What is the penalty for failing to timely notify the PBGC of a pension funding relief election under Code Section 430©(2)(D)?

Thank you.

Client sets aside funds into an escrow account monthly to save up for their profit sharing contribution which they make in March of the following year. They always put the funds back eventually.

That's what I've always heard, but I just found out that this escrow account is in the name of the plan, not the employer!

With that knowledge, it sounds more like the plan sponsor is using plan funds for their own benefit. Don't they have a prohibited transaction every time they take money out of this account (even though the funds have not been allocated to participants, yet)? Does this just need an interest deposit into the plan and payment of excise taxes? Do they need to amend past 5500s to check the box saying "yes" there is a prohibited transaction that has not been corrected?

Thanks!

A company grants a stock option with typical option features (subject to a vesting schedule and then exercisable over a set period of years with shortened exercise period based on the occurrence of certain events (death, disability, etc.)). However, the option is granted over shares of preferred stock that have a dividend preference, such that the preferred stock will not qualify as "service recipient stock" under Section 409A. Therefore, the exemption for "stock rights" is not available. The stock option also does not comply with the requirements of Section 409A because it is not exercisable solely upon a permissible payment event under Section 409A. Therefore, the stock option violates Section 409A.

A formal IRS correction for this type of failure is not available. Any substitution of a replacement stock option that meets the requirements for exemption from Section 409A would violate the substitution rule under Section 409A. Therefore, the stock option is an uncorrectable failure subject to the penalties under Section 409A. Anyone see a better outcome in this situation?

a company has 150 employees.

30 are HCEs

120 are NHCEs

They are creating a new DB plan and would like to cover the 15 owner HCEs and 35 NHCEs for a total of 50 to pass 401a26

They want to essentially include certain employees, such as lower paid and/or younger ones.

Any ideas as to ways in which the plan can be drafted to choose the various employees desired?

There are dozens of job classifications/ job titles.

I suppose we can name the job titles of every group desired to be in the plan and as close as possible arrive at the desired 50 employees.

thanks

I have a situation where I have 5 different locations for an employer, same industry, 1 owner owns a piece of each the others are all different, and I'm not sure if I have an issue with the above. I don't believe it's a controlled group. I was directed to someone but really didn't want to pay the hourly fee for the answer so I'm hoping someone here can help. Also, the entities are all S corps. Entities are counseling centers in different states, so different patients, staff....

Here is the breakdown:

Owner 1 2 3 4 5 6 7 8 9 10

Location 1 45 45 10

Location 2 50 50

Location 3 30 30 30 10

Location 4 33 33 33

Location 5 60 30 10

Owner 1 wants to establish a plan for Location 1 for now. With the other locations adopting the same plan later or their own plan. Thoughts? No owners are related.

I don't think it's a controlled group, or an affilliated service, but muliple employer I was concerned with and if so, what next. I'm in the midst of setting this plan up.

If an automatic enrollment notification was missed by the employee and he/she subsequently had the money returned within the proper timeframe. Is that 1 pay roll for that employee required to receive a minimal match? What am I missing to not have to give a small year end match?

Savings Plan document defines Compensation using safe harbor definition - wages paid by Employer to Employee as reported in Box 1 on Form W-2, plus elective deferrals under Sec. 402g, cafeteria plan contributions under Sec. 125, and transportation fringe benefits under Sec. 132(f), but excluding expense reimbursements, fringe benefits, moving expenses, welfare benefits, etc.

Is a retention bonus which is paid to an Employee while still in the active service of the Employer eligible compensation for 401(k) contribution purposes?

If an employee signs a timely irrevocable waiver for all Plans of the employer, then they are counted in 410(b) coverage testing as not benefiting. They are not counted in the ADP or ACP tests at all. They are counted in the cross testing of the Profit Sharing contribution as a zero EBAR.

Is this correct? I have read some conflicting post on here.

Tks.

Employer X terminates a SEP one year.

Employer X adopts a 401k Profit Sharing Plan the next. This plan allows for rollovers. SEP money is expected to be rolled into the new plan.

Is a SEP rollover considered a 'related rollover' for top heavy purposes?

Has anyone out there taken either of the ERPA exams this January? Was the exam similiar to the sample exams from 2009 and 2010? Any advise?

Thanks.

Kathy

Does anyone see a problem with the 401(k) loan when the primary residence is changed to a rental? He doesn't want to sell right now because of the market.

Second question: Can he take out a second home loan to purchase a home in the town he has been transferred to?

Participant is employed by Company A which sells it assets it to Company B. So Person A is going to default on his loan because Comapny A does not allow rollovers of participant loans from its plan.

BUT, person A is eligible for Coimpany B's Plan and rolls over their account to Company B's Plan. Company B also allows loans. Can person A take a loan from Companyu B and use the proceeds to roll over to a rollover IRA, thereby eliminating the "default"?

Hi all I am hoping some one has some guidance on this. My late wifes employer was a church affiliated hospital. They operated the 403B,(funded by voluntary employee contributions), since 1992 without a written plan document. which was when she began working at the hospital. She named her sister the beneficiary. She died intestate. The original contract had a spousal beneficiary provision, meaning if she died I was automatically the beneficiary. The original prospectus and the new prospectus also had a spousal beneficiary provision. The employer ceased accepting contributions to the plan June 30 2009, they did not call it a plan termination. They opened up another 403B plan, so it can not be considered a termination. Was the closing of the plan a trigger event? My wife passed away July 08 2009, a week after the plan was closed. The insurance company stalled until Dec 30 2009. The employer then produced a written plan document that had eliminated the spousal beneficiary provision. Is there legal precedent to prevent church plans from eliminating an existing spousal provision? If you have advice on how to fight this please email me. Angel.L.Fernandez@gmail.com

Thanks

I was reading in the EBIA manual under the Non-Disc rules on page 1730 regarding the Key tests. The last paragraph of this page states:

'We believe that Keys may likewise be excluded from the premium payment portion of a cafeteria plan and have their health insurance coverage paid outside the cafeteria plan (i.e., paid by the Key on an after-tax basis or paid in full by the employer if the employer’s health plan is not subject to the Code § 105(h)(2) nondiscrimination requirements), while still being allowed to participate in other benefits offered under the cafeteria plan (e.g., a DCAP).'

Am I understanding this to mean that Keys can be excluded from POP, but participate in other components, in the case of my group, FSA? My group's plan passes all areas except for the Key test and I'm trying to find an alternative for them. If anyone who utilizes the EBIA manual has any thoughts on this I would appreciate any feedback.

It seems that RSA money has become more prevalent in the last few years. Correct me if I am wrong, but I am of the opinion that RSA came into existence as a way for Investement Dealers to entice TPA's to encourage plan sponsor's to consider moving their investments. It was also a way to solidify a relationship between a TPA and the Investment Provider. Therefore, why are some TPA's using RSA funds as credits towards plan admin expenses? It seems as if many IP's refuse to speak to the plan sponsors and will only communicate with the TPA on plan matters therefore creating more work for the TPA. Yes or No? Now with 408(b)2 why can't the IP's just give the little bit of money, (I am talking Micro Plan) from the RSA's directly to the plan and circumvent the TPA, if the TPA is going to do it anyway? Seems that it would save the TPA some disclosure effort.

Boy, here's a strange one (at least to me) that I hope some of you DB'ers might have encountered, or may have an opinion.

Participant retired, 5 years ago. Was not married, and elected to receive benefits in the form of a 100% J&S, with his girlfriend as plan beneficiary and the measuring life for calculating the J&S payment.

Fast forward to now. His girlfriend decided she prefers a girlfriend as well, so he ditched her, and is now married to another woman. He, reasonably enough, wants to name his new wife as beneficiary. The plan document doesn't provide any real guidance on what happens now.

1. It seems logical to me that the plan benefit would not change, and is locked for both amount and duration based upon the life expectancy determined at the time of benefit commencement based upon the jt life expectancy of he and his ex-girlfriend. But what happens at death if he changes the beneficiary, who is a different age than the ex?

2. If I'm wrong on that, how should it be handled? Or if that's really unanswerable, how would you handle it if faced with this? Do you have to do something really involved, like taking the original accrued benefit, recalculating a J&S with the current spouse, then actuarially adjusting the whole thing to take into account benefits already paid and come up with the actuarially equivalent amount commencing now? For you actuaries, if such a result or something similar is required, is this relatively easy for you, or is it a very time-consuming calculation?

AAARGGGHH! Thanks in advance for any input!

I think I have an interesting problem on my hands in relation to a client coming from another firm talking about engaging my firm.

These are the facts as presented:

In March of 2011, an employer adopted a 401(k) plan (non-safe harbor, current year ADP testing), effective March 2011. The plan even submitted for a determination letter and received one. Unfortunately, the employer's internal process and procedure was to rely on their TPA who drafted their plan to tell them what to do to start deferrals and such. The TPA never assisted them with this and thus there were no 401(k) Contributions, matching contributions, or profit sharing contributions made to this plan in/for 2011. I'm assuming that no notices of the existence of the plan were sent to eligible plan participants.

Here are the issues I see presented:

1) Is this eligible for Self Correction? Does the reliance on the TPA for how to handle this plan count as an establish plan practice and procedure?

2) Is this a significant operational failure?

3) What would the appropriate correction be?

Here are my proposed answers.

1) I think this is eligible for self correction. The assertion is that the plan compliance procedure established would be to rely on the prior TPA to assist with these issues. While it's not exactly a good or effective procedure, it's a procedure that is most likely designed to reasonably assure overall compliance with applicable code requirements. I don't believe this is an egregious failure as NO contributions are being made for 2011. The descriptions of egregious failure under the regs suggest that egregious failures are mostly applicable to instances where highly compensated employees get impermissible benefits.

2) I think it's clearly a significant operational failure. When weighing the factors to be considered when determining "significance" listed in the regs, the fact that this error affected all participants in the plan (who also happen to be all the employees), as well as 100% of the assets (none), are enough of a thumb on the scale of significance to classify this as a significant failure.

3) This is where I think the idea of self correction gets even fuzzier. The generally accepted correction for a missed deferral opportunity is to provide the participants who missed their deferrals with half the deferral percentage of their group (either highly or non-highly compensated employees). In this case, the amounts associated with their group is 0. Thus, there would actually be no contribution needed for correction.

Do you think the plan sponsor could get away with calling this a self correction of a significant operational failure, and correct the failure by doing nothing but putting a note in their files explaining this is how they went about correcting the problem?

I'd imagine if they wanted to go through VCP, the most the IRS would probably require of them is to assume a 3% deferral rate for non-highly compensated participants as if they were using a first year current ADP test, but relying on a deemed 3% deferral. Thus, the sponsor would have to make a 1.5% contribution, adjusted for earnings. If the IRS would require this, do you think the client could get away with deeming that Highly Compensated employees would have made a 5% deferral, thus making a 2.5% corrective contribution for the highly compensated employees?

Any comments? Am I way off?

2)

Can the default schedule in a rehabilitation plan include reduction of "adjustable benefits". It is clear that the reduction of adjustable benefits can be provided in a negotiated schedule, but I am not sure about such reductions being in the default schedule.

We have modified our 401k matching rule this year so that commission and bonuses are included in 401k wages (for deferral and matching purposes). With the new 401k rules, I anticipate that several employees will hit the 401k wage limit of 250,000 in 2012. Our payroll company, ADP, is telling me that once an employee's earnings reaches 250,000 in 2012, deferrals will no longer be taken from wages....even if they have not hit the deferral limit of 17,000?

I understand that in 2012 there is a wage limit of 250,000....but I thought this was simply for testing purposes? From what ADP is telling me I could have an employee not participate in the 401k for the first half of the year and if his wages (in the first half) exceeded 250k, then he would be ineligible to contribute to the 401k during the second half of the year even though the employee is below the 17,000 limit?

Is this a law or an ADP setting? Legally, are employees allowed to contribute to a 401k after their earning reach 250,000?

Thanks.

Can we still use the old form 2848 (from 2008) for plan D Letter requests submitted by January 31, 2012?

I also see they've updated the Form 8717 (November 2011).