LIBERTYKID

Defined benefit plan desires to provide to part-time or full-time employees that agree to reduce their hours at least 80 percent with the opportunity to receive an in-service distribution of their accrued benefit, but not more than $1,000 a month. Code Section 401(a)(36) permits in-service distributions, so it appears to be legal, but what are some of the practical issues, concerns, about do so? Your thoughts are welcome.

[if this is an ERISA plan, then the ERISA disclosure requirements apply in the same way they would to a 401(k). But do they apply in the same way? If the sponsor designates various vendors, such as Merrill Lynch, Schwab, Vanguard and TIAA-CREF , but lets the particpant select any investment option from each, what exactly is disclosed? Perhaps a list of the vendors, how to contact each, any PLAN charges for maintaining the accounts, and how to make deferrals; but I don't think a side by side comparison of investment options or expenses incurred through the use of the investment account needs be disclosed. Trying to confirm this interpretation is correct is what I am getting at.

The 408(b)(2) regulations require service providers to disclose detailed information about plan fees and compensation to plan sponsors. In general, plan sponsors must evaluate the fee and compensation information received from the plan’s service providers and determine that the services and fees are necessary and reasonable. In a 403(b) plan that permits participants to make salary deferrals only to one of 7 approved vendors and the participant can direct in any investment option offered by the vendor, what is the sponsor’s obligation to monitor the fees and expenses of each vendor? What must be disclosed to the sponsor by each vendor? What should the participant fee and investment disclosure information look like?

[That is why many employers used the approach that the benefit provided is based on the original documentation. But the question is whether a defined benefit plan, which must be administered in accordance with its terms, can pay benefits only on the origional documentation. I would like for that to be the correct answer but I am not sure it is the correct result.

A participant misrepresents his age at time of hire. At time of retirement we find that he is 65 and not age 58. He gets greater benefits at there is no subsidy for early retirement . I'd like to give the person the lesser benefit but believe that I must follow the terms of the plan. The plan does not have an "error correction" section in it. Anyone want to chime in on what the plan can/should do?

A participant terminates from a DB at age 45. He receives a letter from the plan at age 54 stating that he can commence benefits at early (age 55) or normal retirement age (age 65). The letter further states that if he does not apply for benefits at age 65, but later than 65, no actuarial adjustments and no retroactive payments will be made for the period from age 65 to the date benefits actually commence. Isn't the position taken by the plan a cut back of accrued benefits?

Can a Welfare Fund discriminate in the amount of contributons in requires an employer to make on behalf of its eligible employees to pay for benefits? The Fund covers, in addition to the employees covered by a CBA, employees of the union and an apprenticeship fund, and the union and apprenticeship fund contribute less per hour for the same benefits.

Anyone have experience setting up a retirement plan for a professional athlete? Income will consist of endorsement $$$$. His salary is paid by the "league" and is subject to the league pension plan. Any insight, issues or links to articles on the subject is appreciated.

The IRS is threatening to disqualify a SARSEP as a result of the violation of the 50 percent particpation rule. How is the penalty calculated for disqualification?

Corporations A B and C each maintained a 401(k) plan. Each companiy was acquired by company D and each plan was merged into company D's 401(k) plan, which is now being filed for a determination letter. It has now been discovered that the plans for company A B and C may not have been in full compliance with GUST or subsequent amendments. If the IRS discovers the mergers upon the review of company D's plan, this could be a problem??? I'd like to file a VCP to clean this up, but the question is under what plan do I file the VCP? Since plan's A B and C do not exist any more, and plan D is tainted, I will file under plan D's name and disclose the mergers of A B and C. What I don't want to do is to file three or four separate VCPs. please confirm that one filing will take care of this. tnks.

The deatdline for the PFEA Amendment which which modified the interest rates for lump sums for 2004 and 2005 kept getting delayed. I think the 415 amendments delayed it to the end of 2009. Did WRERA delay the amendment deadline to the end of 2009?

1.Employer establishes a SEP on form 5305-SEP but cannot find the form. Is this correctable in VCP? 2. Same employer maintains a qualified plan at the same time as the employer maintains the IRS form 5305-SEP, in violation of the terms of the SEP document which states that no plan can be maintained. Is this correctable in VCP and how would you propose correcting it?

"Thus, the model form can be used but there is no assurance of qualification. " Do you think it is likely the IRS will disqualify the SEP? Is this correctable under EPCRS? It appears to be the failure to follow plan terms. Is it likely the IRS will require the distribution of the amounts contributed to the SEP in the year in which a qualified plan was maintained? Are you aware of an institution that has a prototype that permits a qualified plan and a SEP to be maintianed at the same time? I have a client with this problem and a prototype would help.

The sample plan amendments in the Notice give participants a choice to receive or postpone what would otherwise be a required minimum distribution for 2009. Is the IRS saying that particiants must be given a choice to waive the required minimum distribution or can a plan choose to not give a participant the choice and force out the 2009 distribution as if it was required?

Thank you for your thoughtfull response. My thinking exactly but it is always nice, after due dilligence, to get another opinion. By the way, the preamble to the coverage regulations comes to the same conclusion as the PLR.

US corp wholly owns foreign sub and maintains an ESOP (US co is an S Corp). Can the ESOP cover one nonresident alien of the foreign corp? Although an S Corp can't have a nonresident alien as a shareholder, it is the ESOP that is considered the shareholder and not the participants, correct? Also, the ESOP can be written to prevent distributions in the form of stock, so the nonresident alien will not get stock or become a shareholder. Does this work???

An ESOP gave a participant the right to put shares of stock distributed to the participant to the company in two 60 days periods in the year of distribution and the year after distribution. The participant did not exercise his or her put rights during such period. Am I correct that the law does not give the former participant any other rights to put the shares? How can the former participant liquidate the closely held stock in this situation?

Can an ERISA 403(b) plan avoid the qualified joint and suvivor annuity requirements by offering a lump sum and requiring spouseal consent on any change of beneficiary just like a 401(k) plan?

Is the HEART ACT provision that a person who goes on active military duty for more than 30 days be treated as a severance from employment for the purpose of making a 401(k) withdrawal a required or elective provision. I have seen it described both ways.

The IRS guidance says the notice regarding the election of prior year's funding status is to go to various parties, including "participants." The IRS does not define participant. If the election is to retain the prior year's "good" status (not endangered or critical) do all participants, active term vested and in pay status, receive the notice?

Are health insurance premiums a safe harbor hardship medical expense? such expenses are deductible under Section 213(d) of tyhe Code.

Employer since 2001 permitted eligible employees to commence deferrals immediately upon hire instead of making such employees wait until the plan's dual entry dates. The employer can't use self correction because this error goes back more than 2 years and presumably is significant. What is likelihood under VCP that the IRS will let the employer correct with a retroactive amendment providing for immediate eligibility?

I am submitting a determination letter request under Cycle C for an S Corp ESOP. What there a deadline by which the plan had to be amended for the final nondiscrimination regulations under 409(p)? If so, do you have a cite?

My understanding is that a shareholder who is not an emloyee and who owns less than 50 percent of an employer is not a disqualfied person re: an ESOP sponsored by the employer. If such person sells his shares to the ESOP can such person take a note from the ESOP and can such loan be treated similar to a loan from a disqualified person (i.e., unallocated account, share release as loan is paid off, etc.).