Brian Gallagher

My 2 cents: The way we do it was suggested above: Take money from participant's account (plus/minus investemtn results) and put the money in a suspense account. The plan will short its next check (or wire) by the amount "suspensed". The company makes the participant whole outside of the plan. Since taxes were already taken out, there is no adjustment to the W-2. I don't see how this is a mistake of fact. It's just a mistake. From PLR 9144041: "Mistake of fact is fairly limited. In general, a misplaced decimal point, an incorrectly written check, or an error in doing a calculation are examples of situations that could be construed as constituting a mistake of fact. What an employer presumed or assumed is not a mistake of fact." Plus, how long ago did this happen? You only have one year to correct a mistake of fact.

Remember, at the core of the word Relativity is "relative". The theory of Relativity is based on where the "observer" is. Time flows differently for objects from different vantage points, ie there is a no such thing as a universal frame of reference. To coin a phase: "It's all relative!"

I thouhgt I remembered reading something recently that a court judged that it is a two-way street. The participant should have noticed that the loan payments were not taken. The court upheld that the loan should have been deemed.

Asset fees are not commissions, are they? It's almost like an administration fee. And in this example, the company is paying the fees for ALL the participants. I would think is was discriminatory if the company paid the fees for people's accounts that were over, say, $100,00 and that everyone esle would pay out of their own accoutns.

Gregory--the very first post said that the estiimate was for $5480. There's no guessing on the immediate need, just the "gross up". Joel--in 401(k) plans: for 401k deferrals, only contributions may be taken. If the plan allows for other sources (such as match or profit sharing) contributions and earnings may be taken. It's all up to the plan document.

The gross up for taxes was there even when there was the mandatory withholding. Participants would often gross up 35-40% to allow for their tax bracket, state taxes and the penalty.

Plus, the participant must pay back the loan plus imputed interest (even after it was deemed) should she/he would like to take another loan from the plan.

What kind of plan is this? 401(k)? Profit Sharing only? Money Purchase?

True, my scenario does not satisfy the first condition. I was only thinking about the second condition. In my company, when someone invests in a fund for the first time, a prospectus is automatically mailed to him/her the next business day. In our enrollment material, we use Morningstar profiles to help educatate participants about the funds, and prospectuses are available upon request from us (the recod keeper).

ooops. forgot to put in the link (still getting the hang of posting URL's on this site) anyway, the topic has been done to death (the first 200k bit), so a search of benefitslink should yield something.

I went to this site to do a rudimentary tax braket analysis: Fairmark That's where I got the 25%. So the calculation $5480 / .65 = $8430. It all depends on the tax bracket. If the participant and the plan administrator believes this is a "reasonable" approximation of the taxes, you're okay.

I thought under 404© that the plan doesn't actually have to "give" the participants the prospectus (or profile, or any other hard-copy information). Just that it has to provide the participant the information WHERE to find it. Meaning, if someone goes into one of my plan administrator's office and asks for a prospectus for the XYZ fund. She dosen't have to have one right there, but provide information like: call the recordkeeper XXXXXX at such-and-such #. Or call the fund at this-and-that number.

Does this person make more than (about) $28,000? He may have other income you are not aware of. Then you should use the 25% level. Plus, did you take into account possible state taxes? Also, I see nothing wrong with grossing up for taxes and then taking the whole thing. The money will ahve to be paid sometime.

What is the exact nature of these accounts? We have plans that have Self-Directed Brokerage (SDB) accounts that can coincide with their regular, "core" accounts. In order to establish those SDB accounts, we need to know the suitability information. However, for "core" accounts we don't need that. To me, that would create a nightmare. Every trade would either have to go through the agent and either a suitability review would have to be done on those trades, or the particiapnt would have to explicitly state that the trade was not neccessarily suggested or reviewd by the agent. Yuck!

As for the notion that only the FIRST $200,000 be considered for compensation, it has been gone over a dozen times here. Here is one of them: http://benefitslink.com/boards/index.php?showtopic=22836' target='_blank'> I believe is: it doesn't hmatter which $200k is considered, as long as it is only $200k. A small example: An HCE who makes $400,000/yr is eligible to participate on Jan 1, but declines. He makes $200,00 as of June 30. He decides he wants to participate on July 1. The counter-argument to my position seems to say this person cannot participate becasue he cannot defer (or get match!) on anything past his first $200k. To me it doesn't make sense.

I have a plan which, in 2003 (I think it was August) switched from being self-trusteed to having an insurance company as trustee. Can the auditors do a limited-scope audit for the entire plan year? Or do they have to do a full-scope audit for the portion of the year the plan was self-trusteed, and a limited-scope for teh remainer?

cost basis is simply what you paid for funds in the first place. if i bought mutual fund a on this schedule: contribution 1: $10.00 contribution 2: $10.25 contribution 3: $9.75 contribution 4: $10.00 i spent $40.00 buying the investment. that is my cost basis. even if my distribution is for, say, $43.85, the cost basis is still $40.00

I have a plan that is asking me to pay for an amendment from its forfeiture account. The document allows for expenses to be paid from there, but is a plan amendment an acceptable expense to be paid from the plan? I seem to have come across something that said it wasn't. I'm thinking it might be in DOL Av. Op. 01-01A, but all the links on the 'net I see lead me to sites that just reference it. When I searched the DOL site for "Advisory Opinion 01-01A" all I got were opinions from '92 and '93. Any thoughts would be appreciated.

Sounds like a mistake of fact. Send it all back to the company. He gets his 401(k) money reported on a W2. Just a thought.

If the plan had the request for a significant amount of time, I say the plan should provide, via a QNEC, a contribution to the participant equal to the missed deferrals. Significant amount of time meaning it might be detrimental to the participant to make up lost deferrals. She may have asked to move from 2% to 15%, and making thos deferrals up may have to take out 20-25% of a few o paychecks. Is there an administrative policy in effect that says how a participant may change deferrals and if there are any time constraints, eg once per quarter? And, does it state when the changes will take effect, eg--next payroll, first payroll of next month, within two or three payrolls?

How is it too late to do a QNEC? I would think the company still ahs time to put in a QNEC for the "prior" plan year.

Can the people exchange money from one investment to another? Will they be restricted from accessing their money they might otherwise have been able to do? Some examples: loans, hardships, distributions. If they cannont touch money that ordinarily they could, then the notice would apply. [this is just an educated guess...I usually err on the side of caution]

The way we do it, is remove the incorrect amount +/- earnings and put the money in a suspense account. The company can short its next check by the amount removed. Thus, the money stays in the trust. The only way the money can go back to the company is if the transaction was a mistke of fact. Which certainly sounds like is <U>not<-U>.

I would be careful if I was that plan sponsor. Since I don't know what the doc says, I'll just recount a situation that came my way recently: We have a client that just came to us. While it was with the prior r/k, a participant asked for a distribution. The plan dragged its feet in submitting the request (for whatever reason). The person had a substantial account balance (well over $1MM). When the distrib was finally made, the participant's account was almost $400k less than what is was when he asked for the distribution. He took the Plan to court and won. Wacky thing about this is that when it was at the prior r/k all the money was in a pooled acct. When it was sent to us, we put it into seperate accts. When all the lawyers got done, it turns out that the $400k needed to be paid to this guy, and money could come out of the individual participants' accounts! Some people lost $50-60 k!! So be careful! Why not just pay this guy out, and then pay out again when the P/S is given?

It sounds like, to me, that there was a SHNEC for the 3% and a match on top of that. Can you make both types of SH contributions? Actually, it didn't sound like the match was SH becuase the poster did not say they were 100% vested.