Jean

Only a US court can grant her a divorce -- not sure of name/process for that when a spouse abandons another. She needs to get a court order saying she is or isn't married. Until she is divorced, then spouse remains primary beneficiary.

The individual reports the amount received on line 7. And, per the 1040 Tip on instructions page 22, "Attach Form(s) 1099-R to Form 1040 if any federal income tax was withheld." Generally, the individual should receive a letter of explanation as to what the distribution is for and the year it is taxable. The letter should also explain that they will receive the 1099R next year and to keep it with their 2007 tax files.

You need to find out from your 401(k) administrator (i.e., HR dept rep?) what the rules are for salary deferrals from bonus payments and how to make a salary deferral instruction change. The payroll individual may not know the 401(k) plan rules. It is common that plans require that a salary deferral from a bonus payment could be the same percent as from your general compensation. Some plans allow participants to make a separate salary deferral election for a bonus payment. But if it does not, and you are told the same rate will apply no matter what type of compensation you are paid, then simply increase your current salary deferral to an amount that will equal the dollars you want to defer by the end of your compensation year.

I always thought when a plan is terminating that the participants do not have the right to leave the money in the plan. So a force out distribution is possible, use the automatic rollover guidance.

I would also look at the precedent for "working" and "employed". In your case, all other employees were "employed" as of the last day, but simply not working due to office closing for last few days of the month. Would the employee that was terminated on 12/21 actually gone to work through 12/31 if the office had been open? If yes, maybe the true "last day worked" is 12/31.

I will respond based on my experience with multiple employer plans. This may or may not be the same as your Big Plan. Generally the assets for Co B employees will transfer from the Big Plan to Plan A if it is done as a plan to plan transfer, and employer Co B would generally authorize the transfer. There may also be individually directed rollovers from Big Plan to another plan if any employees have actually terminated employment (or any other distributable event permitted by the plan) from Co B. Maybe the Big Plan is asking for this waiver because they want to ensure that assets are not being disbursed for any reason other than a distributable event?

Would a first year 401(k) plan that is a eligible automatic enrollment arrangement include permissible withdrawals in the test balances?

Regarding when the permissable withdrawal is allowed, we were going to allow an employee to request the withdrawal within the 90 day window if they did not change the salary deferral % but they did change the default investment. This is not an option? Any change (deferral / default) removes the permissable withdrawal option?

Is there any guidance out there, or insight, on how the top heavy test is impacted when the permissable withdrawal option is included in an 401(k) automatic enrollment plan?

The following paragraph appears in LRM #94 for Cross Testing in a Profit Sharing For plans with only one or two eligible NHCEs, the allowable number of NHCE allocation rates is one. For plans with 3 to 8 eligible NHCEs, the allowable number of NHCE allocation rates cannot exceed two. For plans with 9 to 11 eligible NHCEs, the allowable number of NHCE allocation rates cannot exceed three. For plans with 12 to 19 eligible NHCEs, the allowable number of NHCE allocation rates cannot exceed four. For plans with 20 to 29 eligible NHCEs, the allowable number of NHCE allocation rates cannot exceed five. For plans with 30 or more eligible NHCEs, the allowable number of NHCE allocation rates cannot exceed the number of eligible NHCEs divided by five (rounded down to the next whole number if the result of dividing is not a whole number), but shall not exceed 25. Would you include this in a Volume Submitter plan or just M&P?

Yes.

In a traditional ME structure, your client would be a participating employer, not the plan sponsor. The plan’s effective date is associated with the ME and your client has an “election to participate adoption date” which is not a plan effective date. This is how I clarify the date questions. The ME’s 5500 has that plan’s effective date and as there is no reporting to identify a participating client in an ME, your client's plan effective date should not be for a time period when they were only covered under the ME. Likewise, when a client leaves the ME, they do not take any dates associated with the ME to the new plan. This is to eliminate the possibility of follow-up letters from DOL for lapses in filing years. Probably best to use a plan effective date of the restatement date, file a 5500 with a plan number associated with your client, not the ME. If they have never sponsored a plan before, use 001. To answer your questions. 1. Yes 2. List them as ‘transfer in’ as the ME will list as ‘transferred out’. 3. Generally the restatement date as explained above. Regardless of the date used, use related employer rules to run plan tests. Run full year ADP / ACP and top heavy tests. This rule is also covered by the PEO rules that require the ME to test participating employers as separate unrelated plans. Generally, the new plan would receive corrective contributions or issue corrective distributions. 4. Yes, this is proper, although I’m sure often overlooked. ME should list as Code D.

If an eligible plan expense is paid from Roth 401(k) contributions / earnings, would the basis recovery rule apply?

Is it possible to design a plan that permits the participant to designate the portion (not necessarily percent) of the retirement balance that will be paid to a beneficiary. Example, could the participant designate the Roth 401(k) subaccount will be distributed to the spouse and the balance to the child? (Let's forget spousal rules for now.)

Cannot speak to DB rules as I have no experience in them. Prehaps my DC correction approach is parochial, but I believe that a procedure that requires an employee to report an error, and that employee fails to do so, would not in and of it self mean that the plan administrator has no responsibility to correct the error. Procedures are good, they are a safety net. I'm quite sure the average employee would not blink when their plan administrator told them they had a responsibility to report an error and because they did not, no action can be taken. But, I believe the failure to take corrective action is where the procedure is questionable. Procedures fail all the time, that's what makes administration so much fun. What would be the proper correction for an employee that defers more than he elected to and the error isn't reported by the employee? Presumably a procedure to report a payroll deduction error would not make an exception for the dollar amount involved. If no statutory limit are exceeded, what would be the proper correction. I agree with previous post that "On the Internal Revenue side, the employer has significant responsibility in ensuring that the rules are followed -- including the terms of the plan and employee elections. I think we'd have huge problem if employers are completely free to ignore any deferral elections without any repercussions."

Here is one reference: http://www.arkleg.state.ar.us/ftproot/acts...lic/act1309.pdf AR Senate Bill 543

There is a general misunderstanding that employee's should understand their responsibilities even if they haven't been communicated to them. It is easy to assume an employee would check his paycheck stub to see if his election was properly applied AND then report the error. This expectation is a procedure, not a qualification requirement; the procedure should not only be communicated when the election is made, but again after payroll has been run. This could be a simple email reminder to check the pay stub. But, this guarantees nothing and we are back to the plan administrators (who ever they are) ensuring the plan operates properly -- this includes an audit of the plan transactions. If an audit is not done on a regular basis, then these errors will not be caught until it is too late. I don't think there is any thing that puts plan administration requirements on the employee's shoulder and they would generally win if they pushed their case. Meaning, Mr Employer would have to pony up $4k. I would say it's a plan operational failure that should be corrected upon discovery.

Do you have a link to the AR ruling? I have NE.

Can someone provide a primer example of a loan issued from a Roth 401(k) account. How is the loan repayment applied to the account. What are the default tax implications. Is there a code reference? Does the answer change if the participant has / has not satisfied the qualified distribution criteria?

The basic Roth 401(k) distribution rule as stated in IRC 402A(d)(2)(A) requires the following events to occur for a Roth 401(k) distribution to be classified as a qualified distribution: 1. age 59 1/2, 2. disability, 3. death, AND 4. account has been established for 5 years. However, it appears that the distribution events are expanded in the proposed regulations "Other Rules" section because the "Roth contributions are subject to the nonforfeitability and distribution restrictions applicable to elective contributions." So, my QUESTION, if the plan also permits distribution of elective deferrals upon termination of employment, and I terminate and take a distribution of the Roth contributions plus earnings AFTER the 5 year period that the Roth account was established, are the earnings taxable or nontaxable??

I guess that is my question -- it appears the instructions are silent on how to properly report (or not report) the identification of participating employers in a multiple employer plan that were previously reported on Schedule T.

For a Multiple Employer plan, a separate Schedule T was prepared for each participating employer of the plan. The participating employer was identified on lines 1a - 1b. With the elimination of Schedule T in 2005, it appears that a separate schedule is not required for a participating employer (with the exception of Sch B). Could this be correct or is it an oversight?

I know that the participant's assets in a qualified plan are protected, but what about new contributions / payroll elections for future contributions? Are those also protected?

When distribution processing fees are charged to the participant (the participants receives check net of the fee), is this fee entered on line 2i(2) Contract administrator fees, or 2i(4) Other of Sch H ?

The plan document probably is very clear on how the plan administrator may reduce or stop an HCE salary deferral when it is determined that the ADP test will not pass. I don't think that because some of them have reached their 402g limit means that they are not considered in the reduction. The plan probably requires something like this -- the reduction or cessation of salary deferrals begins with the HCE with the largest amount of elective deferrals for the year on the date it is determined the ADP will not pass. All remaining HCE deferrals will be limited by such amount.