Controlled group exists between Company A and B

Company A now wants to purchase Company B.

Company A owned by Mr. X, Mr. Y, and Mr. Z.

Company B also owned equally X, Y and Z.

Can Company A, as part of the buy out, offer a non-qualified deferred compensation plan to Mr. X only, and not to Y and Z?

Thanks for any replies

A local affiliate of a national union sponsors a VEBA (they have received a 501©(9) letter) through which they offer health and welfare benefits, such as payment of insurance premiums, and reimbursement of medical expenses. The VEBA is funded entirely by employer contributions. When participants have a certain amount of funds in their account in the VEBA, they are then allowed to make elections through a cafeteria plan to either contribute additional funds to a vacation/sick account, their VEBA account, and/or a 401(k) plan. For example, if the threshold is $3,500, and a participant has $4,000 in her account, the additional $500 may be allocated by the participant into any combination of the participant’s VEBA account, a vacation/sick bank, and/or the 401(k) plan. Balances in the VEBA are rolled over from year to year and have not been cashed out. Can the VEBA and cafeteria plan work together as is without requiring VEBA (health & welfare) balances to be subject to the use-it-or-lose-it cafeteria plan rules?

I have a question that was posed to me by one of my tax partners. I have not seen it done, but wondering if anyone else has.

He has a client with a great deal of farmland in his IRA's and it is now RMD time. He is wondering if we can do one of two things:

1) Distribute farmland to the IRA owner and since the owner will not own a controlling interest in the land, subject the appraised value to a 15+/-% discount to reduce the amount of land necessary to be distributed; or

2) Establish a LLC to hold the land within the IRA and distribute LLC units from the IRA using 15+/-% discounts in valuing the LLC units.

My initial reaction is that I wouldn't touch it with a 10 foot pole without going in for an IRS letter ruling, but just wondering what others think.

Thanks.

James

A trustee of a pension plan is receiving pension benefits from the same plan. The same individual is also a trustee of a welfare plan in which he is a retired participant. He receives reasonable compensation from both plans for his attendance at trustee meetings. Is this permissible per ERISA 408©(2)?

Does anyone know of an Excel spreadsheet capable of cash balance and new comparability illustrations as well as testing in one spreadsheet?

I found one a few months ago but the calculations for the cash balance portion referred to empty cells, so it is unusable

Anyone know of a home grown spreadsheet for sale?

A) Selecting a QDIA as the default investment, such as a Target Retirement Fund or a Balanced Fund, but NOT distributing the QDIA notice (as might be the scenario with a client not so diligent about passing out important notices).

B) Defaulting to a money market in anticipation that the QDIA rules are more or less impossible for most small employers to comply with. I note that the QDIA rules are not mandatory rules. I also note that Great West does a fantastic job at addressing QDIA.

My own personal answer is that A) is worse than B). My saying is "If you're going to put someone on a roller coaster you better tell them that they're going on the roller coaster." I'm reminded of a sign at Disney World posted at the entrance to it's scariest rides. The sign says, in the form of a headline to a longer notice, "This is a ver scary ride." I think that is Disney's version of a QDIA notice.

I just feel like one day someone is going to lose a lot of money and suddnely realize that they didn't like the way they were defaulted. And if the sponsor didn't provide all those notices (each year, mind you) then I can't see how the sponsor avoids liability.

first year working on this plan

The plan sponsor contributed an excess contribution for 2010 as of 100k as of 12/31/10 val date.

no credit bal or pre fund bal prior to 2010

no election is made by 9/15/11 to establish a pre fund balance.

as a result it seems to me that it is too late to establish a pre fund bal for excess 2010 contribution and thus no available pre fund bal to offset 2011 min funding.

Am I missing something?

it pays to plan ahead or just establish a pre fund bal all the time.

thanks

Question has come up on the compensation limit for a short initial plan year.

Facts:

Plan year 10/1 – 9/30

Limitation year is the plan year

Plan effective 1/1/2012

Should the comp be limited to:

$183,750 (245,000 * 9/12), or

$187,500 (250,000 * 9/12)

Thanks in advance.

I have a client with a weekly payroll. The deposited almost every payroll a week late for 3 years. The auditor wants me to calculate the lost earnings. The lost earnings for each week comes to less then $3.00. Do I have to go through each payroll and breakdown the lost earning by participant if it is such a low amount or can I spread it in another way.

Thanks!

I'm trying to determine if an owner has the ability to relinquish his stock at this point to avoid RMD's when he attains age 70 1/2. Here are the facts: DOB = 1/2/43, Attains 70 1/2 on 7/2/13. However, the plan year is 1/31. As of today, he owns +5%. The current plan year is 2/1/12 - 1/31/13. This is where I'm getting tripped up.

According to Sal's Book, Chapter 6, Section VII, Part B.1.d, "the 5% owner rules applies to a participant who is a 5% owner for the plan year ending in the calendar year in which the employee attains age 70 1/2.

So in my example, my owner turns 70 1/2 in the calendar year 2013. The plan year ending in 2013 is 1/31/13 which is the current year.

Is it too late to relinquish the stock? If so, what date would he have had to relinquish the stock to avoid RMD's going forward? Is changing the plan year to 12/31/12 at this date a viable option?

Earlier this year Company A purchased a 90+ person business from Company B (who has other businesses with thousands of employees.) Employees of Company A had their employment terminated by Company A on Day 1 and were subsequently hired by Company B on Day 2 – the following day. Anyone who had an FSA account with under Company A's plan was unable to make claims with its then current FSA administrator for anything after Day 1.

Q1) In doing so, can company A automatically transfer the FSA balances from the employees enrolled in FSA accounts into Company B’s FSA accounts?

Q2) If company A transfers the FSA balances and accounts, is Company B obligated to offer the same healthcare plan which the employees previously participated in (as employees' FSA contributions are based on costs from healthcare plans with a specific rate schedule and given that these balances cannot roll-over year to year as they do in HSA plans?) It just so happens that Company B’s healthcare plan has 50% higher monthly costs and nearly 300% higher out of pocket maximums.

Q3) If Company A transfers the accounts and balances, can the new employees of Company B (who had their balances transferred) be offered the opportunity to change their FSA election amounts considering the significant cost increases in Company B’s healthcare plan?

Q4) If Company B offers its new employees the option of enrolling into a HSA plan, are the employees who had FSA accounts from Company A prohibited by law from participating in such a plan? (keep in mind, these employees were unable to receive benefit from their FSA accounts for any services after the termination date from Company A on Day 1.)

Q5) If an employee of Company B wishes to no longer partake in Company B’s HC plan, can that person opt-out of the healthcare plan during the enrollment period? And if so, what if anything happens to the FSA account and balance? Would they still be obligated to make deposits into the FSA account?

Thanks in advance.

After looking at Derrin's recent Q&A on MEPs and PEOs, I am curious about more details of how a 5500 would be filed now, if it was not filed a bunch as single employer plans in the past.

http://benefitslink.com/modperl/qa.cgi?db=...loyer&n=321

and

http://benefitslink.com/modperl/qa.cgi?db=...loyer&n=329

Suppose an employer is part of a defined contribution MEP PEO with ten or so completely unrelated other employers. Testing was always done on an employer-by-employer basis, but now the thinking is that the Form 5500 should also have been filed on an employer-by-employer basis as well (it was not filed that way in prior years).

Suppose each of the unrelated employers wants to now comply with the requirement to file their own 5500. Going back to the beginning of the plan to file 5500s from decades ago seems to be imprudent from a cost standpoint, so they are considering that they'll start with their 2011 Form 5500 filing.

However, what do they show for the starting assets on this 2011 Form 5500, which is now the first 5500 being filed for this employer? Would you suggest the starting assets are zero and also show a transfer in from the MEP? Plus, when the MEP files its 5500, it shows a transfer out of the same amount and identifies the plan it is transferring into? Thus, transfering out from what was misunderstood to be a single MEP into a now understood single employer plan? Since the one of the participating employers also sponsors the MEP, there will still be some participants and assets left on the 5500 for what once was considered as the main PEO.

The idea here is to do what can reasonably be accomplished yet still satisfy the DOL and IRS. Any other ideas for this?

Dr. Group A has 30 docs - they have 8 billing personnel and 9 nurses... Dr. Group A wants to split off it's billing personnel with a 100% owner who is not a doctor and has no ownership in the Dr. Group itself... if all services provided by the new billing company is for Dr. Group A - does an affiliated service group relationship exist? if yes, the billing group would still need to be considered in the retirement program in place, if not, the billing group could start its own plan entirely independent of that of Dr. Group A.

If the answer is yes and the billing group is an affiliated service relationship - how much revenue from different non-Dr. Group A sources must be generated by the new billing company for it to NOT be an affiliated service relationship? 50%?

Let's say a participant deferred the max into a 2011 calendar year plan prior to the end of the year. For example $16500 was deferred on 25K in comp through June 30, so the part should receive a basic SH match of $1000. Let's say that the P.S. only deposited $900. The $100 shortage was not discovered until after 3/31/12, is the P.S. still allowed to put in the $100?

Also, let's say the participant earned $50K for the year, the P.S. should deduct the $16500 throughout the year which would have afforded the participant a SH match of $2000 instead of $1000, correct?

This is how I am interpreting Treas Reg 1.401(k)-3©(5)(ii)

I've been working with CPS. Do you know of any other Head Hunter firms that specialize in the needs of TPAs? Thanks

Has anyone ever dealt with this? Basically, an employee was in the hospital during the open enrollment election period. Now that he has returned to work, he would like to change his benefits elections. The plan document is silent on the issue. Does anyone know of any authority that would allow him to make a new election? I can't find anything that would justify this.

I was under the impression that bundled providers were to provide separate, to some extent, fees that are related to basic TPA roles such as compliance testing and Form 5500. I am reading one such disclosure. For services it refers reader to an unattached, previously provided, document called 'Recordkeeping and Administrative Services Agreement'. It then says 'Consistent with this “packaged” structure, the compensation and fees we receive are not broken out into a fee for each specific service we provide.' I may be naive but it would seem that such providers would have different cost structures whether the plan is bundled or not which would make this easy to disclose. I also thought this was required by 408(b)(2). Is this disclosure really sufficient?

A owns LLC1, a mining type operation, there are no employees. A sponsors a plan for LLC1.

A has decided to start a coffee house on the side. A is starting this from nothing, not buying it from someone else. Does the transition period apply since this is not an acquisition?

On plan review we discovered client filed 2009 and 2010 Form 5500s late for PS plan (less than 100 participants). As far as we know they have not received letters from the IRS or DOL regarding the late filings. Client's accountant (who filed the returns late) told us he wrote a letter to the IRS asking to abate the penalty and they agreed. (At this point we don't know if the letter to the IRS was in response to a penalty letter from the IRS.) But what about the DOL penalty? I know the IRS has agreed to waive their penalty if the returns are filed late under DFVCP, but what about where the returns were not filed under DFVCP? EFAST shows that the box for DFVCP filing was not checked on the returns. What options do we have at this point? The returns were already filed (late), not under DFVCP. Should we file amended returns and check the DFVCP box and pay the reduced penalty? I don't think the IRS agreeing to abate the penalty binds the DOL in any way. Any thoughts?

The grant of a nondiscounted option on service recipient stock is not deferred compensation under 409A, so long as there is no additional deferral feature. However, is the promise to receive such an option at a specified time in the future subject to 409A?