A governmental Plan requires employee contributions. When the participant terminates he/she receives the larger of the Plan Benefit and the Employee Contributions (accumulated with 2% interest). In general, the longer service participants always get paid out the Plan Benefit, since that lump sum is much larger.

My questions is about the taxes on the cash distributions. Let's say the accumulated employee contributions are $30,000. The lump sum of the Plan benefit turns out to be $100,000. And the employee had made $20,000 in employee contributions during his tenure.

The payout amount is the $100,000. If the participant takes a cash distribution is the full $100,000 subject the 20% mandatory withholding? Or is it only $80,000? Taking into account his $20,000 in after-tax contributions.

Prospect who currently has an ERISA 403b and they want to change to a 401k. When/if they terminate the 403b, do they have to allow participants the option to take a lump sum distribution? They want everyone to rollover to the new 401k.

Thanks!

We have a client who was part of a franchise and owned 3 companies in that franchise. First, the client sold one of the companies. As they were still a franchise, this plan became a closed MEP. Now, the client and the other owner have left the franchise which means we have an Open MEP. The problem is the client who owns 2 out of the 3 companies, does not wish to sponsor and Open MEP and is kicking the other owner out of the plan. This is effective 5/1/12. The client didn't tell us until now, so the company being kicked out of the plan is still deferring (only the owner makes deferrals). We have spoken with him, and he does not want to create a spin-off plan. We need to go back to him wit instructions on what his options are, but everything we have looked at only talks about ceating a spin-off, creating a MEP, etc. Nothing talks about when the client DOESN'T want to do any of those things.

My thought is that he needs to have his deferrals refunded to him as of 5/1/12, sign a resolution ceasing participation in the plan, and that's it. Does anyone have an opinion and/or a source for that opinion I could use with this client? He isn't going to be happy when we tell him he has to get all of his money back.

Can you tell me if a participant returns from Military leave and wants to make up a missed contribution for a prior tax year, does the participant have to amend that prior year's tax return or does the participant just claim it on the current year's tax form?

Can you provide me with the Regulations that provides this information? Thanks.

I know this has been discussed before. But I am wondering if there is anything new. There is a mortgage and we are being told there is no unrelated business taxable income and no return needs to be filed.

I thought that if there was any debt that a UBTI return had to be filed and often there were taxes due.

What do you all think?

The regulations state that the most valuable accrual rate should be based on the increase in the participant's most valuable optional form of benefit, and further, that the most valuable optional form is determined by calculating the normalized QJSA associated with the accrued benefit. (1.401(a)(4)-3(d)(1)(ii))

Does anyone believe that a lump sum would be the most valuable optional form of benefit if a plan offers a lump sum as an optional form of benefit?

The difference in the most valuable accrual rate is substantial.

Thanks.

My ex-husband who is 56 has NOT commenced early retirement benefits even though he is not expected to live more than 1-2 years. He most certainly will NOT live to be 65. I have a QDRO which states, "If the plan participant should die before either party has commenced benefits under the Plan, the Alternate Payee (me) shall be entitled ONLY to any preretirement survivor benefits under the plan attributable to the awarded benefit share as would be determined at the time of the Participant's death." The QDRO people at Boeing can't advise me and told me that the survivor benefits people probably won't even talk to me without my ex-husband's consent! I don't know what to do. Is it in my best interest to commence benefits for myself now while my ex is still alive, even though benefits will be at a lower rate, or should I wait until he dies and just claim the preretirement survivor benefit? The word "only" sounds rather ominous to me, and it would be very helpful to know which amount is generally greater so I can make a better-informed decision! Does anybody know? Thank you in advance!

SOB Notices have not been provided for participants in the plan I'm reviewing. However, the plan doc states that for those employed after their NRD (age 65), either thru continuing service or being rehired, they get the greater of the following benefits:

1) - AE of AB at NRD

2) - AB at any previous termination on or after NRD

3) - AB based on service and pay at actual retirement

I have a couple of questions:

A - Does the inclusion of 1) above preclude the need for a SOB notice?

B - If the answer to A is yes, is it still good practice to issue the SOB Notice just to clarify that the pension cannot commence until after retirement?

C - If the answer to A is no, do I have to incorporate any additional comparison in my calculation of benefits at retirement? I have seen reference in various places of different calculations, such as:

I - a ratcheted/ladder calculation where a benefit is calculated at the end of each year prior to retirement, and the AB at EOY is compared to the AE of the AB at the end of the prior year, with the greater 1 moving forward.

II - actuarially increased age 65 benefit + post 65 accruals

III - actuarially increased age 65 offset by post 65 accruals.

My thinking is that this client is OK in that it provides for the comparison of benefits in the plan provisions, but that they still may want to start issuing SOB notices.

I welcome any thoughts...

Does anyone know of an actuarial firm that specializes in small Governmental DB plans

Up here in the Arctic, we escaped all but some moderate rain and a bit of wind. Minor inconveniences. For all of you and your families and friends who are affected, my best wishes for whatever you will need to overcome. Hang in there.

Scenario: For qualified medical (and dental and vision, but let's focus on medical) coverage that is part of Cafeteria plan, when there is a midyear election change event, coverage change effective date is first of the month following the event or notification of the event within 30-day window, whichever is later. Exceptions, of course, for birth and adoption.

If the midyear election change event results in end of coverage, the end date is the last day of the month in which the event occurred.

What are the best practices for beginning and ending corresponding payroll deductions? Pay cycle is biweekly, and different populations have alternating biweekly cycle.

Option 1.

--For new or change coverage, begin deduction or change deduction effective with the pay period in which the effective date (beginning of the month) falls, or the first pay period that is administratively feasible thereafter.

--For terminating coverage, stop deduction effective after the pay period in which the effective date of the termination (end of month) falls.

What other options? How do you handle this? Thanks!

Where I work we have an FSA Plan. I used to receive my reimbursement checks within a week or two. Lately, I have to practically beg to get reimbursed after two or more months. What is the maximum period of time between submission and and reimbursed allowed in the regulations? Thanks.

Have a plan that covers ONLY Union Employees. It just so happens that all the full-time employees of this organization happen to be hihgly paid skilled professionals, and they get quite a generous contribution and make a decent salary; some earn more than the $115,000.

Is there some sort of a piercing of the coverage exemption? There is no plan covering the part-time staff. To make this really controversial, let's assume they work 1,100 hours a year and make up 40% of the workforce, and average benefits would never pass...

Of course, the union covers the "trades people" - coverage in the union is not based on how many hours you work.

I have a situation where a TPA failed to timely inform a surviving spouse of rights under a tax-exempt employer's plan to elect a form of benefit other than the default and to defer commencement of distributions. The benefits have not commmenced, but the period for where elections can be made has expired.

Would a plan amendment to adjust the election timing to permit the spouse to make the elections would be respected by the IRS? Seems if the spouse is permitted to make the election notwithstanding the plan terms, 457(f) would slam down on the plan. Thanks for any thoughts on self-correcting!

well, next week I'm off to

"confer, converse, and otherwise hob-nob with my brother wizards."

well, ok most of them are wizards at what they do, I'm still trying to learn. Hope to see some of you there.

Does anyone know what happens if the IRS or Post Office lost an ERPA renewal form and check? If it was supposed to be renewed by June 2012 and wasn't, what happens then?

Unfortunate situation. A small non-profit ran into major financial problems last year. Everyone was let go. The exec director was the last one left. He was in the process of "turning out the lights" when he passed away earlier this summer. He managed to pay everyone out of the plan except one person.

I've tried everything to contact someone to see who can close this out. No one answers the phone there. A few other numbers I've called result in un-retuned messages or "don't know what you are talking about" replies. The few people I have reached with some knowledge of the matter have nothing to do with it, do not want anything to do with it, and have no idea who I could contact.

They missed their 10/15/2012 5500 deadline as well.

Any ideas on how to proceed are appreciated. I know very little of the DOL orphan plan program. Is that something I could/should initiate? Keep in mind that the 1 individual left in the plan has around $11,000. If this is an orphan plan, will the DOL take any fees out of this individuals account to pay for all remaining plan fees and will those fees be steep? If so, I feel bad for this guy, who would have to have his account decreased simply because he is the last man left.

Thanks

If a MEP is formed with two employers where there is common ownership between the two companies but not enough to constitute a controlled group, are discrimination testing & top heavy determination performed separately for each employer? I know recent DOL guidance ruled that this type of an arrangement would not be considered an open MEP and, therefore, should be treated as a single plan. Is the DOL referring to filing a single Form 5500 as a multiple employer plan or also testing as a single plan?

I'm seeking guidance on the design of an FSA plan where the employer's only medical plan is a QHDHP. I know that a Limited Purpose plan can be designed, and I know that a Post Deductible plan can be used, and I also know that a combination of the two is possible. I further know that an employer can write an FSA plan to specify what items under 213 (d) are eligible expenses.

What I want to know is if an employer can write a combination plan that reimburses HDHP eligible expenses post deductible as well as a Limited Purpose plan that covers all 213 (d) expenses except those covered under the employer's QHDHP plan

Can anyone provide clarification?

Does anyone know of any good checklists or articles that summarize all compliance considerations for terminating plan? I am working on 401K plan terminations (when we acquire a company, we terminate their plan and allow them to rollover to our plan). Thanks for any advice!