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).

Does anyone know of any web-based defined benefit valuation software?

Forgive the studipity of this question, but are 403(b)'s exempt from ADP testing?

Need your thoughts...stock acquisition, Buyer acquires Target mid-year. Buyer assumes Target's 401(k) plan (and intends to merge it into its own at the commencement of the following plan year). Buyer began allocating a profit sharing contribution based on compensation on a payroll-by-payroll basis immediately following acquisition date. Other than the fact that the allocation has excluded pre-acquisition compensation, the contributions have been allocated according to a definition of compensation that satisfies a 414(s) safe harbor.

Under these circumstances, has the contribution that has already occurred been allocated according to a 414(s) definition? Or must we test the employer contributions considering pre-acquisition compensation as well?

I can't find any guidance on this, but there must be a rule! Anyone out there considered this before?

I want to be sure I am reading this correctly-I understand that this does not constitute the official stance of the IRS-but in a presentation on EPCRS, Bhagat clarifies the policy on using forfeitures to fund QNECs for purposes of making corrective contributions. Scenario is that ER failed to w/hold EE deferrals on two forms of "extra" payments, one of which was a bonus payment. The plan uses SH match to be a SH 401k.

Would you agree, based on the excerpt below, that the client can use Plan forfeitures to offset the OOP expense for the QNEC corrective contributions, so long as the QNEC is 100% vested and subject to the distribution restrictions? (I should also point out that the failure only affects one ER in a Plan which covers several ERs-so even if my suspicion is accurate-that they can use forfeitures-those are Plan assets and the fact that they are used to help out one of the ERs makes no difference w/r/t the other ERs?)

"Shifting gears again, this one relates to the use of forfeitures to make corrective QNCs. The question is, can a plan use forfeitures to make qualified non-elective contributions for correcting a failed ADP test? In the past we've been guilty of allowing the use of forfeitures, especially in plans where the plan provides that the forfeitures are used to reduce employer contributions.

Let's suppose your plan fails the ADP test and an employer contribution is required to fix it, we in the past used to say, well, since the plan provides that forfeitures are used to reduce employer contribution requirements why not use the forfeitures as a source of funding of the qualified non-elective contribution. As long as at the time the money hits the participant's that the participant is fully vested we should be good. The employee's been made whole and you're complying with the requirements of the ADP test.

However, it was later on pointed out to us that if we take that approach we're violating a regulation because if you look at the regulations for the definition of qualified non-elective contribution it basically says that the qualified non-elective contribution should come from non-elective contributions that satisfy the vesting and the distribution requirements in the 401(k) at the time the contribution was made to the plan. Since generally forfeitures are derived from contributions that were not fully vested when made, forfeitures cannot be used to satisfy that QNC requirement to correct a failed ADP test without violating a regulation.

One of the correction principles is that you don't want to implement one fix that causes a violation of another code or regulation requirement. So basically our stand is, after being made aware of this regulation, is that for purposes of correcting a failed ADP test if you're using QNC to fix it, the monies for the QNCs can't come from forfeitures.

Now, to make an area of distinction, though, and by the way, that clarification will also be made in the next revenue procedure -if you have an excluded employee problem and you want to use forfeitures to fund the QNCs required to replace the missed deferral opportunity of an excluded employee, there because that's more of a revenue procedure fix as opposed to a regulation required fix, we would permit the use of forfeitures to provide for the employer contributions required to correct an excluded employee problem. So, no for the correction of the ADP test; yes for correction of the excluded employee problem. "

GW's participant fee disclosure form for sponsors is asking if there is a DEsignated Investment MAnager under 3(38) of ERISA. I cant find the definiition anywhere. Anyone have it? It sounds like this is probably not the same thing as a "broker" who probably is requied to get the client to sign off on any changes.

Am I more or less on the right track?

Plan allows multiple loans and loans are not my strong point. Participant terminated last year and 2 loans were defaulted (total $17,000). Plan Sponsor then moved assets and in the process, 1 other outstanding loan was deemed (total $18,000). He never took a distribution and was then rehired. He is now asking for a new loan, with a current outstanding balance of $37,000.

I'm without a doubt confused here, and there are probably issues I'm unaware of, but assuming he can take another loan, with balance 1 year ago of $35,000, would available loan balance be $1,500 (50% of $37,000 - $17,000)?

Suppose you have a small DB plan that was effective 1/1/2007 and only requires 1 hour of service per year of participation to accrue a benefit. Also, suppose the company was started 10/1/2006. Several employees worked more than 1 hour prior to the effective date of the plan (from 10/1/06 to 12/31/06).

A Year of service for benefit accrual purposes is defined as the completion of one hour of service.

The plan provides a benefit of x% of average salary for each year of participation. Each participant has 5 years of participation.

The 415 pct of pay limit should be average salary x years of service. Can the period 10/1/06-12/31/06 be counted as a year of service for 415 pct of pay limit?

Thanks.