Medusa

We are TPA for this plan and are being asked to amend the plan to change the eligibility/vesting from 2 year/100% to 1 year/6 year graded. Of course, the two principals came in under the 2 year eligibility and are fully vested. No staff entered under the old provision. Is there an issue relative to dscrimination in timing of this amendment? I haven't been able to find anything exactly on point. Any and all help appreciated. Med

One person doctor corporation. For 2005, we told the doctor that he could contribute $14,000 401k plus $28,000 profit sharing. He deposited the $28,000, and his 2005 W-2 shows the $14,000 deferral. However, he never deposited the deferral. Is it too late? He files a 5500EZ so DOL probably not an issue. Med

FWIW, we do ask the client how they want us to answer the question, after re-explaining the rules to them. If we know they are late and they choose to answer that they are not, we advise them of their audit risk. What worries me a little more about using the 15 day standard is the possibility of the DOL catching onto this and auditing all of our clients' 5500's. That would not be good. However, it doesn't sound like this is something on their agenda. Plus we never sign as preparer.

Thanks guys. I only want to be as strict as others, not more strict!

When preparing a 5500 for a client, how do most of you feel that the issue of "late deposits" should be decided for reporting purposes? Are you using the "bright line" standard of 15 days after the month, or the "as soon as administratively feasible" standard? We have been going with the latter, but it is seeming that we might be alone on this. Med

Thanks PiP. The problem is that there isn't actually any cash in the plan at this point. Further, because it just happened, the investment is actually worth LESS than what they paid, so the plan would be harmed by an exact return. I think you're right, this may be one for those who make the Big Bucks. Med

Sole shareholder of corporate plan sponsor deposits $75,000 (personal funds) into the pension account. This is immediately followed by a $75,000 investment in a limited partnership, which is held in the name of the plan. The individual states that the intention was to make a $75,000 personal investment in the partnership - this investment should be held for him personally. It should never have run through the pension plan. By way of correction, we would like to simply retitle the investment to him personally. Does this seem reasonable? It doesn't seem like the plan was really affected either way. There are obviously excise taxes due. Is the amount involved the entire $75,000? I can't think of what else it would be. Any suggestions would be appreciated. Med

Thanks all, especially for the cites!

vebaguru, what type of PT is it exactly?

This question has come up before but after MUCH searching, I'll be darned if I can find it. Say a plan and its sponsor co-invest in a piece of real estate. Because of certain minimums, the sponsor would have been unable to invest in that property without the co-participation of the plan. I seem to recall that the conclusion on the missing post is that this IS a problem because a disqualified person is benefiting (in terms of ability to participate) from the transaction. Can anyone elaborate?

I have a plan with a six month wait to get a distribution following termination of employment. The plan received from the Bankruptcy Court a "Stipulation and Order to Allow Mr. Dimmick to close out his 401k - Chapter 13 Bankruptcy Case No. ####". The stipulation states that the debtor may close out the 401k in order to purchase a vehicle to allow travel to and from work. He is in fact terminated, he just hasn't satisfied the six month wait specified in the plan document. What to do, what to do??

Just to close the loop on this one, it turns out that the sponsor doesn't have any checks to write against the credit card anyway, and there is no way for the trustee to take a credit card transaction, so he gave up on the concept. He said he "just had to ask".

I have been asked by the plan sponsor if they can fund their employer contribution with a company credit card. They want to get the points or miles or whatever from the credit card company. Is there any prohibition against this? I recognize that the mechanics of the transaction would be a challenge.

I am looking for a Crystal report that is similar to the old Trustmark "Accounting Report" i.e. transaction based in the aggregate. Has anyone seen such a thing.

mbozek: I completely agree with you. Unfortunately it is rather difficult to terminate a plan when the sponsor has gone AWOL. I wouldn't mind resigning either, if there were someone to resign to and somewhere to send the assets. WDIK: Thanks for the link. I know we can turn these plans over to the DOL but they are somewhat slow to react. I am trying to ascertain whether we can go ahead with the distribution on an orphan plan, or whether we need to just refer the participant to the DOL and wait until the DOL instructs us to do it. Although the plan has not been terminated, employment certainly has been.

We have a number of "orphan" plans, where the company has gone out of business and the principals have just walked away from the plan. Normally our distribution request form requires an employer signature. This can be tough or impossible to get in an orphan plan situation. We are considering the possibility of waiving the employer signature requirement in such cases. Does anyone have any comments about the advisability of doing this, or the lack thereof?

We are on the same page!

Mike, perhaps my early posts aren't clear. The bank did what they were supposed to. They did pay the individual they were instructed to pay, and that is the person whose account the money is in. The claim by this other person was totally out of left field.

Instructions to the bank included the name, SSN and address of record. I believe that the check and stub show all three elements, although I am not entirely sure about the SSN.

This is a daily valued plan so everything is done electronically. Electronic instructions were sent to issue a check to Individual A and send it to his address. Of course the employer approved the distribution form itself before it was processed.

How does the story end? First: we told the bank that it is not our problem and that they do in fact need to resolve it. They subsequently determined that since we had authorized payment to the individual on the plan and employer records, and since that is the individual who cashed the check, they were going to take no further action. So, pending any legal action, that is where it stands.

Approximately 2 months ago, Individual A received a termination distribution from the bank trustee of the employer’s plan. He deposited the check into his checking account, which happens to be at the same bank as the trustee. Individual B filed fraud paperwork on the above check approximately one month later. This paperwork resulted in a withdrawal of the amount of the check from Individual A’s account by the bank/trustee pending investigation. Individual B and Individual A are related and once lived at the same address. They have the same name and their SSN’s are very similar. Individual B contends that Individual A stole his identification and Social Security card and assumed his identity. Incidentally, Individual A apparently does not speak English very well and requires an interpreter. Individual B speaks fluent English. The bank/trustee spoke with the employer who contended that whomever worked for them spoke fluent English. Now the bank trustee has decided that it is the TPA’s problem (us) to deal with and are not pursuing the investigation any further. Individuals A and B have been directed to our firm. It does not seem that we can make a definite determination as to who is entitled to the benefit. My thought is that we should return the distribution and the withheld taxes to the plan and await a court order relative to the distribution. Does anyone else have any thoughts as to how to handle this? The amount involved is less than $5,000.

FWIW we are using a master trust for small employers. Technically it is not a master trust since the employers are not related. WE are able to save on trustee fees but still have to perform separate recordkeeping for each plan.

I have heard stories about providers who were penalized by the DOL because they took too long to transfer plan assets to a new provider, once sufficient (in whose eyes?) instruction had been received. Does anyone have any direct experience with such activity? The principals of our company sometimes delay the transfer for a period of time while they try to "save" the case, and while I know there may be fiduciary exposure in theory, I would like some anecdotal reports if there are any.

There is some question in my mind as to which participants such an amendment would affect. It might be that benefits accrued up to the date the amendment is adopted would be protected.