waid10

We handle this in house (no TPA). I checked our plan doc and it is silent on this issue. So it is kind of unclear what we need to do. From your response, it sounds like we could talk to the employee and give her options. Does that sound right?

We are a small employer and have an employee that was out on maternity leave (unpaid leave). Since the leave was unpaid, there was no pay for us to withhold FSA contributions from. Now that she has returned to work, can we have her pay in the missed deductions? If so, over what time period? Do we have discretion? We don't want to make it hard on her by taking it all from her first paycheck back. We would rather space it out over several pay periods if possible. Thanks.

I wasn't sure if this was the correct board to post this on, but I couldn't find another spot that was more suitable. I have a potential new client that is a hedge fund company. They have roughly 40 employees and do not currently have any kind of qualified plan. They are interested in a DC plan but want to offer funds within their hedge (that they manage) as plan investment options. This sounds like a prohibited transaction on its face. They realize that they would have to offer other investments to round out a diversified lineup. It made me wonder how brokerage firms handle a 401(k) plan at their firms. For example, if I am an employee at Fidelity, does Fidelity offer Fidelity funds as investment options within the plan? If so, how do they avoid PT rules and the fiduciary provisions of ERISA? It would seem that this is close to what my client wants to do. Any help you can provide is helpful.

Also, as a follow-up question: what do we do if the participant is unable or unwilling to return the money that was distributed to them?

We processed a distribution of a participant's account in full (mistakenly thinking we had a distributable event). Now we need to correct the error. Is an impermissible distribution of a participant's full account considered an overpayment in EPCRS? I am trying to figure out how to correct the error and the overpayment correction is the only area I can find that seems to apply to our situation. Thanks.

Hi. Does anyone know how the successor plan rules apply to a 403(b) plan? I was under the impression that you could terminate a 403(b) and allow participation in a new 403(b) and not violate the successor plan rules if the new 403(b) was a deferral-only plan (i.e., no employer contributions). Does anyone know if this is correct?

I checked out the instructions to Form 5310, but didn't find much helpful. Any other sources? Thanks.

Does anyone have links to good articles on steps necessary to terminate a DC plan? We just received a determination letter following correction through VCP for some operational errors. We want to now terminate the plan. I want to make sure we follow all necessary steps, thus, I am looking for some good articles to follow. Thanks.

Yes, I have verified that the employer is an "eligible employer." And both plans have immediate (date of hire) eligibility to make salary deferrals.

I am new to the HR department of an employer that has both a 403(b) and a safe harbor 401(k) plan. We have both union and non-union employees. We limit the 403(b) to union employees only. All other employees participate in the 401(k). Is this permissible? Is there any kind of discrimination issue to be concerned about? We also have a subsidiary with all non-union employees. We exclude them from the 403(b) and only allow them to participate in the 401(k). I am concerned that this is not permitted. I just want to make sure we aren't overlooking something. Are there questions I should be asking? Thanks.

The way I read 2008-50 is that we (the employer) cannot require the employee to return the money that should have been deferred. They keep the cash they received as taxable wages. It appears that the proper correction is to make a QNEC to each employee's account equal to 50% of what they would have deferred plus earnings. Do you agree?

Hi. We had an error in our payroll department and salary deferrals for a few employees were messed up. Most of them involved employees that were over 50. They wanted to maximize their deferrals with the catch-up contribution. Mistakenly, they were capped at $16,500 and the extra $5,500 was not deferred, but rather was paid out in wages. What are we required to do in this situation? Can we have the employees return the $5,500 to us, make the contribution to their accounts for 2009, and issue revised W-2s? Or since it is already 2010, is it too late? The second situation we have is where an employee wanted to max out her deferrals at $16,500 by making a $1,000 deferral at the end of 2009. She submitted the proper paperwork, but due to our error, the $1,000 didn't come out of her last paycheck in 2009. It came out of her first paycheck of 2010. Again, can we have her refund the $1,000 to us, make the contribution to her plan account, and issue a revised W-2? Or is there another solution?

The new plan sponsor has a different EIN. Will this pose any problems? Do I need to do anything sooner regarding the 5500, i.e. notify any governmental agency?

We are about to move all of our employees into a new entity. We need to change the plan sponsor of our 401(k) plan to this new entity. How do we do that? Do we just amend the plan? Do we need to do anything else?

We are about to move all of our employees into a new entity. We need to change the plan sponsor of our 401(k) plan to this new entity. How do we do that? Do we just amend the plan? Do we need to do anything else?

We have a handful of participants that recently learned they defaulted on one of their plan loans. Here is the situation: we have a 403(b) and a 401(k) plan. For around a dozen participants, they had plan loans through both plans. The TPA handles the entire plan loan process. When the TPA set up the repayment, they only set up one of the loans (the 403(b)). The participant saw loan repayments coming out of the paycheck each pay period. However, the payment was only coming out for the 403(b) plan loan, not the loan through the 401(k). The TPA just notified these participants that they defaulted on their 401(k) plan loans. Technically, it is the responsibility of each participant to know what their repayment amount should be. So I suppose it could be argued that each participant should have known that their repayment didn't look right. But practically speaking, people are only going to see that some amount is coming out. If it is slightly off of the correct amount, employees wouldn't notice. I find more fault with the TPA in not setting up the repayments properly. But the TPA says we have to treat it as a default. There must be another option. Any thoughts?

I hesitate to just send it. We are jammed up against due dates for comments (and in the case of when a request to the DOL to comment on behalf of the participants, we are past the due date).

This is for a new plan, not a plan termination. And I already sent the determination letter application. I had told the client that I was sending the application on X date and that they should send the Notice before that date. They assured me that they would. Now they tell me that they forgot to send it.

Our money purchase pension plan currently provides for the first of each month as the distribution date. I take this to mean that if there are any participants that become entitled to benefits during the month, distribution of those benefits will commence on the first of the following month. This is very cumbersome to administer. What does the law say as far as commencement of distribution of benefits? Could we limit this to once or twice a year? Can someone point me to the relevant legal guidance on this? Thanks.

I prepared a determination letter application for a client. I prepared the Notice to Interested Parties and sent it to the client. I instructed them to send it to participants on the date I was filing the application. Well, the client forgot to send the Notice. It should have been sent 2 1/2 weeks ago. Does anyone know what the proper procedure is for this?

We are about to enter Audit CAP for errors due to the improper calculation of an employer discretionary contribution. For participants entering during the plan year, we had been using compensation from the entry date through the end of the year (our document provides for full year compensation). This happened over three years with the total missed contributions of around $250k. Does anyone know how the IRS generates the opening bid for the sanction amount? This is my first trip through Audit CAP. I am wondering how they come up with a sanction range, and also how "negotiable" it really is. Thanks.

Hi. We are about to add a working spouse premium (spousal surcharge) for spouses of employees that are working and are eligible for health benefits at their employers. However, we have a lot of married couples that work here for our company. For the married couples with both spouses working here, do we apply the spousal surcharge? Some of them have one spouse full-time and the other working on an ESO (enhanced salary option) basis, meaning they have elected to be paid more for waiving certain benefits. The idea behind the working spouse premium is to encourage working spouses to use their own employer's plan, and not ours. This wouldn't be accomplished by applying the premium to couples with both spouses working for us. But are we violating any laws if we don't apply the premium to everyone with a working spouse that is benefits eligible?

No, the SPD does not say this is permissible.

We have an employee who has a loan through our 401(k) and is making payments via payroll deduction. She is experiencing financial hardship and would like to stop repayment of the loan. What are the consequences for this action? I know it is in default for her and it is treated like a distribution. Are there any consequences for the plan? How should this process work? Thanks.

We have an employee who has a loan through our 401(k) and is making payments via payroll deduction. She is experiencing financial hardship and would like to stop repayment of the loan. What are the consequences for this action? I know it is in default for her and it is treated like a distribution. Are there any consequences for the plan? How should this process work? Thanks. Duplicate post: go here: http://benefitslink.com/boards/index.php?showtopic=43698