maverick

I too find it curious that the DOL referred you to ASPA/an attorney. The DOL's head guy in Chicago (Steve Haugen??) talked at ASPA's Great Lakes benefits conference last year (5/01) and said one of their areas of emphasis would be 401k plan fees.

Plan currently allows 1 outstanding loan. A division recently added to plan has approx 30 people deferring, and 17 outstanding loans. We're starting to see requests for "more money" (e.g., Joe owes 2,000 on loan #1, wants new loan #2 for 4,000, 2k used to pay off old loan, 2k to participant). We do not want to allow multiple loans. So... if loan 1 is paid off today, and loan 1 is effective today, are two loans in existence today? I've heard arguments both ways, and searched the past year's worth of threads on the loan/dist msg board with no success. - He has enough money available to handle a 4k loan, even after reducing the avail loan amount by the highest balance in the past 12 months. - I would make sure that the second loan is paid off before the final payment was due on loan #1. I hate Mondays. Thanks. Maverick

I agree with 2much, re: relying on a participant's representation that a hardship exists. A "problem" I see with hardship rules is the requirement that a participant first take a plan loan in an effort to reduce or eliminate the hardship. If the person needs a hardship dist, do you really think he or she can afford loan payments? If I was king for a day, I'd eliminate loan provisions from qualified plans. Dream on. Recently I saw a plan with 31 people deferring, AND 17 of those 31 had outstanding plan loans!!!! Maverick

Richard: I don't know if one is offered in San Fran, but in Wisconsin a lot of the cities offer a "Chamber plan." The local Chamber of Commerce works with a group health insurer to set up a group health plan available to Chamber members.

I have a client in a similar situation so I'd be interested in the answer re: date. My client has purchased several competitors over the past few years, and maintained the 401k plans of the acquired firms. As in LVS' scenario, each "division" filed its own 5500. As of 1/1/02 the client established a new corporation rolling all the "divisions" into one entity. Another question: Can the highly comps in the new organization defer 5% in 2002 (3% nhce for new plan plus 2%) since it's a new plan (new employer ID and plan ID #)? Thanks. Maverick

Papogi has a good point. One way around this situation (where the other spouse voluntarily drops coverage coverage to get on the employee's plan) is write the plan to limit spouse adds to losing coverage (termination, employer drops health insurance, etc.). That way people can't "shop" for the best deal on group coverage. Maverick.

I used to work for an insurance company that specialized in group products (like flexible spending accounts). We would deny a flex claim if the pillow was purchased over the counter/via tv. However, if the chiro gave the pillow (like an orthopod giving someone a knee brace) to the patient, then ran a claim through the group insurance policy (which would deny the charge), a participant could then submit a flex claim. It worked for me with one of those cushions/supports that goes between your spine and the chair back. Maverick

Schedule I, new line 4k for small plan audit waiver. Maverick

A couple hours before the holidway weekend begins, and already 6 responses!!! Thanks all. BTW, I forgot to mention that for the 401(k) they require 2 months service (age 18); entry date is the first of the next month. I think the best thing to do, other than talking the client into switching to a safe harbor arrangement, is run the tests, but hold out anyone under 21 w/less than 1 year of service. A lot of the people in this category will be gone before they would enter the plan if 1 year/1,000 hours/ age 21/enter next 1/1 or 7/1. Also, concur with the KJohnson re: missing participants. Unless a concerted effort is made to find and pay out terms w/small balances, the plan could end up needing a large plan audit. Have an enjoyable and safe weekend. Tom (aka Maverick)

One of our clients has a plant in Georgia. About 75% the employees are Mexican citizens in the U.S. on green cards; the vast majority of these ees are not deferring into the 401(k) plan. The way I read the regs, the non-resident alien exclusion would not apply. Other than going to a safe harbor 401(k), which the client does not want to do, does anyone have a creative way to get by the adp test? About the only thing I can come up with is to accept that the NHCE adp will be low, and go with prior year testing so the HCEs know exactly what they can defer. Also, there could be a compensation adjustment to "make up" what HCEs want to put into the 401(k). Thanks. Maverick

MHill, et.al. Total Benefit Communications is emailing a fee schedule. If anyone is interested, send me a private message. Thanks.

I was just going to start a new thread on Spanish language forms, but I'll tack something on this one instead. One of our clients is adding a location in Georgia that has a lot of Mexican employees. The workers are in the states on green cards and are eligible for the plan (only non-resident aliens excluded). Does anyone know of a firm that specializes in translating plan forms and documents into Spanish? Thanks. Maverick

Also, I believe retirement is not required, you could resign or get downsized (fired), and still be exempt from the 10% early distribution penalty (plus another 3.33% in if you live tax hell, aka Wisconsin). Maverick

One of our other offices has a client with a SARSEP plan. Since I don't take care of any of these plans myself, my knowledge of SARSEP rules is limited to what I read in various references, most notably benefitlink.com. I read Gary's sticky topic, but still am confused. Can someone please respond to the following? Did the tech corrections act resolve the problem with an individual trying to defer 25%, (but the overall employer deduction is limited to 15%)? The 15% however, does not include the employee's deferral amounts. Thanks. Maverick

Situation: 1 HCE, 1 NHCE, uses a standardized prototype document. On 12/31/01 the plan is top heavy. Effective 1/1/02 plan restated on a non-std safe harbor 401(k) document. If only deferrals and safe harbor match go into the plan from now on, is the plan top heavy? The NHCE will not defer, so she will not receive a contribution. We talked about top heavy safe harbor plans at Corbel's 401(k) update last week, and I'm more confused now than I was before. Side issue: On restatement, could the NHCE sign one of those irrevocable waivers, and if so, would top heavy contributions (if the plan is top heavy) have to be made? Thanks. Maverick

Dave, please don't take this as a criticism of you personally, I know you're just trying to help a participant. Now, having said that, here's my opinion on plan loans -- they don't belong in retirement plans. People (employers, tpa's) spend an inordinate amount of time on various loan "issues" and "problems" that could be better spent on other things. This discussion thread is a good example one of those "problems." I have a client with weekly payrolls and a 1k minimum loan. Over the past couple months I've spoken with a participant 7 or 8 times re: how can I (when can I) get a loan? Account balance was less then 2k, so he called the vru every week until his balance finally went over 2,000; then a 1,000 loan representing 50% of his vesting balance was available. After processing the loan this ee called several more times looking for his check, after I told him when to expect the $$. The admin person at his plant even called wondering the same thing. And, this person was willing to pay a $100 loan fee, which probably does not cover our processing costs, to get a 1,000 loan (my problem, we should increase the fee). The bottom line: Don't expect your 401(k) plan to be a loan company/credit union/bank. You might want to consider deferring a little less and putting the difference in a savings account for easy access. That's my 2 cents, and yes, I feel much better now. Maverick.

If nothing is mentioned in the release notes, I'd call their support line. Or, check the website, something might be posted. Better to do a little legwork now, as opposed to having your DER's blow up later. Maverick

I too would like to see what others are using for this. Right now I tinker with my existing spreadsheet, and end up with fifty different versions. Thanks in advance. Maverick

jpod's post ("Similarly, if you had been filing a separate 5500 with a Schedule F solely to comply with the 6039D requirement, you will no longer have to file that 5500.") is interesting, and differs from all the analysis I've read so far. I hope he's right. Would any of you 5500 gurus out there care to offer an opinion? Thanks. Maverick

I agree with MGB; you still have to file the 5500. Excerpt: "This notice does not affect annual reporting requirements under Title I of ERISA, or relieve administrators of employee benefit plans from any obligation to file a Form 5500 and any required schedules (other than the Schedule F) under that title." So, you print a 5500 page 1, page 2 (with 8c checked),and blank page 3. Sounds like a lot of time wasted to report nothing. Maverick

I have a plan in a similar situation, so I was just thinking about this myself. According to the 2000 5500 Preparer's Manual (Janice Wegesin, Joan Gucciardi, Melanie Aska-Knox), a Schedule R does not have to be completed for a frozen mpp (if no distributions were made during the plan year). Why? Because the plan is no longer subject to code section 412 minimum funding standards. I know Joan and if it's in her book, I believe what she says. However, there may be a DOL edit kicking out R's for mpp's that do not have the minimum funding area completed. How about just entering $0 for items 6a and 6b? Maverick

mbozek: That's the person I was referring to. He works for a local CPA firm.

Thanks Barry. It appears a local practitioner is jumping the gun a little - basing his information on conversations with the IRS that indicated a PLR might be approved.

One of our tax partners heard that something has been released regarding recalculation (reduction) of the payment amount in an established series of substantially equal payments. The specifics involve a situation where the market value of an IRA was severely reduced and there wouldn't be enough to fund the payments until the person attains age 59.5. If the recalculation is not allowed, the IRA will be drawn down to zero, thus triggering retroactive penalties. Apparently a PLR was issued. Has anyone out seen anything on this? Thanks. Maverick

I believe the Wharton School offers this major. IIRC, Jerry Rosenbloom, one of the main guys involved with the Certified Employee Benefit Specialist designation (offered through the Wharton School and the International Society of Certified Employee Benefit Specialists) has a PhD in this area. I've thought about pursuing a PhD as well, but don't want to drive from Green Bay to Milwaukee for 3 or 4 years. Maverick p.s. PhD = post hole digger