Belgarath

I don't think there is anything definitive. I've always assumed that the important thing is that the settlement rates are identical - that is, every 1,000 in the cash value at retirement in both the insurance and the annuity purchases exactly the same monthly lifetime benefit, and that all the life policies must have identical terms, and all the annuity policies have identical terms. (other than a permissible switch between carriers) This would make it very difficult, if not impossible, to have policies from different companies issued simultaneously, as the odds of the policies between companies being identical are slim. As far as the assertion that if there are both life and annuity policies the safe harbor can't be satisfied, I happen to disagree with that statement - even taking a charitable view of the IRS statements, I think at best they are stretching form over substance to an extreme degree.

Jimmy Hoffa?

Thanks Kurt. (It is Kurt isn't it? I Apologize if not) And here's a link to a case where there's actually some discussion of the statute of limitations, which agrees with what you said. http://sunset.backbone.olemiss.edu/~llibco...P.html#Footref2

The following is just a starting point. I am NOT!! an attorney, and I only know enough about this to recommend that you consult legal counsel. But maybe this will help you a little bit to get started. ERISA Itself - 29 U.S. Code 1113: No ERISA claim may be commenced after the earlier of -- (1) six years after the last action constituting a breach of ERISA duty, or the latest date on which a fiduciary could have cured a breach arising from an omission; or (2) three years after the earliest date in which the plaintiff had actual knowledge of the breach or violation. "Actual Knowledge" requires proof that plaintiffs know both the events that constitute the ERISA breach or violation, and that those events constituted an ERISA claim. Montrose Med. Group v. Bulger, 243 F. 3d 773, 787 (3d Cir. 2001).

Since you aren't the employer, and the fees aren't an obligation of the employer, I don't see how reimbursement could be considered a contribution subject to 404. I also don't necessarily see a 401(a)(4) issue here. And I applaud the fact that you don't want to shaft the participants. A couple of things come to mind - sounds like the maintenance fee is 6.00 per year higher with the new system. I'd be very hesitant to charge them more on an existing loan than the already agreed upon (and paid) fees. How did you handle it in the past where a participant prepaid a loan, and you had already deducted 5 years (or 30 years if for a mortgage loan, for example) of fees? Did you reimburse? If not, then there's possibly a discrimination issue. As far as the initiation fee - are they going to get hit with a second initiation fee when you switch over, or will this be reimbursed as well? As long as the total fees charged to existing participants with loans remain equal or go down in all cases, then I'm not sure I see any problems. But it's Monday, so I'm even less sharp than usual - maybe someone else will have clearer thoughts on the issues you raised.

I assume your Summary Plan Description has information to this effect. You could probably just copy the applicable page(s) to send with your cover letter.

I saw a very unusual situation on one of these many years ago. Employee didn't want the SEP contribution, because it was small and would have resulted in a lost IRA deduction. So the employee wrote a letter to the employer, saying that he objected to a SEP contribution on religious grounds, and would sue the employer for religious discrimination if the SEP contribution were established for him! So the employer didn't contribute. Personally, I felt like the whole thing was a sham cooked up between the employee and the employer, because I'd think that most employers would fire an employee who did this. But maybe it wasn't faked. I always wondered what the IRS would do if they happened to check this out.

Sorry, but that's not what I said. I said the combined plan limits would apply. That means that the deductible amount would be the GREATER of 25% or the DB cost. (See IRC 404(a)(7)) So your deductibility isn't necessarily limited to 25%.

Tell them you're a lawyer AND an insurance salesman.

Just some general thoughts... First, the combined plan deduction limits under IRC 404 do apply. Second, I can't imagine why anyone would want a 412(i) plan unless their deduction for the 412(i) was going to exceed 25% anyway, so in that case, the DC is nondeductible anyway. But maybe some of the design gurus here can give you a reason why this would be desirable. Finally, if they are going to install a 401(k) DEFERRAL ONLY plan in conjunction with the DB, then this would be ok.

Here's another related thread. http://benefitslink.com/boards/index.php?s...=0entry100125

Appleby - I'd argue that the code sections/regs you are quoting don't apply. I believe your reasoning is correct IF a minimum distribution is required. In other words, you clearly can't roll over a minimum distribution required under 401(a)(9) because such a required distribution isn't an "eligible rollover distribution." No argument there. However, the minimum distribution requirements in case of death occurring BEFORE the RBD (which clearly is the case here) are governed by 1.401(a)(9)-3. If you read the Q&A's under this section, there's no required distribution to a surviving spouse beneficiary in the year of death in the situation described, so the entire amount may be rolled over. It then falls under the IRA RMD rules as the IRA owned by the surviving spouse starting in 2005. At least that's how I see it.

I've always interpreted it same way as Mbozek, so I think in your situation the spouse can roll the entire amount. No excess contribution to the IRA for the 2004 rollover.

mbozek - While I like your idea of forfeiting from an administrative viewpoint, employers don't like it because once the money has been reallocated, the participant may show up and want their benefit, which the employer must restore. The employers would much rather get them out of the plan. And most employers couldn't care less if the ex-employee's funds escheat to the state eventually. Can't say as I blame them. As you correctly point out, employer is using uncompensated time to locate these folks, who can't be bothered to update a forwarding address. Question: while it would seem to be a reasonable approach (except perhaps to the DOL) to treat missing folks with cashout benefits the same as you can under FAB 2004-02 for terminating DC plans, (assuming you follow the mandatory search methods) I'd also think that this is risky. If the DOL wanted to allow this, they could have, but they specifically ducked the issue. So what are your opinions out there as to how this issue must be handled? What guidelines might one use to determine if someone is simply not responsive, or actually "missing?" What is the fiduciary obligation in terms of "searching" to make this determination? Anyone have DOL contacts to whom they might pose this question? And maybe I'm worrying over nothing. It's apparently permissible, after sending a distribution kit to last known address, to assume that a non-response is consent for an immediate distribution. So maybe the issue of "lost" participants doesn't arise unless the mail is returned with no forwarding address?

Agree with Blinky & AndyH - on #1, no can do. Re # 2 - this is a termination and establishment of a new plan. See ERISA 4041(e). #3 - certainly can't do it retroactively. But I honestly can't say if it is doable or not. I'd almost think that it might be ok for 2004, but I'd have to do a lot of checking before I'd dare to venture a real opinion - I've never seen it done, but that doesn't mean it can't be. I'm not necessarily sure what the advantage would be. #4. What Blinky said.

I have one issue I'm finding very confusing on this. If a participant doesn't make an election and you have mandatory cashouts, you have to do the mandatory rollover. So far so good. However, under the "miscellaneous" portion of the overview, it says that issues regarding missing participants are beyond the scope of this regulation. So how do you know if a participant is merely "nonresponsive" - in which case you do a mandatory rollover, or if they are "missing" and therefore beyond the scope of the regulation? And what do you do if they are determined to be "missing?" This may be much simpler than I'm making it out to be.

No RMD is required. See 1.401(a)(9)-3, Q&A-1.

Gburns - I suspect that he means the recent IRS memo regarding use of short term NHC to receive minimal contributions in order to pass testing. Not that it says that they are giving NHC too much - just the opposite in fact. http://www.irs.gov/pub/irs-tege/directive.pdf

1. Agree. IRC 4972©(4). This isn't limited to just the final year contribution, by the way. 2. Agree. Sleep well!

No, I'm not, but our EA is, so I'll get a copy from him. Thank you very much for this information!!

You have to hand it to those folks at the IRS - they sure know how to take minor things and blow them up into huge problems. We've had 3 cases in the last couple of weeks where the plan administrator has made distributions, done mandatory withholding, then tried to submit the withholding and had problems. First of all it won't go through electronically since they are using the TIN for the plan. (This is nothing new). Then they file with the 8109 coupon using the TIN. All 3 trustees have then been told that the number is not valid since has not been "active" in the last 3 years. On one case, the IRS automatically changed the number to the EIN for the business. On another, the accountant decided to change to the EIN and file under that. On the third case, the Administrator is looking to us for guidance, do they apply for a new TIN? She told the IRS reviewer that the number is active, they have had it for a long time and it has appeared on the 5500 forms, (Schedule P) - he replied that he didn't know anything about 5500 forms, he doesn't do pension plans. Has anyone else encountered this? If so, what did you do? This is the first time this has come up for us - appears to be something new. It isn't uncommon for a small plan to go 3 years without a distribution, which apparently makes the TIN "inactive" by the standards of the knuckleheads at the IRS. We can have them apply on-line for a new TIN, but I'm uncertain what other problems this may create. And at the very least, it can cause administrative and recordkeeping nightmares. Sheesh! Any suggestion for somone at the IRS to whom I should forward these concerns, stated a bit more diplomatically... Thanks!

Unfortunately, no.

Frogman - one thing to keep in mind - which you probably already have! You need to consider very carefully how far you want to pursue this. If you complain to the DOL, and they investigate, based upon the limited information available it seems reasonably certain that you will receive additional earnings. Now, you don't mention how much you deferred, but it's certainly possible that you are talking about a relatively small amount of earnings. You are then faced with the issue of whether a couple of hundred dollars in earnings (or maybe less?) is worth jeopardizing your relationship with your employer. There's a big difference between pursuing your administrative remedies under the SPD, as Pax mentioned, and calling on the big dogs of the DOL. Some of the information given to you here may enable you to present a reasonable argument that the employer will accept, without undue unpleasantry. I'm by no means counseling you not to fight for your rights here, nor am I advocating a big fight. I'm merely suggesting that you weigh the pros and cons of any action. The simple fact is that in most cases, the employer holds all the cards, and if they are vindictive types, then calling in the DOL will almost guarantee future misery for you. I've seen it happen. Sometimes it is worth it (especially if you have no intention of long term employment there) and sometimes it isn't. Best of luck however you go about it.

As a TPA, we're not really all that familiar with the investment companies available in the marketplace. Has anyone heard of a reputable vendor or vendors who will be handling these accounts - for ongoing plans and terminating DC plans? I just sent to PenChecks for some information - anybody know of others? And will they accept accounts of <1,000? We're just looking for the names of a couple of vendors so that our clients will at least have a starting place. Thanks.

I don't have any statistics - only that the vast majority do not choose partial distributions. I'm guessing 98% for us. But we don't formally track the percentage. This may vary substantially depending upon the demographics of the group and plan. As far as administrative expense, the DOl recently said it was ok to charge the per participant fees to the participants' accounts, as long as they have terminated and been given an opportunity to receive their distribution, so I'm not sure the fee issue is necessarily a big one? I believe this was DOL FAB 2003-3, but I don't have my copy handy.