mbozek

try the 800 no. You really need to consult a tax advisor and the plan admin to determine if you can do a tax free transfer of the entire account balance into a 403(B) annuity of another provider under your plan. This is the only way that you can cancel the loan and may take 6 months before the funds will be moved.

The question is whether the hours are correctly counted. Many employers use made up approximations, eg. 4 hours for each day or # of hours scheduled to be worked as a substitute for actual hours worked by PTimers and exclude holidays, vacation etc. ,days paid. I have no problem with using hours of service as long as the er has be capability to count the actual hours worked and the BIS periods for eligibility, vesting and accrual. My experience tells me that this is not how plans are operated.

There is a problem because some employers who use both salary reduction contributions as well as payroll taxes as a cash flow device to make ends meet. If the company tanks the employees lose the the earnings as well as the contributions. In todays world of EFTs there is no reason for contributions to be delayed after the pay date.

Payroll systems do not always count hours worked - some systems do not distinguish between regular and over time hours. Some systems only record $ paid. What I am saying is that before a plan adopts an hours of service rule it needs to have a systmem for counting hours for participation, vesting and accruals and be able to implement a BIS provision and not expect the HR staff to do these calculations manually.

The Dol regs require that then name and address of the employer appear in the SPD. Howver, The SPD must also give the name of person designated as agent for the service of process on the plan and the address at which process may be served on such person.

There is no specific answer to your question because there is no IRS guidance. See BNA Tax mgt Compensation Planning Journal 6/4/99 P 159-167 for article on 401(k) issues in mergers.

MIke YOur missing my point. Employers establish hours of service rules in DB plans to keep out part timers-- Using equvalencies only make it easier for Pters to join the plan. The problem with using any hour of service rule is that the plan admin has to be able to determine the # of hours that a pt ee works each year and most plans do not have the capability to do this because of budget or system constraints which results in using some arbitrary method of counting service, e.g., # of scheduled hours. that why I sugggested elapsed time as an alternative.

You need to find the provisions for taking out plan loans and the consequences of defaulting on a loan. --- You should also review the provisions for canceling/ cashout of the contract and transferring funds to another provider and any fees that will be imposed. Your should then take this information to a financial planner-- Try looking up certified financial planner in the phone book or call the CFP board at 800 -487-1497 and ask for information. The web site is www.CFP-Board.org.

Carol: If the plan is not subject to ERISA then state labor laws pertaining to depositing employee contributions would apply, not ERISA. State labor laws provide stronger sanctions including criminal penalities, for the failure to deposit contributions.

Accounts at Stock brokers/dealers are supposed to be covered by SIPC which is similar to the FDIC for banks. Accounts are protected for up to 500K. U should ask E trade if they belong to SIPC. Some brokers also have private insurance above the SIPC limits.

Why is it that every time there is a failure to operate a plan in compliance with the law there must be an advisor to blame. My experience has been that most large plan administrators do not understand their plan vesting rules. However, it is the the plan admin who determines the amt of vesting svc to be credited. Actuaries, TPA, etc only compute benefits based on the plan admin determination. Most plans cant even determine who performs a yr of svc under the 1000 hr of svc rule no less apply complicated entry or BIS rules. Thats why ers should adopt elapsed time svc rules even if it means covering part timers who may not perform 1000 hrs of svc. It may seem startling but there are a lot of HR people who dont know that vesting service must include all years of service not just the years the employee is eligible to participate in the plan.

U need to have the contract reviewed by a fee only planner, an accountant or attorney who will give u impartial advice. Your advisor needs to see if u can do a tax free exchange of whatever cash value u have to cancel the outstanding loan. U need to ask the advisor the questions in your last post. All paying the interest does is prevent the ins co from invading the principal to pay the interest charges. It may be the investment media used to fund the annuity are not suitable for u.

So plaintiff does has burden of pleading and proving its claims of imprudence by a preponderance of the evidence before a judge not a jury. The P still has the burden of proving that a Fid acted imprudently, instead of the fid having to prove that he/she acted acted prudently under the circumstances.

PJ -you got any authority for the statement that the fid has to prove he acted prudently in order to avoid liability? I thought that the plaintiff/employee has the burden of proof under ERISA to prove that the fid acted imprudently by a preponderance of the evidence?? Fid can rebut the P's proof. Isnt this why most claims against fids for investment selection fail (Unisys) because it is really a battle of the experts and Ps experts are no better than D experts.

Tom: Your idea is a good one if the amt of the payment will exceed the comp paid in 02 by new er.

Isnt there a simple answer to all of this under contract law. If an individual takes out a loan on an annuity/LI contract, the contract provides that the owner must pay interest on the amount borrowed. A default does not cure the requirement to either pay back the borrowed money to the Insurer or continue to pay the interest on the debt. It may be that the value of the funds in the annuity have declined and the insurer is taking out the interest payments from the cash value of the annuity contract. Why not cancel the contract and transfer the remaining funds to another contract. You really need a financial planner to review your options.

Carol: I think you are overreacting to a provision which was written to prevent plans in which employers or plan administrators received compensation ( kickbacks) for selecting a particular 403(B) provider from being exempted from ERISA. "If an employer... receives... such other compensation from an annuity contractor, the employer would be deemed to have established or maintained a plan." Preamble to Dol final regs on 2510.3-2(f), 12/2/77 that you cite. It could easily be rebutted that the measly compensation an employer receives (2-3%) on funds deposited at a bank is reasonable compensation for the cost of administering the plan so there is a set off at 0 cost to the employees. For that matter any benefit an employer receives from a financial institution where employee contributions are deposited on account in a comingled fund, e.g, free checking, can be construed as an indirect benefit in violation of the regs. Where the number of participants are few, the volume of sr contributions is small and there are multiple providers ( which is a component of the exemption) there can be quarterly contributions under the ERISA exemption. Since the 403(B) plan is tailored to the desires and financial means of the individual employees, provisons of an exempt plan can be tailored to minimize the administrative burdens on the employer.

If the new plan permits the loan can be continued after a rollover or trustee to trustee transfer. Tne new plan is subsituted as the creditor in the note signed by the employee to secure the loan.

John: Last sentance of Q/A-33(a) is as good as it gets -spousal consent is not required for a distribution to participant in PS plan .

The prohibited transaction rules of IRC 4975 prohibit a fiduciary from dealing with plan assets for his own account. Therefore collecting a commisson for transactions on behalf of the plan is subject to the 15% pt tax. If no comm are paid it may be permissible if there is no other benefit granted to broker, eg., discount for other clients trades on account of vol trades for plan account. Client should consult counsel before making trade at no cost to plan.

While I dont think u can avoid taxation of the DC amt how about a reverse-_ have the employees receive the funds from the NP and then elect to defer an equal amt of their salary from the new employer and contaribute it to a new top hat plan. Since the ee are going to be taxed on the pay out and will receive the funds as comp they can deduct their contribution to the new plan from their comp for rest of 2002.

Prior to ERISA there were no statutory vesting reqirements. You may be limited to fixing the plan from 1976 forward but you need to consult counsel.

Unlike a qualifed plan, a 403(B) plan is not required to be amended for changes in the tax law since it cannot be disqualfied for the failure to amend the plan. A 403(B) plan is really an annuity contract under IRC 72 in which the contributions and earnings are tax deferred. In fact the IRS audit guidelines state a that a 403(B) plan cannot be penalized for the failure to be administered in accordance with its terms. It is only required to be operated in accordance with the tax law. While the plan should be amended to comply with all applicable changes in the tax law there is no fixed deadline for amending a 403(B) plan nor is there any prohibition against retroactive amendment of the plan to conform with amendments which were effective in a prior year.

nowhere really- Reg. 1.401(a)(2) states that a qualified plan is a definite written program and arrangement which is established and maintained by an employer. IRS has claimed that this language requires all plans to be administered in accordance with its terms.

IRA is prohibited from investing in S corp stock- Rev. Rul 92-73.