Have a takeover cash balance pension plan where actuarial equivalence is defined as 417 mortality and interest rates; interest crediting rate is defined as third segment rate for September of plan year (calendar year plan).

As of 12/31/2011, have my end of year hypothetical account balance; this is converted to a monthly benefit for funding using the interest crediting rate for 2011 and 2011 417. So I get a monthly benefit as of 12/31/2011 using the 2011 basis.

We now come to 2012. As we all know, 417 interest rates have nose dived. When I now compute the accrued benefit from the 12/31/2012 hypothetical balance, I'm now applying the 12/31/2012 417 basis; resulting accrued benefits (as expected) are much lower than 2011 basis due to effective higher annuity purchase rates. If I just stick with the 12/31/2011 prior accrued benefit for funding target, I'm getting trivial target normal cost in relation to allocation; for those with lower allocations, the 12/31/2012 accrued benefit is actually lower than the 12/31/2011 accrued benefit.

Approaches for determining FT and TNC?

1) Use numbers as they fall, don't let 12/31/2012 accrued benefit be lower than the 12/31/2011 accrued benefit for determining FT and TNC. Results don't appear to make sense (trivial or no TNC).

2) Use 12/31/2011 accrued benefit for FT; calculate 2012 accrual based on hypothetical allocation alone. Get reasonable TNC, but now my PVAB is higher than the ending account balance, which doesn't appear to make sense either.

3) Recompute the 12/31/2011 accrued benefit based upon 2012 basis before determining FT and TNC.

Most plans we have designed have gone with static interest rates for actuarial equivalence (typically 5% pre, 5.5% post with post-retirement mortality only) and a 5% crediting rate.

Thanks for any input.

We have a plan where one of the owners is in the process of a divorce and his wife - soon to be ex-wife - also works for the company.

Is there any point in the divorce proceedings short of the final divorce when the wife can cease to be considered HCE and Key? Or must we wait until the final divorce?

Takeover Defined Benefit Plan defines the death benefit as the face amount of insurance provided by premium equal to 66 2/3% of the Theoretical Individual Level Premium Cost.

I noticed in reviewing the prior actuary's val, that they sent the owner and his wife waivers to sign saying they would waive any death benefit provided by insurance in excess of the amount provided by the policies that have already been purchased.

Can a participant waive the purchase of additional life insurance if the plan says the death benefit will be provided by life insurance? Don't they need to amend the plan's death benefit instead??

Thanks!

A dental practice has a safe harbor non elective 401-k where all employees have 3% of their W2 income contributed. What is the correct way to calculate the contribution for the Dentist who doesn't have W2 (salary) but self employment income? Any help greatly appreciated.

Reviewing my first Cash Balance SB so sorry if this question is simplistic.

Val date: 12/31/11; second year of plan

FT: $56,000

TNC: $52,000

Assets: $55,000

Contribution made 12/31/11: $85,000

Have only done regular DB plans so maybe I'm missiing something. An answer to the following questions would help a lot:

How are the Funding Target and and the Target Normal Cost determined for the SB for cash balance plans?

What relation do the Pay Credit and Interest Credit have to the FT and TNC?

Where do the segment rates come in?

I have a plan that excludes bonuses from compensation used to compute their profit sharing contribution. The plan limits their HCE's to the top 20% of the group. They fail comp ratio (barely), but if I were to pull the 6 people who are NHCE's due to the 20 %limit, into the HCE group for this test, it would pass. Would that be acceptable, or when "top 20" is being used for coverage and ADP, is it locked in for comp ratio as well?

Does the requirement to explain the "financial effect" of the QJSA require specifying actuarial assumptions and/or an annuity quote from an annuity provider? Or is it permissible to simply state that the account will be used to buy an annuity from an insurance company?

Any problem with this scenario:

Corporation-sponsored Profit Sharing Plan with 401(k) feature including catch-ups

One participant

2012 salary: $250,000

2012 Profit Sharing contribution $50,000

2012: 401(k) deferral: $5,500

Does anyone have info on where to find a low cost HRA plan document provider and possibly an administrator? This would be for a 1 employee C Corp.

Anyone out there have experience in this area?

Took over a plan this year, and I'm drawing a blank on where the problem is... or is there one?

G and H are a controlled group, and each has their own 401(k) plan.

G: 118 participants that can't be segregated via statutory exclusion, of which 96 are union (included in the plan), has 3 HCEs (all non-union), and also an exclusion for "per diem" employees (14 of which are union (included in the 96), and 3 are non-union)

H: 25 participants, no union, no HCEs, also has a match provision

Clearly, there's no issue with the coverage for the match.

For the deferrals, after pulling out the union employees in G's plan I'm coming up with benefitting 16 NHCEs (118 total - 96 union - 3 HCE - 3 "per diem") out of 44 NHCEs (the 16 benefitting + 25 from H + 3 "per diem") = 36%. And of course all three HCEs benefit.

From here, I'm not sure what to do next. It seems I've found things that point in several different directions, so I'm just spinning my wheels. Any thoughts? Thanks.

Haven't ever worked with welfare benefit plans. The language in the instructions for the 5500 form is based upon the 2510.3 regs. the question at hand (and I haven't seen the plan document yet) is specifically on the following which is the second of the three situations which make you a "participant" for 5500 count purposes.

"the date on which the individual becomes eligible under the

plan for a benefit subject only to occurrence of the contingency

for which the benefit is provided;"

The question was raised - if you are ELIGIBLE to sign up for health insurance, but you do not, are you a participant?

Although this situation seems analogous to a 401(k) situation where you are a participant as soon as you are eligible, whether you defer or not, the regulation has very different language (i.e. it specifically says that you are a participant in a 401(k) plan in such situation) whereas the welfare benefit section of the reg does not. I'd interpret this to mean that the "occurrence of the contingency" is not meant to mean "subject only to signing up" - I'd take it to mean, for example, that if the plan provides accidental dismemberment, you are a participant whether you have an accidental dismemberment or not.

So I think that the answer to the question posed is that no, such a person is not counted as a participant solely upon the basis of being eligible to sign up for the health (or whatever type) of insurance, for 5500 purposes. They would have to actually sign up. I'd love to hear what others think! Thanks.

Lines 5 and 6. All filers must complete both lines 5 and 6

unless the Form 5500 is filed for an IRA Plan described in

Limited Pension Plan Reporting or for a DFE.

The description of ‘‘participant’’ in the instructions below is

only for purposes of these lines.

An individual becomes a participant covered under an

employee welfare benefit plan on the earliest of:

 the date designated by the plan as the date on which the

individual begins participation in the plan;

 the date on which the individual becomes eligible under the

plan for a benefit subject only to occurrence of the contingency

for which the benefit is provided; or

 the date on which the individual makes a contribution to the

plan, whether voluntary or mandatory.

See 29 CFR 2510.3-3(d)(1). This includes former employees

who are receiving group health continuation coverage benefits

pursuant to Part 6 of ERISA and who are covered by the

employee welfare benefit plan. Covered dependents are not

counted as participants. A child who is an “alternate recipient”

entitled to health benefits under a qualified medical child

support order (QMCSO) should not be counted as a participant

for lines 5 and 6. An individual is not a participant covered

under an employee welfare plan on the earliest date on which

the individual (a) is ineligible to receive any benefit under the

plan even if the contingency for which such benefit is provided

should occur, and (b) is not designated by the plan as a

participant. See 29 CFR 2510.3-3(d)(2).

i have a calendar year 401k plan. one of the 5% owners sold all his shares back to the company as of 12/31/12. would he and his children who work at the company be considered key employees for the 2013 plan year end since he does not own any stock during the plan year? is the look back year still the correct way to determine the key employees for this situation?

A participant in a defined benefit plan who is a "restricted employee" because of the Top 25 HCE rules requests a single lump sum. The single lump sum is restricted since after the single lump sum payment would be made, the value of the remaining plan assets is less than 110% of the value of the current liabilities. Furthermore, the PPA lump sum restributions do not apply since the plan's AFTAP is greater than 80%.

Let's assume the current single lump sum is $200,000 and the annual amount of benefit payable to the participant as a single life annuity is $20,000. It is my understanding that the participant can elect the single lump sum and receive $20,000 as an immediate payment for the 2013 plan year. Let's further assume the plan continues to be restricted for 2014 so I believe the participant can receive an additional $20,000 payment for the 2014 plan year. Is that correct? In addition, can someone confirm whether these partial payments are eliglbe for rollover into an IRA?

Let's assume that the single lump sum is no longer restricted for the 2015 plan year. Annual payments of $20,000 have been made to the participant in 2013 and 2014. Exactly how is the remaining lump sum calculated?

Should the original single lump sum (equal to $200,000 based on 417(e) rates) be adjusted for interest and then reduced by the 2 annual payments of $20,000 also adjusted for interest? What interest rate should be used for these adjustments?

Thanks in advance.

Just saw an article that said more companies will be adding a Roth feature to their 401k in 2013. I have not seen this as true. Most small businesses aren't adding Roth's. anyone seeing companies adding Roth's?

- Plan has a no wait for deferrals

- 2 year wait for the match

- definition of compensation excludes compensation prior to plan entry.

- Match is based on annual.

- The match formula is 33% up to 6%.

Example: Participants Total Compensation was $90k

-Plan Entry Date was 7/1/2012 and Comp from plan entry was $45,000

Deferrals totaled $3,000 for 2012.-----> However deferrals from 7/1/2012 totaled $1,500. My understanding is the total match should be $1,000 however we are being told that is should total $500?

Based on the information above, if a participant entered the match portion of the plan 7/1/2012, is there anyway you can exclude the deferrals prior to 7/1? Is there any way to do this if it's based on annual or would this only work if match was based on payroll.

I have a couple of 403b plans that I TPA that are looking to switch vendors. Any recommendations?

There seem to be a lot of good options for 401k plans; not so much for 403b.

General Facts:

1. Company has two owners. Owner A - 51%; Owner B - 49%

2. Compensation Owner A = Max; Owner B = $215,000

3. Neither Owner A, nor Owner B defer

4. Owner A determines the discretionary contribution based upon amount needed max and not exceed 415 Limit. I./E. 20% of Compensation

5. All other employees NHCE

Problem Facts:

6. Plan Document specifies disrectionary contribution to be allocated using integration with the social security wage base.

7. The discretionary contributions for 2009 - 2011 were incorrectly allocated on pro-rata compensation, i.e. 20% for everyone.

Mitigating Facts:

8. All NHCE's received more than they otherwise would.

9. The 51% Owner A received the max, but not more.

10. The 49% Owner B received more than he otherwise would have had the discretionary contribution been limited to the maximum amount needed for the 51% Owner A to reach the 415 Limit.

Problem and Questions:

Although the 49% Owner B received more than he otherwise would had the discretionary contribution been limited, he received less than he would have had the overage been properly allocated.

A. Does the 49% Owner B need to be made whole for the difference?

B. What if the cumulative 3 year correction would push Owner B over the 415 limit in the current year?

C. Should the amounts be re-allocated/refunded from the accounts of the NHCEs?

I posted this elsewhere, but don't think it would be seen.

We just took over a profit sharing plan in which the owner took a loan in November, 2010, has never made any payments, but is in a financial situation to pay the entire loan back plus interest.

He has not filed 2010 or 2011 5500s, but we can address that under DFVC.

Since I have never dealt with this prior to this point, he's obviously defaulted on the loan in 2011 and should be issued a 1099R for 2011.

But, does the fact that he has defaulted negate the fact that he wants to, and is in a position to, repay the loan now with the interest owed?

Any suggestions are appreciated.

Client's plan has a safe harbor NEC.

Owner's brother was an NHCE in prior year, and helped the cross-testing because he was the youngest employee.

The brother is now an HCE based on prior year pay.

In addition, the owner's son is newly eligible.

Obviously, this does not work very well for the owner.

Is it required the the safe harbor NEC be included in the ratio test for cross-testing?

Can only the the discretionary nonelective be tested?

Given: Actuarial Equivalent (AE) interest rate was changed from 30-Treasury rate to 5%.

Question:

How does this change affect Lump Sum calculation?

Do you have to take both interest rates into consideration when calculating lump sum?

Thanks.