I have a control group situation where there are two seperate plans with identical provisions. They are bothe Safe Harbor Match plans with a crosstested profit sharing. I have combined testing in the past to pass the general test.

Plan B is now being terminated as of 07/01/12 becuase of a sale of that business.

My question is in regards to combining testing for the 2012 plan year. I have read that in order for plans to be aggregrated that the plan year needs to be the same to determine non discrimination classification and the ratio test. They can be different to perform the Average Benefits Test.

Can the plans be aggregated for testing? If they cannot I assume that an employer contribution that is nuniform across all participants would be the only acceptable ps contribution.

Any thoughts??

We're looking for a software package to illustrate and administer 412(e) defined benefit plans. Anyone have a recommendation?

owner has 12/31/10 AB = 9,000 per month payable at 62

owner has 12/31/11 AB = 11,000 at 62

plan amended to change early ret at 55 from act equiv to fully subisdized unreduced AB at 55.

12/31/10 AB payable at 55 after amendment = 7,000 (limited by 415)

12/31/10 AB act equiv at 55 before amendment = 6,000

12/31/11 AB at 55 after amendment = 9,000

So for annual accrual for 401a4 testing at age 55 which is more correct?

1) 9,000 - 7,000 = 2,000 payable at 55 prior to normalizing

2) 9,000 - 6,000 = 3,000 at 55 prior to normalizing

thanks

A DB plan has an Early Retirement Benefit (ERB) if the participant has attained age 60 and completes 20 years of service. The reduction is 1/2 of 1% for each month that retirement precedes normal retirement age. Normal Retirement Age is 65.

Now the plan terminates in a standard termination.

Say an active participant is age 61 and has 19 years of service at plan termination. At date of plan termination the participant did not meet the service requirements for an ERB.

Since the plan terminated, does the participant still get the ERB at date of distribution since the participant would have had 20 years if the plan did not terminate? Is this preserved?

How about if an active participant is age 58 and has 17 years of service?

I think that if the participant would have the 20 years by normal retirement age then you would value the ERB.

I remember doing this a long time ago but can't find anything on it.

Located this on the Department of Labor's website regarding QMCSO's:

Q1-29: To whom should the plan pay benefits?

The plan should pay benefits to the alternate recipient, the custodial parent, or the provider of health services to the child notwithstanding plan terms that may require benefit payments be made to the participant. In some instances, payment will be required to be made to the State child support enforcement or Medicaid agency.

[ERISA §§ 609(a)(8), 609(a)(9), 609(b)(3), Social Security Act § 1908(a)(5)]

I read this as payment for benefits are to be made to the alternate recipient, custodial parent or provider no matter what. Am I incorrect?

Also the term "plan", does that refer to both the health insurance carrier AND?OR the employer(if it is a self-insured plan)?

A husband and wife (owners) have a one participant DB plan for several years.

They hire an employee who is scheduled to commence plan participation on 7/1/11.

They freeze the plan on 6/30/11 after they received an accrual for 2011.

Should employee receive an accrual for 2011?

The issue being: should employee receive an accrual to pass non discrimination for 2011, thus resutling in a corrective plan amendment?

thanks

Is there any guidance in regard to how often the applicable interest rate is compounded? Plan uses applicable interest rate for determining actuarial equivalence, so we compounded interest on an overpayment annually, but I'm not finding anything specific that says how often 417 rate is to be compunded. thoughts?

Under 1.409A-3(j)(4)(ix)©(5), after terminating a plan, the employer may not adopt a new plan "that would be aggregated" with the terminated plan "if the same [employee]" participated in both plans, at any time w/in 3 years following termination.

My question is how this language is interpreted. I have seen some practictioners say that you use a "hypothetical employee" standard, such that even if an employee that did not participate in the terminated plan now participates in the new (similar) plan w/in the 3 year prohibited period, the plan termination is not effective and is deemed a prohibited acceleration for all participants under 409A.

This interpretation seems like a huge stretch to me, and I dont see the basis for it. Does anyone know of any guidance on this issue, or have an opinion as to how this language should be interpreted?

Thanks very much in advance.

Which resource do you value more in discussing plan / parity restoration alternatives for your HCE class employees?

1. Qualified plan administrator.

2. Qualified plan advisor.

3. CPA – IQPA auditor.

4. HCE plan TPA.

5. HCE class product issuer.

6. Executive benefits advisor / compensation consultant.

7. Executive benefits TPA.

8. Other – please specify.

Appreciate your opinions.

I am working with a client (a non-profit client) on correcting issues in their SEP, and we have found the following issues:

- Underpayments to employee in 1997-1999, totaling $20,000, so plus interest on the VFCP calculator the total they owe is $35,000. I know that we need to contribute that and how to handle this portion under the IRS' VCP.

- Overpayments totaling $9,000 to current employees (ranging from 2004-2009). The way I understand Rev. Proc. 2008-50 is that we remove these excesses from the plan plus earnings. Do we need to file amended returns for these previous years to remove the deduction, or since this is a non-profit do we just let those pass and not deduct future contributions until they reach the $9,000 they get back?

- Overpayments to FORMER employees of $24,000 before earnings (ranging from 2004-2009). This is where I am scratching my head. There is no possible way we will recover the money from former employees, so is this amount, plus the earnings subject to the 10% penalty since it is staying in the plan? What collection efforts do we need to undertake to get the money from the former employees?

As I said, they have some major issues, and since they are so old, I don't believe we can self correct under SCP (even though that is what a representative at the DOL told our client).

Any insight or instruction would be appreciated, as I can't find guidance on how to handle excess contributions to terminated employees.

Thank you,

Daniel

I was laid off on June 1. I received my 60-day WARN payment on June 6 and was rehired that same day. Am I required to repay these funds?

hurray. according to ASPPA looks like we might not need a signature on these extensions!

On June 11, 2012, several members of GAC met with individuals from the Treasury Department and the IRS. At the meeting, ASPPA was notified that regulations will be issued that will allow the Form 5558 to be filed to extend the due date for filing Form 8955‐SSA without a signature. ASPPA was also informed that regulations are expected to be issued before the end of July 2012.

We're taking over the 401(k) for a non-profit organization that also has a frozen DB plan. I last worked on DB plans prior to PPA, so I know there are a number of changes that I am not familiar with. The plan is currently underfunded, so they have been told that there are restrictions on lump sum payments.

The client believes their actuary told them that freezing the plan freezes the PVAB, not just the monthly benefit. We had a lengthy call today between us, the new record keeper for both plans and the client. I was quite surprised to learn that the PVAB has appeared on participant statements along with the monthly accrued benefit. (Is that a new requirement?) Apparently the majority of the participants are expecting that to be the new permanent "balance" in their accounts in the DB plan as soon as the funding increases enough to remove the lump sum restrictions.

Anyone have a one or two sentence way to explain why the lump sum amounts will continue to change?

Small traditional Defined Benefit plan will terminate in about 4 months.

The plan document contains an alternate form of benefit choice of "Single sum distribution of a portion of the vested accrued benefit". This is not further described in the document.

This seems to indicate the plan could offer an alternate form of benefit that would allow a distribution of a portion of a benefit paid in the form of a lump sum and the remaining portion paid in the form of an annuity.

We have never had a plan sponsor want to offer this.

Is this possible?

Thanks.

This year, they added an additional item 38b to the 2011 Schedule SB.

What would 38b) be here?

34) Minimum required contribution , before reflecting PFB = $277,000

35) Prefunding Balance = $2,000

36) Additional cash requirement = 34) minus 35) = $275,000

37) Contributions discounted to valuation date = $280,000

38a) Excess of 37 over 36 = $5,000

38b) = portion of 38a attributable to use of PFB= ??

If the PFB was not used, the excess in 38a) would have been $3,000. So is 38b) just then the PFB of $2,000?

Thanks

I am legal counsel to a 401(k) plan and have a client who received a letter from DOL informing them that their 401(k) Plan is being investigated. This client is very conscientious and does everything right. Anyway, the client asked me if they should notify their insurance carrier. At this point all that has happened is the receipt of the letter. We haven't supplied the documents, met with the agent yet or had any follow up questions. I think notifying the insurance carrier is premature at this point but was curious as to what others think/ have done.

By the way, I have read the insurance policy and it seems to say that the insured must notify the insurer when the insured becomes aware of facts that could give rise to a claim. At this point, we aren't aware of any such facts. Assuming anything the agent uncovers is even covered by the policy, it seems to me the time to notify the insurer is when we have a better idea as to what the agent is focused on or if we uncover something in reviewing the paperwork before sending it to the agent.

Any thoughts are much appreciated.

Given: PLLC -- DB Plan with employees.

There is not enough corpoarte income to make the minimum contribution.

Owner/ shareholder want to terminate the plan.

Question: can the owner make a personal loan to the PLLC to make the minimum contribution?

(Once the asset is distributed, the owner will then get back his loan).

Is there any problem here?

Thanks.

There are 2 participants in a 401k plan, the owner and an nhce, and no other employees. Although the nhce has said he'll never elect to defer, it seems that the owner will still have to obtain a fidelity bond since it's technically an ERISA plan. Would the bond still be required if the nhce signed an irrevocable waiver of participation?

Didn't the IRS publish a model special tax notice in Spanish? I'm having a devil of a time finding it if anyone can give me a hand.

Thanks.

A participant wants to take a withdrawal from her account. She is over 59 1/2. The plan does not have in service distribution. Only loans and hardships. Since a hardship is not an eligible rollover distribution, she is only electing 10% FIT with held. However, the custodian of the account is stating that funds must have the 20% mandatory with holding since she is over 59 1/2. Is this accurate?