I posted this in the plan loan section originally but wanted to post here as well as I think this is more a plan correction issue. Issue involves a 401(k) Plan document that expressly limits all plan loans to a maximum term of 5 years with no exception or separate discussion of principal residence loans. The Plan Administrator and TPA permitted a participant to take out a principal residence loan for a term of 10 years. That period is generally reasonable, in keeping with how TPA handles other principal residence loans under other plans without a five-year term limits on principal residence loans, etc. and would otherwise comply with applicable plan loan rules, etc. except for the plan's express 5-year term limit. (The Plan has since been amended by moving to a different prototype plan document which permits longer terms for principal residence loans.)

Is this an error that can be corrected by adoption of a retroactive plan amendment to permit longer plan loans per Section 2.07(2)(a) of Appendix B of Rev. Proc. 2008-50 by filing under VCP? Anything that would prevent that from working in this situation?

Not opposed to doing a VCP filing but am wondering if there is any easier way to correct the error given the fact that the Plan now already permits longer plan loans, etc. Since the loan in question was made prior to the new plan being adopted and at a time when the old plan with the express 5-year term was in place, I don't see a way around VCP.

In case you missed this in the 5500 forum,

if you have a small welfare plan, you now have to either have an SPD or file a 5500 for the plan.

Thanks again to SLuskin for posting this:

http://benefitslink.com/boards/index.php?showtopic=51623

I have an HRA plan for insurance premiums. The Employer sends an invoice to the employee for the amount of the annual premium. The employee submits the invoice to the HRA for "reimbursement" even though they have not paid the invoice. A check for the premium is sent to the employee. The employee deposits the check and pays the employer.

Are the rules for self-certification satisfied with this arrangement? Has the expense actually been incurred by the employee without them having any out of pocket expense?

Thanks

A director is no longer receiving subject to a substantial risk of forfeiture and is receiving his deferred comp. It is subject to income tax and FICA tax. Can he shelter this income by adopting a defined benefit plan?

I have a plan that already has a certified AFTAP for 2012. In order to get the AFTAP to 80% on the original AFTAP, there was a deemed reduction in the carryover/prefunding balances. Can the plan sponsor elect to use MAP-21 on a retroactive basis and have the balances restored if the election is made by year end and a new AFTAP is signed by 12/31/12?

Bob owns 100% of Company A and B. They have one 401K plan that covers both

companies, even though the companies are in different industries. Bob is considering

gifting 60% of Company A only to his daughter and son in law. Jack, the son in law,

owns Company C with 30 employees. Company C has its own 401K plan.

Question: Must Company C's plan be aggregated with the Company A and B plan

for ADP and 401(a) testing in 2012? In 2013 and beyond?

If so, any suggested solutions? Participation in Co A (30 EE) is good, Co B (80 EE)

and Co C is very weak. We are afraid aggregation will hurt our testing.

I was reminded of an incident some thirty-five years ago where an actuarial student confronted with doing a benefit calculation for a salaried union employee asked how to determine the hourly rate. I advised to look to the plan document and if silent, look to past benefit calculations for a precedent, and if there were none, we would contact the Plan Administrator about adopting an administrative procedure or amending the plan. Meanwhile, I advised, simply divide the annual pay by the total number of hours.

The actuarial student returned a bit later and had taken the annual pay and divided it by 365 and then by 24 hours. "How many union employees do you know," I asked, "who work 24 hours a day year round?" The student replied, "I don't know any union employees." Shortly thereafter the student left the profession to pursue other interests.

Let's say you pair a 403(b) Plan with a 401k covering just the HCE's. Let's say there are two HCE's, one of whom is an office making more than the officer threshhold, and is therefore a key-employee.

Assume further that more than 60% of the assets in the 401k plan are allocated to the key employee. Is there any opportunity to aggregate the 401k and the 403b?

I attended the advanced pension conference in Chicago and learned during one of the sessions that a plan that holds certain unusual assets, such as collectibles, cannot file a 5500-SF, but must file a Form 5500 instead.

Does this apply to a plan that files a 5500-EZ?

Thank you.

Large non-profit selected a corporate trustee for their 401(k) plan at a time when the plan was bundled with the trustee's record keeping and compliance services. In 2008, they unbundled it, moving to a different TPA, but retaining the record keeping services of this provider. In early 2010 the restated document, drafted by the new TPA, was signed by the plan sponsor and sent to the trustee for signature.

Fast forward to this year. Plan sponsor decides to amend the plan, signs the amendment and forwards that to the trustee to sign. At that point it is discovered that the trustee never signed the restated document due to objections to some of the language. Both the TPA and the record keeper have had changes in personnel, making it difficult to determine exactly what happened (or didn't) in 2010. I work for the TPA and have been able to locate the message sending the document to the trustee, but nothing after that.

Can a restated document that was signed by the employer but never signed by the trustee be considered a timely restatement? Are there any possibilities for a self-correction at this point?

EBSA audit happened in 2011. EBSA only asked for 3 years of late contributions but there were 5 additional years going back of delinquent employee contributions which were disclosed in Schedule H, as well as completely disclosed upon EBSA audit. EBSA auditor did not enforce the additional 5 years. Plan Sponsor repaid lost earnings and plan received a closing letter with no further enforcement.

For 2011 Form 5500, I realize you will have to report all 8 years of delinquent contributions but you get to attach a schedule that shows at least 3 years were corrected (outside of VFCP).

Does the 5 years of delinquent contributions have to continue to be reported as uncorrected in 2011 and beyond, until you actually correct it? That seems like a harsh result if even EBSA doesn't enforce this in an actual audit of a plan. Are there any statute of limitations issues? Some input on this would be appreciated. Thank you.

BL

A plan was submitted for a favorable determination letter (not part of a VCP submission). The reviewing agent discovered that an interim amendment was missing from the submission and suggested that we would have to go to closing agreement if the amendment is not located. I believe the "fee" for the failure to adopt this interim amendment (which for the record is literally a 4 sentence amendment) would be based on Section 14.04 of Rev. Proc 2008-50. Has anyone ever been through this before? Are they really going to impose this ridiculously high fee or are they generally willing to negotiate based on mitigating factors?

Is it even possible? Would it even be a program governed by ERISA? I understand there are potential tax issues, but I'm trying to figure this all out (seems a little odd to me, but an employer wanted to know the pros/cons, but I can't seem to find much out there on this topic...)

Let's say an employer mails an automatic rollover notice by first class mail to a participant's last known address. The notice is not returned. Can the employer safely assume the employee is non-responsive, and therefore, rollover the benefit to an IRA? Or, should the employer take additional steps ("due dilligence") to prove that the participant received the notice?

If additional steps must be taken to prove that a participant is NOT lost, what would you suggest? Certified Mail would provide proof only if you can confirm that the Participant signed the receipt. What if the Participant refuses to sign the receipt; how do you document that? Should you use a locator service to confirm you wrote to the correct address?

I would suggest that due dilligence follow-up is required only if there evidence that the Participant is lost. That is, only if a first class letter is returned.

Thanks

There is pension code of 2T in the List of Plan Characteristics. The instructions state to use this code if the plan is a total or partial participant-directed plan that uses a default investment account for participants who fail to direct assets in their account. My question is this: Do you only use code 2T if it is a qualified default investment alternative where the employer must provide notice to participants?

Thank you,

Annette Leerhoff

I think I know the answer. But I hope I am missing something. 401(k) Plan was "cancelled last summer. The last money was rolled to an IRA on 2-3-12.

Is there any way to start a Safe Harbor 401(k) prior to 2-4-13?

We already know that non-U.S. property should not be in the profit sharing plan and we know it needs to come out. Of course, the plan could sell the property to someone who is not a party-in-interest at market value, which would avoid the prohibited transaction penalty. However, if there isn't a buyer, we're thinking that another option might be to distribute the property to the participant (he is over age 70 1/2) and have him pay income tax on the full value as another option to avoid a P.T. Has anybody run into this before?

Pardon my ignorance, as I'm not a DB person. I'm trying find if there is a relatively straight answer (hah!) to this:

For plan terminations, one would normally use 417 rates, yes? If so, under MAP-21, must you still use 417 rates, or are you allowed to use the "annuity substitution" rates, and therefore possibly reduce the lump-sum payout? I'm under the impression that it is the former rather than the latter.

Thanks!

P.S. - as I look over my question, I think perhaps there is a defference for plan terminations and for normal plan FUNDING. So, for example, when calculating funding for lump sums for a non-terminating plan, you can use annuity substitution rates, even though the lump sum benefit itself does not change? Maybe I'm just confusing the issue more...

I know this discussion has come up on the Boards before, but I cannot seem to find it.

A DB plan has a participant who will need to take an RMD by April 2013. We have contacted the participant but he absolutely refuses to cooperate with the plan. He will not complete paperwork or return calls.

Before wasting half the day researching this, can anyone give me a push in the right direction? How should this be handled by the plan?

Thanks in advance.

I know the DOL's rules on deposit timing and the safe harbor, etc. What are the ramifications / issues if the employer deposits the 401(k) contributions before the actual pay date for the employees?