Hi All,

I am asking this for a colleague.

Has anyone come across a 403(b) plan that receives employer nonelective contributions in which the employer controls the investment of the contribution, not the participant? The participant deferrals are subject to participant direction in individual custodial accounts but the employer would like to have the nonelective contributions in a separate custodial account in which they select which mutual funds that the contributions will be invested in, similar to typical trustee-directed arrangement in a profit sharing plan. I can’t find anything in the regulations that prohibits this but also can’t find anything that specifically allows for it.

A non safe harbor 401-k with a minimal match is top heavy but the only key employee who made the plan top heavy has done an in service withdrawal (allowable by the document) which makes the plan top heavy no longer. Is there a waiting period that must be satisfied before these monies transferred to an IRA are no longer considered for the testing? Thanks for any help.

If a plan sponsor has a DB Plan with a flat beneit x% of Average Comp for all participants (HCEs and NHCEs), and they also have a 401k PSP, can the 401k PSP be tested on its own for 401a4 since the DB formula is a safe harbor? This is a PBGC Plan so no combined deduction limits to worry about.

Our plan says that participants can defer up to $50,000 and more in the employer allows it. In the past we have allowed Employee to defer more. This year he elected to defer more than $50,000. We now have decided we do not want him to defer more. Can we impose the $50,000 on him even though the year has already started and he elected to defer more?

a small employer (less than 20 employees) has been using an age and service requirement for their 403(b). I understand this is an operational failure under 403(b)(12)(A), but what is the correction principle? I believe the employer would have to retroactively contribute on behalf of the employee who was not allowed to defer for a year, but what is the standard amount, if any? Is it the same as a 401(k), where you take 50% of the pre tax deferrals the employee would have made had the employee been timely included in the plan based on "lost opportunity cost"?

An employee (neither an owner, officer or relative of one) borrows money from the company 401k plan shortly before he is eligible to partipate. Is this construed to be a participant loan once the employee enters the plan? No payments or accrued interest have ever been shown on the loan, which I suppose could be acceptable if the loan is considered to be just a third-party loan that's structured as a balloon note.

This same employee evidently has another loan that is owned by the owner's personal IRA. This IRA is currently being rolled over into the plan mentioned above. It does not appear that this would be a prohibited transaction since the employee isn't a party in interest - would this transaction be legally acceptable? All help is greatly appreciated.

Does anyone know whether the DOL takes the position that, in correcting for late deposits of participant contributions, the DOL's online calculator is only authorized for use if the plan sponsor is making an application through VFCP? That is, if the plan sponsor just wants to calculate and contribute the late amount plus interest and pay the 5330 taxes, without coming in to the DOL under the VFCP--can it still use the online calculator for purposes of determining the interest?

How long does a health insurance company have to implement a QMCSO after they've received it?

A company acquired another company in October 2010. The acquired company did not have a 401(k) Plan. Employees of the acquired company were eligible for the parent companys 401(k) Plan as of 1/1/2011. Do these employees need to be included in the ADP test?

Thank you

Client received the letter from the DOL regarding the disclosure on line 4a of late deposits. The letter does NOT request a response. Are you advising clients to respond or not?

I'm inclined not to respond because they did not request one. If we respond then we will need to show the correction which just gives them the opportunity to disagree with the correction.

Alternatively, they could respond and simply say that it has been corrected.

What do youi think?

ok - I have a non-owner plan participant who turned 70 1/2 on 11/12/2011 & retired as of 12/30/2011. He has been taking monthly distributions from the Plan. A level amount of $2,000 a month for some time now. I don't believe the payments were formally set up as installment payments per se but that's bascially what they have been.

If the monthly payments do not cover the calculated RMD, does the participant have to take a lump sum equal to the difference? I know if a participant receives annuitized payments from a plan that they don't have to take the RMD above and beyond, but I wasn't sure about installment payments.

In this case the payments weren't based on anything other than an amount the participant chose to receive at the time five or so years ago when he cut his hours back. The amount has never changed.

thanks in advance.

Given: 1-owner DB plan

Plan was amended to reduce formula for 2010.

Board of Directors adopted resolution on 1/1/2010.

Effective date is 1/1/2010

Amendment was signed on July 2011.

Question: Is there any problem here?

Thanks for all responses.

Given: 1-owner DB plan

Plan was amended to reduce formula for 2010.

Board of Directors adopted resolution on 1/1/2010.

Effective date is 1/1/2010

Amendment was signed on July 2011.

Question: Is there any problem here?

Thanks for all responses.

We have a one person plan and that participant's benefit is at the 415 Limit.

As of the end of 2011, the plan had assets $5,000 greater than the maximum Lump Sum prior to the deposit of the $22,000 2011 MRC (BOY val). It may be worse now.

The Owner/participant really retired in 2011, so there will be no opportunity to move the excess assets into a DC plan and absorb the excess.

There are no other participants to whom the excess can be allocated.

So the client currently has an asset reversion. And if he makes the 2011 MRC, the reversion gets larger. In fact by depositing the contribution the client loses 50% of the contribution to the Feds.

What are the consequences if the client does not make the 2011 contribution (aside from showing the shortfall on the SB, which doesn't get filed with the 5500-EZ...unless there is audit)?

Does anyone have a legal solution for not making the 2011 MRC?

So the FSA plan document allows medical FSA eligibility with 2 hours worked per week. That said, what if one is making minimum wage and elects to have the maximum 5k withheld from the paycheck? There isn't 5K to be withheld working only 2 hours per week.

Also, what about a situation where there is a change in status from full time to part time? And then there is not enough wages to cover the FSA deduction?

Is the employer "on the hook" for the difference?

Have a 401(k) plan sponsored by partnership. We have calculated self-employment income based on the K-1's from the partnership. One partner is now providing us with additional partner expenses that he claims on his 1040. It is customary to consider these "outside the partnership" expenses in the calculation of self-employment income for the purposes of the ER contributions to the plan? If so, how to others who compute ER contributions gather this information? Thanks for your input.

C corporation has an ESOP. Their corporate charter/bylaws whatever restrict ownership to employees or plan only, so a stock distribution is not allowable. So when a participant is about to retire, (let's say they are entitled to $50,000 at current appraised stock value) I'm wondering what options are available. There were two that were brought up, and as I don't know much about ESOP's, I was wondering if one is "better" than another or if both are even allowable options:

1. The corporation makes a deductible contribution to the plan of $50,000. This cash is paid to the terminating participant, and the participant's stock is then allocated amongs the eligible plan partiicpants just like any normal plan contribution. This seems perfectly normal and acceptable. Is it?

2. The corporation contributes $50,000 to the plan to pay out the participant, but it isn't a deduction. Instead, they retire the stock. Is this allowable? Does it have any effect upon the stock price of the remaining shares in the plan? It would seem that this would be a "wash" and therefore a neutral transaction in terms of stock value (?), but is it even allowable?

We have a client who called and wants to close down their 401(k) Plan. It has been in existence for more than 10 years. The problem has been surrender charges (greedy brokers established plan initially). Every new dollar has to age 10 years before it is not subject to a surrender charge. It is a church group.

They called today wanting to terminate the plan. In our discussion, it came to light they would be implementing a new plan. When asked what type of new plan, they said a 403(b).

My question, does the 12 month rule apply? Am I correct in that if you terminate a 401(k) Plan you cannot implement a new 401(k) plan for at least 12 months? Can they get around it by implementing a 403(b)?

Have a top heavy, safe harbor match, 401(k) plan. Employer is also making an integrated profit sharing contribution for 2011. We have one employee who did not defer, thus did not receive the safe harbor match. Key ee's deferring above 3%. Does this individual get the 3% top heavy contribution plus the regular profit sharing contribution? We are using the "top heavy first" method in Relius. The plan document implies in the Employer Contributions section, under special rules for integrated plans, that the PS contribution must first be allocated to top heavy, then the 3% for integration, then an addtional 2.7% to wrap up the integration, then any remaining, comp to comp. As a result, this individual, who chose not to defer, gets the 3% top heavy plus the profit sharing contribution all other NHEs got? Make sense?

If you are doing a conversion, you have two choices (listed below). Under both choices, the educational aspect of the change would of course be outstanding. All notices would be delivered, etc..

1) Any non-responders will be defaulted into a target retirement fund, or some other QDIA

2) Any non-responders will be mapped over into a similar fund to the one that they originally elected.

For me, I think option 1 could serously backfire in the event that market goes down (which we all know will happen at some point in the long-term). I use the example of the 30 year old who opted for the money market, but got defaulted into the 2040 fund instead, which obviously is very heavily weighted to equities. I also feel like 9 times out of 10 the people who call irate are the ones who lost money. IF they feell they lost money because of anything connected to our actions, well then they are incensed.

I'm not against the QDIA approach for dribs and drabs of money related to profit sharing. It's when it involves peopels life savings (in some cases) that the risk is increased. And to me, the mere fact that you sent them a QDIA Notice will not stop them from suing you. It may ensure you prevail in court, but my number one priority would be to stay out of court in the first place.

And as for mapping, the logic from a fiduciary perspective of placing people in funds that are similar to thsoe they originally elected seems to be beyond reproach. Who could claim that it was unreasonable to move Susan from a money market, or an S&P 500 index, to the same type of fund at the new vendor? Of course Susan had the opportunity to select new funds, but did not. Instead of defaulting into a fund that has no correlation to her original intention, she is being "defaulted" into funds that do reflect her intentions.

I think this topic is critically important because vendors are giving a lot of pricing breaks these days in exchange for using their target retirement funds as the default during a conversion (i.e.., in lieu of mapping).