RCK

pmacduff, Received an allocation or made a contribution is indeed the DC version of the rules. But this is a defined benefit issue. And the opinion came from our esteemed ERISA counsel, who can be counted on to give us a strict if somewhat conservative interpretation of any rules. RCK

We do count hours. And 99% of these people do not work 1000 hours in any given year. The "probably" was a global comment, not a participant specific comment. All the guidance defines active participant. So it says that an employee is considered an active participant unless they are excluded by the eligibility provisions. Examples of eligibility provisions are age, years of service, and classification of employment. It seems to me that you are applying the common sense approach, which does not seem to apply in this situation.

Our interpretation of the instructions of last year's W-2 forms has come under fire from participants, and having reviewed the 2001 forms and instructions, I expect that to happen again next January/February. Our main defined benefit plan specifies participation at the entry date following attainment of age 21, and one year of Eligibility Service (where one year of eligibility service is an employment anniversary with 1000 hours of service). It excludes union employees,but not temporary or seasonal employees. Up through 1999, our interpretation had been that if they did not work enough hours to meet the eligibility criteria, then the Pension Box would not be checked. All the guidance that we have found says that someone who has met the age and service requirements and an entry date, but who has not met the hours requirement should be coded as a Pension Plan (or Retirement Plan for 2001) participant. Tax Management for example says" Even a participant who accrues no benefit because he or she has not completed the required number of hourswill be considered an active participant." We have a group of employees who work for us and other similar employers on a "substitute" basis. They might only work one day in a given year, or many more days, but probably not 1000 hours. They claim that even if they receive 8 or 10 W-2's for a given year, we are the only ones that are checking the Pension Plan box on the form. Continuing to check the Pension Plan box will interfere with our ability to hire and retain these people. Anyone with comments/clarifications? RCK

In our experience, the key determinant of audit price is whether the plan is subject to a full scope audit (participant directed with a company stock option), or just a limited scope audit. Other than that, I agree with Boilerburm.

Our promissory note says " I authorize XXXX to institute continuing payroll deductions in the full amount of each installment of principal and interest on this note until the loan is repaid in full.' And that's what we do: the participant cannot elect to stop payments. So I don't see this as an ERISA preemption issue--is MoJo saying that the note itself violates state laws? But then again, we've been doing auto enrollment (we prefer not to use the negative election terminology) for two years, so our exposure is not on the loan issue.

I think that the client has the plan, and the predecessor did not have a plan. Sara H is trying to figure out how much of the predecessor service to count toward eligibility and/or vesting under the survivor's plan.

I'd say that you need to start with the purchase agreement. You will also want to check any communications that went out to acquired company. Our general practice is that for an asset purchase, we don't count pre-acquisition service and for a stock purchase we do. I know that we have made an exception and counted service for a asset purchase, but I don't think that we have ever not counted service for a stock deal. So, I'd check the purchase agreement, and then make sure that your plan lines up with that. You may have to amend to specifically include service with XYZ company. RCK

As a practical solution, it just might work. I would be concerned about doing that because it so far from the real facts of the situation--there was not a plan termination, and there was not a transfer of assets. I think that is just compounding the error, and if it were my problem, I would not do it.

I agree with Jon Chambers in theory, but think that it comes down to the plan document. Ours, for example, says that they have to take a loan first. So they take the smallest possible loan ($1,000) and then request the hardship.

Section 2 of the Schedule H is an income statement, so that would be looking for a change in unrealized gains from the beginning of the year to the end of the year. Both of those unrealized gain numbers would be based on the difference between cost and then current market value. As to the hallucinating issue--I can't be sure. But then again neither can you. I'd look for regs on the issue, because the IRS will know.

Congratulations on this opportunity. The 5500 is supposed to be completed on the basis of Current Value, where current vlaue is fair market value. You do have an option of using a cash or accrual basis (or modified accrual basis, whatever that is), as long as you apply it on a consistent basis. But it still has to be fair market value. My experience is that the trustees who are reporting on a cost basis are also reporting on a market basis. I would hope that you are not going to have a problem.

I agree with David MacLennan and disagree with pax. Specifically with pax's comment about the amount of the assets being "muddy". The amount of the assets is not muddy--it is very specifically defined. The actual stocks' bonds, etc. would indeed be muddy, but the amount certainly is not. Wearing my plan sponsor hat: we have about a dozen plans (6DB, 3 Profit Sharing, a Money Purchase and 3 401(k))participating in three interlocking trusts,with roughly a billion in assets. And it's been through IRS and DOL audits without a problem. Wearing my Enrolled Actuary hat: I would definitely sign the Schedule B--the assets are clearly defined and valued. Disclaimer: this has to be set up right and run right.

I think that two points merit repeating: 1. As pointed out earlier, the issue here may be whether you are exempt or not. If you are exempt, your employer can indeed ask you to work a ton of hours. And you can of course make a bolt for the door (my recommendation). 2. Your supervisor has lied to you. For the two weeks between her original position, and her new rules, it seems to me that you have "accrued" the comp time. Probably not worth fighting about.

Amy, What do you mean "reinstate"? Do you mean that the plan was terminated and you want to un-terminate it, or something else? Some details would help. RCK

I would think that if something like that had happened, it would have been the result of a confidential negotiation between the TPA and the sponsor, and would not be public information. We had a situation where the trustee failed to follow our directions to pay the PBGC premium from the trust. After some discussion, they agreed to pay any penalites that emerged.

I agree with the first half of Richard's most recent comment, but need to add a clarification to the last part. The sponsor can rely on the prototype's favorable determination letter as long as they do not now, and never have, sponsored another qualified plan.

First, be sure that the plan requires suspension of contributions. That is part of the safe harbor design for Hardships, but is not a general requirement. If you are self-correcting this, and there no guidance that is directly on point, then I would not do anything for those who have already terminated. The alternative is to issue revised W-2's, and 1099-R's and notify them that part of their distribution if they took it as a rollover is not rollover eligible.

Good question. I should clarify that we are dealing only with daily valued Mutual Funds, and not with a brokerage window, or mutual fund window, etc. So we are confirming receipt of the instructions and execution of the transaction at the same time. Instructions received by 3:00 central are processed that evening at that day's closing prices.

Assuming that the original filings were all done under different EINs, here's what I'd do. Create a correct one, being careful about the EIN and making sure that it is for the parent. Submit it as an amended return, with a cover letter that explains what you are doing. This is certainly a situation where a cover letter is appropriate. Then I'd keep copies of your corrective filing handy for next year, when you get all the inquiries asking where the subsequent year filings are for all the erroneous filings.

We are about to take the position with our plans that requests made through a voice response system will get a written confirmation and requests made through our Internet site will not get a mailed confirmation. The transfers initiated through the Internet will see a confirmation page, and will be encouraged to print that. We are doing that at the suggestion of our very large unbundled provider.

I apologize for trying to supply a quick answer for 401kgreen's original question. The relative responsibility for this error does of course depend on the agreement between the TPA and the sponsor. In my experience, the majority of small plan (which I assumed this was) administration is done by the TPA.

I think that reg 1.401(k)-1(g)(2) gives you the ability to use either the whole year or the 8/31/to 12/31 portion.

I'm not sure about the "in default" terminology, but QDROphile is right on point about all the awful things that can happen, but are not likely to. The standard response in any situation is what does the plan say? Most plans tend to go by the IRS' safe harbor rules for determining what constitutes a hardship withdrawal, but there is no requirement that you do so. So if you are following the plan's rules and they are different from the IRS' rules, then your problem is probably not major. But if the hardship was processed clearly in violation of the plan document, then you do have some degree of problem. IF the TPA made the distribution, then that is good news from two perspectives--they have a liability, and the IRS is going to look more favorably on the situation. If the sponsor made the distribution, what's the TPA doing?

pax is of course correct. If there is an amendment terminating the plan, freezing accruals and barring new entrants, then it seems to me that you do all those things, and vest everyone who was participating. If that was not done, then the plan is not terminated and new entrants should be coming in, benefits accruing and vesting continuing. Sure hope that actuarial valuations have been done on a basis consistent with whatever you figure out.

I don't think that you are encumbered by the "law" on this. Since you don't have access to the old plan (and assuming that you can't figure it out from earlier benefit calcualtions), you're going to have to "make up" a rule. Since you will be providing an actuarial equivalent benefit, it does not matter very much. If it were my plan, I'd tell the participant that we would base benefits on an estimate of SS benefits, and that if he wanted his benefit based on actual SS benefits, he would have to provide an entitlement letter before we initiated benefits.