ccassetty

We are going to try it the next time we meet with him, but I was hoping that in the meantime someone could point me to whatever it was I was looking at before.

He is saying that this rule applies only to non-deferral type employer contributions. Our attorney has conceded that the aged money rule goes away for inservice withdrawals after NRA.

Coincidently, the question about a participant in pay status being rehired came up in our office yesterday as well. I've been waiting with baited breath to see what wisdom others might impart. However, the reason no one is responding may be that there is no specific guidance on this one way or the other, so anything that would be offered would be opinion only. Our technical staff read the available guidance, including secondary sources, and came to the conclusion that it is OK to stop making RMDs upon rehire. Since the regs say that the required beginning date is the later of 70 1/2 or retirement, and since the employee is no longer retired, couldn't that be construed to allow the RMDs to be stopped? We feel that this is a reasonable interpretation given no specific guidance on point. Again, this is just our interpretation and should be used at your own risk. If the above interpretation is reasonable, I would think a reasonable extension of that interpretation would say that if the employee was rehired within the same calendar year, no RMD would be due for that calendar year. However, I would not take the position that a person who was terminated in a calender year, then rehired in the next calendar year but prior to the 4/1 deadline was not due an RMD for the calendar year in which they terminated. Such an interpretation would not be reasonable in my opinion. Heres a question we did not address, but would certainly come up when the person retires again. Do they get the 4/1 deadline a second time? I'm sure we'll hear from those who dissagree.

Thanks, but it doesn't specifically say that the aged money rule doesn't apply, so I don't think it will work. What I had found before specifically said that when you have a hardship or age 59 1/2 requirement, the aged money rule does not apply and I think that is the only thing that will convince him. I hope someone out there can point me to it.

Our ERISA attorney insists that this rule applies to employer money for all in service withdrawals, including hardship, regardless of any other requirements. So, every plan we have says that hardship and age 59 1/2 withdrawals are subject to this rule. We need to get him convinced before the EGTRRA restatement that this is only required when you don't have an age or hardship requirement. I think when we add this to plans that have never had this requirement before it is a protected benefit issue. He says no because it's required so that is how the plan has had to operate. I found some published guidance a few weeks ago that literally said that this rule only applies when there are no other requirements such as 59 1/2 or hardship. Now I can't find it (no snide remarks please, I'm already kicking myself for not making a note, copying it etc). Can anyone give me a cite? He won't accept the "interpretations" in the Pension Answer Book or The ERISA Outline Book. I need to quote him chapter and verse. TIA!!!

401der is correct that a HE loan would be better. Borrowing from your retirement plan should always be your last resort. Whatever way you go to pay them off, shred your cards so you are not tempted to run up more debt once they are cleared.

No one has expressed an opinion on this, maybe its because this wasn't news to anybody but me . Anyway, I checked with our resident experts in house, and they assured me that this was perfectly OK, in case anyone was wondering.

A new employer started business on July 15, 2003 and began a 401(k) plan effective for 2003. No deferrals were made the first year. For 2004 calendar year plan, there is one HCE (the 100% owner). He deferred $13,000 out of a $60,000 salary, no employer contributions. Here's the fun part. The disaggregation rules say that all of the HCEs can be tested with the non-excludable NHCEs (current year testing on this plan) If we take this rule at face value, in theory, the single HCE ends up in a test by himself and gets an automatic pass even though he is also an excludable employee (remember nobody has a hire date prior to 7/15/03). If this works, new employers who start a 401(k) right away would get a free pass for the first year, maybe even the second year of the plan. I can't believe this works. When I started to peer review this plan and saw what the administrator had done, I thought "no way", but then after thinking about it, I am not sure that it doesn't work. I sure don't want to pass on it without some feed back from the experts though. Thanks!

I agree with rcline46. The participant should be allowed to pay off the loan.

Were others that were laid off at the same time brought back to work? If so, when? If he would have gone back to work at the same time as others called back to work, had it not been for the active duty, then I believe you are correct that he should be given credit for the time and salary he would have made had he not been on active duty. I don't believe any credit is necessary for any portion of his active duty when he would have still been laid off. I'm assuming here that the employer has determined that the employee has otherwise met all the requirements for eligibility for benefits under USERRA. Read the plan document carefully for language covering laid off employees, the answer to this question may depend to some extent on that language as well. In all cases, the employee must receive the greater of the benefits provided under the plan or under USERRA. The DOL has special offices set up just to help with questions on USERRA benefits. Go to the DOL web site and enter USERRA in the search box. You will find lots of information, including information on finding an office near you.

The law and regulations permit a spouse beneficiary to waive the QPSA after the death of the participant. However, the plan documents or the forms being used might prohibit it. You need to look over the relevant sections of the document and the language in the forms to see what the answer is for a particular plan. I'm assuming your second question was intended to be "If so, how long does a spouse have to waive?" Assuming the plan does allow the spouse to waive the QPSA benefit after the death of the participant, I would think the spouse would be able to waive the QPSA benefit anytime prior to the time the death benefits are required to be distributed from the plan. Here again, there could be something in the plan document or forms that might say otherwise.

Even before the new expanded rollover rules, a spouse AP had the same rollover rights as a participant. So yes, if the distribution would be eligible for rollover if it was being paid to the participant, it can be rolled over by the spouse AP. Read the receiving plan's provisions on who is eligible to make rollovers, that should answer your second question.

If you have the Pension Answer Book or the Distribution Answer book in your office, you could start there for the basics. Also go to IRC 417 and its regs. The 417 regs provide references to other code and reg sections. Money Purchase and DB plans must follow the spousal consent rules (except as you pointed out for amounts not greater than $5,000). PS and 401(k) plans must follow the spousal consent rules also if they offer annuities. Note that even plans that don't have to follow spousal consent rules for distributions must still get spousal consent on beneficiary forms if the participant names someone other than the spouse as primary beneficiary. Have you asked others in the office for guidance on reference materials that may be available to you such as CCH or the ERISA Outline Book?

As Alf said, the plan document controls. Does the plan language back up the employer's wish to hold off making payment until the discretionary contribution is made? Doesn't sound to me like it does. One other consideration is that the distribution form signed by the participant only has a shelf life of 90 days. Once it goes past that, the participant will have to sign a new form.

According to the ERISA Outline Book, a plan may not require the participant to repay deferrals in addition to the vested portion of the employer money in order to have their account balance reinstated. He references Reg. 1.401(k)-1©(1)(ii).

You didn't say if the participants were clearly informed when they signed up that there could be a discretionary match announced after the end of the year. If so, I think you can do what you propose. If not, even though the discretionary match is provided for in the plan document, I would be very uncomfortable doing this.

Just my 2 cents worth - The loan was rolled to the Purchasing Company's plan, loan payments continue to be made, etc. Ask the payor what basis they have for saying the loan was not part of the rollover and should be treated as a deemed distribution. Based on the information provided, you are right and they are wrong........ Although, if the plan document has language in it that says that termination of employment or plan termination triggers a loan default, then there may be a basis for what they are doing. Perhaps in their opinion the fact of the rollover cannot override that language in the document requiring the loan to go into default, although I would say this is certainly debatable, depending on the language. Short of such language in the document, however, I say they are wrong and should reissue the 1099-Rs.

After the person comes back, all of the time the person was in qualified active military duty is counted for vesting purposes as though the employee had remained employed. It sounds like this employee was a full time employee and so it would be assumed that the employee would have worked the 1,000 hours in 2003 had he/she been employed through all of 2003. So, 2003 would count as another year of vesting service.

If you are talking about the 401(k) safe harbor rules, the non-elective contribution has to be 3%. Or, the plan could do the safe harbor matching contribution instead. Either way, if only the safe harbor contributions are made, the plan doesn't have to worry about top heavy.

My vote would be that the plan can force out the alternate payee provided the plan has utilized this provision for other participants when appropriate. The alternate payee's account balance is separate from the participant's account balance, so I think the applicable balance for forced payout is only the balance in the alternate payee's account. I'm sure others will let us know if they disagree.

One more thing, my suggestion about the extra opportunity to change deferrals would apply only if the plan has a restriction on the frequency of deferral election changes. If the participant can change at any time, then the employer could simply point out that the participant has the option to adjust deferrals as a result of the incorrect amounts being withheld.

You also need to be aware of the incidental rule. Taking premiums from an account balance in which no further contributions are being made could quickly lead to a violation which could jeopardize the whole plan. If the incidental limit will be a problem, here are a couple of options: If the retiree has the means, he/she could buy the policy from the plan for its current cash value. This transaction would be non-taxable, the life insurance protection could be continued by the participant outside the plan, and there would be no worries about the incidental limit. The other option is to have the plan take a loan on the cash value of the policy. This money stays in the plan, then the policy is assigned to the participant who will need to pay premiums on his/her own and could also work on repaying the policy loan. This is not a participant loan and there is no taxable consequences to the employee.

Bob K, could you provide a cite in the new regs for the exception you refer to in response to Alf's question about an exception if the maximum loan amount won't meet the need? I went back to try to find it and couldn't. Or, perhaps I misunderstood Alf's question. The cites given in later responses are for the exception to the loan if it creates an additional hardship. In any case, the participant has the option of taking the loan, then if needed, take the rest of the available account balance in a hardship withdrawal.

Your right, the date received by the employer is the key, I was just assuming that there was little or no delay between signature and turn in. However, were the forms time stamped or some records kept of the dates they were received? If not, I think there is little choice but to go by the signature dates when cleaning this up.

Thanks to all who responded. I just accepted a position at way less than I was making before, but I think it is a good opportunity. Wish me luck!