RCK

You said that the plan has a brokerage window. Does that mean that the real estate would come in through the brokerage window? Or that it would be just a new investment option? In either case, if you do it for the owner, you're going to have to make it available to all the employees, or at least enough to have nondiscriminitory benefits, rights and features.

I must be missing something. The arithmetic that Tom went through does not apply to rollover-eligible distributions, and does not apply to periodic distributions. What does that leave other than required minimum distributions?

This is a DB plan, so you should have compensation history in order to allow the calculation of benefits. The compensation definition for benefits purposes is probably the same as for employee contribution purposes. And if the definitions are the same, you should be able to recalculate all the employee contributions. If the definitions are not the same-- that is, contributions are made based on a different definition, then I'd research the extent of the differences. If they are reasonably close, I'd use the research to adjust the benefit definition of comp as need to get my best estimate of contribution definition compensation. In your question, you did not explicitly mention the actuarial firm that has been doing the cost calculations. If they are different from the sponsor, administrator and trustee, then they should have what you need. Who's responsible for having the information? Ultimately the sponsor.

Tom's answer is right. But the arithmetic of the distribution escapes me. A distribution of $25,000 should have had $5,000 federal withholding, but it seems that did not happen. It would be less if there was post tax money involved, and it would be more if there was some state withholding included. I'd be interested in knowing what the 1099-R shows.

A benefit from a qualified plan cannot be assigned or alienated or subject to any type of garnishment or levy. So pledging it as collateral for a loan would not work.

I'm from Minneapolis, and our policy is the same as Joe's--if the office is closed it's essentially an extra holiday. If the office is not closed, then it is vacation/lost pay/personal day. We aren't in Buffalo's class for snow, but we do have some cold on occasion. We have a car starting service for people who get here, but can't get their car started to get home.

Back to Kevin's original question: A large percentage (I think that it's in the 65% range)of Fortune 100 companies use company stock for at least a portion of the company match or Profit Sharing contribution in their 401(k) plan. And if you need an audit, your audit cost will go up because you will need a full scope audit instead of a limited scope audit.

It seems to me that the there are two questions here: 1). Can this be paid from the Trust? The answer is probably yes, but the plan document must contain language that allows that. 2). How does it get paid? The key is to get the trustee to agree to payment and to authorize a check from the trust. This would be done best of a voluntary basis--request payment and suggest payment from the trust. I agree with mo again's question whether the plan could be forced to pay for a service that the plan sponsor has initiated.

I agree that too much of a retirement portfolio in company stock is questionable risk management. But I would be thrilled if my employer matched 150/175/200% of the first 3% of my contribution in any kind of stock. So I think that Company Stock in a retirement plan is much better than no stock in a retirement plan.

I haven't dealt with a plan this small for years. But my recollection is that on audit there would be a reasonable compensation issue if both people work but only one gets paid.

Since these tend to be fairly small, I have taken the position that the cost of doing a technically accurate allocation exceeds the amount of the recovery. So we treat it as current earnings. The only exception that I've had to make is when the recovery came from a state Annuity Guarantee Association, and was a recovery of lost earnings for a Confederation Life GIC. The state required that the recovery only go to residents of that state. They would have liked it to go to every state resident who had an account when Confederation Life encountered the difficulty even if they had taken a distribution. But we convinced them that we could credit it to state residents who had an account then, and still had one.

I agree. The plan only has to offer repayment rights to participants who were less than 100% vested when terminated. On a slightly different note, we came to this conclusion: that the original distribution is taxable. The repayment must be made with post-tax dollars, and the subsequent distribution is still fully taxable.

Since sampat is essentiallly gathering opinions here, I will add mine to the mix. 1. If you could explain to me how to make $129,000 of contributions out of $55,000 of earnings I would be interested in that program. 2. The 5% assumption is certainly aggressive, and suppressing the investment returns to justify that assumption is mind boggling. 3. Many (actually many, many, many)years ago, I did a valuation for a 30 year old with retirement at age 35 (the 415 limits were different then). The participant was a commodities trader and the burnout rate was so high that retirement at age 35 was justifiable. To the best of my knowledge, it was never audited. But is age 55 justifiable in this situation? If not, the possible deduction drops rapidly. 4. This will be a high maintenance scheme, and it seems to me that much of the potential deduction will be for expenses.

This plan clearly has a bunch of problems, and walk-in CAP seems like a viable solution. In order to do walk-in CAP, you need to have solutions to each of your problems. Here's what I would do: 1. There is a 411(d)(6) problem with the joint & survivor annuities, and has been since 1996. The only fix is to provide them, and that may require moving to a prototype that provides them. 2. If anyone took a distribution under the CBA period of the plan, you're going to have to go back and offer them the opportunity to repay their benefits and take a Joint & Survivor annuity. It is hard to believe that anyone would take you up on this, unless they elected a life annuity and died. The surviving spouse would certainly be interested in a survivor annuity. 3. You're going to have to get those three years to a place where they pass the tests. The IRS approved method is to make additional contributions on behalf of the NHCEs. This can be extremely expensive, and you may want to try to refund contributions of the HCEs. 4. Defaulted loans. If they've actually been defaulted, I don't see that you have a problem. But assuming that they have not actually been defaulted, default them and report the income. 5. Loans in excess of limits. I don't have an idea on this one.

Sorry--yes, we are doing the VCR filing and the Termination letter at the same time. Or at least that is our intent.

Ouch. You were generally right with your comment to HR, that they had 15 days after the end of the month of the deduction to get the money deposited. Even that is not a safe harbor-- the IRS would apply a facts and circumstances test to see if the contributions should be made even faster than that. One of our subsidiaries sponsored a plan that had some administrative issues, and the agency that I thought responded best to the participant's needs was the regional DOL office. THe Department of Labor website is at http://www.dol.gov, and through the contact us section you can find out which region you are in and what their number is. I would suggest moving quickly before all the money is gone.

My understanding is that the Vendor determination letter on the prototype does not count as a determination letter for filing purposes. I lined up my comment numbers with your question numbers. That is, by "file them now", I meant file the 5500's right away. File them and see what happens. The one plan that we have that is terminating but has defects, we are planning on filing the VCR at the same time as the Determination letter filing.

I agree that freeerisa is very handy, but if you're going there, be sure that you have the sponsor's name exactly right, or you're not going to find what you're looking for. Some of our subsidiaries file their own 5500's and when I ran our name through, I did not get most of those plans because of slight name variations. On the other hand, I did find a plan that I didn't even know about. (Fortunately it was for a credit union run out of one of our locations,and not part of the controlled group).

My initial thought is that the plan probably does not have a determination letter. And if that is indeed the case, then VCR and SVP are out. Other specific comments: 1) It seems like the employer has made his own attempt at applying APRSC. If this were an isolated case, I might be tempted to say that it's good enough (assuming that the earnings adjustment is reasonable). But with a consistent pattern of failure, APRSC is out. 2) File them both as soon as possible. 3) Somebody is going to have to balance this. Is it fair to assume that the 5500 is not subject to an audit requirement? I think that you have to start with the deferrals and follow them through to the trust (and adjusting for the earnings you mentioned earlier). I would not spend much time trying to figure out what the sponsor had supplied to you earlier. 4) I see this as a payroll issue, and would fix it there--recategorizing the loan payments as post tax and issuing a revised W-2. My experience with the DOL is that they tend to be pretty patient and understanding at the agent level. Solve that participant's problems and they will probably go away. You can correct multiple errors with a single filing, so you may be able to take advantage of that. You will need to fix all the problems, or at least decide what fix you are recommending before you submit for a determination letter on the termination.

As long as the participant needs a Social Security Number and a PIN to get into the site and enroll, I don't see any issue with authentication. There is no real difference between this and a Voice Response system. I'm a plan sponsor, and we are currently in the process of a phased rollout of an Internet site for account inquiry and initiating transactions. The participant would be able to initiate a full range of transactions--requesting forms and information, reallocating funds, initiating a loan, initiating a withdrawal--and even opting out of our Automatic Enrollment program. Our usually conservative ERISA counsel has no objections.

Doesn't this depend in part on who is paying the distribution cost? If the plan is paying it, then I'd be hard pressed to say that you can forfeit even small amounts. I do think that there is guidance somewhere that the IRS will view an account balance under $5.00 as deminimus and forfeitable. I can't recall where we encountered that though. If the participant is responsible for the payment, then I see this as a completely different situation. (My prior employer charged me $50 for taking my account balance, and that is legitimate). Assuming that you force out all amounts under some threshhold, then force out the $20 accounts,and their net distribution is $0.

I agree with MoJo. We choose a 2% default rate because our primary goal was to get eligibles involved--it was not specifically designed to increase our allowable HCE contributions. And we did not want to bump up against wage and hour laws too hard. The context behind our decision includes two important points: our match formula caps out at 5% of pay, and a significant portion of our population is typical retail-- young, relatively low paid and high turnover. If we had an opportunity to do it again, we would probably make the default rate 3% (and would allocate the contribution 50% Stable Value and 50% S & P Index).

Thanks for everyone's thoughts. Una M: I wish that we could do payroll stuffers, but with heat sealed checks that is impossible. We have targeted mailings to the poeple who were auto enrolled and made no changes, but have not had much luck. I do like your thought about reinforcing the mechanics of making changes to deferral percentages and investment elections. We will include something along those lines in the next round.

We implemented an Automatic Enrollment (Negative Election) program nearly two years ago. Eligiblity is 90 days, and at that point the employee has 30 days to "opt-out". If they don't opt out, they are auto enrolled at 2% into a Stable Value fund. The good news is that only about 5% of the eligibles are choosing to opt-out. The bad news is that less than 10% of those who were auto enrolled have either increased their deferral percentage above the 2%, or changed Investment elections. My understanding is that our experience is not unusual, and my question is whether anyone has successfully tackled the problem of inertia in deferral percentage and investment elections.

I agree with LCARUSI. I would clarify in that I would not say that the beneficiary form is overriding the Divorce Decree. The participant is choosing to make the former spouse the bneeficiary--the former spouse is not claiming a portion of the retirement benefits. So the Divorce Decree is still valid.