Have there been any "recent" (last 4 years, say!) developments on funding calculations for a DB plan that is partially funded with life insurance?

I had understood that, after PPA, you had to use the envelope method, and would calculate:

1. The TNC, by adding the one-year term cost of insurance to the regularly calculated number,

2. The FT, as normal, and

3. Assets, by adding in the value of the life insurance policy.

I have read that a modified split funding method is possible, but only if the participant's right to receive the insurance benefits is irrevocable (I am not really completely clear on what that means!).

I am running up against some proposals that appear to still be using the old split funding method.

Any comments about how life insurance can still be used to significantly increase deductible contributions?

Thanks!!!

401 (k) Safe Harbor Match Plan. Employer fails to defer on the the last payroll of the year which only has bonus wages. Plan has no compensation exlcusions.

Would therefore this section of self-correction under EPCRS be permissable for a Safe Harbor Match?

(F) Special Rule for Brief Exclusion from Elective Deferrals and After-Tax Employee Contributions. An Plan Sponsor is not required to make a corrective contribution with respect to elective deferrals (including designated Roth contributions) or after-tax employee contributions, as provided in sections 2.02(1)(a)(ii)(B) and ©, but is required to make a corrective contribution with respect to any matching contributions, as provided in section 2.02(1)(a)(ii)(D), for an employee for a plan year if the employee has been provided the opportunity to make elective deferrals or after-tax employee contributions under the plan for a period of at least the last 9 months in that plan year and during that period the employee had the opportunity to make elective deferrals or after-tax employee contributions in an amount not less than the maximum amount that would have been permitted if no failure had occurred. (See Examples 6 and 7.)

There seems to be no distinction between Traditional and Safe Harbor plans in the referenced section. Am I also reading the correction properly that it would make no difference when the failure to withhold deferrals took place provided that the participant had an opportunity to defer no less than the maximum amount in the last 9 months of the year. Would the participant have to be notified of the failure to use the special rule?

That's the way I'm reading this section, if I'm not reading too narrowly into the descripton. Thanks.

Dupicate Post

5% owner has been receiving RMDs for a number of years and dies late December 2012.

She was not married (husband pre-deceded) and her 4 childeren were each named 25% beneficiaries.

If I'm reading the 401(a)(9) regs correctly the RMD for 2013 is the single life expectancy of the oldest child.

But how does the RMD get paid? Do each receive 1/4th of the required RMD or is the RMD paid to the estate or can one receive the RMD and the others roll?

If one of the four wants a taxable distribution that is more than the RMD does that satisfy the RMD for all? That is can the other three roll over their 25% interest to inherited IRAs?

I'm sure this has come up before but I haven't seen it (or if I have it has been so long ago I forgot) and my quick search of the sub-forum did not yield any results directly on point.

Employer has current PSP in place. Employer wants to add safe harbor 401(k) and provide for 3% safe harbor contribution all effective March 1. Employer wants to use age 21 and 1 YOS requirement for eligibility. Employer also wants to benefit current partiicpants in PSP as soon as safe harbor 401(k) is added to PSP. In other words, upon amendment of PSP to add safe harbor 401(k) Employer wants participants in PSP to be able to defer and accordingly be able to receive safe harbor 3% for plan year 2013. Will normal statutory eligibility rules allow this (i.e., all current participants in PSP able to defer and receive 3% safe harbor contirbution) or would plan need to waive age/service requirement for all employees employed as of March 1? Thanks.

Quick question for one of my law firm clients:

What is the deadline for profit sharing contributions? I know it is typically corporate tax filing deadline plus extensions.

However, in this case, the partners of the law firm will be making the contributions individually. Is the tax filing deadline the same, or is it the individuals tax filing deadline?

Newbie here. If an employer's 401(k) plan defines compensation as W2, then (correct me if I'm wrong) - but there could be compensation amounts that will not be on an employee's paystub - but could be reported on the W2. In other words, the amount reflected on an employee's last payroll statement of the year may not necessarily equal the W2 plan compensation amount.

I believe the primary difference is the taxable amount of items not paid in cash. Does anyone have any examples?

So if John is paid $5,000 monthly (gross) - his last payroll statement will show $60,000. If he deducts 3% of of pay to his 401(k), then each paycheck will see $150 contributed as an elective deferral, for a year-end total of $1,800. (3% of $60,000 is $1,800).

But what if his W2 compensation is $66,000? I believe his deferrals should be $1,980 for the year. How does an employer typically account for this in their payroll?

An employer has a DB plan and a DC plan (pooled). He wants to terminate the DB plan, but it has some illiquid assets, and the employer is asking whether he could exchange it for some liquid assets in the DC plan. It feels like a PT. Is it? There may also be some exclusive benefit issues.

Dog

Particpant, whose RMD started in 2011, died in 2012.

How do I determine the PVAB payable to beneficiaries in 2013?

Do I use AE to determine the PVAB at death and have it accrue interest (AE) to a payment date without regards to mortality?

Sorry for being vague but not sure how to post this question.

Thanks

A money purchase plan contains rules concerning the payment of benefits when a unmarried participant dies and does not have a beneficiary card on file. In January an unmarried participant passed away with no spouse or children. The Plan's default rule in this case is to pay the participant's estate. However, because the participant was young and had limited assets, the family has stated that no estate is expected to be opened.

Under applicable state law, the participant's parents would receive the account balance if it went through probate. They are the only ones with any viable claim.

The employer is interested in amending the Plan retroactive to the first day of the plan year to modify the distribution rules and add parents and siblings to the list of those who can receive benefits outside of probate. In other words, when an unmarried participant passed away without a beneficiary card the administrator would move down the list-- spouse, children, parents (new), siblings (new), then to the estate.

In order to save the parents the expense of opening an estate for a small benefit (> $10k) the employer is willing to make a retroactive amendment. If there were any chance of competing claims we wouldn't do this, but it looks like it will be the easiest way to handle the situation.

Any problems with such a retroactive amendment?

Is there a rule or regulation specifying how long a 401(k) plan may take to grant or deny an application for a hardship distribution?

I'm making a list of the ways in which the Affordable Care Act affects the administration of a 401(k) plan. I'll bet that BenefitsLink mavens can explain things that I wasn't smart enough to see. Let's see who has the most ideas.

May a non-profit terminate an 403b and start a 401k plan in the same year?

Hi-

I have a client that allocates the profit sharing contribution on a per payroll basis. The formula is 9% of compensation (6% on one definition of compensation & 3% of another definition of compensation). They have a number of employees (almost of them HCEs) who hit the $250,000 limit in March..therefore do not receive any ps contribution after that. So, on an annualized basis, they are only receiving 4.5% contribution. The formula in the plan document is discretionary. Is this method of allocating the contribution ok?

If an employee only paid in $500 to her medical FSA, used up her entire $5000 election (i.e. for 2012, the limit is still 5K), then left employment. Does she have to report the extra $4500 she withdrew from her FSA (i.e. the portion above and beyond her contributions) as taxable income?

Old Medical Practice was equally owned by 6 doctors. Two leave. Old Medical Practice goes inactive on Friday, just collecting accounts receivable.

In anticipation of this, the other 4 doctors have formed New Med Practice, owned equally by them. New Med Practice hires all the staff employees that had worked for Old Med Practice, leases a new space, and resume medical practice three days later (Monday).

They do not constitute a control group. Considering only the 4 doctors that own interests in both Old and New Med Practices, they own 100% of New and only 66.67% of Old Med Practices.

Neither Old nor New Med Practices owns an interest in the other. They are therefore not an A-org affiliated service group.

Clearly, the 4 doctors in New Med Practice each own 10% or more of both practices. However, neither New Med Practice nor Old Med Practice provides any services to the other. So they are not a B-org affiliated service group.

Neither New Med Practice nor Old Med Practice receives more than 50% of its revenues for providing management services to the other. So, no IRC section 414(m)(5) affiliated service group either.

Consequently, it would appear that all of those that worked for Old Med Practice has had a separation from service that permits payout from the qualified retirement plan of Old Med Practice, despite working for New Med Practice.

Am I missing something in this analysis?

If a participant in a 401(k) plan dies without designating a beneficiary, I know that you would follow the terms of the plan to determine the beneficiary. What happens if someone else is named in the participant's will as beneficary of his/her 401(k) balance?

Thanks for your help!

A Trust for a deceased participant (who had aready started recieving a 10 year annuity) is receiving the remainder of a 10 year benefit from our DB Pension Plan. It was the named beneficiary on the distribution form. The original participant was not RMD age, and would not have been prior to the end of these benefit payments.

The Trust was scheduled to close on 12/31/12, but has remained open. The administrator would like to close the Trust as scheduled, and distribute it's assets to the beneficiaries. Benes are 2 adult children at 50% each.

Question:

If I am provided with a copy of the Trust that identifies the beneficiaries under the Trust and percentages, is it possible to pay the beneficiaries directly the remaining 7 years worth of benefits? Or must they keep the Trust open for that timeframe.

I have a pension answer book, but it's not fully answering my question.

Thanks!

Can you confirm that there is no way for the HCE's in a 403b plan to get an employer noneletive contribution without including some non-highly's?

I just remember some nondiscrimination revenue procedure unique to 403b's / non-profits. a) I think that was superseded by the new regs and b) I think even that required some level of employer contributions.

I think it said something like the HCE's could always get a 1/3 more without worrying about testing, or something like that.