Alf

I agree. It only applies to a plan subject to 409A in 2005, so it is safe to assume that existing elections are noncompliant (or have impermissible discretion). Employees will have a chance to make new elections under the 409A regime and I don't see why your example won't work. Don't they also have the option of just deciding to take their money out? If that is true, then giving them the broad right to make new elections seems to make sense to me.

The $5,000 max contribution does not have to be pro-rated for short plan years, I don't think. You cannot retroactively take contributions for Jan and Feb, but you should be able to just let them take out their annual amount for the 10 months left in 2005 instead of over 12 months (depending on confirmation of the previous sentence). Expenses can't be reimbursed for periods predating the plan document and the document cannot legally be drafted with a retroactive effective date, but practically if an existing (unwritten) arrangement was formalized in Feb with a 1/1 effective date, noone would care. I guess that the fact that no payroll withholding was done in Jan and Feb is a pretty big red flag, though. My point is that there is no IRS enforcement of these, so just keep the documentation up to snuff in your files.

The earliest of the six is fine. I think fixed schedule means just that, a predetermined schedule of dates instead of just one date. I wouldn't call your new arrangement an SAR, though, because once it is revised to meet 409A, it no longer resembles a traditional SAR at all. It will just be a bonus pegged at stock price or a NQDC plan that bases its investment returns on the stock price.

The 1099Rs are not correct and have to be amended. The IRA custodian needs to be notified that some $ is not eligible for rollover. The best cite is 2003-44.

Of course, it is impossible to generalize this broadly, but isn't this more off than it is on? It sounds to me like this is the old constructive receipt rule. I would say that 409A causes taxation at vesting UNLESS you meet the requirements of 409A. Anyway. I thought that QDROphile nailed it imo. This plan isn't grandfathered (b/c not vested), so shouldn't taxation apply at vesting, which is when the original rolling risk lapses?

I think people are afraid of your facts/question, but I'll bite. Stock is an equity, so your facts aren't very clear. I assume that "stock" is qualifying employer securities and the "equities" are regulated investment companies (mutual funds) so that the RICs will be liquidated to get the "cash." If this is the case, you may have a basic problem with ESOP qualification because of the requirement that ESOPs be primarily invested in QES, unless the ESOP is bifurcated into two or more parts (different plans really). Anyway . . . Prohibited transactions should be a big concern when dealing with the purchase of a building. Is this building being used or purchased from a disqualified person or party in interest? Even if it is not, holding real estate in any qualified plan presents real issues about UBIT and just paying expenses, etc. There are several threads about the cons of real estate investments in qualified plans on these boards and the internet in general to get you started.

I odn't know - were people let in or given vesting and allocation credit during 2004, even though there was no amendment? If so, it is operational and amendment now may not be possible without filing a VCP. If the plan was administered without giving this credit and the decision has now been made to give credit retroactively, then no operational problem.

Yes, if it is not a cutback. For example, if adding the service makes others eligible for a pool of profit sharing money, the amendment potentially takes money away from others, so it is prohibited by 411(d)(6) which trumps the 401(b) RAP rule. Also, I am not sure you can correct an operational defect by plan amenmdment even if you are within the RAP, so you should consider whether that applies to you ans research whether you have to file a VCP.

If the plan has to be amended to provide for the trust, then I wouldn't do it. If the provisions of a grandfathered plan already contemplate a Rabbi Trust, the modification wouldn't bother me. Employers are permitted to continue to administer grandfathered plans as is, subject of course to the pre-409A rules.

You leave it alone and operate it pursuant to its (pre-409A) terms. The IRS has just warned us that grandfathered arrangements aren't free from scrutiny if audited based on pre-409A standards.

I thought that ACTUAL GRANTS of restricted stock grants were exempt, but a PROMISE to make a FUTURE GRANT is not necessarily exempt.

I don't see it that way at all or else I don't understand the retroactive nature of your example. Keep it simple and just deal with the future. If 100K is deferred into a noncompliant plan, the exec is taxed on 100K in the year of deferral and socked with a 20% excise tax. Every future year that the funds are deferred, the exec owes interest at the underpayment rate until the account balance is paid. Once the funds are paid, everything is over. Your example starts with a 100K payment, so I got lost. Now, transition rules are a different matter. IF you have a pre-2005 plan that is not grandfathered and not compliant, my guess is that the exec would be taxed on the 1/1/05 balance during 2005 and the 20% tax would be levied on that in 2005. Deferrals for subsequent years would be subject to interest until the balance is paid. Of course, this is all a guess and may not make sense to anyone but me!!!

Treasury has stated that these plans will not work under 409A, but without any detail. There is a least one long thread on this board with theories about what the IRS is worried about, but weare assuming that they won't work after 2004.

Are you saying that the 5500 must be run on the cash basis only?

Checks cut on 12/31 don't prevent next year's 5500 from being due even if the checks are cashed in a timely manner. I can't see why constructive receipt is relevant from the ER perspective. If the checks were cut in a year, the 1099 is done for that year. If there is a dollar in the trust on 1/1, the 5500 is due (for a calendar year plan at least).

Isn't it too late to set up a SEP for 2004. I thought the document had to be in place by 12/31.

Treasury has been clear all along that you won't need new arrangements to preserve grandfathering. Keep the old features running and gunning and move on with 409A provisions for 2005+ money.

Combine. I don't think you are eligible to file the second once you file the first, especially because the same years are at issue. I seem to recall that you pay the larger fee, but because the non-amenders are on a different fee schedule, you may have to pay both fees.

It sounds like the question was answered several responses ago. I consider the general assets of the employer as = to the employer being able to do whatever they want with the funds, but of course, technically, the employer should not do anything illegal or improper with the money. Additionally, verify that everything is consistent with the plan document. The key is that there should be no formal trust or legal account in any name other than the employer's.

Yes. It is the employer's money and they can do whatever they want with it. There should not be a trust associated with an FSA, so the money is just general assets of the sponsor.

As Nancy would say: "Just say no!"

The new DOL rules for mandatory cash-out/IRAs.

First, this is the wrong board for nq plan qs. Second, if you aren't 401(a), but subject to Title I of ERISA, you don't have to worry about these rules.

Yes, Sweetnam

Raytheon does not contribute these to charities.