Belgarath

If they are truly that unresponsive to a CLIENT request, I'd add something to GMK's suggestion. And this needs to come from the client, not from you as an outside broker, which it appears you are. (I'm not excusing MM's apparent lack of professionalism, by the way) Have your client, in their letter to MM, state their dissatisfaction with the lack of cooperation and obstructive behavior in the exercise of legitimate contractual rights (surrender), and cc the State Department of Banking and Insurance with a recommendation that they investigate and/or audit to determine if penalties and/or class action lawsuits are appropriate. That usually gets some attention and prompt action.

Yes, they can require that their own paperwork must be used. Has anyone considered ASKING them why they won't transfer? There may be a flaw in whatever paperwork is being sent, etc... I flatly don't believe that they will refuse to answer a question from the ANNUITY OWNER/CLIENT as to why they refuse to "move the assets."

Interesting. A couple of observations: The PPA/HEART amendment contains the following. I think you could argue that since your vesting schedule DOES in fact satisfy PPA, that you do NOT need to to complete a "custom" schedule in the PPA amendment. The wording in (a) says that IF your vesting schedule does NOT meet PPA.... - well clearly you do. Ambiguous enough to be reasonably interpreted to require nothing be completed on the PPA, I think, even though it might be a stretch. Realistically, do you think that an IRS auditor, in this situation, would require you to apply 6-year graded vesting to someone who is already vested a higher percentage under the clear intent of the plan, and the SPD clearly gives the more favorable schedule? I'd like to think not. Granted it is safer to put the proper schedule in the PPA/HEART amendment. On another note, my SPD's have been printing out showing the proper vesting schedule in such a situation - other than for 403(b)'s, which are a PIA and don't always seem to follow normal document results. I don't understand why yours aren't printing properly. Probably some arcane checklist combination - have you tried actually submitting your checklist to Relius? I had a strange situation a while back that I don't even remember, and while they couldn't figure out the problem over the phone, once I sent them the actual checklist they were able to explain how to avoid the problem. Good luck. The Employer only needs to complete the questions in Sections 2.2 through 2.7 below in order to override the default provisions set forth below. If the Plan will use all of the default provisions, then these questions should be skipped. 2.1 Default Provisions. Unless the Employer elects otherwise in this Article, the following defaults will apply: a. If the Plan has a vesting schedule for nonelective contributions that does not meet the Pension Protection Act of 2006 (PPA), then the vesting schedule for any Employer nonelective contributions for Participants who complete an Hour of Service in a Plan Year beginning after December 31, 2006, will be the schedule below. Such schedule will apply to all nonelective contributions, even those made prior to January 1, 2007. If the Plan has a graded vesting schedule (i.e., the vesting schedule includes a vested percentage that is more than 0% and less than 100%), then the vesting schedule will be a 6-year graded schedule (20% after 2 years of vesting service and an additional 20% for each year thereafter). If the Plan has a cliff vesting schedule that requires more than 3 years of vesting service, then nonelective contributions will be nonforfeitable upon the completion of 3 years of vesting service.

No problem! I regularly mix up my years until at least May of every year anyway.

Hi Mike - interestingly, when searching prior thread on this, your post as of January 17 in the 401(k) forum came up with $260,310.19 for 2012, to get to the $250,000. What did you change between then and now, and why?

Just playing with my spreadsheet. While I realize that different spreadsheets may be off by a dollar or so due to rounding, I get a Schedule C income of $260,310 required to get the $250,000 comp maximum after SE tax reduction. (unrounded it gives me $249,999.82) Taking into account maximum 401(k) deferrals, for a S/E to get the 415 maximum $50,000 account addition, I get a required Schedule C comp of $174,157. Anyone getting anything different?

Haven't ever worked with welfare benefit plans. The language in the instructions for the 5500 form is based upon the 2510.3 regs. the question at hand (and I haven't seen the plan document yet) is specifically on the following which is the second of the three situations which make you a "participant" for 5500 count purposes. "the date on which the individual becomes eligible under the plan for a benefit subject only to occurrence of the contingency for which the benefit is provided;" The question was raised - if you are ELIGIBLE to sign up for health insurance, but you do not, are you a participant? Although this situation seems analogous to a 401(k) situation where you are a participant as soon as you are eligible, whether you defer or not, the regulation has very different language (i.e. it specifically says that you are a participant in a 401(k) plan in such situation) whereas the welfare benefit section of the reg does not. I'd interpret this to mean that the "occurrence of the contingency" is not meant to mean "subject only to signing up" - I'd take it to mean, for example, that if the plan provides accidental dismemberment, you are a participant whether you have an accidental dismemberment or not. So I think that the answer to the question posed is that no, such a person is not counted as a participant solely upon the basis of being eligible to sign up for the health (or whatever type) of insurance, for 5500 purposes. They would have to actually sign up. I'd love to hear what others think! Thanks. Lines 5 and 6. All filers must complete both lines 5 and 6 unless the Form 5500 is filed for an IRA Plan described in Limited Pension Plan Reporting or for a DFE. The description of ‘‘participant’’ in the instructions below is only for purposes of these lines. An individual becomes a participant covered under an employee welfare benefit plan on the earliest of:  the date designated by the plan as the date on which the individual begins participation in the plan;  the date on which the individual becomes eligible under the plan for a benefit subject only to occurrence of the contingency for which the benefit is provided; or  the date on which the individual makes a contribution to the plan, whether voluntary or mandatory. See 29 CFR 2510.3-3(d)(1). This includes former employees who are receiving group health continuation coverage benefits pursuant to Part 6 of ERISA and who are covered by the employee welfare benefit plan. Covered dependents are not counted as participants. A child who is an “alternate recipient” entitled to health benefits under a qualified medical child support order (QMCSO) should not be counted as a participant for lines 5 and 6. An individual is not a participant covered under an employee welfare plan on the earliest date on which the individual (a) is ineligible to receive any benefit under the plan even if the contingency for which such benefit is provided should occur, and (b) is not designated by the plan as a participant. See 29 CFR 2510.3-3(d)(2).

I don't think anyone can advise you what is "best" without a detailed knowledge of your financial situation. Having said that, a couple of comments. First, since you are talking about contributions that over the next several years are likely to be at least several hundred thousand dollars, I think it is worth your while to engage the services of an independent actuary to discuss and answer your questions. Second - be very careful of advice from a person who is trying to sell a plan based upon commission-based products. The typical 1st year commission on a whole life policy is 50% or more. I'm not implying that anything unethical is proposed or going on, but there is an inherently powerful incentive for less than objective advice in such a situation.

"(iii) the employees affected by the amendment are predominantly nonhighly compensated employees." This part is often a sticking point. Seems like it is often the owner's kids, or some new HC that was hired.

Hold off buying until the price drops to "3 for the price of 4"

Thanks!

Apparently, according to the usually unreliable information provided by the client, they are asking for the SSN's of all of the Trustees of the plan. We told 'em to take this up with the investment provider(s) - if I hear anything concrete, I will post it here.

Thanks MoJo - I know nothing more than what I posted. I'm going to tell them to ask the investment provider(s) to provide them appropriate citations, I was just curious if anyone knew if this was really a requirement. Basically, I presume the investment house can make up any internal rules they want as long as not prohibited, so if the client doesn't like it, they can invest elsewhere!

All right, I'll bite on this one. I'd say of course the fiduciary may take this into account when making a judgment on if and when to make such a change. In fact, I'd say that the fiduciary is obligated to take such factors into consideration. Taking a perhaps ridiculously extreme example, the fiduciary might decide to change a fund every two weeks, and if so, must certainly consider the cost to participants of such changes. I think it is particularly a potential issue when it is a flat fee for the administrative expense, rather than proportionate.

We have nothing to do with plan investments, but I thought someone might know the answer to this. I have little information to go on other than that a client wants to open up new plan investments and/or investment options. the client says that the investment house(s) or brokerages, whatever, are telling him that the plan fiduciaries must provide their personal social security numbers, due to Dodd-Frank. (Mind you, this is what the client is saying - usually inaccurate in ost information they provide!) Doe you know if this is true, or partially true, etc? Thanks!

Just make sure any such fee paid from plan assets has been properly disclosed in advance under the fee disclosure regulations.

I think the $100.00 is correct. See IRC 6722 for penalties to be imposed for forms required to be filed on or after January 1, 2011. There are also reductions for timely corrections, etc... There are also higher penalties for "intentional disregard." See 6722(e).

Masteff - I wasn't disagreeing with you. I was just saying that IF the former employee subsequently becomes disabled (under the requirements of the law and the plan, such as a statement from a licensed physician, or whatever the plan says) that it qualifies for the exception from the premature distribution penalty. The disability didn't have to occur prior to termination of employment. I agree with your assertion that if the plan doesn't have sufficient documentation/proof that it is a qualifying disability, then they shouldn't report it as such. My experience with small plans is that the employers are usually pretty loose when requiring "proof" that it is a qualifying disability...

Reinstating this question because I just had the actual situation come up - participant terminated employment a couple of years ago, subsequently became disabled (within the meaning of the law), and now wants a distribution. Less than 59-1/2, not other exceptions apply. After looking into it more deeply, I'm even more comfortable with this being an appropriate exception. IRC 72(t)(5) says that for purposes of this subsection, an "employee" includes any participant... So the 72(t)(2)(A)(iii) exception that refers to "employee" should include a former employee who still has an account, and is therefore clearly a "participant." If for some reason someone is uncomfortable with this, they could always just roll it to an IRA and take the distributions from the IRA, Seems like an unnecessary step, however.

No, at least IMHO. (and probably that of most others) Barring new guidance from the DOL, you have to give it at least once in ANY 12 month period, without regard to whether the plan operates on a calendar or fiscal year basis. And if you think about it, taking your interpretation would fly in the face of what the DOL is trying to accomplish, as you could essentially go for 2 years between "annual" disclosures. (Jan. 1 of 2012 for example, and December 31 of 2013. You could then repeat this cycle forever) So my answer is no. And I don't expect the DOL to come around to your interpretation.

ETK - thanks for the response, but I'm not entirely sure what you are saying. Let's suppose the participant made $50,000, and the ADP for his group is 6.5%. So 6.5% x 50,000 = 3,250, and the "missed deferral oportunity" correction is therefore 50% of that, or $1,625.00. Barring any other limitation in the plan, there's no way you are anywhere near a catch-up situation. So my reading is that there is no "correction" for a missed catch-up in this situation. I kind of think you are agreeing, but I wasn't certain?

I haven't happened to run into this before, and wondered if others had, or if not, what your interpretation might be. Employer improperly excluded a couple of participants from making deferrals. No problem fixing that. Question is, how you interpret Revenue Procedure 2013-12, Appendix A, .05(4). I would interpret this to be that the correction for an age 50+ employee who was excluded does not mean that you give them the "catch-up" correction IN ADDITION TO the "normal" correction. Rather the catch-up correction is only for someone who actually deferred, but was improperly prevented from utilizing the catch-up. The only example in Appendix B that addresses this talks about someone who deferred but was improperly excluded from utilizing the catch-up. Thoughts?

I'm assuming (foolish me) that there will be a fee of some sort assessed against the account to pay for it - only makes sense. But depending upon how much money the PBGC must "spend" administering this, and/or locating lost participants, it might actually be a net gain - if a lot of these people never claim their funds, then I'd hope they would escheat to the PBGC at some point. Oh well, I guess I'll just have to wait and see what is proposed.

Saw the following today - this could, if it is made reasonably user-friendly, be very good news in that a terminating DC plan with lost participants should presumably be able to transfer the funds to the PBGC. I've been waiting for this! I wondered if anyone had heard as to whether the DOL will be coordinating with the PBGC to deem such transfer as an appropriate fiduciary decision with a liability shield? The Pension Benefit Guaranty Corporation (PBGC) has released its semiannual regulatory agenda for Fall 2012, which outlines regulations that have been selected for amendment during the next year. Proposed rule stage Among the items in the PBGC’s proposed rule stage are: • Proposed amendments that would amend the PBGC’s regulation on Reportable Events and Certain Other Notification Requirements (part 4043) to conform to changes under the Pension Protection Act of 2006 (PPA; P.L. 109-280) and the PBGC’s regulations on Premium Rates (part 4006). • A proposed rule to implement section 410 of the PPA, which allows certain terminating plans not covered by the existing Missing Participants program to participate in that program.

"The reason that the incidental limits "do not apply" when you use seasoned money is because the entire transaction is taxable." Personally, on this question I'd refer them to their ERISA attorney. There is some disagreement even among ERISA attorneys on this question - possibly depending upon who is paying them, but that may be an unfair observation, so don't give it any credence. Although Jim Holland opined this from the podium many years ago, I've yet to see any enforcement of this as official IRS policy, and I've seen many plans pass audit without it even being questioned by the IRS. It certainly isn't for the faint of heart, and the unquestionably safe/conservative position is not to do it without the client having received an opinion from an ERISA attorney.