MGB

To make it even easier: http://www.dol.gov/dol/pwba/public/program...ry94/94-42a.htm

Note too, that firms promoting their mailing lists as "opt-in" customers are usually lying (or "twisting" the truth). I receive many, many spam emails that state I am only receiving it because I opted in to receive it. Absolute lies. I have never opted in to receive anything. When a company has your email address, they can sell it to someone else. (Note all those "privacy disclosures" you receive from financial institutions and others - they state they will do this unless you specifically request not to. Of course, they have already sold your name by then and it is too late.) The purchasing company of these email lists calls this an "opt-in" (even though you never heard of them) because you missed your opportunity to stop the sale of your name. They then can sell their "opt-in" only lists to companies who think they are buying legitimate leads. And, yes, everyone showing up in my mailbox are deleted and never read.

I disagree that 411(a)(8) requires a plan to conform to that definition for NRA. NRA may be any age (e.g., 80). What everyone always misses in this are the words "for purposes of this section." The NRA defined in the law is for determining vesting (411(a)), minimum accrual requirements (411(B)) and allocation between ER and EE benefit (411©). It does not require that the plan follows the 65&5 for its definition of when the NRA is. They even provide a hint that the NRA defined for purposes of 411 is a completely different concept than the one in the plan when they state that the NRA for purposes of 411 is the earlier of the NRA in the plan or 65&5. There would be no reason to say this if the plan were limited to 65&5 by law. Those that have "locked into" the idea that a plan may not have anything greater than 65&5 are confused by the discussions of SSNRA. There should be no such confusion because there is no limitation stopping a plan from using SSNRA. Getting back to Matt's original question, no, the ERD is not a distributable event.

I believe the changeover from 4th quarter occurred 1/1/94, so that the 93-94 numbers that I show go from 4th quarter 93 to 3rd quarter 94. I don't recall (without doing some digging) what the rule was prior to 87, but I imagine it was always 4th quarter to 4th quarter.

Note: These are only applicable to the 3-yr highest compensation limit under Section 415. All other automatic increases in other limitations are calculated from a base year which can result in different rounding. The IRS publishes these with the same release in which they give the adjusted dollar limits. They have only been doing that for a few years, so the older ones here I probably calculated myself. They are the average of the Jul-Sep CPI-U divided by the same average from the year before. 1987-1988 4.47% 1988-1989 4.31% 1989-1990 4.60% 1990-1991 6.22% 1991-1992 2.99% 1992-1993 3.05% 1993-1994 2.72% 1994-1995 2.17% 1995-1996 2.64% 1996-1997 2.94% 1997-1998 2.20% 1998-1999 1.60% 1999-2000 2.35% 2000-2001 3.51% 2001-2002 2.70%

Why would you file a Schedule P if there is no trust?

You may not transfer your 401(k) without a distributable event. That requires termination of employment or termination of the plan. Even upon termination of employment, there is no requirement that the plan distribute before retirement, but most do. Many do not until after the end of the year of termination. Besides a loan, your plan may also have provisions for a "hardship withdrawal." The purchase of a home qualifies for this under most plans. You would be subject to taxes and a 10% penalty (you would also be subject to taxes taking from the IRA). The loan is the best approach. By the time you get your hands on the money through any other ways, you have lost considerable amounts to taxes (federal, state, and penalties). For example, assuming you are in the 28% marginal tax bracket and a 6% state tax and a 10% penalty, you are only left with 56%, not much more than the loan (and you still have the other 50% in the plan under the loan). You also lose the tax credit that you would be eligible for in 2002 for contributions to the plan if you take a distribution. There are no tax ramifications of a loan unless you terminate employment while the loan is still outstanding. At that time, if you do not pay it back, it becomes subject to taxes as if you had taken a distribution.

I find their statements somewhat troubling. I assumed (dangerous to do, given that I am not an attorney) that if an employer grossed up wages so that there was no financial harm, that the interest rate would not need to be reduced to 6%. Obviously, the DOL thinks you need a court order to determine "no financial harm," rather than common sense. The law refers to "financial harm" by entering the military. The DOL has interpreted this to be "ability to pay," which is a completely different concept. From the DOL Q&A'S: Q: Under the Soldiers' and Sailors' Civil Relief Act, creditors are required to drop interest charges down to 6% on debt owed by those called to active duty. Does this apply to a loan from my pension plan? A: Yes. Under the Soldiers’ and Sailors’ Civil Relief Act (SSCRA), creditors, including a pension plan, are required to drop interest rates down to no more than 6% on debt owed by those entering military service for the period of such military service. Further, under the Employee Retirement Income Security Act (ERISA), the loan will not fail to be a qualified loan under ERISA solely because the interest rate is capped by SSCRA. Under SSCRA, a plan fiduciary could petition a court to retain a higher rate based upon the individual's ability to pay. Q: If I prefer that the interest rate remain higher so that I can accumulate more money in my pension plan, is the plan administrator required to comply with the Soldiers’ and Sailors’ Civil Relief Act and unilaterally reduce the rate? A: A plan fiduciary could petition a court to retain a higher rate based upon the individual's ability to pay. Absent an order from the court, however, the plan fiduciary would be obligated to reduce the interest rate.

The 402(g) limit would be $11,000 in 2002 under pre-EGTRRA law. However, there is another thread here somewhere stating that personnel in the state, when questioned, are giving the $10,500 figure as being the correct amount. I don't think they understand that the automatic escalation is in the Code and would automatically produce the $11,000, rather than there needing to be an amendment to the law each year to increase it.

Two other issues: 1. This type of option triggers 417(e) rates and mortality on the entire calculation (because it is not a "nondecreasing annuity"). You may not rely on the conversion factors in your plan to arrive at the annuity amount (assuming the annuity chosen is not the normal form), and must first calculate a minimum annuity amount using 417(e) rates and mortality. 2. If this is a contributory (after-tax) plan, the lump sum must be pro rata between the employee contributions and the remaining benefit. For this purpose, the present value of the total benefit must be calculated under Section 7520 rules (estate valuation), which 99.9% of pension practitioners have never had to deal with (it is based on a rounded 120% mid-term AFR and the mortality from the decennial census statistics).

The answers are different depending on whether your company is publicly traded or not. If it is publicly traded, then you should only have access to the same information that an outside stockholder has. It would be illegal for the company to provide you with additional information that has not been given to the public. If you are a non-traded company, then I do not know what the reporting requirements are...someone else may know. I would guess that it is the same information that needs to be given to stockholders if it was a traded company.

I am making a wild guess here. Wouldn't this be a state law issue? Under state laws, you cannot withhold funds from an employee's paycheck without their approval (except for certain items like garnishments, tax withholding, etc.). I assume that this implies they can rescind that approval at any time. Perhaps different states have different requirements and the plan document language is trying to cover all possibilities.

That was the CFO of Nortel Networks. They had a mutual fund option in the 401(k) that was primarily NT stock. Just before each (negative) earnings announcement, he moved out of that fund (not out of the 401(k)) into other investments and then came back later. Fired. The most ridiculous part of it was that it was only $80,000. In all of the articles I read on it, the best one I saw was a quote "How can such an idiot get to be the CFO of an S&P 500 firm?"

mming, I do not think your comments on the beginning of year valuation matches with the requirements of Rev. Proc. 2000-40. The B for the ongoing plan must include pieces from both plans. See sections 4.07 and 4.08.

This was the federal bill proposed last year (hasn't gotten very far): The Social Security Number Privacy and Identity Theft Prevention Act (S. 848 and H.R. 4857) introduced by Senators Diane Feinstein (D-CA) and Judd Gregg (R-NH) in the Senate and by representatives Clay Shaw (R-FL) and Robert Matsui (D-CA) in the House of Representatives. Except for certain required uses of an SSN (tax reporting, etc.), no other organization may use or obtain an SSN without the affirmatively expressed consent of the individual. Even with consent, the SSN could not be publicly displayed (sounds like a grey area whether printed on a card is public).

Wouldn't the new rules on people benefiting from a nonprofit apply here? These are known as the "intermediate sanctions" regulations recently issued.

When the 1974 Privacy Act was passed, there was tremendous problems with providing a notice of how the SSN would be used every time it was required (I was in the military at the time and every piece of paper had these huge notices on them because your military ID number was your SSN). When I returned to the Univ. of Wis. the next year, they got around the law by using a 10-digit ID number which was just your SSN plus one more digit (I think it was calculated from the prior 9). They only provided the notice when you enrolled this way. I have been very concerned about this lately with electronic funds transfers. I've been paying bills for the past 9 years through CheckFree. When I recently moved and changed banks to SunTrust, they would list the transactions on my bank statement as coming from a transfer identified by my SSN (they did the same thing with automatic deposits). This is the first bank (I've done this with a few) that reported it this way. I complained because here I had a bank statement in an unsecure mailbox with my address, SSN and account numbers all in one. They claimed they couldn't change their system -- I changed banks. And yes, the federal proposed law on this (I would have been able to tell the bank not to do this under the proposal) is still alive and could come out of committee in the future.

I vote yes, but don't have a cite to back it up. Note that this is exactly what Enron did/is doing for all of their executives to keep that money away from the bankruptcy.

States have their own numbers.

I don't have a 1040 here, but if line 42 is the total tax (before recognizing withholding and tax credits), then you have it right. Example: Total tax before withholding and credits = $2,000 Withholding = $2,500 Tax credit = $1,000 You would get $1,500 tax refund. This is where "nonrefundable" comes in: Total tax before withholding and credits = $500 Withholding = $700 Tax credit = $1,000 You would get only a $700 refund. The credit cannot reduce the tax owed to less than $0. (If this were a "refundable" credit like the Earned Income Credit, then you would get a $1,200 refund.)

The contributions do not have to be salary reductions, they can also be after-tax contributions. In addition to all of the above named plans (assuming they accept after-tax contributions), contributory defined benefit plans would also qualify. Note that distributions from any type of plan within the prior two years or during the period following the contribution, but before the filing of the tax return, will reduce the contribution used in determining the credit. Also, this is a nonrefundable credit. That means you must have a tax liability to be able to use it to offset. For very low income workers without a tax liability, the tax credit is useless. If a person is subject to the alternative minimum tax (e.g., high salary with large offsets for other losses), the credit cannot reduce taxes below the alternative minimum tax due.

This is a nonlawyer response: The distribution must be forced. If the participant does not cash it, they still owe taxes on it. I would surmise that it gets turned over to state escheat funds if the check never gets cashed. I don't think there is any legal way to call it a forfeiture.

Sorry, I did not realize dmj switched the discussion from pre-tax to after-tax (AT). The original discussion was about raising the pre-tax percentage to very high amounts so that second-(low)wage earners could help the ADP test.

dmj, How can changing from 15% to 50% provide more for the HCEs? 85000*15%=12750 They can't even put in 15% with a $11,000 limit.

Kirk, I am surprised by your comment. I have been in consulting for 25 years and have run into many clients (all large - thousands of employees and multiple plans) that have never gotten a determination letter and their plans have been in existence for much longer time periods (some back to the 40s). All of these had timely amendments for every required change in law and all had some of the best ERISA attorneys I've worked with reviewing them.