I have a plan that uses the top paid group election. Company was sold 12/10/2010. My understanding is that anyone who was an owner during 2010 would still be considered an HCE for 2011 even if they don't meet the top 20% compensation definition. Is that correct? Thanks!

For 2010, was the election form required? I have one actuary saying it was optional and elections weren't required (he didn't attach them) and another saying it was required and we were out of compliance on the plans for which it wasn't completed. I can't find anything definitive. Was it required for 2010?

We have a terminated participant in a DC plan that received a $2,000 distribution. The funds were transferred directly to an IRA. It turns out that she was overpaid by $500 (so she should only have received $1,500). We wrote the participant a very nice letter which she ignored, so we contacted her broker. The broker confirmed that she isn't going to pay the $500 back so the trustee is going to make the plan whole.

When we issue the 1099-R should we issue one for the full amount ($2,000 with code G, $0.00 taxable) or two 1099-R's: one for $1,500 (code G, $0.00 taxable) and one for $500 (code 1, $500 taxable) since the $500 was not eligible for rollover? Or?

Any input would be greatly appreciated. Thanks!

I just listended to the IRS phone forum where they went over their questionnaire and the results. They said they are getting a lot of questions on interest rates for participant loans but:

1) They referened the DOL's rules. (commerically reasonable, etc)

2) BUT Prime was NOT reasonable, because only the bestest borrowers can borrow at prime.

3) Prime +1 and Prime +2 was "probably reasonable"

We've always used and always seen prime plus 1 so I'm happy they have backed off the statement of "anything less than prime +2 is suspect." I can see their point on prime anyway.

It is my understanding that these regs only apply to participant directed accounts, yes?

Has anyone requested a BAA from their health plan insurance carrier? If so, what was the response?

I have a DC/DB combo, and we're providing the 5% Top-Heavy Minimum in the DC Plan. Who gets it? Is it only people who work at least 1,000 hours, regardless of their termination date? The eligiblity for both plans is identical.

So for example, I can tell you that anyone eligible for the plan, who was employed on the last day of the plan year gets the THM in a regular DC Plan. Is there a similarly straightforward rule for the 5% DC/DB THM in the DC Plan?

company is bankrupt. what is the correction for failure to fund safe harbor non elective?

The plan document (restated in 2002) provided for a match of catch up contributions (safe harbor match). They have never matched catch-up contributions. Any suggestions on how to correct are appreciated.

Can an employer deduct $5 per payroll from the participant for handling loan repayments to the retirement plan? I haven't ever had a client ask to do this and I am not finding much online. My gut says no...

I have a qslob -A and qslob -B plan in 2010, an hce made over 245k in qslob A in 2010 and was considered an hce for 2011 in qslob a and he made nothing in qslob b in 2010. During 2011 hce terminated from qslob a and was hired by qslob b. He only made 90k in qslob b for 2011 and 200k in qlsob a.

1. would hce from 2010 qslob a be an hce for qslob b in 2011?

2. would hce be considered an hce for 2012 in qslob b?

3. would he be able to take his money from qlsob a?

thanks

On 1/1/2010, mandatory burn of FSCOB and PFB occurred to increase AFTAP to 80%. 5500 was filed by 7/31/2011. Client has now determined that assets 1/1/2010 were misreported and were high enough so that no burn was required. (Problem was that well-known national bank misreported).

Clearly, much needs to be revised. Has anyone been down this road?

The concern is that if Schedule SB is revised to reflect "no burn," the IRS is going to come back and say "uh uh."

Let's assume an employer has a final average pay defined benefit plan. There is a one-year of service eligibility requirement. If the employer amends the plan to provide that participants initially hired after, say 12/31/2012, are no longer eligible, is a 204(h) notice required in that situation? Notice that the amendment would not apply to employees who have not yet completed the one-year of service requirement when the amendment becomes effective.

So this client rehired an employee who previously terminated in 2009. He was put on the 2010 8955-SSA and was rehired in March of 2011. So.....

Does he go on the 2011 SSA as a B with the new acct bal total? Left off enitrely, since he's not entitled to a distribution at this time? When he terminates again he'll go on as a B for that year.

We have a VEBA trust that is running out of money and can't continue in operation. How do we wrap up the VEBA trust? Is there a specific process for this?

If we cannot finish out the year or cover current costs (no money) are the trustees going to be on the hook? The employers?

I know there isn't any statutory answer for this question, so I guess it is more of a WWYD kind of question!

Plan says employer match is based on payroll periods. The match formula is 40% of salary deferral up to 10% of compensation. Plan has 3 partners who receive K-1 and 10 or so common law employees who receive W-2 wages throughout the year. Compensation for common law employee is W-2, compensation for self-employed is earned income.

The partners receive draws or guaranteed payments (not sure which...but I don't think that matters) throughout the year that is paid to them at the same time as the common law employees receive a paycheck. They defer throughout the year based on those draws/guaranteed payments and the client calculates and deposits match, using the amount of the draw/guaranteed payment as compensation.

Typically at year end we just take the preliminary K-1 and calculate what their match should have been for the year based on line 14A. And usually there are no adjustments that need to be made to the match the client calculated because they max out their match.

However, for 2011, the client did not start matching until mid-year. They matched 13 out of 27 payrolls.

If we calculate the match for the self-employed the way we typically would (based on their total deferral for the year and their prelim K-1), they owe $$$$ to the plan for the self-employed individuals. The client does not want to match them for the entire year since they didn't match the common law employees based on the full plan year. And this makes sense to me.....it does seem unfair.

So we are contemplating pro-rating the prelim K-1 number (taking it by 13/27) and only counting the deferral from the time they started matching the common law employees. They will still owe money to the plan for 2 of the partners, but not nearly as much. They are still going to be upset, because as it turns out, no one has ever explained to them (or had to explain to them) that compensation for the partners is earned income; that you just cannot use the draw/guaranteed payment amount to calculate the employer match.

Thoughts? Any concerns? Other solutions?

Thanks!

I have read through many of the othe other posts. My understanding is that generally, A VEBA will have to file Form 990, in addition to Form 5500.

My confusion lies with respect to the flow-through rules mentioned-if the revenues and expenses flow through the corporate entity sponsoring the VEBA, isn't it sufficient to report on the corporate 990, as opposed to a separate 990 for the VEBA's trust?

Suppose you have a small defined benefit plan with 6 participants that has existed for 5 years. The benefit formula is 5% of FAC x YOP. All participants have accrued a benefit of 25% of their average salary.

The 100% shareholder of the company (also a plan participant) wants to start a 401(k) plan for all employees and provide a mandatory employer contribution of at least 7.5% of salary every year.

If the defined benefit plan were amended to continue 5% for shareholders and .5% for all others, would the plan fail 401(a)(26) going forward if there were no new participants? Both plans together would easily pass 401(a)(4).

I know the safest way to go is a fresh start with each employees frozen accrued benefit + .5% going forward. This is the way we will go, but if the plan instead did not have an A+B formula, would it fail 401(a)(26)? No employee other than the owner would have a positive accrual going forward for quite some time. However, all employees would have accrued a benefit of at least .5% for each year of participation under the plan.

Just read that a former co-worker of mine died at age 100 on leap day, February 29, 2012. He was born on leap day, February 29, 1912. So, anyone care to estimate the odds against this incredible parlay?

Need a reality check.

A church-related nursing home wants to adopt an executive comp plan for a key employee.

Since the nursing home is not a 501©(3), I believe that 457(b) is not an option.

Is a 457(f) plan an option for this type of employer?

And if so, are deferral elections possible? I have concerns that under IRS Notice 2007-62, these would be taxable at the time of deferral.

Would employee-only elections still work?

I realize this is an unsettled area, but am hoping someone can help me to be at least a tiny bit less confused than I currently am.

Thanks.