LCARUSI

You have to read your plan document carefully, but it sounds okay from the way you described it. Remember, you also have to monitor the 415© limit equal to the lesser of: 25% of pay, $30,000 This limit applies to all additions to the employee's account - pretax, after-tax, match, profit sharing,forfeitures (everything but investment earnings)

Fiscal year is 12/31 and plan year is 6/30. They had both been 6/30 until fiscal year was changed many years ago. Are there any compelling reasons to change the plan year?

As long as the job classification isn't service related*, I don't see a problem. You must of course satisfy 410(B). * If the job classification was employees scheduled to work less than 1000 hours, that would be a problem. You can't exclude on that basis.

None of the items you mentioned are protected forms of benefit: loans, eligibility, max def rates They can be changed at will by a sponsor. Whether or not such a move is smart is another question.

Beth - I don't think your approach would work. I believe you'd have to amend the plan each time you want to switch between safe harbor and nonsafeharbor.

If you wish to establish the IRA with the bank (and I'm not necessarily recommending that), you CAN add to it. That is to say, you could make continuing IRA contributions to that account. However, if you do contribute to the account, it is no longer a "conduit IRA" and you would never again be able to rollover any portion of it to another qualified retirement plan, e.g. another company's 401(k) plan.

I believe it counts - regardless of whether the forfeitures were reallocated or used to reduce a prior co contribution

Tom... Wow. Since there were about 300,000 401(k) Plans in the US in 1998, that means between 100,000 and 150,000 of them are misguided in their plan design?

There is no 10% tax on after-tax contributions, regardless of age. They are not taxable and therefore there is no penalty tax to be applied.

I've seen it deducted from the check proceeds and I've seen it deducted from the account. That's not to say you're third choice (separate payment by the participant) is invalid, I've never seen it done that way. It seems okay, but an administrative pain.

From the original due date, which is 7/31 and not 8/2 (if we're talking about 1999)

I assume you mean the participant has a total balance of $12,300. If the participant elects not to repay the loan, he/she can elect a direct rollover for the full amount of $10,000. There is no requirement to withhold, regardless of age. (There is no cash being distributed to withhold from.) However, the participant will be subject to taxation on the distribution of the loan. The taxable amount will be $2300. (Unless he/she comes up with $2300 from his/her own funds and contributes it to an IRA within the 60 day requirement.) [This message has been edited by LCARUSI (edited 08-31-1999).]

GregSelf - I have good news and I have bad news. The good news is that I once agreed with you and took the same position as you on a similar question. The bad news is that I was promptly corrected by David Shipp. In summary, you do not need a distributable event. David pointed me to the Reish & Luftman Q&A column on plan defects question 66 (and also 67,68,69). The original thread was posted by SBAVELY and its title was "Excess Elective Deferrals". It was originally posted on 11/17/98 and was last updated on 11/25/98. [This message has been edited by LCARUSI (edited 08-30-1999).]

So we're assuming the employee's tax year is the calendar year, which is not always true.

jlf - I am not familiar with the distribution rules for 403(B) plans and I don't have time to research it. If the definition of an eligible rollover distribution is different for a 403(B) plan than for a plan qualified under 401(a), so be it. If you want to know why they are different, I don't know. I can only repeat what I previously said, you can have an eligible rollover distribution in a qualified plan without a triggering event. If you read the definition of an eligible rollover distribution, it is basically any distribution except for specific exceptions, and I can easily give examples of distributions which have no triggering events and do not fall into any of the exception categories. Therefore, they would be eligible rollover distributions.

DB plans are not necessarily more expensive - it depends on the level of benefits. And yo have the flexibility to fund it on an actuarial basis.

jlf - You don't need a distributable event to qualify for an eligible rollover distribution. For example, a nonhardship inservice withdrawal qualifies as an eligible rollover distribution

Stop paying your mortgage and use those funds to pay off the debts you want to discharge. When you get the delinquency notice on the mortage, request a hardship withdrawal.

Yes. Election to take a permitted withdrawal under the terms of the plan would not affect the participant's eligibility for a top heavy contribution.

JF - I don't think you can compare a 15% contribution to a one-time translation of an SPD. And we shouldn't just follow rules. We should do the right thing within the framework of appropriate rules. Rules are just a baseline.

With regard to Dan's proposed method: 1) I assume you wouldn't do this if the acct balance were over $5,000 (unless the participant is past normal retirement age). I see no justification for cashing out such a person without consent. 2) Even if the person is under $5,000 and subject to cashout, the withholding rules are quite specific, at least with respect to an eligible rollover distribution. And presumably this would be an eligible rollover distribution. The rules say withhold 20%. How can the sponsor arbitrarily withhold 100%?

Even if you don't HAVE to provide the SPD in Spanish, don't you think it's the right thing to do when you have 30%+ spanish employees?

Try any of the major benefit consulting firms. That would be preferable to using a firm that translates but has no benefits background.

If the participant can't receive it as cash, it's not part of a 125 Plan.

If the employee declines medical coverage, then he/she receives a cash credit. This credit cannot be taken as income but must go into the employee's 401(k) account. Is that a valid design for a 125 plan given that the employee does not have the option of taking it as cash? Also, do these contributions count against the employee's $10,000 annual deferral limit?