Alf

Remember that certain Federal Circuits will not give any weight to proposed regualtions as against the taxpayer. The Roth 401(k) regulations certainly tell you what the IRS intends to do however, so althought they can't be "relied" on, you should be able to rely on them - right?

The 401(k) regs require that the ADP test is run on the same "plan" that is used for the coverage test. Either you run the new plan's ADP and coverage separately (and fail coverage), or combine the 401(k)s (assuming you can) and fail ADP.

Again, this is just wrong. Code Section 106 provides that the gross income of an employee does not include contributions which the employee’s employer makes to an accident or health plan for compensation (through insurance or otherwise) to the employee. HRAs are also allowed to reimburse premiums for other health insurance coverage, such as a COBRA premium, so that is probably additional proof that one employer's payment of premiums on an individual policy or a former employer's policy is tax free to the employee.

Plans frequently limit the number of hardships available in a year for exactly this reason, but there is no legal reason to limit hardships if the plan does not.

You have to exclude keys for five years or try a safeharbor 401(k) b/c that is generous enough to satisfy the top heavy minimum.

If the default was paid off in lump sum before the required offset, everything would be fine from a qualified plan perspective. Confirm the terms of the plan b/c not all allow a grace period or one that long. There is an issue about how the decedent paid the loan off I suppose (probate authorization?). Also, is the payoff necessary? It probably depends on who the beneficiary is, but a deemed distribution on loan default is an eligible rollover distribution I believe if the cash is made up into an IRA.

Deductible and exempt from tax under Code Section 106. No nondiscrimination rules. It must be set up as directed payment and the employer must recieve documentation of payment. The new employer can't just give discretionary cash to new employee for any purpose.

The plan could proide several alternatives, but frequently death is a defualt event. The loan would be offset against the account and that woudl be taxable as a distrbution unless it was made up by a spouse in an IRA rollover within the requisite time period. A plan would rarely allow a beneficiary to continue to repay the loan on its original terms, but it could. The plan could limit this as much as it wanted. The tax would be on the participant via a 1099R. If the plan allowed the beneficiary to continue the loan, I guess the beneficiary would be taxed on the default, but not sure.

We would classify it as an operational defect and not a party-in-interest transaction, but technically VCP is not effective to correct prohibited transactions or get out of 5330s so it probably should be reported.

I don't understand either point in the response, but directed investments is not a protected benefit.

Yes, isn't that the work-around. Declare the contribution as whatever they were planning on making, plus the forfeited shares. You end up reallocating by offsetting the forfeitures against the declared contrihution.

This was in a press-release in the BL Newsletters today and I wonder if anyone has comment:

Yep. It violates 401(k) and 401(a) and the plan could be disqualified by the IRS, so all vested account balances could be taxed to the employees, the trust would be taxed on all earnings each year under the high trust tax rate schedule, and the employer would lose deductions for any current and future contributions.

The DOL has personally mentioned to us that they want to see INVESTMENT committees meeting at least quarterly. I don't know of any that actually meet that frequently, however because they take care of more routine (non-investment) matters by consent outside of meetings. On the investment side, it really depends on the types of investments and advisors used so there is no set answer.

It may be an operational violation to cash out prior terms that were backlogged. If the plan says to cash them out at a certain time and that did not happen, it shouldn't be done now. Otherwise, we have not heard of providers making this distinction, but can understand why they wouldn't want the lost particiipants.

Confirmed. See Page 57 of the 2004 Instructions.

I understand. In that case, the signature IS that important because that is what legally adopted the amendment by the deadline. If you are really dealing with GUST, then your VCP will be complicated with a determination letter appliation, won't it? Not a cake walk and it will take the IRS more than in year to rule, in my opinion. Does anyone know whether the updated VCP guidance is going to change the non-amender procedures much?

Yes, probably. The signature on the amendment is not really what is important. What matters is the adoption of the amendment. SPD/SMM won't do it legally, but if you have adoption by the board of directors for example, the signature on the amendment won't be necessary, usually. Of course, it all depends on what the document requires for effective amendment of the plan.

We always say no to general partner. Boy, how do the plan asset determinations like operating companies, VCOCs, REOCs apply to partnerships? Do you just have to keep benefit plan investors below 25%?

Most use standard documents, I believe, but if you limit eligibility, you can cut out the ERISA provisions (claims, some loans, etc.) and thngs like cashouts and really shorten the document, but it usually is not worth the work.

See what I mean???

I can't get a clear answer - are one participant plans subject to ERISA?. Interested in plan asset regulations esp., but other ERISA provisions as well.

We had to set up one with annual amendments to get a determination letter once, but not since.

At least a year if no Determination Letter application (seriously) and longer if there is an application.

We always understood that the actual grant of partnership profits interests were not immediately taxable, but now have documentation of a grantee making a Section 83(b) election at time of grant. Are we missing something? If the grant is not taxable because fo the character of the property (partnership proftis interest), not the restriction, is it eligible for an 83(b) eleciton?