Does anyone have a 4204 bond document that they can share? I am looking for boilerplate with respect to terms to include (i.e., terms in the actual bond document - not the sale agreement) that would trigger the payment under the Seller's 4204 bond.

A plan sponsor decided to reinstate their company match in 2013 after a period of a few years without the company match. Today the plan sponsor asked me to run the non discrimination testing to see if the HCE's were projected to have any excess contributions. Since the plan document currently states to use prior year NHCE ADP/ACP values the ACP test fails because the NHCE for 2012 was 0 since there was no match. Because of this, all the HCE's would need to receive a corrective distribution. Are there any special rules about ACP testing when a match is reinstated that would allow the HCE's to receive a match for the year?

Thanks

When writing our Plan Document / setting eligibility criteria, can we make the following stipulation: If you are eligible for and enroll for medical benefits through any other entity, then you will be ineligible for benefits under this medical benefits Plan.

Can we do that?

Is an insurance agency considered a Professional Service Employer for PBGC purposes? I have a 401k client with 20 employees that is considering adding a DB plan. It's an insurance agency. Would PBGC coverage be required?

Here is another twist on the EZs not being filed. We had a husband and wife plan for which we last prepared a 5500-EZ for 2004 (approx. $70k). Despite our efforts, they provided us with no information since then, and we finally gave up and dropped them.

The husband recently contacted us asking for our help. They now want to terminate the plan and rollover to IRAs, and they have had their broker speak with me. Fortunately, the plan still has only around $80k, so there were never any reports to be filed. They are prepared to file a final report.

However; The plan is a Money Purchase (contribution is 25%). They probably didn't make any contribution at least for most of the 8 missing years, and if and when they did, you can bet it wasn't in the right amount (Sole Proprietor).

It is highly likely that to have done everything properly with the plan, there would have had to be amendments for years they made other than 25% contributions, including a probably amendment to freeze the plan. Or alternatively, they would have had to start a Profit Sharing plan, and then merge the 2 plans. Or yet another alternative would be to just forget the whole thing and perhaps prepare the 5500EZs for their records. Obviously, making up the documentation now or not addressing the problem at all would not be strictly Kosher.

1. What are thoughts about this qualifying for EPCRS?
2. Any other brilliant ideas for handling this?

I look forward to feedback.

Can anyone point to a good definition of "management functions" for purposes of section 414(m)(5)?

hello,

a plan wants to amend their plan to add automatic enrollment to newly eligible employees effective the beginning of the next plan year. Can the plan limit the amendment to just newly eligible employees or do current eligible employees have to be subject to the amendment as well?

A company who's plan we administer just bought (asset acquisition) 100% of another company who has a 401k plan. The owner of the business would like the acquired employees to be immediately eligible to participate and to receive matching contributions and for the acquired business's plan to be merged into the existing company plan. Is this appropriate and allowed?

Thanks

Plan doc wording says that for a ppt who meets the service but not age requirement for an ER benefit, he may receive an ER benefit based on a table of ER factors in the doc that starts at age 50 once the age requirement is met. The ppt in question would be eligible at age 49 based on the wording in the doc. Does the fact that the referenced table starts at age 50 trump the apparent eligibility at age 49? Or would we extrapolate (I guess) back to age 49?

Thanks

Employer contributions made to the Plan to make up for qualified plan limits. Contributions are 100% vested. If the contribution is $10,000 is it necessary to run $10,000 through payroll in order to pay the necessary FICA (but not Federal/State) income taxes?

401(k) Vendor is covering the cost for the Plan Sponsor to visit the vendor's home office and see how things operate. This includes, flight, hotel and meals.

The question came up is this a prohibited transaction.

Any thoughts???

Hello, all,

I am currently working with an IRS VCP examiner to correct some improper plan distributions from a 401(k). The distributions were intended to be loans, but were not properly documented, amortized, etc.

IRS has approved correction, under the specific circumstances involved. Part of the correction, of course, is that the Plan will be repaid and made whole, with proper interest, etc.

What I'm puzzled about is this: In calculating the proper interest for the loans (taken out in 2011), I used Prime (3.25% in 2011) plus 2%. My understanding, per prior informal IRS guidance, was that this amount of interest would be "reasonable."

(Here's a prior discussion on IRS's informal position regarding this: http://www.irs.gov/pub/irs-tege/rne_win12.pdf )

The confusion comes in because the IRS VCP agent, by phone, is now telling me that IRS auditors, on exam, are now seeking "justification" for interest rates used on plan loans, and that we need to ensure that the rate used is what would have been commercially available. See, e.g., this mention of this topic in the IRS Retirement News for Employers - Winter 2012, that the examiner brought to my attention: http://www.irs.gov/pub/irs-tege/rne_win12.pdf )

The IRS VCP agent suggested that my clients were professionals, and I should check to see if 5.25% was the rate they would have gotten. My first thought was that she meant that 5.25% is TOO LOW.

On further reflection (and given recently low interest rates), I'm wondering if, instead, she is suggesting (albiet in code), that I should consider using a LOWER interest rate than 5.25% Because I'm thinking that an ACTUAL commercial loan would have been lower for that period. (Was she telling me that 5.25% interest was too high?!)

Hopefully and easy one, but I have never heard of this. We have a non-owner active participant who is age 74 with an outstanding loan balance in a 401(k) plan. The participant is terminating and wants to rollover their account to an IRA. They are aware that their 2013 RMD must be processed from their account prior to the rollover.

Question: Can we offset the actual RMD amount by the loan that will default?

It seems logically that you could since the tax consequences net to the same place, but we all know that logic doesn’t always rule.

Example: 2013 RMD is $6000 and participant has a $5000 loan balance that will default upon their termination in 2013. As such, I would give them a $1000 distribution and 1099 them for the entire $6000 with a tax code 7. Then allow her to rollover the remaining account to an IRA.

Thanks.

A recently deceased participant has a beneficiary on file from years ago that lists an old boyfriend as the sole beneficiary of the account. The family of the participant is looking for any out to prevent that individual from being the actual beneficiary.

Is there any way that a named beneficiary cannot be the actual beneficiary following the death of a participant? A way to prove that a beneficiary election is outdated?

Wondering if anyone has encountered this...

100% ESOP-owned plan sponsor has foreign subsidiaries and, as a result, has an obligation under the FBAR regulations (Bank Secrecy Act - UBS scandal etc...) to disclose all financial interests in foreign financial accounts. Although the ESOP, in its capacity as an employee benefit trust, is not obligated to file since it's invested solely in domestic employer securities and maintains no interest in foreign accounts, based on the regulatory langauge the ESOP trustee appears to have a obligation to file in its capacity as the plan sponsor's sole shareholder. The filing instructions and FBAR reg. state - "A United States person (e.g., a trust - no exemption for qualified plans) has a financial interest in a foreign financial account for which...the owner of record (i.e. plan sponsor) is...a corporation in which the United States person owns directly or indirectly...more than 50 percent of the total value or total voting power of shares of stock." Penalties for the failure to file are punitve (50% of foreign accounts up to $100,000).

Although such filing will be redundant, the intent of the regs is to be overly broad. That said, it otherwise seems apparent the ESOP trustee has an obligation to file, right? Am I missing anything?

Many people guess that a retirement plan’s administrator (not a recordkeeper or TPA) has an ERISA fiduciary duty to maintain the plan as a tax-qualified plan. Recently, a consultant told an employer that this idea is wrong.

The consultant said that ERISA requires a plan’s administrator to administer a plan according to the plan’s written terms and ERISA. Further, the consultant said that if a plan becomes tax-disqualified in form because the employer failed to amend the plan, nothing in ERISA requires the administrator (in its role as the plan’s administrator) even to try to get the employer to amend the plan.

In fairness, the consultant said that the administrator must use prudent care to not make (and not allow) any communication to describe anything about the plan’s or its transaction’s tax treatment in any way that is false or misleading. The consultant suggested revising the summary plan description to omit any explanation about tax treatment. The consultant suggested editing the § 402(f) notice (if any) so that every explanation is preceded by “If the Plan is a plan described in Internal Revenue Code § 401(a), ….”

The consultant said that a plan’s administrator administers the plan that the employer created.

Do you think that the consultant is right about the absence of an ERISA fiduciary duty? If not, why not? So that the reasoning is something more than a sense that something doesn’t seem fair or decent, what language in ERISA’s statutory text supports the fiduciary’s duty?

I'd very much appreciate the opporutnity to talk to any traditional 401k TPAs who are expanding into health plan compliance services as a result of ACA and what their experience has been to date.

If you're willing to give me 15-20 minutes of your time for a phone call please reply to JMPeterson@KaufCan.com

All responses will of course be held in strict confidence.

Thanks

I have a client who deposited a 2012 contribution in 2011, Is this allowed? Would it be listed on the 2012 SB with the date in 2011?

Any comments would be appreciated.

Thanks!

Parents are divorced. Children live with mother. Health insurer mails out a letter to two children (each received a letter, addressed to them at their father's residence). Letter contains information regarding a prescription medication they take, gives name of medication. Letter is dated"may 2013". Just received letter from father today. Aren't the name of medications covered under HIPPA rules and regulations?

I can't seem to find anything that specifically addresses my question - Is there a deadline for amending a 5500?