Alf

I can't say for sure that I understand your question, but I assume that any fiducary breach or prohibited transaction would always contravene the plan document. It shouldn't itself be a defect you have to correct. Now, I don't understand the error you are calling a prohibited transcation, so I may not get your point in the first place. It is not a qualification defect or prohibited transaction to make loans at a fair market interest rate to a party in interest, is it?

Plans that accept rollovers should follow the regulations. My answer would have been to distribute the disputed amount to the participant, regardless of whether it was a distrbutable event under the plan. That money shouldn't have come in and it should go to either the sending plan or the participant and the regss say send it to the participant.

Ok, thanks! If new loan notes are issued that are inconsistent with the terms of the plan, I would be worried about it either being an operational defect problem with the QP or an invalid note under state law which would not qualify for the PT exemption. Our situation is much more straightforward. The plan's provisions were changed and existing notes were not grandfathered. The amendment will be fixed to grandfather outstanding notes. This should have been considered when it was decided to allow loan terms greater than 5 years for primary residences, I guess.

Plan was amended to change what events constitute an event of default, but existing loans were not grandfathered. Now the plan has a default event that is not in the note, so which controls? Although we need the notes to be vaild under state law to be eligible for the statutory PTE, can we argue that the plan controls over the note because of preemption?

Very reasonable. We would have the same concerns that you do until Congress does something on the education/advice front.

To get rid of a few illiquid nonstandard assets, we want to allow in-service withdrawals (age 59 1/2) and will open it up to all participants (not just self-directed), but we don't want it to be permanent (paternalistic to keep retirement savings intact) and don't want to have to grandfather the right for ever. Can we just offer it during a certain pre-specified window and avoid grandfathering?? How long does the window have to be (one day is enough to get the nonstandard assets out, but one full year sounds less abusive)?? Does it matter if only HCEs end up using it, or will 401(a)(4) be ok as long as it is available to all??

Ok, applicable dividends are paid to the ESOP and reivested in qualifying employer securities pursuant to 404(k)(2)(A)(iii). Is there any guidance on how long they have to remain invested in the stock if the ESOP has a 401(k) feature with mutual fund investments and employees want to diversify the dividends? In a 55/10 diversification situation, does anyone know how the diversification requirement and the reinvestment of applicable dividends in stock requirement coordinate?

If the plan is not subject to J&S, no distributions require spousal consent, including hardships. The ability to drain an account through hardships is no greater than through regular distributions.

Does the plan adminsitrator have notice of all of this? You have a really tough call if the admin. has notice that a QDRO is in the works, even if the alternate payee dies. I don't know of any reason why a posthumous DRO couldn't be a QDRO. Even though it probably depends on state law, administrators aren't charged with determining the validity of state court orders. You should try the distributions message board too.

990T? Tax? Can somebody clarify or do I have to go hit the books?

The $1,000 minimum is from DOL regulations dealing with the requirement that loans be made available to all parties in interest on a reasonably equivalant basis. A minimum above that amount would violate that requirement in my opinion and make all loans that were made prohibited transactions.

Are the workers his common law employees or are they employees of G? That could go either way, I suppose, but my guess is that they are his common law employees. If they are his employees I don't think they can be "leased employees" can they? I would run down the PEO rules for sure because the term is not defined by the IRS and these sound like worksite employees.

Returning deferrals will disqualify the plan because it violates the terms of the plan and the IRS would see it as a prohibited cut-back in that the non-keys are entitled to the TH minimum and you are taking that away.

I know the IRS just issued model amendments for governmental 457s. What about tax-exempts? Why are they different/what (very basic I am sure) point am I missing?

Part A may not be able to get a distribution. It is not automatic or required, but assuming Part A can get a dist, it can be rolled over if the receiving plan allows it. It is unlikely that Part A's plan will allow a rollover in based on Part A's status as a former employee, but check the plan just in case.

IRS Ann. 2004-32 is the latest det. ltr. guidance out there. It lays out the IRS plans for determs, including EGTRRA. I understand that the IRS hoped to have a draft Rev. Proc. out in August 2004 that explained the staggered remedial amendment period, but I haven't heard its prospects lately. The info I had listed the IRS goal for opening the pre-approved plan program as Feb 2005 and the earliest cycle for custom plans was Feb 2006, but I wouldn't expect that to stick. Any other info?

Ok, this sounds like a worst case - a separate account was set up in the FSA plan's name, although it is not a trust account. The sponsor does not treat it as their money on financials and the legal title to the account is the plan. As far as the 5500s, can this be wrapped up with the other welfare plan 5500 in sponsor's wrap document or is there something unique about FSA 5500s that prevents that. Should sponsor get the account re-titled and treat is as if it has always been general sponsor assets?

Can anyone help with the basics on holding FSA money? Trust/fiduciary/audit are the three questions: I understand that it is not reuired to be held in trust. Is it subject to fiduciary requirements to earn interest? Are the funds required to be audited. Can they be kept in an account in the plan's name if it is not a trust account or does the account need to be legally titled in the employer's name?

It doesn't sound like you fully understand your rights. If you elected $480 for the year, the availablity rule requires that this total amount is available for reimbursement until the day you terminate, even if you haven't paid all of it in yet. So you should incur expenses and file reimbursements for the $289 left. Then, there is an issue about whether they can take the remaining $180 out of your final check. I would have to say that the consensus on this board is no, but you need to check the plan and spd because those will control (generally). Also, the COBRA election suggestion is another great way you can preserve your rights to incur qualifying expenses beyond your termination date (plus this has the added advantage of really messing most adminitrators and employer up because it is a hassle to deal with). So, you can take it out on your employer by spending the remaining $480 before you have even paid it in and by electing COBRA if you have any problems incuring the remaining $289 before you terminate. I predict, you will get to walk with an extra $180 of free reimbursements if you make a big enough stink.

Is this an FSA question?? I didn't think partners could participate?

I agree that the feature should be listed, even if not used. However, I have a relevant, but slightly different question about "frozen" or closed features. What if there was a participant directed brokerage account at one time (characteristic 2R), but it has been discontinued for new investments? I guess that is similar to having once made matching contributions, but then taking the discretionary contribution provision out of the document for future years. Do you still report the feature if still affects money in the plan, but is not currently available?

I would say general health, like toothpaste, so deny. Our plan does not permit dual purpose items even if it is prescribed and it eliminates some of the confulsion of OTC remibursement.

Let me be the first to tell you that the plan document controls. Except for death or normal retirement, there is no statutory requirement for distirubitons to be made at termination of employment. Everything depends on the plan document.

I don't agree that the notice requirement prevents it. Your notice was correct when sent and I don't know of any authority for the fact that you can't change eligiblity, contribution, or distribution provisions prospectively during the year just because you sent out a safe harbor notice becore the beginning of the year. I am not sure that you will get an ACP pass if you add the match in the middle of the year though.

Can an executive's voluntary termination trigger early distribution in a for-profit nonqualified deferred compensation plan? I may be getting confused with the 83/457 rules, but won't it trigger constructive receipt if the executive can "just" quit and get the money early?? Please help straighten my brain out!!