RCK

John A is correct, but Rev Proc 2001-17 does say that in the case of Audit CAP at least, that the IRS will calculate penalties based only on the predecessor plan that generated the problem. This has given us enough comfort to pursue this. RCK

Correction. We do test BRF for our location based match. But something in our demographics and design means that we are always having much bigger ADP/ACP problems. RCK

The "apply 100% withholding and let the IRS track them down" approach is really clever. There is of course no authorization anywhere for doing that. If nothing else works, you can do a spinoff/merger and move the assets to an existing plan. This has become our solution of choice--I'm a plan sponsor with a lot of activity, and we've done it twice in the last couple of months.

We use a performance-based match, but it varies by profit center, not by individual. We have had cases where the profit center might have as few as 1 or two people, but in general there are several hundred. The plan has to pass coverage and ADP/ACP testing, but other than that there is not anything special. I been around a lot longer than I'd like to admit, in a variety of circumstances, and have never seen an individual performance based match. It does seem to be doable though. I will be interested in other responses. RCK

Doesn't the plan allow for in-service distribution of rollover amounts? If not, I'd consider adding it. That would certainly solve your problems--gives the employee access to his money, does not create a policy that the employer can't live with, and is philosophically sound (the employee rolled the money in solely based on their own preferences--let them take it out whenever they want).

I agree with MGB. A reputable plan sponsor who set up a Cash Balance plan, and who got competent advice would realize that what they have is a DB plan (that's what gets them the funding flexibility and the ability to "skim" the investment yields). As such, they must have an determinable benefit at Normal Retirement Date, and therefore a lump sum that will undoubtedly be different from the cash balance. That risk is the price they pay for having a DB plan. Certainly the transition from a traditional DB plan to a Cash Balance plan is frought with risk, and without significant grandfathering may result in some disadvantaged participants. RCK

Sure. So do 401(k) plans, nearly all profit sharing plans, ESOPs, etc. But a qualified plan has to be nondiscriminatory in regards to benefits or contributions, not just benefits. In general, DB plans are nondiscriminatory in regard to benefits, and DC plans are nondiscriminatory in regard to contributions. But age-weighted profit sharing plans are cross-tested to be nondiscriminatory in regard to benefits.

The answer to the original question is "sure, you can do that." The communications are certainly a challenge, particularly for statement purposes. And I think that RJM's solution is workable. As to LMalone's primary concerns, as long as your communications are clear on what happens and what exactly is vested, then all you have is a forfeiture of non-vested contributions. And the participant would normally have investment authority over those even if not vested. I have to admit that I don't see the point of making the match weekly but subjecting it to a last day rule. We have a guaranteed match subject to a vesting schedule and made weekly, and a profit sharing match, subject to vesting and a last day rule, and contributed after the end of the plan year. It works just fine. RCK

We have not gone back and "swept" existing eligible non-participants. We talked about doing it, but the cost numbers were pretty scary. And the group that we were considering included only people who had not made a positive election to enroll--we were not going back to an earlier system when people actually had to complete a piece of paper either way. I think that if you auto enroll people who have actively opted out once already, then you just need to communicate a little more aggressively.

To Bill MM's question: We auto enroll new hires of some groups covered by union contracts, who do not have a match. Our experience with them is essentially the same as other groups that we auto enroll: 95% do nothing--either opting out or changing percentage or investment election. I think that dropping the match and auto enrolling new hires is not a problem. I would not want to be around if you are going to go back and "sweep". If I did not enroll when given the chance with a match, and now you are going to auto enroll me without a match, I'd be VERY upset.

I don't think so, and that's based on two ideas: I don't know about one, and I don't think that PBGC filings are public information. The 5500 filings are public information, and that is why sites such as freeerisa.com can function. I don't think that PBGC filings are public.

My understanding is that a lump sum payment does not have to include the value of any Early Retirement subsidy. Our plan (covering 20,000 participants) has heavily subsidized ER factors, and the only lump sums are forceouts for less than $3,500. The lump sums are based on benefits at NRD, and deferred annuity factors. This is all specified in the plan document. The answer to Gary's question would be dependant on the plan document. If it does not specify, I'd rely on precedent and amend to make that formal.

I don't think that there is a choice: there is one plan, so there should be one EIN and one Plan number. In order to have separate plan numbers, you'd need separate plans.

I agree with everyone else--you should return the money. I would add that generally you are responsible for notifying HR on what you're going to be doing- not just notifying "my boss and his boss". Seems like there is plenty of blame to go around, and everybody should get a portion.

If you have a daily valued plan and have adopted the most favorable provisions under GUST, then you can sweep every day to see whose accounts are under $5,000 and can be forced out. Of course, if they don't respond and their account bounces back over $5,000 then you can't force them out.

We are a plan sponsor (with 35 plans, and total assets of about one billion) and we have not heard a word about this from any of our service providers. RCK

I'm not sure why they'd want jump through the hoops and limits of proving a hardship when they could take a total distribution, and split it as they wanted between cash and rollover.

Keep in mind that the question as posed was for an active employee. We lose terminated people all the time, but hardly ever lose an active.

As a sponsor, I'd say that the participant loses the advantage of the sponsor's due diligence in fund selection, and therefore picks up a little more responsibility. For a sophisticated investor, this would obviously not be an issue. The more tangible advantage might be access to lower expense levels--either contract fees, front end loads or investment management fees.

I agree with Hans. The only reason for more detail at all is that XYZ and ABC will probably want to split his contribution between them for internal accounting purposes. RCK

I need to jump on the "don't do it" bandwagon. We inherited a plan through acquisition that has historically allowed retirees to treat their Profit Sharing account as a savings account. They stop by the office every few months, swing by to see their old buddies, and submit a distribution request for a few hundred dollars, or a thousand, or whatever they need. There is no way to either get rid of that or maintain it now. This is an extreme case, but it would not be difficult to see michaelv headed that way.

I have to admit that I'm not familiar with "thinly publicly traded" companies. Isn't Frank subject to insider trading rules and disclosures? RCK

I agree with Alf. We just did something similar--submitted an employer contribution that happened to represent employee contribution, employer contribution, and earnings. We will show the entire amount as an employer contribution, not split three ways. It seems to me that if you argue that the gain component should be shown as a gain, then you should show the employee component and an employee contribution--and neither one makes sense to me.

Assuming that you do have a partial termination, you only have to 100% vest the affected participants--those who separated from service as a result of the action. You do NOT have to vest those people whose jobs and /or participation were not affected. rck

John A, In June of 1998, one of our acquisitions did an eve of closing termination of their 401(k) plan, but left us with the responsibility of filing for the determination letter. We had all kinds of problems with data, because we in turn sold them within a month, they had changed recordkeepers, and we got minimal cooperation from either the old one or the new one. We did not file for the determination letter until March of 2000. We got approval in early December of 2000. So, it can be done. The Rev Ruling does say "generally, .. . . ", and we certainly had plenty of extenuating circumstances. But I do not recall getting any questions at all about the elapsed time. I would file Immediately. RCK