EGTRRA and Notice 2001-56 seem to suggest that the suspension period for taking a hardship is exactly 6 months, but the regs under 401(k) say the period is at least 6 months.

Under Treas. Reg. 1.401(k)-3©(6)(v)(B), a plan may limit the amount of elective contributions on account of a hardship distribution for 6 months in accordance with §1.401(k)-1(d)(3)(iv)(E).

§1.401(k)-1(d)(3)(iv)(E) says for at least 6 months after receipt of the hardship distribution

Can a plan impose a suspension period that is greater than 6 months? Any guidance you can cite?

IRS Rev. Rule 81-11 describes two methods for applying the fractional accrual method when less than a full-year of service has been credited in an accrual period. The Rev. Rule does not specify a default method. Two acceptable methods were outlined. A plan does not specify a method and the case has arisen whereby the participant left after accruing 20/40 benefit, did not receive a distribution, was rehired 10 years later, and then terminated 5 years later.

Under Method I, we have 20/40 + (1-20/40) x 5/10 = .75

Under Method II, we have (20 + 5) / (20 + 10) = .8333

The Plan does not address the situation. I.e., it does not specify Method I or Method II.

Question: (1) May the Plan now specify Method I without a 411(d)(6) violation?

(2) May the Plan Sponsor adopt Method I (say in its Retirement Committee meeting minutes)?

The regulations provide three categories of plans for purposes of determining the amount of vested deferred compensation that is eligible for grandfathering treatment: account balance plans, nonaccount balance plans, and equity-based compensation plans. I am trying to classify a non-exempt incentive plan that pays a benefit based on the various objecive performance measures (for example, an increase in sales growth over a specified period). I would like to categorize this as an account balance plan, so that the increase in the amount of benefits after 12/31/2004 constitute earnings and therefore included in the grandfathered portion (as such earnings relate to the vested portion as of 12/31/04).

Any thoughts?

Safe Harbor Plan uses a non-Safe Harbor definiton of comp for allocation of the SHNEC. The comp ratio tests fails. Can I use Rate Group testing, along with Profit Sharing allocations during the plan year to determine if the allocation(s) would otherwise meet 401(a)(4)? Or, would the definition of comp require an amendment for the SHNEC? Thanks.

Safe Harbor 401(k) plan had 401(a)(17) failure in 2011. Employer deposited too much matching contribution. Can't use the account balance reduction method, because 100% of the account participant's was paid out in accordance with a QDRO.

We know that a safe harbor plan can't be amended mid-year. Is there any exception to this in order to correct with a retro amendment and making an additional contribution for the other participants?

My employer's 401(k) Plan offers participants the opportunity to contribute to the Plan on a pre-tax, Roth after-tax and non-Roth after-tax basis.

During a HRIS system update at the start of year, one participants long standing non-Roth after-tax election was not carried over properly. The IRS provides guidance on "Correcting a Failure to Effect Employee Elective Deferrals". The guidance specifically states that the procedures do not apply to after-tax or catch-up contributions--which is kind of odd because catch-up contributions are elective deferrals but non-Roth after-tax are not considered, at least that I've seen, elective deferrals...but I digress.

The produre for correcting a failure to effect elective deferral elections is nearly identical to the procedure for correcting the improper exclusion of an eligible employee from a plan with the difference being that instead of using the ADP for the ee's group (NHCE or HCE), you use the actual election, because it's known, to determine the correction. The correction is the product of the eligible earnings multiplied by the deferral election multiplied by 50%. There is a similar correction for after-tax contributions for excluding an eligible EE--you you use 40% instead of 50%.

Based on all of this, can I assume, because the IRS does not provide guidance, that the corrective contribution for failing to effect after-tax elections is the same as the procedure for failing to effect elective deferrals (again, using 40% instead of 50%)? Or is the employer not on the hook for correcting the mistake except, possibly, for missed earnings?

Any help or a point in the right direction would be much appreciated.

A multiemployer employer welfare plan maintains a "Value Bank" that members can use to pay for dental claims, prescription co-pays, etc. There have been several fraudulent claims sent in by members trying to get "their money." The reimbursements are, of course, funded by the agreed upon employer contributions to the plan, but the members do not actually have any "money" in an "account." If they don't have valid claims, they don't get any money.

The trustees would like to amend the plan to impose a penalty upon anyone they find sending in fraudulent claims. A possible penalty would be loss of all funds credited to their Value Bank "account."

Does anyone see any problems with this? Does this need to be collectively bargained?

An employer has 2 "old" 403(b) plans. Both plans have around 60 participants with account balances but no new contributions have been made into the plan for years. I believe it was frozen to not allow new participants/deposits about 5+ years ago.

The same employer sponsors a new 403(b) plan with different investments. I believe all employees are eligible to participate in this new plan.

Can the employer terminate the two old plans and allow the participants to either (1) roll their balances into the new plan (2) take their account as a cash distribution, or (3) leave their account where it is but turn it into an IRA.

Alternatively, can the ER merge these 2 old plans into the new plan, moving all the old money into the new plan without participant consent?

Thanks

I had health insurance through my father that was recently terminated as I reached the age of 26. I understand that someone is eligible for Special Enrollment because of this - my question is - who is eligible?

The reason I ask this is because the COBRA payment is too high for me - I would like to change it to a different plan. Can I use this special enrollment privilege to change the benefit level - or is this only something that my father can do for his plan? I have not yet elected to receive COBRA if this matters.

Thanks for your help.

An employer has an existing deferred compensation plan with no provisions for employee elective deferrals. The plan has payouts that start upon separation from service, and the payment schedule complies with 409A. The employer now wishes to add an aggregate cap to the amounts paid out under the plan that would limit the amount of the payout to any individual if there are multiple payees. The cap would comply with the 409A regulations if this were a de novo plan.

Would the addition of the cap constitute a service recipient election that would trigger the 1/5 rule? And would the application of this rule require that payouts could now start no earlier than 5 years after the date when they would have started under the original plan?

This would be a deal-breaker here because it would require the employer to delay payouts for at least 5 years after separation from service. This seems like a harsh and unintended result for adding a provision that would have been clearly permissible in a de novo plan. I am cautiously pessimistic, however, that the answer might be yes.

Any thoughts would be greatly appreciated.

I always have calculated the employer match by dividing the employee's 401k contributions for the period by the employee's pay for the period to two decimals. I'm not sure why I have been doing it that way, but I would appreciate comments.

When reporting DIA's in brokerage accounts, do we have to look at individual stocks or just mutual funds?

I just printed the 404a disclosure including glossary from Great West and it is 42 pages! By using the ASPPA Glossary, I can reduce it all the way down to 36 pages!

I expect some clients are not going to be pleased when I tell them to make copies and distribute to all of their employees. Some will probably ask "What happens if I don't do this?"

What are you all going to tell them?

Does the Nebraska extension of coverage under a health plan for dependents up to age 30 apply to self-funded plans? I haven't been able to find any materials that clairfy this. Thanks.

If an employee becomes eligible for two governmental 401(a) plans at the same time may the sponsor permit him or her to make a one-time irrevocable election under both plans and still comply with the requirement under 1.401(k)-1(a)(3)(v) that the election be "made no later than the employee's first becoming eligible under the plan or any other plan or arrangement of the employer"?

I have researched and cannot find authority or guidance on this issue.

Thanks.

For 401k plans that use a platform such as John Hancock, I'm curious whether most TPAs are preparing the annual notice - due by Aug 30 - for their clients to distribute? Or will you rely totally on the investment company to provide it? Or are you letting the plan sponsor deal with it based on communications from the investment company? Just curious.

I have a holding co that has been sponsoring a retirement plan and the 5500 is filed using their EIN #. Are there any issues with the holding company sponsoring the plan?

My question is as follows: we prepared a Form 5500 for an ESOP. The ESOP stock is publicly traded. On Schedule R, Part I, line 1, we included the total distributions that were paid in stock. However, the instructions say to enter the total value of all distributions during the year in any form other than cash, annuity contracts issued by an insurance company, distribution of life insurance contracts, plan loan offset amounts, or publicly traded securities. Because the ESOP stock is publicly traded, we should have put zero on Schedule R, Part I, line 1.

Should we amend the 5500, Schedule R?

Thank you

I have a small organization (not proessional service) - just 2 owners (husband and wife each own 50%) and 1 participant. The plan is PBGC covered. The only participant who is not an owner terminates in 2010 and is due a benefit. He is finally paid out in February, 2012. Technically the plan is no longer a PBGC insured plan effective march 1, 2012. For a portion of 2012 the plan is PBGC covered so do you think I can still get the 25% of pay maximum PSP for 2012? I know I can't for 2013. (presume DB cost is far over the 25%.)

Followup question - the company is incorporated and I am pretty sure that each spouse own's 50%. But if one spouse own's 100% and the other only owe's through attribution - then the plan remains PBGC insured? I might talk to them about changing the ownership in that case.

thank you.

Someone in my office said the current rules say that the SAR must be distributed before the 5500 is e-filed by the sponsor.

Is that true?

If so, what regs changed?