Belgarath

I can't shed any informed light on it, because I wasn't there. But I agree with your conclusion that 404(a)(7) would apply, and I don't believe I'd rely on a statement from the podium, on this particular issue, even if Mr. Holland did in fact state this. Any chance that the PS account balance could be transferred to the DB? Probably not a viable option - but it's all I can think of.

Interesting. I checked a couple, and it appears to me that they were simply using an inflation assumption that didn't materialize. But I'm surprised that ASPA published this without at least a caveat (unless there was maybe one that didn't jump out at you?)

I'm puzzled. How did you phrase the Google search? I was interested to see what website would say 41,000, (because it is 40,000) so I tried a Google search myself, and could not find even one site that listed 41,000. Could you provide us with your search terms or a website example?

Don't know if this will help - I spoke with an Enrolled Actuary this morning, and he said that he thought (although not sure without doing some research) that the "without wearaway" requirement for 412(i) plans was due to LRM 23. Maybe this will give you a starting point.

Purely out of curiosity - does anyone know why there was ever a "carve out" of "individually allocated" insurance contracts in the first place? To my simple mind, common sense would dictate that an asset is an asset, and as long as it is owned by the Plan, it's an asset. Not that it matters - you just prepare the forms according to the instructions - (and obviously there are different interpretations of what those instructions mean) - I'm just wondering if there's any logical reason for it.

You could try 1.401(b)-1(a). There may be a better source than this, but take a look at the last sentence. That's all I can think of. Hard to believe that an IRS auditor would waste your time with this! Maybe you can reverse the field on the auditor - ask for documentation that it ISN'T permissible, and if he gives you ahard time, talk to his supervisor.

I think I'm missing something here. I thought that the only IRA amount which could be rolled to an eligible retirement plan was the amount which is "includible in gross income." See 408(d)(3)(A)(ii) as amended by EGTRRA. So this would preclude the nontaxable basis in the IRA from being rolled over to the qualified plan. Has something additional been passed that supercedes this, or am I misinterpreting something?

Blinky, I just wanted you to know that in addition to your administrative talents, you just saved my life. I have to make a mustard hollandaise tonight, and we're out of Grey Poupon, which I need to pick up after work. And if I'd forgotten, and couldn't make the sauce, my wife would kill me! Once again, these message boards prove their worth!

I absolutely agree that a blackout notice is required. Just wanted to clarify that my response was actually to RClines's question about who was responsible for it.

FWIW - the attorneys out there should probably weigh in on this issue. Assuming your contract with the employer allows you to cancel services for nonpayment of fees within a certain specified timeframe, it seems likely that you should be ok. The Plan Administrator/Trustee has a legal obligation to administer the plan properly. And if you cancel services, due to their failure to remit fees, as allowed/required by your legal agreement with them, then I think THEY are on the hook, and not you. It might possibly be advisable to have some language in your "pay up or else" letter that mentions the ramifications of failure to communicate a "blackout period" properly, but again, I'd run this by legal counsel. Hopefully they will say "nah, don't worry about it!"

My inclination is the same as yours, and I always advise our clients to seek competent ERISA counsel for a question like this. Going beyond my gut feeling, there was a PWBA opinion letter 2000-10A which dealt with IRA's, and it said there was NOT a PT where the IRA owner was a general partner and family members had limited partnership interests, and the IRA invested in the limited partnership. Whether this same type of logic would/could be used in your non-IRA situation, I wouldn't care to guess without a lot of thought! I'm always inclined to be very conservative on any of these issues anyway, but if the client's legal counsel opines that it is ok, then all I ask for is a letter from the client so advising me.

The 5305 model SEP is the IRS model document. A prototype SEP has to be submitted to the IRS, and approved, like other prototypes. As Appleby previously noted, the 5305 SEP prohibits contributing to the SEP while still contributing to another DC plan. A prototype SEP can, and often does, allow the plan to have contributions to both, subject of course to normal 415 limits, etc., and may have other provisions as well that are not contained in the IRS 5305 model SEP.

Aha! Once you actually receive documentation, you find out that things are far different than what they tell you over the phone. First, SPOT is correct - the other TPA completed the form this way, but with the understanding that the client would get the audit done and attach it before filing the forms. Second, the DOL is not yet imposing any penalties - just asking for the audit. But this does make me feel better about the other TPA, since I couldn't imagine anyone doing this. Thanks to you all for your responses, and sorry if I wasted your time based upon incorrect initial information.

A final 5500 form needs to be filed for the plan year that ends when all plan assets were legally transferred to the control of another plan. Normal 5500 filing deadlines apply.

Have since found out more details. The TPA did in fact do this, because the client didn't want to pay for an audit! Oh well...I agree with Katherine that step one is for them to get an audit done immediately. Then beg.

I've never seen anything like this, and wondered if anyone had, and has an opinion of the likely outcome. The prior TPA had someone who was either inexperienced or insane prepare the 5500. On the Schedule H, line 3(a)(1), they checked that there was an unqualified opinion attached (although one was never done) and simply attached some statements from the various financial institutions! And the client, apparently not knowing any better, filed the forms as prepared. Needless to say, the DOL kicked it back and is proposing penalties of mega-thousands or something like that. Client is asking what they can do? I've never seen such a situation, and wondered if anyone had, or had a feeling as to the likelihood of some successful penalty reduction if they beg for mercy? (and there's the obvious step of a suit against the TPA, which I presume wouldn't be necessary, because I suspect any TPA in this situation will simply ultimately pay any penalty. But maybe not, once the attorneys get involved.) Any opinions or ideas?

I respectfully disagree with the attorney if you are talking about a new waiver. You have a document which, presumably, specifies the eligibility requirements. Once an employee has satisfied those eligibility requirements, the plan has language specifying how a given contribution is allocated. If the plan does not somehow have a written provision for a waiver of participation, then allowing it will be an operational error in that the operation of the plan is not complying with the terms of the document. I'm assuming that these are current waivers - I can see a reasonable argument being made that a prior (valid) waiver which was irrevocable at the time is still valid. I'm not sure what position the IRS would take on this.

I'm going from memory here, so I'd take this with a large dose of caution... If the plans are permissively aggregated under 1.410(b)-7(d), then I think you are ok to consider your money purchase contribution toward satisfying gateway. Conversely, if not permissively aggregated, then you couldn't count it. As far as the "topping off" in the PS plan where necessary, this could be a problem if the plan language does not allow it. Technically, I suspect you'd have to calculate a contribution where the "regular" allocation would get you up to the gateway minimum. There was some talk a while back about the IRS coming up with some form of specimen amendment for the "topping off" approach, but I haven't heard anything more about it.

You are correct.

Take a look at IRC 1563(e) to see if the "spousal noninvolvement" clause applies. It might. And beware that in a community property state, there's a debate among even some of the experts (and believe me, I'm not an expert in this area!) as to whether you are considered to have direct ownership in your spouse's business, even if you think you don't. If you come down on the side that there IS direct ownership, then the spousal noninvolvement clause CAN'T apply, because one of the conditions for it to apply is that there can't be direct ownership. I ALWAYS refer clients to their legal counsel for a determination of whether they are a CG/ASG.

Spot - just a small suggestion, which may or may not be helpful in your case. (I don't know the answer to your question, and haven't looked it up.) But the Rev. Proc. you reference has been updated - see Rev. Proc. 2003-44. It's possible that the IRS has modified or updated the applicable section(s) that you are looking at. The IRS website has a very handy "redlined" version which specifically shows modifications, so you can scan it pretty quickly to see if anything has changed.

I agree with asire2002. Although the circumstances where former employees are considered "parties in interest" are probably rare, it does occur. And there's a special rule under 1.401(a)(4)-10© to help employers avoid a qualification defect on the nondiscrimination testing of a loan feature by allowing a plan, as the DOL regs permit, to offer loans to former employees who are parties in interest, and treat them as employees for this purpose, but not to offer loans to other terminated participants. And I agree that a plan may not indirectly exclude former employee-participants by requiring payroll deduction as the only repayment method. I guess I've just been lucky - I've never actually seen a request for a loan by a former employee.

A little Jeffersonian purity is always a boost to an otherwise rotten Monday! Too bad more people don't embrace this concept. Thanks.

I suppose it depends upon how you interpret 1.401(a)(4)-4(e)(1)(i). I'd interpret this to mean that it is a protected benefit.

Others may disagree, but if I were the Trustee, I'd put the brakes on my greed and pay the participants their share of the earnings. If a participant ever got wind of this and made a formal complaint to the DOL, I suspect they wouldn't agree that the Trustee/HC/owner is "entitled" to all this gain. As an aside, if the consensus was that the funds would lose money in this short term, why wouldn't any prudent fiduciary have liquidated the investments and placed them in something that at least guaranteed the principal and a small return? The Trustee should check with legal counsel, but I surely wouldn't want this plan scrutinized if I were in the Trustee's shoes...