Employer sponsors a Profit Sharing plan with comp/comp allocation formula. No last day or 1000 hour rule for contribution allocation. The employer has been funding the plan each month, but now cannot continue to fund due to financial issues. The HCEs have already earned more than $250K each, so if they don't freeze compensation as of June, they will not have money to fund the additional contribution needed to true up the NHCEs at end of year. If we freeze, however, is the 401(a)(17) limit prorated as it would be in a terminated plan?

Suppose you have a small profit sharing plan with 10 participants. 5 are full time and 5 are part time (under 1,000 hrs).

The plan allows all employees to be eligible upon being hired. In the past, profit sharing contributions were provided to all employees (full and part time).

They now want to amend the plan to be a 401(k) plan and require 1 year of service of 1,000 hrs for all sources. They also want the plan to have a safe harbor match and only want to provide the safe harbor match from now on.

Since the 5 part time employees have never worked 1,000 hours, they would not have met the eligibility requirements for the new salary deferrals and safe harbor match.

I believe rev. ruling 2004-13 also indicates that a safe harbor match would make a plan exempt from the top heavy minimum as long as no employer contribution (other than the safe harbor match) is funded for the year. Also this determination is made on a year by year basis.

It appears that in this case, the part time employees will not be able to make salary deferrals, receive a safe harbor match or receive a 3% top heavy minimum.

Does anyone agree / disagree?

Anyone know whether exchange traded funds can constitute qualified replacement property under 1042?

Can a PRA participant, who has terminated employment, use up the balance of her PRA by paying for future months of health plan coverage? Termination date: 6/8/2012, Premium is covering July, Aug, Sept, 2012.

Proof of the premium payment has been submitted, but I'm thinking that because the coverage is not for June or any other prior month, it is not a reimburseable expense for this Participant.

I have been reading EBIA and other reference articles, but haven't come across specific rules for PRA!

If anyone has some direct references for me, I would be so grateful!!!

Thanks much,

CJL

Although Cash Balance is technically in the DB realm, on SSA - is the balance for a reportable participant shown as DC the instructions on the for for item (f) Part III note only indicating Defined Benefit plan - periodic payment - I'd report in column (g) - DC plan - total value of account and provide current cash balance... agreement?

This was in the M&A forum, though I've reposted here as well:

"QUOTE (Rider @ Feb 15 2011, 02:52 PM)

Plan 1 has a safe harbor match of 100% on 1st 4%.

Plan 2 has a safe harbor match of 100% on first 3%, plus 50% on next 2%.

They want to merge plan 1 in to plan 2 mid-year.

Seems to me they may have to wait until the end of the year or it will invoke testing?"

I have the same issue, in an M&A situation. In my case Plan 1 has a match of 100% on 1st 5%. Surviving plan would have the richer match.

IRS stated that amendments to safe harbor plans to add Roth and hardship withdrawals are allowed, but no more. I have also seen that IRS representatives have said that a safe harbor and non-safe harbor plan cannot merge mid-year lest the safe harbor be affected.

However, I've seen nothing regarding merging two safe harbor plans mid-year. If you have two safe harbor plans pre-merger and a safe harbor plan post-merger, with no reductions in benefit levels, then what's the beef? If it's not allowed, then the primary impact in this case would be that those in the less rich plan will have to wait longer to get the richer match.

Has anyone seen any informal commentary on merging two safe harbor plans? Thanks in advance.

Sal's EOB states that there is an IRS 6-month extension from the date of the IRS determination letter to make the distributions.

I am absolutely unable to find a Revenue Ruling or citation, IRS form or publication, newsletter, etc., that supports this. Does anyone know if this statement is correct? Did the IRS state this at a conference or is it in the actuary "gray book" questions somewhere, etc.?

The PBGC instructions give 120 days, but not 6 months.

Thanks!

P.S. I e-mailed Sal with this question as well - I'll post his response if he gets back to me.

Hello ladies and gentlemen. I spent some time reading through lots of post and haven't been able to puzzle out exactly how second 401K loans are calculated. Instead of providing a hypothetical, I will just post my question with real numbers.

Our 401K has horrible investment options, so I take loans and invest my money elsewhere.

My available vested balance is currently $13200. I have one loan, which was taken out in January of 2011 for $5500, and has an outstanding balance of $4150. I took out a second loan in October of 2011 for $3200, with an outstanding balance of $2650.

If I pay off the second loan that has a balance of $2650 (giving me a vested balance of $15850), and then take out another loan, what would the maximum amount be that I could take?

Our company allows for 2 loans with no time requirements between them, and the only restrictions are those imposed by the IRS. I have asked my HR manager, and called the company that manages our 401K. Neither were able to answer my question. They told me I would just have to pay off the second loan, then apply for a new one online and let the computer figure it out. The IRS website wasn't much help either.

I am confused as to whether I would take 50% of $15850 giving me $7925, THEN deduct the outstanding balance from the first loan ($4150) giving me a loan of $3775. Or if I deduct the $4150 from $15850 first, then take 50% of that, giving me a loan of $5850.

Thank You

My husband has worked for Chevron for 24+ years at the refinery in Pascagoula, Mississippi. We have been married for that long a time. We are now divorcing. The bulk of funds that will come to me is from his Vanguard ESOP and annuity. I am not understanding any of this at all, and it is hard to get any clear answers. He would prefer for me to not disturb his retirement annuity. Instead, he would prefer to allocate more ESOP comparable to the amount in the division of the annuity. I am not sure if this is wise to agree with. Does the QDRO allow for any of the monies from this ESOP to be withdrawn without heavy taxes or penalties at the time of divorce or thereafter? I really need some money in hand in order to survive since I may be laid off from my job in a couple of months. Does a divorce attorney handle the terms of the QDRO. or is this up to myself and husband to take care of this separately through another source? Is it possible to borrow from the ESOP? I know I most likely sound completely lost and even pathetic, and this is certainly true in the greatest sense. Thank you for any assistance.

Employer submitted a matching contribution on compensation in excess of $245,000 in 2011. The match is a fixed formula: 125% of deferral up to 4% of comp. Participant deferred $16,500 (NOT catch up elig). Correct match should have been $12,250 ( $245,000 * .04 * 1.25) Actual match was something like $15,000 ($300,000 * .04 * 1.25).

As I understand it, this is a 401(a)(9) failure creating an excess allocation of employer match. According to EPCRS, the correction is to forfeit the excess along with earnings.

Due to a subsquent QDRO distribution, the amount left in the er match source is less than the correction.

Client did all this directly with the investment provider, without going thru TPA.

Any suggestions????

Thank you!

Has anyone had a small fully insured plan penalized because they didn't file a Welfare 5500 and they didn't have a Welfare SPD which spells out the "refund allocation" language?

See below, which one of our clients received from the IRS. Thanks.

If you have fewer than 100 participants on your group welfare benefit plan(s) you are exempt from filing a Form 5500 provided you have an SPD in place with the appropriate "refund allocation" language. The Form 5500 filing exemption may be lost if a Plan Sponsor does not disclose how insurer refunds are allocated. This can be problematic because many small employers do not prepare and distribute an SPD containing this language, nor do they file a Form 5500-relying on the small plan exemption. However, failure to prepare and file Form 5500 by the deadline can result in a DOL penalty of up to $1,100/day.

We have a DB plan that will be paying a restricted HCE the actuarial equivalent of the straight life annuity benefit. The plan is only about 90% funded so certain HCE's cannot receive full lump sum.

This plan has employee contributions from back in the day.

If the restricted employee is due, say, $15,000 in 2012. According to information I have read, he cannot roll over these payments to an IRA. Also, his employee contributions total $6,000.

He will have the option to take the rest of the lump sum (with option to roll over to an IRA) when the plan becomes 110% funded or the plan terminates.

When his Form 1099R is prepared is it as simple as this: total distribution = $15,000, taxable amount = $9,000 ($15,000 - $6,000). In 2013, the total amount of these payments would be taxable.

I have a group of plans that are part of a controlled group...

Plan A: QACA SH, but requires ACP test since match above limit-uses prior year

Plan B: QACA SH-No ADP/ACP testing requirement

Plan C: QACA SH, but requires ACP test-uses current year

Plan D: Not SH

Plan B is on a standardize prototype document with "Fail Safe" language for coverage failures (ie: 1000 hrs/last day).

Of course, Plan B does not pass the ratio test. Plan B does not have a last day/1000 hours requirement. Since the plan is not failing coverage because of this, is it possible to run an ABT in order to pass coverage for prototypes?

Another question...Can I NOT apply the under 21/less than 1 YOS option to group B for all testing and apply it to all other plans? Of course in each case the denominator would be the entire controlled group (A, B, C & D)

Example: Plan B coverage denominator would all employees. Plan A's test would be divided in to 2 "groups", those over 21/1 yos & those under 21/1 yos and the denominator would have all of the other plans divide as well.

Any thoughts?

Plan document has a discretionary match. Company has used the same formula for several years, and matched each pay period.

Is there a fixed period notice requirement to suspend the match?

I am looking for sources of guidance on the 408(b)(2) fee disclosure regulation as it applies to a “traditional” multiple employer 401(k) plan, specifically a PEO arrangement.

A client has forwarded a fee disclosure packet from Transamerica that identifies itself as a disclosure for the “Principal Participating Employer”/MEP Sponsor (the PEO) and states that Transamerica is not a service provider to any Participating Employer. It also says that the PPE/MEP Sponsor can use the disclosure as a tool to comply with reporting duties for Participating employers but that the packet s not intended to satisfy those duties for Participating Employers.

I am wondering if data is even available from Transamerica or other providers, on the Participating Employer level.

If you have knowledge of any means by which the PPE could bridge the gap between the “umbrella” disclosure, and disclosures to each Participating Employer, I would appreciate your thoughts and comments.

My understanding of the new regulations set to take effect are that the plan sponsor receives a disclosure from covered service providers. Does anything have to be filed with the department of labor, ebsa, etc.?

What is the fix for a situation where plan directly rolled to a former employee's IRA (which the former employee wanted), but such was done before providing a 402(f) notice was given, and nothing in writing was given explaining that the employee had the alternative of a lump sum payout?

Hello,

Newbie to this site. I am trying to do some research on Health and Welfare plans and wanted to find a resource that gave the 5500 data. I came across BrightScope but believe this is limited to 401k/403b. Any resources for H&W, particularly Self Funded?

Free access is best of course but any reasonably priced, quality product offered by a website is fine too.

Thanks

I'm not familiar with the manual option of using an actual handwritten signature to submit a 5500. My question is: If a Form is signed and dated on one day (10/15), but efast2 shows a later date as submitted (10/20), is the form considered late?

I ran across a similar issue posted here where the allocation percentage was 0% for the first 3 years. My situations are a bit different in that eligibility for the allocation is service-based (in one case part-time vs. full-time; in the other 30 years of service to get allocation). I feel it's different enough to warrant a new topic posting.

In the first case, the employer would like to amend their plan to require full-time employment as a condition for receiving a matching contribution. Part-timers would still be eligible for the 401(k) plan and could make deferrals but would not receive a match, even if they worked over 1,000 hours. Full-time employees would be able to defer and get employer match, regardless of hours worked. The employer's thinking is that all employees are eligible for the 401(k) plan upon meeting the 1-year eligiblity requirement, so they satisfy the 410(a) minimum eligibility standards, and since the allocation formula doesn't require a certain number of hours worked, the rule about not requiring more than 1,000 hours for an allocation doesn't apply.

In the second case, the employer has a defined benefit plan and a defined contribution plan. The DB plan will stop accruals at 30 years of service (this is permitted by the IRS). The 401(k) plan is currently a deferral only plan, no employer contribution. The employer would like to amend the 401(k) plan to provide a profit sharing and match for employees who have completed 30 years of service and no longer have accruals in the defined benefit plan. Again, the employer's thinking is that since all employees are eligible to contribute to the 401(k) plan after 1 year of service, they have satisfied the minimum eligibility standards under 410(a), and since the 30-year requirement to receive an employer allocation is not tied to hours worked during the plan year, they're ok.

Assuming that coverage and nondiscrimination testing would be satisfied in both cases, my concern is with the IRS' definition of "plan" as it applies to IRC 410(a), and I'm unable to really find clear guidance whether "plan" refers to the plan as a whole or to each component plan that would normally be used for nondiscrimination testing. If it is the plan as a whole, then I might be inclined to agree with the employer's position that the minimum eligiblity standards are met, as icky as the prospect of a 30-year employment requirement to receive a matching contribution would be.

I'm also concerned about indirect service-based allocation requirements that exceed 1,000 hours, but am not able to find any clear cut guidance either way to provide to the employer. I have sought counsel, who was as befuddled as I about these inquiries.

I'm interested in what others in the community think about this. Especially in the first case, I find it difficult to imagine that the IRS would be satisfied with only allowing part-timers to defer and not ever being eligible to receive an employer allocation, even when they work over 1,000 hours and are there on the last day of the plan year (remember, neither of my plans has a 1,000 hour requirement or last day rule to share in employer allocation).