John gets paid $3,000 in gross wages on a bi-weekly basis. He has a 5% deferral election, in which case $150 is contributed to his 401(k) every pay period.

John's employer has a restricted stock program. The stock will vest on 11/1, and the value will be reported on John's first paycheck on November - and then subsequently reported on the W-2 at the end of the year.

The 401(k) plan uses W-2 as the definition of pay - in which case restricted stock is counted as plan compensation. And the plan does not exclude anything from the compensation used to calculate deferrals. Therefore, the 5% election for the first paycheck in November must be applied to the gross comp for that pay-period, which will include the value of the restricted stock.

If the value of the stock is $15,000 - then you take 5% x $18,000 to come up with a 401(k) deduction $900. So John's paycheck is going to be a little less this pay period.

But what if the value of the stock is $120,000? 5% of $123,000 is $6,150. What do you in that situation? Take out any other pre-tax deductions and then put the rest into the 401(k) plan? So John wouldn't get a paycheck for this pay period? Do you have to take out the rest on the next paycheck? or the paycheck after that?

We'll assume the employer doesn't want to amend their plan to exclude this pay from the calculation of deferrals.

When a DB plan terminates, participants are offerred lump sum, which has always been an option.

If they choose another form as allowed in the plan, i.e. J&S or Life with 10 yrs guaranteed, and are still employed, do they have to have the lump sum option still available to them in the future? Any difference if they have terminated employment? Or are working past NRD?

Hi - Now that we've made it past the August 30, 2012 deadline, what is the due date for the next annual report under the 404(a)-5 Regs? Thanks

Can an employer have a Safe Harbor POP and an HSA? Would it depend on if an employer helps fund the HSA?

Thanks for any advice!

Michele

Here's the situation:

husband owns 100% of his company with existing qualified 401k SH 3%/PS plan and 2 NHCE non key employees

wife starts new company has one NHCE non key

Wife and any of her employees (as they become eligible) will all participate in husband's existing plan.

Companies are completely different types of businesses and they do NOT share NHCE employees.

Both husband and wife have self-employment income only each from their respective business.

For Sch C purposes for the NHCE $$ deduction, does each of them deduct only the portion of the contribution that goes to their NHCE(s)?

Does it matter as long as no NHCE contribution is deducted more than once?

Situation - employer has safe harbor nonelective 3% formula, with a discretionary PS contribution, currently allocated on a proportional basis. Wants to amend, for 2012, to a rate group tested allocation.

I know the IRS has taken a rather (in my opinion) asinine view of this at some past ASPPA conferences, essentially opining that mid-year amendments aren't permissible, other than those already specifically granted, for example, in IRS Announcement 2007-59.

While I won't bore you with why I think they are being unreasonable on this, I just wondered if anyone actually heard the 2011 discussion from the podium? If so, did they just reiterate their tired old "logic" as to why mid-year amendments aren't permissible, or did they provide any substantive discussion?

To use an extreme example, if the plan currently excludes fork lift operators, and they want to amend to include fork lift operators, they should be able to do so. And amending the PS allocation method shouldn't matter, as they will get their safe harbor nonelective 3% regardless. (I could perhaps see a convoluted devil's advocate argument for safe harbor matching issues)

Thanks.

I mostly post in the 401k voard. Not sure if this is the right board but I'm trying to findout if there is a text book regarding the long term disability insurance claims process, such as information on important case law and regulations. In 401k world we have Erica outline book, which codifies almost everything you would want to know... Anything like that for lt disability?

Does anyone know where I can find some sample language to "disengage" from a client who consistently won't provide requested information or make plan corrections based on our recommendations? Thanks.

Just taken over a sole participant (owner-only) DB plan. The plan has NRA of 62 years.

As at 1/1/2012, participant's AA was 61 years and years of service as participant were 9.

While going through the plan documents I noticed that the accrued benefit formula was as follows:

100% of average compensation * completed YOS as a participant/YOS as a participant at NRA

In this case participant's YOS at NRA would be 10.

Does this satisfy the 401(a)(4) safe harbor section?? Most other plans I have seen (in my limited DB plan exposure) have had a denominator of atleast 25. Or since this is a owner-only plan it can get away with this benefit formula??

Thanks for your help in advance!!

Just curious as to whether clients are looking at the fee disclosures and are they taking action?

In 2010, a plan sponsor missed a regular deposit of $1,700. This oversight was discovered nine months later (before end of plan year). At that point, it was immediately deposited; and lost earnings of $50 were calculated and deposited.

Sponsor recently received a letter from EBSA stating that the situation needs to be corrected. VFCP was recommended. Is VFCP required in this case?

Can a particpant take a loan, and suspend making loan payment while currently on a leave of absence?

The regualtions and plan loan policy address if the participant were to go on a leave of absence and have a loan for suspending loan payments. But, is it different if the particpant is currently on a leave of absence, wants to take a loan out, and suspend payments?

Thanks in advance for all you input on this issue.

The participant was divorced over 10 years ago. At that time the Separation Agreement stated that spouse was to get 50% of 401(k) balance (total balance was about $6,000 at time of divorce). Participant did not present a QDRO, and because he was still working, he did not qualify for a regular distribution at the time of the divorce (loans were not permitted at that time, but are now). Participant paid the ex-spouse $3,000 using non-plan assets and she signed a statement (not notarized and not dated) that he paid her in accordance with the Separation Agreement. Now participant is applying for a plan loan. The account has about $150,000 now and participant wants to borrow $50,000. As plan administrator, we think that the outstanding award in the old Settlement Agreement prevents us from making a loan. We think that the "release" by the ex-spouse is not valid (and wouldn't be even if it had been notarized and dated) and that the only way to validly make the loan would be for the participant to get a revised Separation Agreement that states that the ex-spouse has no rights in any amounts in the participant's 401(k) plan. HOWEVER, since the amount that was due to the ex-spouse was $3,000 and since even if the requested loan were made the account would still have about $100,000, we think that we can make the $50,000 loan but tell the participant that the $3,000 in question can't be loaned or distributed to him in the future until he gets a revised court-approved Settlement Agreement clearly stating that ex-spouse has no rights to the 401(k) plan. To complicate matters, the participant has no contact with the ex-spouse and doesn't know where she is, so it would be difficult to get her consent to a revised Settlement Agreement -- not to mention attorney fees for getting a revised Settlement Agreement. --- So the main question is whether an old Separation Agreement "hanging out there" awarding an ex-spouse part of the 401(k) account makes it impossible for the participant to get a subsequent loan or distribution.

A few years back, sometime from 2004 to maybe 2009, there was a case where a plan - and I believe it was a multiemployer plan - had a COB provision that provided the plan would be secondary for claims in excess of $1,000 if the participant was also covered under another plan. I believe the case was in Minn. or Michigan, but I'm not sure of that.

Does anyone by chance know the name of that case?

for profit hospital is a wholly owned subsidiary of a non-profit health system. Employees transfer employment from the subsidiary to the parent. On its face it seems to me that this is a controlled group and as such no severance of employment entitling the participants to distributions. Am I missing something?

Any cites and guidance will be appreciated.

Participant was incapacitated and had a POA. The POA signed the distribution request form for a lump sum. Distribution transaction took place, but unfortunately by the time the check was received the participant had passed away.

Since the POA's rights end when the person is deceased they are wondering if anything can be done with the check, or should it be cancelled and wait until the death certificate is issued? Not sure if it matters, but the POA is also named as the personal representative and 100% beneficiary in the will.

A C Corp is owned equally by 3 people. 1 of the owners works for the C Corp as a W2 employee and is the only employee. Can just the W2 employed owner participate in a 401k plan or must all owners participate?

Also, do all owners have to participate in the profit sharing or can the W2 employed owner be the only owner receiving profit sharing either through a 401k or as a corporation election? Would a regular 401K or a Solo 401k be the best fit in this situation?

an employer has 2 401k plans.

one plan is deferrals only

the other plan includes the key employees, is TH and provides 3% non elective safe harbor

both plans pass discrimination on their own.

so no TH in deferral only plan.

they are thinking of adding a DB plan and testing it with 401k safe harbor plan.

they need to include a couple of people from deferral only 401k plan in DB plan to pass minimum participation.

So questions is:

any problem with a participant in the 401k deferral only plan also participating in safe harbor 401k plan?

the person would be subject to the deferral limit of 17k in total of course and perhaps make deferrals in one plan and receive employer allocations only in other plan.

so, such a person would be in both 401k plans and the db plan, but the safe harbor 401k plan and DB plans combined do not need 401k deferral plan to pass non discrimination.

thanks

After a diligent search, I cannot find any references that an ERPA can represent the plan sponsor (as an example) to the DOL. So that is my question, is the designation recognized by, and have the same weight with, both agencies? Primarily interested in 5500 filing for DC plans only--where the ERPA would be authorized to sign / file the 5500.

Thank you.

Has anybody addressed how to proceed as an employer when an employee's HSA account has been closed by the trustee because of unpaid fees on the account? The trustee (bank) refuses to re-open the account because it has had too many problems with this employee. Any thoughts? Encourage the employee to open a new HSA elsewhere? Have the employee prospectively change his HSA election as there is no account in which to place salary reductions? The employee is due to receive an employer contribution to the HSA in October, but if there is no HSA, there can be no contribution. Thanks for your comments.