Are safe harbor contributions available to be withdrawn for a Disability Withdrawal?

If a defined benefit plan has frozen the plan's benefit formula, does the 415 Maximum Lump Sum continue to increase after the freeze date? Specifically, does the 415 Maximum Lump Sum based on the 415 Compensation Limit continue to increase? For example, if a participant has 5 years of plan participation and 5 years of service on the freeze date - does the calculation of the 415 Compensation Limit increase for each additional year of service (up to 10) after the benefit freeze date? If yes, where is the citation in the regs?

This has importance if the frozen defined benefit plan becomes over funded and must allocate the excess assets (but not in excess of the 415 Max Lump Sum).

Thanks

Over the years I have encountered plan consultants who perform cross testing using very different methods, some directly contradicting how others do it, some not knowing what the numbers mean and just assuming the computer did it right. I learned some of the basic rules regarding cross testing long ago, but after seeing such inconsistency among professionals, I would like to not only go over the basics but also become familiar with more involved designs, including cross testing for 401k plans. I've looked for online instruction/classes without any success. I would also welcome written instruction, especially if it includes examples. What type of resources and training is available for this purpose?

Hi Benefits Link users:

Employer "A" started a SEP in 2009 at Wells Fargo bank and neither he nor the bank has a copy of the SEP document that was adopted. We don't know if it had a 0, 1, 2, or 3 year eligibility. Call this OLD SEP.

He hired employees for the first time in 2011.

Assume he adopts a new SEP in 2013 at another custodian, Schwab, and adopts it as a new SEP, not an amended and restated SEP, effective 1/1/2012. Assume he elects a 3 year eligibility. Call this NEW SEP.

Would the fact that the employees hired in 2011 met the eligibility in 2012 under OLD SEP, prevent the employer from being permitted to exclude these same employees by contributing to NEW SEP with the longer eligilibility? I don't think the SEP rules address this.

Assume one step further that Owner A had been hired in 2008 and he had started with a SEP with a 1 year eligibility. (I am working with and advisor so don't know at this point when the business started). Since Owner A met the eligibility in OLD SEP in 1 year, is it discriminatory to now amend to NEW SEP to a 3 year eligibility? Qualified plans are governed by 401(a)(4) which addresses a series of amendments being looked at together. I don't think that concept applies to a SEP but don't know.

Thanks,

Craig Schiller, CPC

Does anyone have a good payroll stuffer on the Saver's Credit?

After reviewing for the umpteenth time the letter to BenefitsLink regular poster, Kirk Maldonado, from Elliot I. Daniel dated March 2, 1987, and after reveiwing DOL Advisory Opinion 97-03A, Advisory Opinion 2001-01A, and other DOL guidance, it appears that generally speaking the costs of administering an ESOP (other than those costs relating to the settlor functions of designing, drafting, or terminating the plan) may be paid with plan assets (assuming the plan so provides).

Given the requirements of ERISA Section 407(d)(6) and IRC Section 4975(e)(7) that an ESOP be designed to invest primarily in company stock (and I know that the two definitions are somewhat different - but we have just one class of stock in the situation I'm looking into), it seems to me that the expenses of negotiating a stock purchase agreement with a major shareholder to permit the ESOP to acquire sufficient stock so that it was "invested primarily in company stock" would be an expense related to the implementation of the ESOP and therefore payable by the ESOP. Advisory Opinion 2001-01A seems to be broad enough to include this under the umbrella of expenses of the "implementation of the plan."

I would be most appreciative of any thoughts.

Not for Profit (501c3) nursing home may be taken over by a for profit provider.

CEO of Not for Profit corp may receive a large severance package.

Would this fall within scope of irc sections 280G and 4999 or, would employer's status as a non-profit 501c3 exclude this from scope of those sections?

This is an ongoing plan for which we have always satisfied the gateway test with a 6% DC contribution. This year, the owner's compensation went from 250k down to 35k.

The DB benefit is based on a historical high 3 compensation. Our system is throwing a 197% combined benefit rate as it's compariing the current year additional accrued benefit (based on 246K average) to the current year $35k compensation.

I understand the gateway test has to be run using 415©(3) compenstion, but does it really have to compare a high 3 average benefit to a single year's compensation?

DB Plan with over 1MM in assets wants to purchase an investment property. The plan will pay the entire cost with no financing.

The 2 owners' PVAB, combined, exceeds 90% of the total PVAB of the plan.

Assuming the purchase is a bona fide investment , that every year an accurate appraisal is provided , etc., and that the plan will always have enough cash to provide termination benefits for the other participants: is there anything that would forbid the plan to invest about 75% of assets in such property? I know that we have to report on the annual 5500 if more than 25% of plan assets is invested in a single asset. However I wonder if there is any "legal" limitation as long as the non owner employee benefits are not in Jeopardy.

Thanks for help.i

A participant reached NRA in 2012 and retired. The Plan offers one lump sum payment after the next valuation and written request by the participant. Is there an issue with amending that today to a five year payment schedule? Would they have to give the participant the option for the one lump sum payment, since they already retired?

We just inherited a plan with an outstanding loan by the officer of the company.

The participant made one payment in 2011 and has not made a payment since; the prior TPA has not issued a 1099R.

We asked around at a few pension meetings and someone mentioned the possibility that the transaction could be handled as follows:

participant taxable in 2011 on the missed payments due in 2011

participant taxable in 2012 on the missed payments due in 2012

participant taxable in 2013 on the missed payments due in 2013.

Therefore, there would be 1099Rs in 2011-2013 only for the missed payments and these would be a code "1".

The participant has every intention of starting to repay the loan with the next quarterly installment.

This is a most interesting take on the situation and would appreciate any comments.

Does anyone know what is allowed in the way of transfers from 401(k) to HSA?

How about HSA to 401(k)?

Does anyone know where I can find, or how to derive, the factors to convert a balance to a 50% J&S annuity based on the UP-1984 tables?

We have plan the is part of a large controlled group. They acquired another company through an asset acquistion in 9/2012. They use the top 20% rule to determine HCEs. For 2012 HCE determination, do we need to consider this group? They acquired group did have a 401(k) plan and it is not merging into our plan at this point. It will remain separate.

A 401k participant (not an owner) with a DOB of July 1939 terminated on 12-31-2012, making his RBD 4-1-2013. The investment company's computer system calculated his RMD based on his account balance on 12-31-12 divided by a factor of 23.8 for age 74.

In my opinion, since his first distribution year is 2012, the calculation should be based on his balance as of 12-31-2011 and a factor of 24.7 / age 73.

Who is correct?

Can a Gov't 401(a) not credit a year of vesting service for the followng reasons:

-Periods of layoffs; and

-If participant is not employed on the last day of the plan year.

Cycle C due 1/31/2014 or cycle E due 1/31/2016?

Or can they "elect" either?

Thanks

Having an argument with a plan sponsor over the definition of compensation under their plan. Compensation is defined as Code 3401 comp including deferrals but excluding 1) comp prior to participation; 2) while an ineligible employee; and 3) amounts in Regulation §1.414(s)-1©(3) (i.e., reimbursements or other expense allowances, including fringe benefits (cash and non-cash), moving expenses, deferred compensation and welfare benefits, even if includible in gross income).

Here is the issue - throughout the year they may pay 'temporary disability payments' to employees that is 100% paid by the employer and included a taxable income on their W-2. Client claims this amount is to be excluded from plan compensation and that only payment for actual work performed should be included. I argue that since payments are made by employer and includible in W-2 taxable income it is treated no different than sick pay and is included in plan compensation.

Can these 'disability payments' be construed to be a payment under §1.414(s)-1©(3) and therefore excludable from plan compensation as the client insists?

If an employer wants to start a new safe harbor plan in April, can they make it effective retroactive back to 1/1?

The 401k Regs read that “ a plan will fail to satisfy <safe harbor> unless plan provisions that satisfy the rules of this section are adopted before the first day of the plan year”. 1.401(k)-3(e)(1) This would seem to require that the plan itself cannot have an effective date earlier than the date it is signed.

We have taken the position before that we will make the plan effective back to 1/1 and then just put a 4/1 delayed effective date in place for the 401(k) and safe harbor provisions but I wonder if that is correct? That seems to violate the above rule.

What are others doing?

Thanks!

We have a doctors group with a cross tested 401(k) plan. One of the doctors retired in March. The plan states that you do not get a profit sharing allocation if you are not there on the last day of the plan year, except for death, disability and retirement. So we gave the doctor a contribution. He does not want to fund a contribution for himself.

Can he waive his allocation? All the doctors are in the same allocation group.

If so, is there guidance?

Thank you.

Kate Smith