mbozek

I would not worry about the IRS as long as the employee follows the procedures for a leave of absence. Employees frequently terminate employment after a LOA to pursue other interests.

Under Reg 1.402©-2 A-3(B) an eligible rollover distribution is any distribution that is not specifically excluded. A-3(B) and A-4 do not exclude a distribution for disability from a rollover unless it is a series of periodic payments. I dont know any IRS ruling that prevents a LS distribution for disability from being eligible for a rollover. Check the 402(f) notice for rollover availability.

Two much: Your analysis is bolstered by the current tax rates which provide for a combined federal tax rate of 25% on taxable income up to $47,450 for a married couple (including the penalty tax). Many employees need the distibution because they have been laid off or want to take a vacation.

two Options: 1. If the ee is a non hce why not amend the plan to provide for a special er contribution equal to the amount of the make up? 2. Otherwise why not defer the day of termination as an ee to cover the period of time that it takes to make the special payment. Ee can take vacation or leave of absence. Also there is no contradiction for an individual to contribute to two plans at once because the controlled group rules explicitly permit a person to participate in two plans of unrelated employers at the same time and the salary reduction amt is a max of 12k for all 401(k) plans in which the individual participates in the same year.

It is better to put the HCEs into the 403(B) plan which has no ADP testing. Each HCE can put in 12k plus 2k if over 50. Also if the er is an eligible er defined in IRC 402(g)(8), ees with 15 yrs of svc can contribute an additional 3k for up to 5 years. If the 401(K) plan has no hces then it automatically passes the ADP test and the non hces in the 401(k) plan do not have to be offerred the opportunity to participate in the 403(B) plan. The HCEs will have to perform substantial service for the np for the salary they are paid.

The reason why employees rarely if ever have taken advantage of the restoration privilege is that they dont have the funds to contribute to the plan.

The IRS never developed the software/scanners necessary to process the information from the pink type sheets and routinely discards these pages from submissions.

You can give out as many notices as as you want but why would you want to give a generic notice of information that all participants recieve in the SPD just to rehires? Also as I stated before there is no guarantee that the Plan admin is going to identify all rehires. In some plans employee data is erased after a specificed period of time or lost /destroyed after a merger/acquisition.

Who is the check payable to? In welfare plans the contract was usually issued to the er so the proceeds are paid to the er. In a 401(k) plan the trustee of the plan is the payee on behalf of the participants. If there is no trustee of the plan who can legally cash the check? If the er does the cashing then it is doing so under a constructive trust for the benefit of the participants and may be required to file a 5500 to show the disposition of the assets as the plan admin. My understanding is that the DOL has been performing audits of de mut. proceeds by subpoening the list of plans that have received checks from the carriers to determine if the provisions of ERISA have been complied with.

Under IRC 457 the assets of the govt 457 plan are held for the exclusive benefits of the employee in a manner similar to assets held in a qualified plan trust. This rule applies even if the plan assets are held in an annuity contract without a trust. LI must be held in a trust. The assets must be held in the ERs name in order to avoid taxation to the employee. This indicates that the trustee can transfer assets from one policy to another provided that the plan has not waived such a right by permitting the employee to select investments. However you really need to review the plan document, trust (if any) and state law to determine what are the powers of the trustee/sponsor to change investments. The terms of the investment, e.g., LI policy may also contain restrictions on transfer without the employees consent or have a back end load. There are proposed regs on 457 plans that should be reviewed. 403(B) plans are different if the employee owns an individual annuity contract. However, an employees interest in a group annuity or a custodial account can be transferred to another provider without the ee's consent.

Under most state intestacy laws the child would be the beneficary if there is no spouse but may have to share the benefits with the decedent's living parents. The nephew seems to be the administrator of the estate. If the plan forfeits the benefit the child could always come back and make a claim for the account balance with interest from the date of death. The only way to forfeit the benefit would be if a search through some locater service fails to locate the child. But then another heir such as the nephew may be entitled to the benefits under state law. I dont think it is permissible under ERISA for the Plan admin to get waivers and releases from the nephew and other heirs to avoid paying the benefit but that is a business risk.

It is always possible that state law may limit choices- or regs issued by a state agency for that matter. I assumed that the plan document would incorporate any reference to state law as a matter of good drafting.

Huh? I have never heard of heirs turning down money. Usually they fight over small amounts. A heir can be appointed administrator of the decedents property with minimal cost. Some states provide for simplified administration of small estates. Did the decedent own any other property, e.g., car, bank account, home? If so some one has to be appointed representative to distribute the property. The plan admin cannot simply forefit the property because at some future time each heir can come in and file a claim for the benefits. I assume there is no spouse.

where did u come up with 15k? I thought the max penalty if all 5500 are submitted at the same time is 1500.

Without going into the precendential value of a footnote to a DOL opinion letter on a matter falling under the IRC, there is still the question of whether an elective maximum contribution to a 401(k) plan can be made by a self employed person prior to the time the sep's income from the sponsor can be definitely determined by the partnership. There is substantial authority for delaying the contributions to a plan because contributions must be definitely determinable under applicable IRS rulings. Also making an incorrect contribution can subject a participant to a penalty for over contribution.

DOL reg 2520.102-2 (a) states that the SPD shall be sufficiently comprehensive to appraise the participants of their rights and obligations under the plan. I have always included the repayment right as part of the SPD and never considered that any other disclosure was required since the participants are supposed to read the SPD. I dont see any basis for a claim by a participant who fails to read the SPD to discover the opportunty to repay prior distributions in the absence of any legal obligation to provide a specific notice for such opprotunity (e.g. 402(f)). Providng a notice when not required by law is a invitation to disaster because it assumes that the plan admin is going to always know when former participants who received an distribution of less than 100% of their benefit return to service.

I thought that Goldsmith had several facts which made it distinguishable such as a provision in the employee's employment agreement which provided that the employer would pay the LI premium on the employee's life (by a reduction in the ee's salary?)which the ct said was no different that if the er paid the employee who then would make the payment. In the deferred comp type plan there are two separate contractual relationships 1) between the LI company and the employer for payment of the proceeds and 2) between the employer and employee under the DC plan. The LI proceeds are fungible as general assets of the er which can be used for any corporate purpose which is consistent with the PLRs cited (by the way there are at least 9 more rulings out there).

How do u know there is no estate? If a person dies without a will the relatives inherit the property through intestacy. If the heirs do not step forward the property is transfered to an administrator or other govt official who will try to locate the heirs. If there are no heirs then the property will escheat to the state.

yes unless the employee has the right to designate the investment under the plan. See plan document for provisions relating to investment of plan assets.

Kirk: I thought the Goldsmith case was anomalous and not followed by the IRS in subsequent plrs issued after the case was decided see 9617019, 9510009, 7940017 .

The conditions for payment of NQDC is a matter of contract between the er and ee. Since the er gets to define the terms of the plan it can provide any benefit amount it wants to an employee.

If the ee has not received a statement of benefits in the last 12 months then she should request assistance from the nearest office of US Dept of labor Pension And Welfare Benefit Administration (PWBA). It should be in the phone book under US government or on the U.S. Dept of Labors web site which might be found through a link on this cite. She should send copies of the previous requests with her request for assistance. Some HR depts have been cut back because of economic conditions and dont have enough staff to administer their plans. I was recently contacted by an employee who has been waiting 8 months for a statement of benefit amount which the plan admin has admitted he is entitled to receive. It seems that the person who was to handle the matter was transferred.

Many partners cannot make elective contribution by 15 days after end of the year because their actual draw/ K-1 income can not be determined at that time. Partners election is defined as "maximum amount permitted under the plan". It is not unusual for partners contributions to be delayed for several months until the accountants have determined the actual amount of the draw for each partner. The same delay would apply to a person who establishes a uni-401k plan if the net earnings from self employment cannot be determined. Also I fail to see how the 15 day rule applies to self employed persons who are not employees covered by the protection of ERISA.

Most Q plans for non union employees do not cover union employees. Union ee have a separate plan. I once represented a client that had identical but separate plans for union and non union plans but the non union plan did not exclude union ee from participation. Question is whether union ee are covered under another plan, eg. DB plan. Under the IRS regs there is no requirement that union must bargin for plan that does not include unon employee every time CBA is renewed. If union ee are covered under a DB plan for union ee then you can argue that union elected to opt out of 401(k) plan in exchange for DB plan contributions by er. Part time employees can be excluded if plan permits exclusion for employees who work less than 1000 hours in a year. Plan can be amended to exclude part timers beginning 1/1/03 but must include part timers for prior years.

If the plan permits self directed investment in RE and the account purchases the property for cash with no debt there should be no regulatory issues provided that the employee derives no benefit from the property, e.g, does not have a rent free office or residence. Using the condo as security for a loan will generate UBIT when the property is sold at a max rate of of 38.6% for gain in excess of $9350. However, putting RE in a Q plan or IRA by an individual investor is not a good investment move because of the loss of tax benefits (deduction of expenses, taxes, insurance, interest, depreciation, loss of capital gains) plus the admin problems (plan admin may not agree to hold title to RE because of all the legal and paperwork requirements, providing tax notices as well as liability risk to plan because as legal owner it would be a defendant in a negligence law suit or envoronmental pollution claim). Also the participant/plan account will have to pay for the cost of counsel to handle legal issues including preparation of deeds, notices, eviction notice, defense in dispute over rental agreements etc since the PA will not do such chores. PA may require that participant pay legal costs for review of legal docs by plan counsel which PA must sign. Finally RE is an illiquid investment and owner may be forced to sell at an inopportune time. The participant needs to hire competent ERISA counsel to review all the aspects of the purchase of RE as a plan assets.