On 12/1/09, a group of employees spun out of a larger plan. It was an asset sale and the plan was NOT considered a successor plan. The new plan has immediate eligibility, immediate entry, 100% vesting.

For 2009, No HCEs. For 2010 No HCEs.

Now for 2011, we have HCEs. (Prior Year Testing). When applying the "otherwise excludable" option, do we use 12/1/09 as the DOH for all ees that came over as the date to apply the 'otherwise' excludable option? This would mean everyone would be considered "otherwise" excludable. Or can we use the original DOH from the previous employer?

The document has the following language: The Plan Administrator will determine the appropriate manner in which the ADP test is to be applied In the enventof a merger, spin-off, or asset transer involving the Plan, based upon such authority (if any) as may be issued by the IRS.

My gut tells me that they should use the 12/1/09 date since they decided not to consider compensation for HCE purposes.

Any thoughts.

This topic is strictly to determine which employees if any are excludable for testing (coverage and non discrimination)

A doctor starts his business 6/1/2011.

Calendar plan and fiscal year.

On december 30 2011 he adopts a pension plan effective 6/1/2011.

The plan provides 21&1 elig, but those employed on 6/1/2011 enter plan on that date.

The doctor and 4 employees have hire dates of 6/1/2011.

1000 hours is required for an accrual.

However, since it is a 7 month plan year that amount is reduced to 583 for 2011 (just thought of this now).

2 of the four employees terminated in 2011 after completing 583 hours (less than 1000).

So, in effect each employee would have completed a plan year of service for accrual purposes.

They terminated prior to the adoption date of plan of 12/30/2011.

So must the terminated employees be counted for testing?

If they never become participants, then clearly it would be "no".

However, since they were employed at 6/1/2011 and if they were considered participants then it seems they should be included in the testing counts.

Re: otherwise excludable employees:

Can we deem the employees with 1000 hours in 2011 as non excludable (even though they completed 1000 hours in only 7 months) and the terminated employees who worked less than 1000 hours as otherwise excludable?

(Also just thought of this) And lastly, if we give the owner and all four employees the same accrual rate for 2011, then there is no issue re: coverage and non discrimination and then the terminated employees would have non vested terminations and $0 distributions.

Ideally there would be a cite that provides that if an preson is terminated at time of adoption they do not have to be included. I'm thinking that with less than 5 years past service provided they could be excluded.

Thanks

Does anyone have experience terminating a cash balance plan?

If the accrued benefit is equal to the hypothetical account balance, how do you handle the disparity between the total actuarial value of plan assets and the total hypothetical account balances of all psrticipants?

I have been out of the 409A loop for a couple of years so I am a little rusty. I have a question that is not specifically related to 409A but touches on deferred compensation so 409A may be implicated.

Can receipt of restricted stock (NOT restricted stock units) be deferred?

Example: I am awarded a restricted stock award that vests in three years. Can I be given the opportunity to defer receipt of the shares until I, for example, retire?

I don't think so because under Section 83, the shares are transferred to me at grant and when the restrictions lapse I can sell, etc. them. That's when they are taxable.

Anyone have thoughts?

This has been asked before in previous posts, but I'd like to ask again.

As applied to professors and adjuncts, is there any justification for using something other than actual hours, an equivalency or elapsed time to calculate hours of service for eligibility purposes? I don't think there is, but welcome thoughts on this. (I'm referring to a plan that applies a year of service/1,000 hour requirement for employer contributions.)

In Reg 1.403(b)-4(e), there is guidance regarding how to calculate a "year of service" for purposes of the special catch-up contribution. I don't think that applies to 410(a) year of service determinations, but again welcome comments.

I believe that a payment made in the event of a "change in control" (not a 409A-compliant definition of change on control but a strict definition) can still constitute a "substantial risk of forfeiture" for purposes of using the short-term deferral exception. However, I can't find this anywhere in black and white. I have been charged with finding some authority that says this. Can anyone help out? Thanks in advance.

The plan participant requests a hardship for the purchase of a principal residence. He signs all the paperwork, needs the check for the closing so the Plan Sponsor has the check cut from the plan with the understanding they would get the HUD statement as backup once the deal closed etc.. Participant gets to closing and the deal falls through! Now the participant wants to put the money back into the plan to avoid paying taxes and the 10% early withdrawal penalty, and wants to start contributing to the 401(k) again. Do you know of any "mistake in fact" allowances (or something) that would allow the reversal of this "hardship" withdrawal that should never have been approved? We can't find any guidance on this anywhere.

409A has a broad reach - - - one IRS official stated that the definition of deferred compensation is "frighteningly broad and deceptively simple" since it covers things like tax gross-ups, taxable medical care, etc.

Can the same be said (at least until 457(f) guidance comes out) about 457(f)? My impression is that 457(f) only covers true elective and non-elective deferrals of cash, and was never applied to things like the value of taxable medical care, reimbursements, etc.

Thanks.

EE hired 1/14/11, plan has a age 21 and 1 year elig, so he will get in 7/1/12 (semi-annual entry dates). Plan is cross tested P/S and the er does give allocations of P/S each year.

I assume that the guy didn't want to give his age in fear of discrimination (I have seen a photo), but I can't see how we can get around NOT having his DOB or at least year of birth.

Anyone know of anything out there that can protect the ER/Plan Sponsor so they can ask for this info for the plan?

I hope this is a simple question for someone -

Cafeteria plan document requires that in order to be an eligible dependent, the child must have been adopted or placed for adoption prior to attaining age 18.

Is this requirement that the adoption have occurred prior to the child's attainment of age 18 prescribed by US tax code, or is it just a plan provision?

A participant recieves a lump sum payment from a qualified plan and rolls it over to an IRA. Participant is advised that he received too much money. Attorney for the plan notifies the IRA provider of the overpayment and requests its return. Is the IRA provider obligated to return it? Does the provider need the participant's approval to return the overpayment?

I have always asked my clients to sign the "Application for Extension of Time to File". Is a signature really necessary? Is there an automatic extension if the "tax filing" has been extended? If so, do we still need to file a Form 5558.

Simple questions I'm sure, but I have never had a client not want to sign

Does any one have any experience with a spin-off of about half the participants to a second plan?

Let me be clearer. Plan ABC has 150 participants and attaches CPA-audited financial statements to its Form 5500. In mid-2012, about 75 of the participants and their account balances are spun off to new Plan XYZ. For 2012, Plan XYZ would not have to attach CPA-audited financial statements to its Form 5500 although Plan ABC would. For 2013, neither plan would have 100 participants and thus no audit.

Does it matter why the spin-off occurred?

Could it be only to avoid any audit requirement for 2013?

Are there regs or court cases on point?

deleted

Question regarding if EAP should be listed as a separate line of coverage for election of continuation coverage under COBRA:

EAP (which includes clinical visits) is offered to all active employees. Cost is combined with medical premium-equivalent rates, and employee pays a portion of the cost. (Employees who opt out of medical also have access to the EAP - the Employer just absorbs the cost.)

In practice, if a terminated employee elects COBRA continuation of medical coverage, EAP eligibility continues also.

Should we instead be permitting a separate election for EAP, such that a continuant may elect EAP without electing medical coverage?

I have an ESOP client that in the 2/28/2011 pye give a person a contribution for the pye 2/28/2010 as a self correction. This person was a rehired in the 2010 pye who should have re-entered upon rehire and worked >1,000 hours. So they should have been given a pye 2010 contribution.

I have now found as we were estimating the pye 2012 contribution a person who was rehired in the 2011 pye who worked >1,000 hours. So this person should have been given a pye 2011 contribution.

So if one self corrects the same problem two years in a row that would seem to not work for self correction.

What is the risk? After all a VCP filing would demand the person be corrected exactly as we would self correct.

It seems like the risk is VCP might demand a fine be paid to avoid disqualification.

Any insight would be helpful.

Does anyone know where I can get a copy of this publication in english?

Hello all,

The 100% owner of company A owns 100% of company B (controlled group). He earns 100K from company A, and 80K from company B. There are no non-owner employees in company B.

Company A maintains a 401(k) plan. Company B is not a participating employer.

For the ADP/ACP testing purpose for the plan maintained by company A, what is the compensation do I use for the owner? Is it 180K or 100K?

The Plan -

- Corbel volume submitter

- Document defines 414(s) compensation to be used for non-discrimination testing

- The definition of compensation in the document is W-2, which I use for the allocation purpose (for profit sharing contribution)

My conclusion was to use the 180K as the definition of 414(s) compensation from my research was to include all the compensation from the related employers. But someone asked me, if the coverage is not an issue, and therefore you don't aggregate for the coverage, and therefore you don't aggregate them for non-discrimination testing, then why combine both compensation?

So, now I am questioning the relationship between the aggregation of coverage and non-discrimination testing, and if that affects my original question of the compensation that has to be used for the ADP testing. I am thinking whether you aggregate for the coverage or not, the 414(s) compensation that has to be used for the ADP/ACP testing, has to include the compensation from the related employer.

Would you please help?

Thank you.

ML

A client let an employee into the 401(k) plan in 2011, before their 1/1/2012 entry date. They don't want to change the plan provisions. They want the employee to take a distribution to correct the error. How would this appear on a Form 1099r?

Thanks for any input

I have calculated what I think to be the "optimum" amount of earned income that a 50+ self-employed business owner can make in 2012 in order to be able to receive the maximum annual addition (i.e., $55,500) in his/her solo 401(k) plan. I came up with $174,158.30.

Was wondering if anyone else has made (or will make) this determination and confirm my calculation.

Thanks!