A Plan Sponsor has a DB Plan and DC Plan. The DB Plan terminated 12/31/2009. Because they chose to wait for the issuance of a Determination Letter the assets were not distributed completely from the DB Plan until midway through 2011.

The Determination Date for determining whether the DC Plan is top heavy for 2011 is 12/31/2010. Do the DB plan assets/benefits still need to be taken into account in determining the top heavy status (i.e. the two plans are aggregated?). Or is the DC Plan tested on its own since the DB Plan terminated in a prior year?

In the past, it seemed that the IRS was fairly reasonable about allowing MINOR modifications to a VS without requiring a determination letter filing. However, under Revenue Procedure 2011-49, a literal reading of the Revenue Procedure doesn’t provide any wiggle room on this subject. In fact, they specifically removed a provision from prior Revenue Procedures that, reasonably, allowed correction of “obvious and unambiguous” typographical errors and/or cross-references. Now, if you lose reliance over fixing a typo, or a reference to the top-heavy provisions in article “x” – when in fact article “x” is for minimum distributions and article “b” is the top-heavy article, then more substantive modifications seem risky.

Anyone had any conversations with the IRS on this whole issue, or heard anything at conferences, etc.? Whether the IRS truly intends to enforce this I can’t say.

But it looks like you could file minor modifications on a 5307, as per the following.

See following excerpt from Revenue Procedure 2012-6.

Modifications to Revenue Procedure 2011-49

.02 Rev. Proc. 2011-49 is hereby modified as follows with respect to determination letter applications filed on or after May 1, 2012:

1. An adopting employer of an M&P plan (whether standardized or nonstandardized) may not apply for a determination letter for the plan on Form 5307.

2. An adopting employer of a VS plan may not apply for a determination letter for the plan on Form 5307 unless the employer has modified the terms of the approved plan and the modifications are not so extensive as to cause the plan to be treated as an individually designed plan.

Client has a profit sharing plan with several companies that participate. Client's intent and practice has been for each company to make a discretionary contribution to the plan based upon that company's performance and then allocate that contribution among that company's employees. Therefore, each participaing company makes a different contribution, i.e. two employees making the same amount of money working for different companies will receive different amounts. The plan however states that contributions from participating employers will be pooled and allocated among all participants, i.e. two employees making the same amount of money working for different companies will receive the same amount. If there is a correction that retroactively credits accounts based upon what participants should have received under the terms of the plan, employees that work for the well performing companies will lose money from their accounts (which is bad for morale) and employees that work for lesser performing companies will gain money (which was not the intent of the client.) What are the chances that the IRS will allow a correction to comply with the client's intent as opposed to the terms of the plan document?

Daily val 401k Plan. Participant has a vested balance of $2,093. Plan's loan policy has a $1,000 minimum loan amount. There is a loan set-up fee of $100. Can loan be processed?

If we say that, at the time of loan request, there was over $2k, then the answer would be yes. On the other hand, we KNOW that the loan will trigger a $100 fee which would mean there was less than 50% in the account. I know that subsequent distributions (and losses) have no bearing on the loan amounts. But, in this case, we know right away that the fee will bring down the amount used as security. What does everyone think? I couldn't find anything on these boards or in the EOB. Thanks.

Would a 1 person S corporation use the 415 Safe Harbor definition of compensation for determining a profit sharing contribution (does this definition include S corp. income)---Thanks.

I am preparing the file a VCP application for various 401(a) plan failures. My question is whether other ERISA attorneys advise their clients to make the corrective contributions prior to filing with the IRS? Or do you prepare the VCP application so that the correction is in proposed form, and then wait for the IRS to bless the proposed correction before making the contributions?

I have always made the corrections before filing as I prefer to not wait an additional 6-9 months for the IRS to respond and have earnings continuing to accrue. But I have heard other attorneys feel differently.

Any thoughts?

I understand that the new regs do NOT cover certain 403(b) contracts or custodial accounts issued to current or former employees before 1/1/09, but if the plan is subject to ERISA, the disclosure is required, yes?

So for example if a plan with 10 participants 8 of which whose accounts were issued prior to 1/1/09, receive some sort of employer contribution, they are not required to have the 408(b)2 notice, but 2 participants who joined the plan after 1/1/09 must be issued the notice of fees?

For unknown reasons, our payroll company implemented stop dates in there system for several employees that shut off their 401(k) contributions a few months into the year. This was done without our knowledge. The issue was eventually detected. Our TPA (not the payroll company) now says that we have to make a QNEC contribution of $30k+...which is a substantial amount for our company. Their specific statement was:

Revenue Procedure 2008-50 covers the required corrective action when an employer fails to implement an employee deferral election. The procedure requires corrective action on the part of the employer whereas the employer makes a QNEC contribution to the plan on the participant's behalf in an amount equal to 50% of the employee's missed deferral plus matching contributions equal to the matching contribution the employee would have received had the employee made a deferral. The contribution must also include earnings to the date the corrective contribution is made to the plan.

Excerpt:

(5) Failure to implement an employee election. (a) Missed opportunity for elective deferrals. For eligible employees who filed elections to make elective deferrals under the Plan which the Plan Sponsor failed to implement on a timely basis, the Plan Sponsor must make a QNEC to the plan on behalf of the employee to replace the “missed deferral opportunity.” The missed deferral opportunity is equal to 50% of the employee’s “missed deferral.”

Two questions:

1. Do you think this falls under this provision given that we, as the Plan Sponsor, implemented it and a third party caused the error?

2. Do you think this is the proper provision for handling this issue or is there another alternative that would allow the employees to make catch up contributions?

Under 409A a participant can change form of payment so long as, generally, the change doesn't take effect for a year and the payment is deferred an additional 5 years from when it otherwise would have been paid. I know there are some nuances, but I'm not concerned with those.

If an employee has one payment scheduled at termination of employement, can he make a subsequent deferral just on half of that payment?

For example, participant is to receive $10,000 on termination. Can he make a subsequent deferral election at least one year in advance to receive $5,000 5 years after termination--the other $5,000 still payable on termination?

Does anyone know when the IRS will publish the new 430 segment rates calculated under MAP-21? Or does anyone know where these rate have been calculated?

Thanks.

Our branch is part of a large holding company and my branch along with the rest of the company was in a 401k that had employeer matching. The main company moved us under a different branch and in the process terminated our 401k that had matching and gave us the option to be part of a new non-matching 401k the company above us uses. Again the rest of the the holding company is still under the matching while our plan was terminated while we remain part of the company.

They also will not allow us to roll that 401k over to another plan citing we work for the same company. Is this legal?

I have a new client where the prior "vendor" () never told the client they were top-heavy. I was reading the ERISA outline book and Sal suggests that one might make a legally definsible argument that the top-heavy minimum may not be due in the year that a plan terminates. The argument would almost certainly be rejected by the IRS (he says), but you could fit this into a literal interpretation of the regs. He strongly recommends against this approach (I want to make sure I make this clear!).

I seem to recall though that there was a recent IRS Q&A where this approach was publicly shot down by the IRS, and I'm need of that reference for purposes of these ongoing discussions. If anyone has it, I would appreciate it.

Thanks!

!.409A-1(h)(2(ii) indicates that payments due to separation from service can't be made for at least 12 months in the case of an independent contractor who does not qualify for the exemption from 409A. Example: employee goes to independent contractor status and performs sufficient service so as not to trigger separation from service. When he is done performing services as a independent contractor, does he have to wait for 12 months to receive distribution? Thanks for the help!

If a sponsor has a DC plan and a TDA plan - do they need to be combined for 5500 filing and/or for the participant counts?

A 92 year old family member is currently receiving a J&S annuity at his 415 limit. While he's alive, the plan is underfunded. After he dies, the plan will be close to 100% funded. It would be nice to have some cost certainty.

We asked insurance companies if they'd sell us an annuity. They're not interested because of his advanced age.

I don't think we can pay him a lump sum because he'd lose the value of the survivor benefit (assuming we ignore the multiple annuity starting date issue).

Any ideas would be greatly appreciated.

I am considering a life insurance policy, but not sure about the amounts. I am considering between the 100 and 250k amounts. The difference between them is about ~300 a year. Obviously in the event of my death, I want my family to be able to have some breathing room to deal with my debts and the what not. When i was talking this over with my sister, she was shocked I was considering something so high. She and her husband only carry 50k each.

My reasoning, was it will need to at least cover my annual salary, and and while not quite enough to settle the note on the house, it should be able to cover mortgage payments for several years to either wait on selling when the market improves, or at least be usable as a down for my wife to use to move cheaper (if she or the kids mis-use the money, then well, I tried...) place. But what strategies do you guys who have life insurance use to determine how much to buy into?

We have a new client starting their first 401k plan. They have payroll twice a month, but the employer only wants to allow employees to defer from the last payroll of the month. I have been searching for IRS guidance on this and have struck out. Can anyone point me in the right direction? I also checked the plan document and can't find where it is addressed. My feeling is that they should have to allow employees to defer from every pay check.

If a participant sends notice to a plan of the birth of a child and requests enrollment of the child within the special enrollment period, but then fails to send in enrollment form and the required documents to establish the child’s eligibility for coverage, e.g., a copy of the birth certificate, within the special enrollment period, is the plan still required to cover the child back to the date of birth?

Here’s an example:

June 1 – baby born

June 6 – participant notifies plan by letter that child is born and requests enrollment in the plan

June 12 – plan sends participant enrollment form and information on documents (birth certificate) that must be submitted to establish child’s eligibility. (Plan has a 30 day special enrollment period.)

September 8 – participant sends completed enrollment form and documents (birth certificate) that establish child’s eligibility

Is the letter sent by the participant in June sufficient for purposes of the HIPAA special enrollment rules even though the participant did not complete the enrollment form and send in the birth certificate until September (long past the 30 day special enrollment period)?

I've looked at the regulations, which provide that"the plan must allow an individual at least 30 days "to request enrollment."

Any thoughts would be welcome. Thanks.

Hi. We have an employee that died recently. He does not have a beneficiary designation on file. He is divorced with two children. Our 401(k) plan doc states that absent a designated beneficiary, his account is distributed to a surviving spouse (which there is none), then to children (there are two), then to parents, then to the estate. It appears then that we should distribute to the two children (which are adults).

But he also has a 403(b) account. That plan document says that if there is no beneficiary designated that the account is distributed to the surviving spouse, and if there is none, then to the estate.

So it seems that the two plan docs are not consistent. Can someone fill me in? What does the law say on this? I have looked in 401(a)(9) but haven't found anything helpful.

Thanks.

Hi. We have an employee that died recently. He does not have a beneficiary designation on file. He is divorced with two children. Our 401(k) plan doc states that absent a designated beneficiary, his account is distributed to a surviving spouse (which there is none), then to children (there are two), then to parents, then to the estate. It appears then that we should distribute to the two children (which are adults).

But he also has a 403(b) account. That plan document says that if there is no beneficiary designated that the account is distributed to the surviving spouse, and if there is none, then to the estate.

So it seems that the two plan docs are not consistent. Can someone fill me in? What does the law say on this? I have looked in 401(a)(9) but haven't found anything helpful.

Thanks.