I've encountered a 401(K) plan in which the plan document states that the Employer will make a 3% QNEC for each participant. It also states that if mandatory employee contributions are required as a condition of employment, then those amounts can satisfy the employer's QNEC. The plan adoption agreement sets out that employees, as a condition of employment are required to contribute 3% once eligible, and as such, the QNEC is satisfied by the employee's contributions and the employer does not make any of the contributions for the QNEC. My question is, based on these facts, does the $16,500 employee deferral limitation include the QNEC? For example, can an employee have a year end deferral of $16,500 based on voluntary deferrals and $2,500 based on their mandatory non-elective deferrals for total employee contributions of $19,000 or does the $16,500 apply to total employee deferrals regardless of whether they were elective or non-elective?

Thanks in advance.

The chairman of a MEWA/VEBA Board of Trustees spends 5-10 hours per week on plan management matters and his co-trustees want to compensate him $2,000 per month from trust assets. He does a critical job and has served the trust 7 years without pay (no back-pay is sought).

The legality is sound in that he is not employed by any employer or union participating in the plan and is not employed by the association - He receives full-time pay from a non-participating employer group. He is completely removing himself from this discussion (other than answering the question of how many hours he devotes to the trust on average).

QUESTION: Any thoughts on how the trustees should benchmark and document this?

$2,000 would be $100/hour on a slow month which seems high...

Thanks in advance!!

One of the alternatives that I would like to present to companies to dealing with the new fee disclosure burden is to do this:

1-Terminate k plan and process payouts (direct rollovers or lump sums, as chosen by each plan beneficiary), those that roll to IRAs will be able to direct the investment of their retirement savings, not held in IRAs rather than plan trust--no fee disclosure or other responsibilities for the company,

2-Establish new profit sharing plan without participant direction of investment, just pooled accounts over which the trustee/investment committee makes all investment decision,

3-Add 401k feature to take effect 13 months after the old k plan's termination.

Does the 12 month prohibition begin to run from the day that employees may no longer make elective deferrals or from the date that the old k plan's assets have all been rolled/paid out incident to the termination of the old k plan?

If a plan that has allowed participant directed investments switches that, to trustee/investment committee making decisions over pooled accounts (the individual ones all swept into the pooled account), may the annuity investments be continued but simply be assets belonging to the employee upon whose life expectancy the annuity is based, with the rest of the benefits in the pooled accounts be shared proportionately?

For example, suppose 2 employees. One with $150,000 in benefits, of which $100,000 is an annuity's value and the other $50,000 is mutual funds. The other employee has $75,000 total benefits, all in mutual funds. The $125,000 is swept into one plan account. The second employee has 3/5 (60%) interest ($75,000 of $125,000), and the first employee has 2/5 (40%) interest ($50,000 of $125,000) as well as all of the annuity as held by the plan.

Is this permissible? No new funds going into the annuity, just avoiding penalties for cashing it out. Leaving it as just benefits of the employee on whose life expectancy the annuity is based, with no ability to direct what happens to that annuity.

Any problems?

We may have deposited too much in an employee's (or several employees) HSA accounts for a specific pay period. Since the HSA accounts are individually owned, I don't think the funds can be taken out of the account. Does anyone know if we can offset the incorrect amount with future contributions?

Thanks for any help.

Clients wants to contribute max for individual and family. HCE is the only one with a family. Is this discriminatory? or is it okay because it is offered to all?

could the employer contribution be 100% of deductible for everyone and be okay? rather than a specified dollar amount?

thanks!!

Hello all,

My (until now) clear understanding of the final service provider disclosure regs (issued July 16, 2010) has been that welfare plans are *exempt* from reporting indirect compensation.

At the same time, a service-provider client has received a demand from a welfare fund for indirect compensation information to report on Schedule C. Letter states that the Plan is required to report to DOL any provider that fails to respond. The welfare plan has more than 100 participants, and holds assets in a Trust, so is required to File Schedule C.

The DOL has affirmed that if a welfare plan is required to file Schedule C, then indirect compensation must be reported. See Supplemental DOL FAQs About The 2009 Form 5500 Schedule C, Q/A-23, available at http://www.dol.gov/ebsa/faqs/faq-sch-C-supplement.html

So... that leaves us... where?

There is a requirement that those welfare plans required to file Schedule C must report indirect compensation.

Simultaneously, providers to welfare plans are exempt from the requirement to disclose indirect compensation (which has not even been defined for purposes of welfare plans, and will be the subject of future rulemaking).

My instinct is to respond in writing the plan (actually the plan's financial auditor) that made the request to say that we fully support compliance with the DOL's requirements but that under currently law our service-provider client is not required to report anything.

Does this seem right? Need a reality check.

Thanks!!!

Is there any prohibition against depositing employer contributions on a payroll by payroll basis that will be tested on a cross tested basis assuming there is nothing in the plan document specifically preventing it?

For example one group of employees will receive 10% of their pay for the payroll period and another group will receive 5%. At the end of the year the contributions will be tested on a cross tested basis. If it does not pass the company can make additional contributions for the lower group. Would it also be allowable to forfeit contributions for the higher group in order to pass nondiscrimination?

I think TIAA CREF changed it's reporting on Schedule A. The beginning balance on the Schedule A report does NOT match the ending balance from 12/31/2010. Recently, an auditor asked me to change the schedule A such that the activity did NOT match the Schedule A report. They were using the Statement of Changes in Net Assets instead.

Does anyone know what's going on here?

Has there been any guidance on how plan auditors are to address the required fee disclosures scheduled for 7/1/12 & 8/31/12 in their 2011 auditor's report? Would these be considered subsequent events requiring to be included in the auditor's 2011 report?

Can I cross-reference the Amnerican Funds/John Hancock, etc., contracts for an explanation of the TPA Compensation that we receive?

new plan

2 partners and a few employees

the employees costs are deducted on the partnership return.

one partner has a target normal cost of 60k and the other has a TNC of 100k.

The partners want to deduct 80k each and amend benefits to eventually be equal.

if partners agree i dont see problem with above.

any thoughts out there?

thanks

Do arrangements subject to 457(f) have available a short-term (2-1/2 month) deferral rule similar to the one available in 409A. For example, a 457(f) arrangement says the substantial risk of forfeiture lapses on December 31, 2012 and the payment of the deferred compensation will occur on January 2, 2013. Is the deferred compensation taxable under 457(f)(1)(A) in 2012 (no short-term deferral rule available) or 2013 (short-term deferral rule available)?

Thanks,

Ken

Calendar year PS plan has 2 allocation groups with the allocation %s written in the doc. Other than initial plan eligibility there is no criteria to receive an allocation of employer contribution. Employer is considering amending allocation schedule to add a third group for 2012. It is my understanding that since there is no last day rule or hours requirement for an allocation it is too late to amend for 2012 as all particpants have already accrued right to current allocation schedule. Can the employer consider the new allocation schedule for compensation earned from the adoption date of the amendment and the current allocation schedule for comp earned prior to the adoption date of the amendment?? Thanks.

For small cashouts ($1,000), do you or your clients require proof of age (to determine the present value, etc.)?

Before paying a small cashout ($1,000), do you or your clients require proof of age (to confirm age for present value, etc.)?

To avoid a prohibited transaction, is there any official (or semi-official) guidance on the amount of time that must pass between the sale of an asset to a third party (B) from an individual (A) and then the sale of that asset to the individual (A)'s retirement plan?

We have a large client who would like to name their recordkeeper as directed trustee of their 401(k) plan. The adoption agreement is an FT William prototype. The recordkeeper is saying that they will only agree to be trustee if the employer uses a separate trust agreement, but they don't want to use the FT William separate trust agreement. They have their own that does not appear to be anything generated on the Relius document software that we know they use for their bundled clients. The question has been raised as to whether the client would be able to rely on the FT William IRS approval letter if they are using an unrelated separate trust agreement. The recordkeeper will only say that they can't give legal advice, but that is the only way they will agree to do it and other clients have had no problems with it.

Is this really an issue, or is someone making mountains out of mole hills?

To make a long story short, we administered a DB plan and 401(k) plan for a client for about 7 years.

They left us for 2 years but the new administrator completely dropped the ball and did nothing during those two years.

They came back to us.

We noticed that incorrect distributions were made to a terminee back two years ago. It looks like the plan sponsor just took the PVAB from our 2007 report that was not based on 417(e). In any event, we recalculated her benefit and will have the plan distribute the additional $10,000 to her.

In addition to the DB benefit underpayment, they overpaid the same participant $5,000 from the 401(k) plan.

Can the DB plan reduce her benefit by the $5,000?

Thanks.

A plan sponsor of a small esop is considering acquiring a small company. The plan sponsor wants to use prior years of service with the predecessor potentially acquired employer for vesting(6 year graded)/eligibility purposes(1YOS/Age18). The document touches on affiliated employers as well as Participating employers but I don't see why prior service with the acquired employer can NOT be used for plan purposes when those participants are acquired. The benefits, rights and features of the current participants are not reduced. Am I missing something?

Thanks