been to the link you referenced. Let me be very specific - I need to know if the calcualted amount of the annuity payment is requried to be on the distribution notice, or if providing the lump sum, and instructions on calculating the annuity payment is sufficient. Thanks.

Yes - but within those - there is a reference to Q&A 36 under 1.401(a)-11 From Qualified Pension and Profit-Sharing Plans 2nd Edition - Pamela Perdue - 2.04[7][h] 2-59 - "participants must be provided with a general description of the eligibility conditions and other material features of the optional forms of benefit and sufficient additional information to explain the relative values of the optional forms avaiable under the plan" The footnote for the above paragraph references Q&A 36. Do we have a link to the Q&A's?

As long as we're agreed that the payment would then be taxable to the employer - no arguement from me. I don't like the "loan" idea though - loan from employer to the plan doesn't sit well with me for some reason.

One response that I've seen numerous times is to use the interest rate posted for calculations under GAAP/GATT for DB plans - somewhere between 6 and 8%.

Okay - my search is getting frustrating. I'm looking for a link to the Q&A's - specfically #36, which discusses the Notice to Participants upon term when QJSA is a distribution option. Specifically - is the notice required to calculate the QJSA payments or only required to provide the participant in simple language (HA) the formula and anuity tables used to calculate the benefit from their lump sum amount? Any help would be greatly appreciated. Thanks

I would also review the tax filings of the employer - did they consider the "Plan Expense" that they covered as deductible expenses? If so, then I don't believe that under audit the reimbursement to the employer by the plan of an expense that was also deducted from the employers taxes would be favorable.

Check with your provider - they may charge you extra for more frequent entry - the administration increases - PIN letters go from a quarterly event to a monthly event. The biggest issue that I see, is that with Monthly entry, the determination falls back to the the employer on the entry date rather than the TPA. This is alright as long as the HR individual has an understanding of the entry dates and how to calculate eligiblity.

This is a classic problem with employers that wish to deposit matching contributions based on pay periods. The formula is also probably based on annual salary or compensation rather than pay period compensation. The employer cannot withdraw the funds - I don't see a distributable event that would allow for it, I could argue though that the excess could be counted toward the next plan year in suspense. Any one see other options or issues with the suspense account?

I had a discussion this weekend with a friend, and his office has been tossing the thought around for a few weeks now. The issue specific to California, is that we can't think of a case where the State imposed a penalty for over-funding. So, a client could take advantage of the new limits at the Federal level, and just not get the full deduction on the State Level - Can anyone shoot some holes in that? I know each state is different. This is for California. Thanks all.

Hmmm - I posted a response last week, guess it didn't take. In my specific case, the relative was the last found heir, otherwise the business and plan all would have gone to the State. The court needed to appoint the individual as the heir and at the same time, we had them appointed trustee. I'd check with an ERISA attorney, but I'm sure what the law is for a beneficiary of a trustee. I don't see why they can't be the successor, however, for legal purposes, you'll want to check and get things done correctly. Good Luck!