Participant is age 62. Plan does not allow for any in-service distributions other than hardships. Is the Safe Harbor Nonelective / Match money available?

Company A went into Chapter 7 bankruptcy in 2006. Company A sponsored several welfare plans and a 401(k) profit sharing plan. The 401(k) deferrals were and mostly still are invested on the American Funds recordkeeper direct daily platform. The profit sharing contributions were invested in a single common fund, invested largely in company stock. Shortly before the company failed, several key employees quit (fled?) and were paid their profit sharing distributions in non-company stock, leaving the plan with the soon to be worthless company stock. The bankruptcy trustee, in his role as plan trustee, filed a lawsuit to recover the distributions. Some of the money has been recovered, and a couple of actions are still pending.

The plan cannot be terminated until resolution of the legal actions. The plan is on a prototype document, and we were retained in March 2010 to complete the EGTRRA restatement. The document is currently in compliance. We were also asked to file the delinquent 5500s and to prepare the plan for termination as soon as the lawsuits are resolved. This is where the problems begin. The last 5500 was filed for the 2005 plan year. Thereafter, the TPA, unable to get any cooperation, resigned. Nothing has been done since. We have obtained many of the financial records, but no sponsor data, such as participant census data, etc. has been located. We have come to the conclusion that the material is probably lost, or at least unrecoverable at a reasonable cost. The plan is also in audit status. In brief, the cost of preparing the missing 5500s and paying for the DOL late filing penalties and the plan audits will likely exceed the probable plan assets.

Obviously, the abandoned plan rule would be a major benefit here. However, based on current regulations, since the bankruptcy trustee assumed the role of plan administrator, the plan is technically not abandoned. The DOL, in its December, 2012 proposed regulations, recognizes this fact and expands the Abandoned Plan Program to firms undergoing liquidation in Chapter 7.

Finally, I get to my questions:

1. Is it possible to apply the proposed abandoned plan regulations to this situation? If yes, does it make a difference that the sponsor was in bankruptcy prior to the proposed regulations?

1. If the answer to #1 is no and we have to do a standard plan termination, can we petition the DOL to waive the late filing penalties and audit fees. The problem, as noted above, is that the 5500s would most likely be incorrect and the audits would be qualified.

1. Can a QTA be appointed in this situation?

1. Should the plan trustee throw himself on the mercy of the DOL?

1. Should the plan trustee retain an ERISA attorney?

1. Any other ideas?

Thanks,

Thornton.

Plan has a two part allocation formula. For participants entering plan before 7/1/01, there is a uniform integrated allocation schedule and for participants entering plan on or after 7/1/01 there is a service based allocations schedule (that would satisfy the minimum allocation gateway). Can the two schedules be tested separtately, that is since the integrated formula is uniform, no x-testing necessary, so maybe only the serviced based schedule would be subject to x-testing?? Or am i just wrong and would the allocations need to be tested as a whole? Any guidance/suggestions would be appreciated. Thanks.

Company A is owned by Mr. X (40%), Mr. Y (40%) and Mr. Z (20%)

Company A owns 50% of several other companies. The other 50% ownership of these other companies are comprised of individuals or organizations not affiliated with Mr. X, Y or Z.

Given this, then there shoud not be any controlled groups between Co A, X,Y,or Z, and these other companies, correct?

Thanks very much.

We have encountered this problem a few times. ER in a one-person plan finally contacts us after a few years of not responding and we find that a 5500-EZ should have been filed for one or more past years (assets over $250,000). As an EZ filer, he is not eligible for DFVC.

Any suggestions on how to properly correct this without incurring horrendous late filing penalties? Although we could probably file a 5500-SF and use DFVC, this is probably not the right way to do it.

QDRO states that AP may commence her benefits on or after the participant's earliest retirement date but not later than the participant's normal retirement date. Participant is still active past NRD. We have prepared the benefit package for the alternate payee but she refused to return it. Plan document is silent regarding this issue. What are our options?

1. Start paying her on a life annuity basis (but she may refuse to cash the checks).

2. Wait until participant retires and start paying her with missing payments to participant's NRD (with interest or without interest?).

3. Wait until participant retires and start paying her actuarially increased benefits from participant's NRD to her commencement date.

4. Suggest to plan sponsor to contact participant and AP and request a new QDRO.

5. Other?

I just want to verify whether an individual has multiple SEP limits when working for multiple employers.

"A" is self-employed, earning $300,000 annualy and sponsors his own SEP making a maximum contribution of $51,000.

"A" is also an employee of non-related company X where he earns $200,000 in W2 compensation.

Company "X" also sponsors a SEP and contributes 25%.

Can "A" receive his $51,000 SEP contribution from his own company and an additional $50,000 SEP contribution from company "X"?

I know this is possible in qualified plans but the "individual" limit wording for SEPs makes me nervous. Thank you for your help!

one of the items our good friends at the govt are 'talking' about requiring is an illustration for a participant of a lifetime income illustration.

enclosed is sample statement (or at least an attempt just to see how this would work) which comes close to matching the sample provided by the govt at

http://www.askebsa.dol.gov/lia/

govt assumptions:

How the Calculator Works

The calculator uses the safe harbor assumptions described in the ANPRM for estimating future contributions, investment earnings, and inflation:
Contributions continue to Retirement Age at the Current Annual Contribution amount increased by 3 percent per year.
Investment returns are 7 percent per year (nominal).
An inflation rate of 3 percent per year is used for discounting the projected account balance to today's dollars.

In converting the account balances into lifetime income streams, the calculator uses the safe harbor annuity conversion assumptions described in the ANPRM:
A rate of interest equal to the 10-year constant maturity Treasury securities rate for the first business day of the last month of the period to which the statement relates (equal to 1.63% as of December 3, 2012 for statement periods ending December 31, 2012).
The applicable mortality table under section 417(e)(3)(B) of the Internal Revenue Code in effect on the first day of the last month of the period to which the statement relates. This is a unisex table (i.e., the annuity values are the same for males and females

ok, so the enclosed statement is hardcoded at ret age 65 (thus the income at ret is simply divided by 200, and joint/survivor 221.81, to keep things simple)

(By the way, the govt illustration adds 1/2 year to future years - this statement does not)

of course the govt is asking for comments

I suppose one possible comment would be: you take the contribution and project a 3% increase each year. so if the person received 50,000 this year, then the projection would be 51,500 for the following year, which of course would be over the 415 limit. so just how is a cap to be built into the formula?

statement with projection.rpt

A cash balance plan has made in-service distributions to participants in the past. They are now amending actuarial equivalence. In addition, they are amending the plan's hypothetical contribution credits to bring certain participants to their maximum benefits under 415.

When considering the distributions previously made, are we allowed to revalue the benefit based on the new actuarial equivalence?

Also, when adjusting the payment from the age that it was paid to the present, should the adjustment be made using the interest crediting rate or the post retirement interest rate?

How is the following situation corrected:

A controlled group between 2 companies. 2013 is the first year after the transition period and both companies need to be considered together. Company A has a safe harbor 3% nonelective plan with with SH going to all employees (not just NHCEs). Company B has a 401(k) only plan subject to ADP testing with no employer contributions. The plan's do not pass 410(b) separately.

Since they don't pass 410(b), I can't split them into 1 safe harbor group and 1 group that is tested.

How is this corrected?

Am I stuck providing the 3% SH contribution to all employees of Company A but still being subject to ADP testing?

We found out that a terminated participant in one of our plans rolled over his balance to an IRA in December, 2009. We didn't know about it until now, so of course no 1099-R was issued.

1) Since this is a non-taxable event, what are the ramifications?

2) What if we just skip reporting altogether?

3) Does anyone have any experience of IRS's position on this?

In a DB plan with mandatory employee contributions, the employer has not been withholding enough from employees' pay to cover the mandatory contributions required by the plan (due to improper exclusion of certain amounts from compensation). This has been going on for a while, so some of the affected participants are now retired. Any thoughts on how to correct this under EPCRS?

One option would be a retroactive plan amendment to exclude the amounts from compensation for purposes of mandatory contributions, but that would require a VCP filing.

Under SCP, it would seem that this would require some variation of requiring the participants to make a payment to the plan, but it seems like there would be a lot of practical issues with implementing this, especially in the case of retired participants.

Business owner over 50 has a SEP. He has contributed a few thousand to the SEP already for 2013. He wants to start a 401(k) for 2013 to get the additional catchup deduction.

Is the limit on the combined plans the same as if he only had the 401(k) profit sharing?

Hi. We are adopting a wrap plan, but I am a bit unsure of the logistics.

Here is my thinking on how to handle this:

1. Adopt a resolution for the new wrap plan. In that resolution, I was thinking of including a discussion of how the existing welfare benefits are being incorporated into the wrap. I don't want to adopt a separate termination resolution for those benefits as I worry about confusion in using the term "termination."

2. Select a three digit plan number for the new wrap. Is there some application to obtain this number? Or is it merely selecting a number available that starts with a "5" when looking at the employer's other welfare plans?

3. File final 5500s for the existing welfare benefits. Then going forward, the wrap will file a 5500.

Does this all sound reasonable? Am I forgetting anything?

Thanks.

Large Plan

Revenue Sharing accually gets deposited into the plan.

Fees are then paid out of the plan

1. Fees are more than the Revenue Sharing. Would I show the Revenue Sharing coming in under Other income and the Total Fees coming out.

Say Revunue Sharing is 5,000. Fees are 7,000. Would I show the entire 7,000 on the 5500 as fees and also on the Schedule C or just the Net amount?

2. Say the Revenue Sharing is more than the fees - say it was 10,000. How would that be reflected?

This is the first year we have a plan the actually deposited Revenue Sharing to offset Investment fees and/or Adm fees.

Any suggestions?

Pat

Suppose you have a 5 participant DB plan that was frozen three years ago. The plan is not top heavy.

The plan has a maximum benefit of $5,000 per month.

Only the company owner (and only HCE) has been limited by this maximum.

Could the maximum benefit be amended to $5,500 without unfreezing benefit accruals?

If this is possible, the company owner would still have accrued considerably less per year of participation than any other participant. There were no former participants.

Also, all other participants have accrued much more than .5% of pay per year of participation so I would think 401(a)26 would not be a problem.

Thanks.

Client has inquired about the following article: Employer-Sponsored IRAs: A Retirement Plan with Unique Advantages

Can he have both an "employer-sponsored IRA" and a SEP-IRA?

I service an old SAR SEP plan with American Funds. The self employed owner and his employees do deferrals. I have done the ADP testing to make sure he stays within the limits. We have a 3 year wait to be eligible.

His wife now works for him. The document can allow employees to come into the plan for deferrals only without waiting the 3 years ( separate eligibility ). If we change this I presume the ADP test stays the same using just eligible employees for deferrals.

So if these employees including his wife come in immediately for deferrals only --- would they NOT get the top heavy munimum until their 3 year regular wait is up ??

How would the ADP test work for the husband ( owner) and his wife. Are they each limited to the 1.25% figure ? Are they aggregated somehow ?

Thanks,

Bob

The IRS' recent LRMs for 403(b)s indicated that you can have a 30-day waiting period before you let people start making elective deferrals. Is there any other IRS guidance interpreting the "effective opportunity" element of the Universal Availablity rule? Suppose a client has a standard 90-day probationary period for all new employees. Can it hold them out until the 90 days are up?

If a plan document for a DC profit sharing plan defines the annual allocation as simply "discretionary", the employer has the flexibility to provide whatever percentage it wants each year and (I believe) also has the flexibility to provide different amounts to different employee types (i.e. based on age, service, job classification, etc.) as long as the allocation satisfies all NDT rules. Is this correct? My specific example involves a client that wants to provide a serivce-based schedule this year that fits within the confines of the gateway rules for smoothly increasing allocation rates, and was wondering if it had the ability to do so based on the provisions of the plan (which again simply say the amount to be provided is discretionary, with nothing futher regarding different employee types receiving different amounts).

Is there any reason to think they can't do the service-based allocation?