I am doing some research on ethics issues in retirement plans. I would appreciate hearing some examples of client requests or other plan matters that caused you to consider the ethics of how to respond. If possible, please provide a story where real names are not used. Or if you can refer me to a source of this kind of information, that would be helpful too. I would appreciate any help.

I have a new client with the following situation:

401k plan (not a safe harbor), it is top heavy, no match or nonelective contributions.

There is one key employee (and he is also the only hce), he defers $5,000 (he is not catch up eligible), the non highly ADP participantion rate is 0%. The key/hce employee then receives a refund of $5,000 to correct the ADP test.

The key makes $150,000. Is the top heavy mininum 3% or is it nothing since 100% of his deferral was refunded? I can't seem to find an answer anywhere.

Thanks

CPC, ERPA, QPA, QKA

My cousin is diabetic and his wife just mentioned to look into life insurance for ds because it is insanely expensive for my cousin now. And he's only 32! Thought it might be a good idea but I have no idea where to start?

The plan terminated 10/15/2011. The termination was not for hardship or other reason that would preclude ADP/ACP testing. If I understand this correctly, the ER must still make the SH matching contribution. Is that SH match subject to ACP testing?

Plan Sponsor has a 401k PSP and CBP. The vesting service for the CB Plan started at the effective date of the CB Plan (1/1/2010) so as of the determination date for TH testing (12/31/2011) there were no vested benefits in the CBP. When performing the TH test do you look at the present value of the vested accrued benefits (in this case, all $0)? Or the present value of the benefits without regard to vesting?

Also, the CBP uses a BOY valuation date. For determining if the Plan is top heavy in 2012 is it ok to use the 12/31/2011 401k balances and the 1/1/2011 benefits in the CBP? Or do the CBP benefits need to be projected forward to 12/31/2011?

I need some guidance and I’m getting conflicting information from two different benefits companies. Possibly, I’m not explaining myself properly to them or I’m just not understanding properly (or they’re someone is trying to sell me something I don’t need!)

My partner (Joe) is 100% owner of two LLC’s, (call these entities A, B).

Both have less than 20 employees each, both are completely different businesses with no employee overlap.

Joe is also an W2 employee of entity X and fully participates in its 401k.

I (Wes) have a C-Corp with S election, (call this entity S) I’m 100% owner of, with no employees (besides me).

Joe and Wes are getting into a completely new business, an LLC, 50/50 owners, and 20 employees (call this entity N).

The conflicting information we are getting is generally centered around the entities being called controlled groups.

Joe and Wes are not related. None of the entities have customers in common nor derive revenue from each other.

Wes has had both a SIMPLE and a SEP (at different, exclusive times) in entity S.

Joe has a Safe Harbor 401k for the employees of A. Joe offers nothing in B.

1) One planner is telling us that Joe must offer the same plan in A and B since they are a controlled group.

2) Same planner is saying that N is formed, the same plan, any plan, must be offered in ALL the entities

3) What’s the truth, if there is black and white truth? (another planner is saying that the entities can have their own plans)

4) What kind of plans should be set up? Considering:

Joe would like to keep maxing out his 401k in X, because of a great employer match.

We will be scrapping the 401k in A since the employees no longer wish to participate.

We like to set up a plan in N for Joe and Wes (where few, if any employees want to participate – so if some sort of mandatory contribution is required, that’s ok).

Wes would like to keep some type of plan in S.

Thanks very much… I have a conference call next week with both planners so any guidance would be helpful.

Previously posted regarding difficulties I was having regarding the implementation of a QMCSO. Payment checks are still going to the non-custodial parent (which is in non-compliance with the QMCSO); however, the ex has started to send me the health insurance checks endorsed over to me - what should I do with these checks?

Facts:

1. 1985 - Based upon #4 below, former participant terminated with vested balance prior to Sponsor/Plan becoming our client.

2. 1985 - Based upon #4 below, former participant's vested balance was properly reported on Schedule SSA.

3. 1988 - Sponsor/Plan became our client.

4. 2012 - Former participant receives notice from Social Security Administration that they had a balance of $850 in xyz Plan in 1985.

5. 2012 - We research all available records, some of which date back to 1996, and have no record of the former participant or balance. No records have been kept prior to 1996.

6. 2012 - We notify former participant that balance was previously distributed (an assumption on our part), and they no longer have a benefit in the Plan.

7. 2012 - Former participant rejects our claim and insists we provide forms for them to obtain their benefit.

Assumptions:

1. Former participant's balance was properly distributed between 1986 and 1995.

2. The Social Security Administation was never notified the benefit was distributed.

Known Issues and Questions:

1. Who has the burden of proof to show the benefits either remains or was properly distributed?

2. Since records are not required to be kept for 20 years, how do we prove the benefit was properly paid should the burden fall on us?

3. Related to 1&2, was there a mechanism to remove someone reported on Schedule SSA when they subsequently receive their distribution?

4. If the answer to 3 above is yes and it was never done (a reasonable assumption considering they received the notice), does it affect who has the burden of proof?

5. If the ultimate conclusion is that we have to pay, do we have to include gains/losses from 1985?

6. If the answer to 5 is yes, how do we calculate that if the investment records no longer exist?

7. What other issues and questions am I failing to consider?

a 401k plan with only deferrals and a safe harbor match as I understand is exempt from the top heavy allocation requirement.

The company then adds a separate and new profit sharing plan and a new defined benefit plan.

All three plans are part of required aggregation group.

the group is tested to be top heavy.

for employees only in the 401k match plan: do they need to receive a top heavy allocation OR is that 401k plan still exempt from top heavy?

rev rul 2004-13 seems to make clear that if within same 401k plan there are profit sharing allocations, the exemption does not apply.

However, I am not sure w/r/t situation above.

thanks

Question (what else?):

Real estate is in qualified plan for the benefit of 3 brothers who purchased it with plan assets long ago when they were the only participants. Real estate was not in an LLC or any other organization, but was held directly by the Plan. One property is a commercial strip mall with only rents as income, & the other is undeveloped land. Now that the company is winding down, they want to roll %ages of real estate into IRAs, one for each brother--maybe into Roth IRAs, but I don't think that impacts the question.

Assume we want to protect the IRAs and their owners by having each of the IRAs be a member of an LLC, with the real estate held by the LLC. How do we get the properties into the LLCs without a distribution of the property from the qualified plan? We can't distribute the real estate directly to the individuals, have them move the assets into an LLC, and then rollover the LLC membership interests into the IRAs--rollovers must be the exact property received in the distribution, or the proceeds from its sale (IRC Sections 402©(1)© & 402©(6)(A)), but cannot be cash or substitute property of the same value.

Any ideas? Or I missing something pretty basic?

Client has a 401k. The client files 5500s for 2008 and 2009. 2010 5500 is filed on 4/5/12. IRS sends letter stating you owe us money. Can he amend the 2010 5500 and mark the box for DFVC and pay the 750?

A plan uses a volume submitter document and is set up as comparability with two groups, 1) one named individual and 2) everyone else who is eligible. The employer is a partnership and the person in group 1 is one of the partners (HCE & Key). He gets a 0% PS contribution and everyone else gets 11%. Does this scenario need to be tested for gateway and the classification/average benefits tests? It's as if the formula is salary ratio with one HCE not getting a contribution, but since the document is comparability, does it need to be tested anyway?

Would the answer be different if the partner was getting 11% too?

Thanks.

year end valuatio scenario.

based on 12/31/2010 valuation 2011

aftap is certified to be 91% before 10/1/2011. at 4/1/2012

aftap is presumed to be 81%. 12/31/2011 valuation is done after 4/1 and

2011 aftap would be less than 90% if calculated and certified resulting in 2012

presumption less than 80%. Is there anythig wrong with

issuing a 2011 minimum funding report without a final 2011

aftap calculation? final 2011 aftap is done when 2011 sb is done

and contributions for 2011 have been made sufficient to have 2012

aftap above 80% so no 436 restrictions arise.

In the following article, it appears that the DOL is ignoring the good work that many pension auditors are doing.

http://www.bna.com/overreliance-limitedsco...s-n12884909164/

Small frozen DB plan provides a death benefit equal to the present value of the accrued benefit. Actuarial equivalence definition includes pre retirement mortality.

Participant defers payment past NRD. Is the deferred benefit from NRA to a later age (assume 68) required to be increased with mortality (using D's)? Document does not specify and past practice was no since there is no forfeiture on death.

I know there is past discussion of this, I have read it. The key word is required.

FWIW, I think the IRS clearly says no for purposes of 415 adjustments.

Opinions please.

A company sponsors:

1. 401k with discretionary match plan

2. new profit sharing plan

3. new db plan

required aggregation group

401k passes discrimination on its own

db and ps plans combined and cross tested to pass discrimination.

say it is a TH group and thus the 401k plan provides TH to those only in 401k plan.

However, since 401k plan not being tested with other plans for non discrimination should they provide gateway?

I dont think so.

thanks

Has anyone heard of a rollover from an FSA to an HSA that does NOT have to follow the rule of: the lesser of the balance on September 21, 2006 or current plan year end balance?

Client is saying the 2006 requirement was done away with.

The 2011 Publication 969 still contains that requirement.

Thanks.

Plan and trust agreement provide that unless otherwise required by law, trustee has voting and tender rights with respect to qualifying employer securities in the plan. I see nothing in ERISA or the Code that would require a pass through vote on whether 401(k) plan should sell qualifying employer securities of a public company to an independent buyer.

Any thoughts?

I have been trying to locate a good treatise or some regulatory guidance regarding the process for voting employer securities of a public company (held in a 401(k) plan) in the context of a stock sale. It is clear that the trustee is subject to ERISA fiduciary standards in voting and tendering stock held in the plan, but I am wondering if there is a source discussing the potential securities law issues (including any procedural issues). Also, it appears to me that although not specifically required, an independent trustee is advisable if trustee is part of company management?

An employer has both a general purpose FSA and a limited purpose FSA. We just got an email from the employer saying that an employee has had a status change and is moving from the copay plan to the HDHP plan. She wants to change her general purpose FSA to a limited FSA and start making contributions into the HSA instead.

Has anyone ever heard of anything like that?

I have not.

Thanks.

I have a 401k plan with the owner and spouse only in the plan. Both are over age 70.5 and both have separate account balances and have been taken out RMD's the past few years. In 2012 the spouse passed away. There were no distributions taken out prior to her death and both still have a balance in the plan. Who should the 2012 RMD for the spouse be payable too?