Profit Sharing Plan wants to consider offering J&S annuities as distribution option. Practically speaking it would seem Plan would need to deal with current investment provider to see if it could assist with obtaining such annuity contracts in the event a participant were to elect the same or locate one that can do so. Can Plan charge an electing participant some level of administrative expense associated with obtaining the annuity contract if Plan has to do its own legwork to obtain such annuity contract? If so, what might be a reasonable range for such administrative expense? You can probably tell I don't deal at all with J&S annuities based on my questions, but I am grateful for any help you might provide....

A Form 5307 is being filed for a determination letter regarding a volume submitter DC plan that is being restated, and the question has come up as to whether or not the employer would be exempt from the applicable IRS user fee. The form instructions for the 8717 say that the plan would be exempt if it "was first in effect no earlier than January 1 of the tenth calendar year immediately before the year in which the submission period for the plan's current remedial amendment cycle begins" Is this submission period considered to have started on 5/1/10 and will end on 4/30/16 since the deadline for the EGTRRA restatements was 4/30/10? If this is the case, the plan would seem to qualify for the exemption, as its effective date was 11/1/01 (and it's an eligible employer). In other words, plans effective 1/1/00 or later can be exempt from the fee - is this accurate?

Was hoping to get some help on the following plan(s), which seem a bit messy

Client started a Safe Harbor 401(k) plan effective 10/1/11, but didn’t sign plan docs until 12/1/11. Is that an issue? Client has 1 employee, who they notified that they would be starting a Safe Harbor Plan, but never issued a formal notice. Client has made all of the appropriate 2011 non-elective safe harbor contributions and they have issued a formal notice for 2012.

They also have a separate Profit Sharing Plan, effective 1/1/11.

They would like to file a short plan year for the 401(k) so that both plans are on the same fiscal year and then merge the plans together.

No specific question, but hoping for some general feedback as what is best to do with this plan and for this client.

It is not uncommon for a plan sponsor to have a DB/DC combo plan where the plans are aggregated for testing.

Say the plan provides large DB benefits for the owner, small db benefits for the staff, but provides relatively large DC allocations for staff to pass tests.

Now say the owner goes one step further and provides lilfe insurance in the DB plan tied to the projected benefit. Of course the owner has a large projected benefit and the staff do not (as explained above).

I pose two questions.

1. Is the life insurance death benefit in any way factored in determining the accrual rate or equivalent allocation rate?

2. Would the above type of life insurance be discriminatory on its own, thus preventing plan from passing non discrimination testing?

thanks

a profit sharing plan accepts rollovers in its adoption agreement.

i do not have possession of it's plan document at this time.

If a profit sharing plan accepts rollovers, does it follow that it accepts rollovers from all employees or could it be drafted to only accept rollovers from plan participants and thus employees not yet participating in the plan could not rollover an account into the profit sharing plan?

And if it requires an employee be a participant, then such plan can be amended to eliminate its acceptance of receiving rollovers and thus new participants after the amendment could not rollover money into theplan.

Thanks

We have a client who had a SARSEP for the first half of 2011 and froze the plan per the IRS instruction as of June 30, 2011 and then established an 401k plan on July 1, 2011.

Can anyone provide guidance on how testing is done? Is the DP Test for the SARSEP run for the period 1/1 to 6/30/11 and a separate ADP Test for the 401k plan? Or. do the plans have to be tested together and a single ADP Test run for the entire year?

If anyone has some guidance on this issue, it would be appreciated.

We are looking to redraft adn tighten up our current TPA Services agreement. Does anyone know of where I could find a draft or boiler plate type services agreement that we could modify to suit our needs? Our document provider has one but it is more geared toward daily valuation shops. We are strictly a provider of administration services. Any help or advice is greatly appreciated.

The plan is a frozen 401(k). Has filed for the past 3 years (froze in 2008) with a participant count of 65. The plan year is 7/1-6/30. A corrective contribution to approximately 150 ppts. for a prior year was made to the plan in October 20xx, so that will not affect 7/1/xx-6/30/yy plan year because on 7/1/xx, there were still only 65 ppts. with an account balance. HOWEVER, the service provider put the money in the wrong plan. Therefore, although feasibly, had the corrective contribution been placed in the correct plan in October, there could have been more than 100 (and greater than 120, if the count is right) ppts. with account balances as of the start of the 20yy plan year. BUT, the discovery was not made until the Plan was well within the 20yy plan year, and then money was moved at that time, bringing the participant count to roughly 150 ppts (inclusive of the frozen 65) as of 1/31/20yy. Looking forward to the 20yy plan year filing-do I base participant count on what "should have been" versus what it was on its face (i.e., that because the service provider mistake had yet to be identified as of 7/1/20yy, as far as the plan was concerned, there were only 65 ppts. with an account balance in the plan)? I also note that the plan is terminating, so the 20yy plan year (or short plan year depending on how fast we get the assets out) will be the final 5500 filing.

I have read through the form's instructions, and combed through regs, rev. rulings...I don't see any guidance. So if anyone has encountered a similar situation and can share your outcome, or if you want to proffer some advice, I would really appreciate it.

The situation is that we used 1 YOS & semi-annual entry dates for disaggregation purposes (max allowed), and the plan's entry date was not semi-annual. The IRS auditor is challenging this, saying that we should have used the plan's entry date for determination of the disaggregated group.

Has anyone ever had an IRS auditor challenge this? Any suggestions to 'convince' the auditor this is ok.

Hopefully someone can shed a little light on 415 increases for participants that are receiving benefits under a plan while still active employees. I read both David MacLennan’s articles and Tom Finnegan’s IRS comments on MASD and am still confused as to whether I have an issue or not.

For simplicity let’s assume that I have an active participant who at age 65 elected under an in-service provision to start receiving monthly benefits in 2011. His AB under the terms of the plan was $18,000/mo or ($216,000/yr) but was limited to 415 and only started receiving the IRS limit of $16,250/mo (or $195,000/yr). He has a high-3 comp of $245K and more than 10 years of service and participation. Again for simplicity let’s assume the age 66 2012 415 dollar limit is $206,000 (i.e., the age 65 $200,000 limit AE to age 66). Also, the plan does not have a lump sum distribution option.

Question 1 – Assume the participant is still age 65 in January 2012 can he automatically increase his monthly distribution for January to $16,667 (i.e., $200,000 / 12)?

Question 2 – Assume the participant is age 66 in January 2012 can he automatically increase his monthly distribution for January to $17,167 (i.e., $206,000 / 12)?

We missed a deferral in one paycheck. Can we make it up in the next paycheck?

I know under Notice 2008-113 it is a failure to pay compensation that should have been deferred. There is a special procedure even if the failure is caught and correctd in the same year. However, the examples for that correction involve bonuses--a one time payment. So, clearly, if an amount is not deducted from the bonus, a one time payment, there is a failure. However, in our case we're looking at regular compensation. We will still be deducting from compensation, just a couple weeks later than we normally do in practice.

Do I have an argument here?

If so, does my argument go out the window if the plan or the election form specifies that deferrals will be made proportionally on each paycheck?

Plan is New Comp, using X-testing to get owners to max. PS includes last day rule; plan is also SHNEC.

Plan is having trouble passing testing. There is a terminated employee with low wages. He's getting the SHNEC and therefore the Gateway Minimum. Plan says each employee is in their own group (subject to reasonable classification). This person is the only Janitor in the entire company, so reasonable classification is not an issue.

How do you all feel about an 11(g) amendment to eliminate the last day rule, allowing me to drive the janitor all the way up to 16% of pay, while leaving everyone else at the gateway minimum of 5%?

Something is rubbing me the wrong way about it; I just can't find the rules that say I can't do it.

Given: DB Plan, owner and wife, no employee

Owner dies suddenly without election. Default option is 100% J&S.

Question: What is the value of the DB plan to be included in his estate?

Is it $0?

Thanks.

Has anyone seen a restaurant set up good practices for handling after-tax contributions from tip income? How does the election process, and change in election process handled? How does the employer ensure that a check from an employee for after-tax contributions does not exceed the tip compensation on which it was based?

Can anyone provide some software options for a small company who wants to administer its equity plan in-house? The company only awards restricted stock with service vesting so the administration will likely not be that difficult.

If there are options with varying price ranges/capabilities, that would be especially helpful.

I’m new to the retirement plan world, so please bear with me… I thought I had a good understanding of key employees based on my study materials for certification I’m working on. Now that I’m actually doing testing, there are some different opinions between my coworkers over what constitutes someone being key or not. Particularly under the 1% owner or officer test where you need to look at comp. In the interest of my sanity, this is a plea for help in better understanding this concept.

Here is the scenario: Plan is not top heavy for 2011. Employee is a 4% owner and has always been. In 2010, his comp was only $130,000. In 2011, his comp is $169,000. When determining if the plan is top heavy for 2012, is his balance included as a “key” employee because he meets the key requirements for 2011? There is an example in the ERISA outline book almost exactly like this. My interpretation is that yes, he should be included as key because he meets the requirements for 2011 plan year- which is the determination period for this calculation.

But then the ERISA outline book identifies key employee as those who meet the key requirements for the for the prior plan year. So does this mean he is actually not a key for 2011 (and therefore don’t include his balance as of 12/31/11 as key) because he didn’t meet the key requirements as of 12/31/10? Want to make sure I get this right because it directly affects whether the plan is top heavy or not for 2012.

An employer will occasionally pay a salary advance to employees. I assume that this would be treated no different than any other regular pay. The employee will be able to defer from it - and it is included a plan compensation for 415 limits, ADP/ACP testing, etc.

Does anyone know of anything to watch out for in terms of salary advance pay and qualified 401(k) plans?

Even though a Cash Balance Plan has complied operationally with the meaningful benefit requirement and all participants received the proper allocation, the amendment to increase the NHCE by 1% was never done. Should have been adopted for the 2009 year going forward. Calendar year plan.

This is a very small plan. The increase for each year was probably less than $2000 spread among 6 NHCE. There is one HCE.

The EGTRRA restatement was submitted to the Service, Cycle E. Acknowledgment received but no contact from an agent. The demo submitted with the restatement reflects the correct percentage, but the plan document does not (off by just 1%).

Any suggestions on how to fix? All participants are whole.

Thanks for any suggestions.

A company is going out of business. It has a DB plan and owes 1M if terminated. The company has 500K in assets and does not mind giving the PBGC what it has. Because it will not formally file for bankruptcy, how do I get the PBGC to take over this plan? It does not meet the criteria for a distress termatation. However, the PBGC can take over a plan if it feels assets will be lost. Any help in how to get the PBGC to take over this plan is appreciated.

Does anyone have any experience with a qualified DB plan that allows employees to roll a 401(k) or other qualified plan distribution into the DB plan and immediately convert it to an annuity? Our plan contains that provision but no one has ever done it. Of course, we have not advertised it or pushed it either.

Does anyone have or know of a plan that allows this and where employees actually take advantage of it?

Thank you to those who respond.