MR

I'd certainly think it would be taxable in 2000. Since 1099 forms are due by January 31st, it wouldn't be possible to properly report the distribution timely.

Don't have a cite handy, but I would think you'd vest at 40%. It doesn't seem likely that the HCE's could be rewarded for tardy corrections.

It is also likely that you'll find it in your plan document. Buried in the deferral language is often a reference to the limit and how and excess is handled. Disco Stu's synopsis is correct.

Yes, for the average benefits portion of the test, you'd use all contributions from all plans, but for the rate group portion of the test, you'd typically use only the non-elective contributions. I have received a couple of opinions since my original message and the consensus is that you'd include in the rate group test the contribution the participant would have received, even though it was offset by his prevailing wage contributions. Agree?

If you have a prevailing wage (davis-bacon) plan with an offset profit sharing formula that also happens to be new comparability, when performing the rate group test, would you include the davis-bacon contribution that was used to offset the participant's profit sharing contribution. For example, if a participant would have received a profit sharing allocation of $2,000, but received davis-bacon contributions of $5,000, his actual profit sharing contribution would be zero. In the rate group test, would this participant's contribution be zero or $2,000? To me, it should be $2,000, since this is the amount that was used as an offset. opinions?

I think Tim is correct on both points. You do not have to amend the plan, but you do need to post a notice and his dates look right to me. Of course, you'll eventually need to amend the plan to reflect the safe harbor choice, but the notice suffices during the remedial amendment period. If your client missed the August 31st date, you might suggest a short plan year from 10-1 to 12-31 and begin the safe harbor 1-1-01. Just what you need - another calendar year plan, I'm sure.

Now that 5500 season is in full swing, here's a question about a multiple employer plan filing for 1999. The IRS instructions clearly state on page 10, under Box A(3) that "Participating Employers do not file individually for these plans." You are required to file a separate Schedule T for each participating employer according to the instructions. My question is, what happens to all of the participating employers that filed separate 5500's for 1998? Will the IRS or DOL come looking for a 5500 for a plan of a participating employer in a multiple employer plan that no longer needs to file under the new rules?

We have a new client that transmitted 401(k) contributions late in 1998 and 1999. We are currently calculating a rate of return on those contributions so that they can deposit the lost earnings to the plan. They also had a 1997 discretionary profit sharing contribution that was not deposited until April 1999. If they did not take the deduction for that contribution for 1997 and were well within the 404 limitation, should they deposit "lost" earnings on the discretionary contribution? My first thought is no, since this is a discretionary contribution, unlike the failure to transmit 401(k) contributions on time.

Richard is right on the money. It's always a fun conversation when you take over a plan that had not been run this way and have to break the news to the client that his prior administrator had his head up his rump.

PC, it is a deemed distribution, so I'm comfortable that the methodology is correct, but I have a question regarding the accrual of interest. I don't have the new loan regs handy, so I'll be lazy. I thought the accrual of interest was for purposes of determioning the highest outstanding balance within the last 12 months. This would be used to calculate the maximum available amount with respect to the $50,000 cap. Am I incorrect on this? thanks.

Suppose your client, before you took over the plan, ran a loose loan ship and allowed participant loans without requiring repayment via payroll deduction. Much to his surprise, some of the loans went into default. Now a participant who defaulted on a prior loan wishes to borrow again. I think his defaulted loan balance, regardless of when the default occurred, counts as part of his balance for purposes of determining the maximim available amount. For example, suppose I had a balance two years ago of $20,000 and I borrowed $10,000 and did not make any repayments. I defaulted on the loan and was issued a 1099R for $10,000. Now, my non-loan balance has grown back to $20,000 again and I look to borrow. I think my plan balance is $30,000 (actual cash balance plus defaulted loan of $10,000), so the maximum outstanding loan amount would be $15,000. Since my existing balance is already $10,000, I can only borrow another $5,000. Forgetting all of the reasons why it might not be prudent to let me borrow from the plan again given my history, is the math right?

only earnings before 1989 can be distributed for a hardship withdrawal request. check your plan document - it probably states this in the hardship section.

Howdy, Kim. Sounds to me like you've got the right attitude to be a good administrator. The idea that your employer cannot or does not supply you with reference material is kinda silly. Imagine if your clients knew!! I own a TPA firm that employs a dozen administrators (in Connecticut, if you're interested) and we have all of the reference materials the others have mentioned. For my money, Sal Tripodi's books are the best. They always seem to provide an example of the exact situation you are looking for. I suggest you make a deal with your employer. He or she shells out a couple bucks for the books and you promise to do most of your research on your own time. The other folks are right, of course regarding the "learn it by doing it" approach. The books will give you a great understanding of what you can and cannot do, but its no substitute for practical experience. Try duplicating a test in excel, for example. Anyway, get studying, before the rules change again. Good luck.

In Connecticut, a husband and wife can have what is called a "mediated divorce", wherein the court appoints a mediator and the happy couple agrees who gets what. The mediator prepares documents for the court to sign that, among other things, provides for a distribution to the former spouse from the qualified plan. This document is not a DRO and I'm not convinced the plan should accept it. Obviously, the participant does not wish to incur attorney fees, but I am inclined to insist on a real DRO before processing the distribution. Question is - is there any type of agreement, other than a QDRO that would be acceptable? I have heard that in some instances, there is.

OK, you have a takeover plan that is, lo and behold, a prototype document with a new comparabiliby formula. The adoption agreement was drafted in 1997. It is my understanding that the IRS is steadfast in its insistance that prototypes cannot be new comparability. So what do you do? I can restate to individually designed, but what effective date should I use? Its only a profit sharing, so I'm not uncomfortable restating now, but I don't want to leave the client exposed to trouble. Is there any guidance on this? Has the service given any indication as to how they would treat situations like this? I know there are other prototypes out there that stuck in new comparability formula options, hoping they would be allowed.

Well, I can see this is a popular forum! My TPA firm has grown from about 400 clients to 700 clients over the past 3 or 4 years, and I suspect there are those of your out there with similar stories. My question is- have you changed the structure of your business as a result of the growth? What I mean is, have you added levels of management or created "teams" or started creating task-oriented positions? When we had 400 clients, we had six administrators who did all of the work for their clients and two of us were the "checkers". As we grow and the ministerial garbage (withdrawal forms, loan forms, participant calls, etc.) increases, I find my adminstrators somewhat bogged down. Are there any steps you have taken to streamline your processes? thanks.

I own a TPA firm that has grown from about 400 clients to almost 700 over the last 4 years. I expect there are many or you out there fortunate enought to be in a similar situation. We're still very good at what we do, but are having some difficulty managing the growth. Our structure is such that we have 13 administrators, 4 secretarial staff, 2 actuaries and my partner and me. Each administrator handles all aspects of his or her caseload and the average is about 60 plans each. We've never had any middle management and I'm not sure that's still the right approach. I am thinking of going to a "team" approach, perhaps better utilizing the strengths of each of my staff. Finding quality candidates is also tough. For those of you out there who have gone through this, what advice do you have? Are there changes you made as your business grew that really worked well? Have you created any task-oriented positions, such as a "5500-guy"? Any suggestions would be most appreciated.

a participant dies and his 4 kids are the beneficiaries. three of them elect to leave their money in the plan. question is- are these 3 considered participants? if so, they should complete beneficiary forms. if so, must they name their spouses as beneficiaries?

ok, we're pretty sure about this one, but just want to be sure. a client hires an employee who is over age 70 1/2 and who wishes to roll his distribution into the new employer's plan. must the prior plan do a minimum distribution before rolling the balance to the new plan? what if the employee had waived the minimum with the prior plan? we think yes either way.

lets say you have a client that started a 401(k) plan in 1997 and you became the TPA in late 1999. you come to find out that the client failed to provide complete census data to the prior TPA, so ADP testing was never done for 1997 or 1998. The client, which is a conglomerate of dental practices, then goes belly-up and claims it cannot provide complete census data for 1997, 1998, 1999 or 2000, but will "do its best". Now, it turns out that "its best" is not very good at all and you are certain that the data provided is at least incomplete and almost certainly innacurate. my inclination is to refuse to do the ADP test. i don't want to be blamed when this plan is audited and the agent finds the test to be based on bogus information. now suppose that the client says he wants to terminate the plan without having done the testing and wants us to send out distribution forms to the participants. if the plan would fail The ADP test for any of the years involved, it would be disqualified, so offering the employees the option of rolling their distributions to an IRA might get my firm in trouble, i think. what do you do? is it even possible for me to place the responsibility for bad rollovers onto the trustee by sending him a letter informing him that he has no assurance that the plan is qualified? i'd like to resign from the plan, but i empathize with all of the parties involved and don't want to leave them stranded, but i also don't want to get my firm in hot water.