MR

For those TPA's out there, what are you planning in the way of participant statements to comply with PPA? For clients who use individual brokerage accounts or some other platform that does not maintain vesting, what are you going to do? The thought of duplicating account balance information, just for the purpose of adding a vested balance section is too maddening to consider, but I haven't heard a good alternative. Suppose its not an option to just tell the folks who drafted the PPA to stick it?

do the owners have spouses they could put on the payroll? if the plan doesn't have a 1-year wait, they could have spouses earn a minimal amount and defer nothing and still be in the non-excludable test by using the "carve out" rule.

Here's a perspective that participants in plans need to understand. The Trustees of your plan have an obligation to ALL of the plan participants. This obligation includes providing them with the information and education they need to properly allocate their investments. The danger of opening the plan up to unlimited options is that it becomes a practical impossibility to see to it that the employees really know what they are picking. You do the research and make informed decisions. Others might not and could get themselves into trouble. I own a business and buy stocks with my personal funds, but would be very hesitant to open our retirement plan to anything beyond mutual funds. Be happy with your 30-60% returns with your outside money, but some day you may find yourself glad that you have your pre-tax investments in boring mutual funds. Those fund managers don't make the big bucks for nothing.

merging is what they want to avoid. the plan attorney is comfortable that they can terminate and distribute, but is now worried about the tax id issue.

lets say you have two medical groups, each with a 401(k) plan, that join forces and form a new company. the intent is to terminate the plans of the "old" companies (merging would be messy) and start a new one for the new company. the catch is that the new company has the same tax id# as one of the "old" companies. (not sure why they did that). So, they are terminating a 401(k) plan of an employer with the same tax id# as the employer for which a new plan is being established. if it was the same employer, they can't start a new 401(k) within 12 months of the termination of an old plan, but its not the same employer. the question is - will the DOL or IRS object to this?

in fact, there are employees and coverage would likely be a problem. the real question is whether we take part in what could be a faulty set-up. as Jay21 points out, there are countless situations like this that occor without anyone being the wiser. i'd be shocked if i don't have other clients in the same situation. but since i do know about this one, do i insist they follow the rules, however unintentional they might be?

lets say you have a client who owns a business. his wife owns an unrelated business and they have a minor child. the attribution rules imply that there is a controlled group. several reference documents also imply that this effect is unintentional. the question is - do you allow this couple to establish separate plans?

I like that, but what about the timing? I guess, since there's a last day requirement, nobody has "earned" anything until then, so we can change the rules before 12-31. thanks,

Lets say you have a non-standardized prototype 401(k)/ps plan and the owners at this late date decide they do not want to share in this year's profit sharing contribution. They have already made 401(k) contributions and plan to continue through year-end. They can't waive participation, but can I amend the plan, effective 12-31-04 to exclude them from the plan? I could exclude all owners, just like Union employees, etc. The plan requires 1000 hours and year-end employment status in order to share and my concern is that amending to exclude them on the last day of the year would be a cut-back. A more expensive alternative, but one that I think would be more legit would be to amend to a New Comparability plan, putting the owners in their own group. Any thoughts?

Yeah. The more I look at it the more clear it is that I could only count some of the 2003 contributions as catch-ups if they exceeded the 2003 402(g) limit. I can only recharacterize up to the catch-up limit for the calendar year in which the plan year ends, as you say. Thanks

I'm looking for specific guidance on the determination of what deferrals can be characterized as catch-up contributions for an off calendar plan year. My specific example is this; An owner defers $1000 per month during 2003 and another $10,000 during the first 6 months of 2004. Its a 6-30-04 plan year and he has deferred a total of $16000. If the plan fails the test and the maximum he could have deferred is, say, $12,000, can I consider $4000 to be catch-ups? We can use $3000 as 2004 catch-ups for sure, but can I count $1000 as 2003 catch-ups? He didn't exceed the 402(g) limit in 2003, but are we allowed to re-charaterize due to the ADP failure? I've looked around for guidance, but have come up empty so far.

just wondering

Perfect! Thanks. mr

i have a client who currently pays the investment fees (annuity wrap) for all participants in his plan. now, he wants to pay only for current employees, not former ones. i thought i saw some kind of write-up recently that addressed this, but i can't come up with it. any thoughts?

Thanks. That's the one I'm looking for.

I am looking for a good source addressing whether or not and under what conditions the IRS can take a participant's 401(k) account. Any suggestions?

Thanks. I think the penalty for 501c-3 organizations is only $750, so I suppose its not at all worth the risk.

We go out of our way not to handle 403(b) plans, but I'm trying to advise a prospect as a favor. Client is a non-profit and has a 403(b) with a discretionary employer contribution and the new HR person has discovered that no 5500 has ever been filed. At this point, I tried hanging up, but she called back before I could have our number changed. My question is whether or not to suggest DFVCP. At a Corbel seminar a while ago, one of the pension attorneys suggested instead writing an excuse letter to go along with the late forms. Has anyone had experience with this? thanks, mr

Lets say you have an LLC and the Member's K-1 is negative. Do you count him in the ADP test at all?

Anybody know of a good reference for learning more about plans for PEO's?

We have a client that had continued to sponsor a SARSEP through 2002. Late in 2002, they decided to install a 401(k) Profit Sharing Plan, with the Profit Sharing Plan effective in 2002 and the 401(k) effective in 2003. So, they no longer sponsor the SARSEP, but some of the employees contributed to the SARSEP in 2002. The company made a profit sharing contribution for 2002 in lieu of the SEP contribution. The profit sharing structure is "new comparability" with different group contributions. The question is, would you count the 2002 SARSEP salary deferrals in the average benefits percentage test along with the profit sharing contributions?

We have typically created a group specifically for the youngest offspring, but we also make sure the top heavy section of the plan applies only to non-key employees. this permits an allocation of zippo to the little fly in the ointment. sometimes even a 3%thm is sufficient to mess things up.

some of these are good points, but the question remains - where in the regs does it say that the residence in question must be owned by the employee. the regs allow withdrawal for expenses related to the purchase of the primary residence of the employee. yes, evidence would be needed, just like any other hardship request. yes, its this guy's primary residence. suppose instead it was the guy's wife and the house was in her name. maybe he's in the witness protection program or something. anyway, does the fact that he's not on the deed determine whether or not he qualifies?

not convinced yet, guys. the regs say, under the deemed hardship distribution standards that a distribution is deemed to be on account of an immediate and heavy financial need of the employee if the distribution is for: costs directly related to the purchase of a principal residence for the employee (excluding mortgage payments) if the plan sponsor believes that the employee really lives with his sister and brother in-law and that the money will be used to buy the house, how does it not meet the above requirement? to be honest, i'd rather tell this guy no, but now i'm intrigued by this.

We looked in the code, and it simply tells you the hardship must be for purchase of your primary residence. So, if this will be the primary residence for the individual and he can prove that, then why would the house need to be in his name? I guess the problem here is that you won't find any specific reference to this particular example in the regs.