LCARUSI

Derek, At the risk of belaboring the point,I don't understand your posting. If the sponsor contributes a QNEC equal to what should have been distributed to HCEs, what happens then? Who shares in this QNEC? Is it then immediately distributed from the Plan?

I suggest you also post this question in the "Miscellaneous Benefits" Message Board.

Beth- Giving your advisor the benefit of the doubt, are you sure you understood their suggestion? It sounds truly bizarre to suggest that deferrals be "placed in a trust" and then transferred to the plan's trust after it is established. What is the nature of this temporary trust? It would be interesting for your advisor to post a message/explanation in this thread.

Please post it.

I would check the plan doc carefully. Does it require an employee to be an "eligible employee" on the last day of the year? What is the definition of compensation for the purpose of allocating contributions? In my experience with plans of this type (with union-nonunion transfers), plans have been drafted so this employee would receive an allocation based on compensation while a nonunion employee.

There is an excellent thread on this subject "treatment of former employees" in the 401(k) Board. It was started by Charlie Stevens on April 19, 1999. (Use the search feature to get to it.)

In theory, some of your reasons for wanting to discontinue a plan and start a new one might be valid. In practice, I just don't see how it could make sense if you consider the alternatives available to amend the old plan or change service providers. And let's not forget the work involved to terminate the old plan. And I agree with WBROWN that you've got the successor plan rules.

It is becoming increasingly rare for plans to offer installment payouts. (at least in my experience). But I've seen two ways of doing it: 1) Each year you pay 1/n of the remaining balance. For example, on a 10 year payout, you would pay 1/10 of the balance after 1 year, 1/9 after 2 years, 1/8 after 3 years and 1/1 after 10 years. The problem with this is that each payment tends to increase (assuming positive investment earnings). Butit's an easy methd to administer and explain. 2) Calculate each payment as if the account balance will earn a stated rate of interest for the remainder of the installment period AND then recalculate each year the amount of the payment. You stand a better chance this way of having more equal payments, but it is more complicated to administer and explain. EMAIL if you're interested and I'll fax you a sheet showing how it's done.

You quoted the following: "allocated to all Participant's eligible to share in the allocations in proportion to each such Participant's Compensation for the year" It sounds like this is a plan which provides for an annual profit sharing contribution in addition to the match and the language. And the provision regarding forfeitures is based on the provision for allocating the annual contribution (if any). If that is the case, the employee gets a share assuming he/she meets ALL the criteria for a share of the "allocation" - for example, there might be a requirement for minimum hours, or that the employee be active on the last day of the year etc. Check the document. You should also check the document to be sure there is not a separate provision relating to the forfeiture of matching contributions.

First of all, an employee's maximum contribution rate might be contained in the Plan document - so that's the first place to look. With respect to statutory limits: 1) Each participant is subject to the 415 limit (lesser of 25% of Compensation and $30,000) 2) Since the organization is tax exempt, it should not be concerned with the maximum tax deductible limit of 15% of eleigible compensation (computed on an aggregate basis) [This message has been edited by LCARUSI (edited 06-22-99).]

5.33% if you are testing <21/1 separately again. If you are combining them into a single test, I think you would use 5.03%.

I agree with Larry that you should have a non-hardship withdrawal provision to deal with withdrawal of vested company money. The hardship withdrawal provision (and all its rules and procedures relating to 401(k) contributions) should be limited to 401(k) contributions. That having been said, you cannot allow unlimited access to vested company money - either matching or nonelective. Take a look at rev ruling 68-24, 74-55 and 74-56.

I'm sorry everyone. There was a thread concerning 403(B) rollovers. It was updated as recetnly as today. It was appearing in duplicate. When I attempted to erase one of them, they both disappeared. So much for housekeeping! As I recall, the discussion was complete. Repsonses indicated that 403(B) distribs cannot be rolled over into a 401(k). SOmeone also pointed out that pending legislation would allow it. If I omitted anything relevant, please post a message here.

I don't think you can "instruct" the Trustee. The Trustee is obligated to take all actions, including voting of stock, in the best interests of plan participants. That having been said, it seems like a resonable thing to do - for the Trustee to decide to vote the rmaining shares in the same proportion.

Yes, the Plan can limit rate changes to once per year - but it would be a foolish thing to do. It would be a disincentive for nonhighly compensated employees to contribute if they fear they cannot suspend contributions if they get nto fianncial difficulty. And it shouldn't be a problem for the employer to allow more frequent changes. Many employers allow quarterly rate changes, but also allow employees to completely suspend contributions at any time. MOst employees don't change their contribution rates.

Assuming this is a distribution of the participant's entire vested account balance, the taxable amount would be $1,000 (because the participant's cost basis is $1,000). The only exception might be if the plan document contains specific language requiring tax calculations to be done on a separate contract basis. I haven't seen that in a long time and I don't know if it is even permissable any more. [This message has been edited by LCARUSI (edited 04-20-99).]

If the document addresses this issue, then I guess you should follow the document. However, in my experience, I've not seen such specific language in the Plan. I would argue that the employee implicitly agreed to a suspension of contributions by not bringing it to the attention of the employer when he or she received their paychecks. The employer might counsel the employee to increase contrib rate this year to make up for lost contributions last year. If the employee lost a matching contrib which will not be recovered with a higher contrib rate this year, the employer can offer the employee a payment outside of the plan to make up for the loss. (Dangerous precedent!) And I suspect many people will disagree with me and say it's the employer's responsibility to correct its error and make the plan whole by contributing the missed deferrals and match to the plan on behalf of the employee.

Question to Mike Weddell or Charlie Stevens: In light of 96-47, do you think the arrangement as described (sponsor paying expenses only for active participants) is invalid?

I agree with Dan that this is a complex situation, but it would still be nice to hear comments and general advice from others as to how ejohnson might resolve this situation.

How does (did) this election work? It is my understanding that such an election had to have been made prior to 1/1/84. How exactly was it made? A special form on an individual's tax return? Could someone elect pretty much anything? For example, could someone elect no distributions until age 100? Were there any restrictions. Thanks for your help.

m thom has posted a similar issue on this board. You should check out the repsonses there as well as in your thread.

I'm sure you'll get a more definitive response than mine, but here are my thoughts: 1) The plan documents must allow the plan to pay expenses. 2) The expenses in question must be expenses that qualify for payment by the Plan. 3) Even if (1) and (2) are satisfied, I still think it's a bad idea to do it that way. Instead, the Plan should pay the expenses directly.

I agree strongly with RARogers. What you want to do is EXACTLY what the IRS does not want you to do (for reasons of 410(a)).

What do you mean by excess contributions?

The Department of Labor and the Internal Revenue Service. If you are a participant in a qualified plan (and you have a grievance), you should start with the Department of Labor.