assuming my spreadsheet is correct

based on the code and regulations (and the CPI-U factor released today) next year's limits should be:

deferral 17,500

compensation 255,000

Annual addition 51,000

DB limit 205,000

no change to catch up, key, HCE

A plan was originally designed years ago with a 5-year cliff schedule and a 3-year cliff for top heavy years. When the plan was restated for EGTRRA in 2010 the vesting provisions were changed to say that a participant's interest will vest according to a 2/20 schedule, but for amounts contributed prior to 2007 the original cliff schedules would apply, specifically stating that the 3-year cliff schedule would apply for top heavy years prior to 2007. The plan actually operated liked this beginning with the 2007 plan year, although the doc wasn't amended until the EGTRRA restatement (the TPA said an amendment wasn't needed at the time and it was OK to wait until the restatement). The plan first became top heavy in 2011.

There's a participant who terminated in 2008 with a very large account balance, the great majority of which was allocated to him prior to 2007. At the end of 2006, he only had 3 years of service and his entire balance was 0% vested under the old schedule. The small contribution he received in 2007 was vested under the 2/20 schedule and when he terminated in early 2008 he had a total of 4 years of service. From 2007 through 2010 he was shown being 0% vested in the large pre-2007 amount and 40% vested in the tiny 2007 amount. Now that the plan became top heavy in 2011, I am wondering if the vesting language, which is literally written as simply as I've described above, is adequate and whether it would be correct to still consider the pre-2007 amounts 0% vested? All help is greatly appreciated.

Anybody know if/why Relius Web Client fell off the face of the earth today? Nothing I have published showed up on Web Client. No response to incident submission from RA.

There was a recent NAPA article ( http://www.napa-net.org/news/managing-a-pr...r-opener-ever/) which cited big names such as Brian Graff, James Holland, Bruce Ashton, Dallas Salisbury, etc. The idea is that an online retail portal called Savernation would convert cash back rebate on purchases to pre-tax 401(k) or IRA contributions.

Anyone heard of this concept or know how this works? Thanks.

The required audit for a large 5500 filing will not be completed on time (due today). I just wanted to get some opinions. The way I see it, the client has two options; I’m just not sure which is the lesser of two evils:

1. File the 5500 today without the audit and then follow-up with an amended return with the audit in a few days. Keep fingers crossed that IRS and/or DOL will not hit them with penalties.

2. Don't file anything today, and then file the 5500 with the audit under the DFVCP in a few days. Besides the $2000 up front cost for the DFVCP filing fee, is there any addtional exposure under this option?

Any thoughts are appreciated.

My firm was recently retained to make a number of filings under the DFVCP for a new client. They should have filed various benefits (including health, dental, LTD, etc.) over the past 10+ years, but did not. We have been unable to obtain the required 5500 information to make complete DFVCP filings for some of the prior years. For example, for the health plan, the insurance company was able to provide the Schedule A information as far back as 2005, but not for years 2002-2004 (and it does appear that the client was required to file for those years).

For those years (and other years in which we are unable to obtain all of the 5500 information), what's the best course of action? I would think that it is best to go ahead and file and indicate in a cover letter or otherwise that certain information could not be obtained, but haven't seen any guidance on the topic. Any thoughts?

thanks in advance.

Plan currently has 2 groups of employees who are eligible to defer but NOT eligible for the match. They are not passing the ratio coverage test. Of course we can run average benefits testing, but that is challenging as well.

One of the options we are considering is adding an after-tax feature and making all employees eligible for after-tax. This would solve the ratio problem. But, would the plan then need to run a BRF Test? Our thought is yes, since you have 2 groups of employees receiving a 0 benefit, and the rest receiving a match.

Thoughts?

The employer has non-U.S. citizens with Social Security #'s - provided the plan doesn't exclude non-U.S. citizens - any issue with them participating? haven't run across this question before so I though I'd post in addition to research - any thoughts or observations on the issue would be appreciated... Thanks

My ultimate question is: how long does an employer/self-funded group health plan have to retain documents for the CMS Medicare Data Match Program (to determine Medicare Secondary Payer status)?

I found numerous articles online saying that CMS requires a 5 year - and recommends a 10 year - document retention period. The only agency/legal resource I found that discusses the requirement appears to apply to insurers, not employers/self-funded group health plan sponsors (at the link below).

http://www.cms.gov/Medicare/Coordination-o...ement082808.pdf

Can anyone direct me to a agency/legal resource discussing Medicare's Data Match Program document retention requirements as applied to an employer/self-funded group health plan sponsor?

The requirement that an individual own at least 5% of a corporation or partnership, for that entity’s interest to be proportionally attributed to the individual, seems to be different depending on whether the attribution is from a corporation or partnership.

Specifically, Treas. Regulation Sections 1.1563-3(b)(2) and 1.414©-4(b)(2) both contain illustrations in which a partner with a 4% direct interest in a partnership is excluded from attribution. No mention is made of other forms of attribution – such as family attribution – increasing the 4% partnership interest up to or past the 5% threshold.

By contrast, Treas. Regulation Sections 1.1563-3(b)(4) and 1.414©-4(b)(4) contain illustrations in which attribution from a spouse of a 1% additional interest in a corporation increases the 4% partner up to the 5% threshold such that the partner is attributed with a proportionate share of the corporation’s ownership interest in another entity. I have copied the Section 414 regulations below for convenient reference.

Does this mean that an individual who is a <5% partner is not attributed with a proportionate share of the partnership's in another entity - period, full-stop, even if, under family attribution rules, the <5% partner's interest would exceed the 5% threshold?

But if the entity were a corporation, attribution from the family members would apply, such that the individual whose direct ownership stake is <5% would be attributed with his proportionate share (including through attribution) of the corporation’s ownership stake in another entity?

Sec. 1.414©-4 Rules for determining ownership.

(a) In general.

In determining the ownership of an interest in an organization for purposes of section 1.414©-2 and section 1.414©-3, the constructive ownership rules of paragraph (b) of this section shall apply, subject to the operating rules contained in paragraph ©. For purposes of this section the term "interest" means: in the case of a corporation, stock; in the case of a trust or estate, an actuarial interest; in the case of a partnership, an interest in the profits or capital; and in the case of a sole proprietorship, the proprietorship.

(b) Constructive ownership--

(1) Options.

If a person has an option to acquire any outstanding interest in an organization, such interest shall be considered as owned by such person. For this purpose, an option to acquire an option, and each one of a series of such options shall be considered as an option to acquire such interest.

(2) Attribution from partnerships--

(i) General. An interest owned, directly or indirectly, by or for a partnership shall be considered as owned by any partner having an interest of 5 percent or more in either the profits or capital of the partnership in proportion to such partner's interest in the profits or capital, whichever such proportion is greater.

(ii) Example. The provisions of paragraph (b)(2)(i) of this section may be illustrated by the following example:

Example. A, B, and C, unrelated individuals, are partners in the ABC Partnership. The partners' interest in the capital and profits of ABC are as follows:

(In percent)

Partner Capital Profits

A 36 25

B 60 71

C 4 4

The ABC Partnership owns the entire outstanding stock (100 shares) of X Corporation. Under paragraph (b)(2)(i) of this section, A is considered to own the stock of X owned by the partnership in proportion to his interest in capital (36 percent) or profits (25 percent), whichever such proportion is greater. Therefore, A is considered to own 36 shares of X stock. Since B has a greater interest in the profits of the partnership than in the capital, B is considered to own X stock in proportion to his interest in such profits. Therefore, B is considered to own 71 shares of X stock. Since C does not have an interest of 5 percent or more in either the capital or profits of ABC, he is not considered to own any shares of X stock.

(3) Attribution from estates and trusts—[….]

(4) Attribution from corporations--

(i) General. An interest owned, directly or indirectly, by or for a corporation shall be considered as owned by any person who owns (directly and, in the case of a parent-subsidiary group of trades or businesses under common control, with the application of paragraph (b)(1) of this section, or in the case of a brother-sister group of trades or business under common control, with the application of this section), 5 percent or more in value of the stock in that proportion which the value of the stock which such person so owns bears to the total value of all the stock in such corporation.

(ii) Example. The provisions of paragraph (b)(4)(i) of this section may be illustrated by the following example:

Example. B, an individual, owns 60 of the 100 shares of the only class of outstanding stock of corporation P. C, an individual, owns 4 shares of the P stock, and corporation X owns 36 shares of the P stock. Corporation P owns, directly and indirectly, 50 shares of the stock of corporation S. Under this subparagraph, B is considered to own 30 shares of the S stock (60/100 x 50), and X is considered to own 18 shares of S stock (36/100 x 50). Since C does not own 5 percent or more in the value of P stock, he is not considered as owning any of the S stock owned by P. If in this example, C's wife had owned directly 1 share of the P stock, C and his wife would each be considered as owning 5 shares of the P stock, and therefore C and his wife would be considered as owning 2.5 shares of the S stock (5/100 x 50).

I'd love to hear some thoughts on this situation involving an employer-funded 403(b) plan in a multi-vendor environment.

Participant wants to transfer assets from his retirement plan account with Vendor A into his retirement plan account with Vendor B. When completing the transfer form he inexplicably includes his retail IRA account number with Vendor B. Vendor A receives the transfer form and processes it as a transfer, BUT includes the retail IRA account number on the check.

Vendor B receives the check, sees the retail account number, routes it to their IRA department, and deposits it to the Participant's retail IRA. This is not discovered for almost 11 months, well into the next plan year. By the way, Participant is actively employed and ineligible for any kind of in-service distribution.

We know that the transferred amount needs to come out of the IRA and back to the Plan. We believe that the earnings must also come out of the IRA and into the Plan. Question--how to treat the earnings on the impermissible deposit? Are they transferred tax-deferred into the Plan? Or do they come out as taxable income to the Participant, generate a 1099, then go into the Plan as post-tax money? (The Plan does not currently provide for post-tax sources.) Vendor B and the Plan Administrator disagree.

An employer offers an opt-out payment to employees who opt-out of medical coverage and provide evidence of other coverage. Can the employer make the opt-out payment to an employee who opts out of coverage because he or she is enrolled in Medicaid?

Hi,

We have a plan that does not pass the ratio test for match & prrofit sharing so need to go to average benefits testing. Also needs general testing since profit sharing is a service based allocation.

Can the average benefits portion be run on an accural basis to use lower thresholds? Then run the General Test on an allocation basis. Then General can't be run on an accural basis since it does not pass gateway.

The owner of a small business dies in 2012 before making the non-elective 3% safe harbor contribution for 2011 and 2012. His business was sold to a larger company after death. He was sole Trustee of the Plan, sole owner and President of the corporation, but his wife was an officer (Secretary/Treasurer) of the small corporation. We are trying to explain to her why she needs to make the 2011 and 2012 safe harbor contributions to the employees. I've asked the question as to whether the sale was an asset sale or stock sale and for copies of documentation so we can determine if the larger purchasing corporation has any liability, but I doubt they would take on that liability (I know their attorney - not in his nature).

It is my position that the safe harbor contribution is a liability of the corporation and should be paid out of the proceeds of the sale (she says it went to pay bills, there's nothing left). I further believe that as an officer of the corporation she could have some personal liability for the contribution.

My qusetions are: (1) is anyone aware of any way the corporation can get out of the safe harbor contribution due to the death of a principal? (2) is a corporate officer who is not Trustee have any personal liability to the plan or its participants for a safe harbor contribution not made?

Am I missing something here?

Thanks!!

My client is considering amending their plan document for 2013 to add a traditional safe harbor match. However, they were recently acquired and there is a chance that the plan will be merged (not terminated) into the parent plan.

1. Would they have to amend the plan to remove the safe harbor feature before merging if the parent company is not safe harbor?

2. Does a plan merger constitute a short plan year (so that they wouldn’t have to test)?

Can an elective deferral to a NQP with a valid payment term be respected with respect to future salary above a specified level to which an employee presently has no LBR?

Health Clinic Employer with 500+ employees: They have a self-funded dental/vision plan. They allow physicians/MDs to enroll after 30 days while all other employees wait 90 days. Benefits are identical... only the entry date is earlier. Concerned that this is discriminatory under 105. Correct?

They also have fully insured plans with the same structure, but these would be exempt because they are fully insured, correct?

Thanks

Happy 10/11/12

(and yes, if you missed it, there's another one next month)

Good afternoon, everyone

Hopefully an easy question: we'd like to VFCP a plan for delinquent contributions. Section 5(b)(5)(ii) says that Lost Earnings SHALL (emphasis mine) be calculated by the IRC 6621 underpayment rate, etc., etc.

However, the DOL says the following on their website (http://www.dol.gov/ebsa/faqs/faq_vfcp2.html):

In order to correct under the program, you will need to calculate the lost earnings on the delinquent contributions. For purposes of correction under the program, the rate of return to use is the highest of:

The rate of return of the plan for non-participant directed plans or of individual participant accounts

Restoration of profits (as defined under the program)

The Internal Revenue Code §6621 rate. How to calculate each of those amounts is demonstrated in the questions and answers below

However, I have to think that the actual reference to this has to be in the VCFP procedure (Federal Register Vol. 71, No. 75, April 19, 2006). I can't find it anywhere. The word "highest" doesn't even appear in the procedure, and the word "higher" is only in the context of transactions that aren't ours, and still referencing the 5(b)(5) calculation. Can anyone point me to a point in the procedure where it says we can choose between the IRS rates via the VFCP calculator, or our plan's highest rate? I realize it's usually advantageous to use the IRS rate, it being lower, but not always, such as in the case of losses.

Any help would be greatly appreciated. Thank you!

Is auto enrollment permitted for a governmental 401(a) plan?

Thanks.