Is there a safe harbor? If not, will HCE's forgo the tax benefit?

If compensation is earned in the last pay period for the year but not paid until the next year, which year would this compensation fall under?

I have a post-NRA actuarial increase 401(26) and 410(b)/401(a)(4) scenario I’d like to get people’s thoughts on.

I have a plan with an active career average benefit formula, (annual accumulation plan) with two participants entitled to a benefit of 13% and 0.5% of plan year comp respectfully. Both participants have compensation and have worked the hours required for a benefit accrual. The participants’ post-NRA actuarial increase is greater than what they would have accrued under the benefit formula.

FIRST, in regards to 1.401(a)(26), I would think they are considered benefit. Under 401(a)(26)-5, it states that in general "an employee is treated as benefiting under a plan for a plan year if and only if, for that plan year, the employee would be treated as benefiting under the provisions of §1.410(b)–3(a)".

Under 1.410(b)-3(a)(2)(iii)(F), an employee is considered benefiting if "The employee has attained normal retirement age under a defined benefit plan and fails to accrue a benefit because of the provisions of section 411(b)(1)(H)(iii) regarding adjustments for delayed retirement." I read 411(b)(1)(H)(iii) to basically say that the employee benefits due to the actuarial increase.

SECOND, assuming they are considered benefiting, they would need to be included in the 410(b) and 401(a)(4) tests. Under 1.401(a)(4)-3(f)(3), the general rule indicates to me that the accruals for the plan year are taken into account; it states that any actuarial increases in an employee's accrued benefit solely because the employee has delayed commencing post NRD may be disregarded. In reviewing the examples in the code, it looks to me that the benefit accrued based on the benefit formula would be used for testing.

Any thoughts would be helpful. Thanks!

Jeff

A participant is hired on 1/3/2012, the first working day of 2012. eligibility is 1 year and quarterly entry dates. Would this participant enter the plan on 1/1/2013 or do they have to wait until 4/1/2013?

I have a client with a 401(k) plan that is switching it's investment custodian. They just received the following message from the custodian they are switching from:

We received the signed discontinuance letter and I noticed that there was a request to issue an invoice for any outstanding charges. Unfortunately, it is not possible to create an invoice for upfront payment of outstanding fees because under current tax law, the payment of the discontinuance charge may be considered a plan contribution, rather than a payment of plan expenses. If this happens, there are several issues that may need to be addressed, such as:

- whether the terms of the company's plan document allows such contributions

- whether the payment has to be allocated into participant accounts in accordance with the plan's allocation formula

- whether the allocation violates the Code Section 415 limitation on contributions

- whether any non-discrimination requirements may be violated

- whether the company will be able to deduct this as a plan contribution

- even if this is considered to be a reimbursement of plan expenses, John Hancock is not able to reflect this payment in the Schedule A report.

To avoid any of these potential issues, it would be advisable to adhere to the terms of the contract and deduct the outstanding charges at time of discontinuance.

Has anyone had to deal with this situation before? I would have thought that the discontinuance charges would be considered simply plan expenses that could be paid for and deducted by the Plan Sponsor.

Thanks for the help.

I have a multiemployer defined contribution plan that will likely make a submission under VCP. My question is regarding payment of the fee. Of course, the fee is paid by the Plan Sponsor, but in the case of a multiemployer plan, I'm not sure exactly how this should be handled. Should the sponsoring labor organization and the participating employers pay the fee? Can plan assets be used for a multiemployer plan? Any insight would be appreciated.

I had a client ask me whether an agreement was structured correctly for the company to receive a tax deduction for the separation payments. How can I tell? Isn't the employer always entitled to a tax deduction for compensation paid (and reported)?

I'm revisiting 404(a)(7) and the deduction limitation where DB & DC plans are involved - 404(a)(7)©(iv) tells me that PBGC covered plans aren't addressed by 404(a)(7) , i.e. I guess only the individual limits are applicable - for the plans that do fall under (a)(7) , it looks like :

the combined plan limitation = max ( 25% of comp, max( MFA, FT-Assets)) , where MRC = Min.Req.Contribution , FT= Funding Target.

If the only DC contributions are deferrals, then the individual limitations apply , e.g. 404(a)(3) and 404(o) .

If DC contributions are <= 6% of comp , then again the individual limitations apply.

If DC contributions > 6% of comp then, only counting the amount of DC contributions > 6% , the combined plan limitation expressed above is used.

I realize that WRERA is ancient history but would appreciate knowing if the above interpretation is on track and, if not , hopefully someone will provide some insight.

thanks in advance .

I know 5500 reporting used to be required, but are they still subject to NonDiscrim rules?

I have a plan that terminated in 2011 so all participants were paid out in 2011. Do I still need to file an SSA for 2010 with people with a vested benefit even though I know they were already paid out in 2011. It seems foolish to report them this year just to remove them next year. Any thoughts?

The client recently identified that they withheld elective deferrals from participants' 12/24/2010 payroll but never deposited the funds into their accounts as they should have.

I've explained to the client that they should seek legal counsel to determine the most appropriate way to address this correction and have also forwarded them the prescribed correction VFCP procedures taken from our Q&A on timely deposits.

The client has subsequently forwarded VGI a regular contrib. file with these previously deducted deferral amounts which rejected in our Recordkeeping System because the additional amounts in 2011 put participants' over the 402(g) limits.

Questions:

Q1. Since 2010 plan year has already passed, should these missing deferral amts. now be returned to the participants along with corrected W-2 tax forms for that tax year?

Q2. If the answer to Q1 is "yes," should the client deposit (read as "fund") those unposted EE amounts into their QNEC source along with the associated earnings?

Q3. If the answer to Q1 is "no," how should those EE deferral monies be posted to the participants' accounts without impacting prior year testing/tax related issues?

The client recently identified that they withheld elective deferrals from participants' 12/24/2010 payroll but never deposited the funds into their accounts as they should have.

I've explained to the client that they should seek legal counsel to determine the most appropriate way to address this correction and have also forwarded them the prescribed correction VFCP procedures taken from our Q&A on timely deposits.

The client has subsequently forwarded VGI a regular contrib. file with these previously deducted deferral amounts which rejected in our Recordkeeping System because the additional amounts in 2011 put participants' over the 402(g) limits.

Questions:

Q1. Since 2010 plan year has already passed, should these missing deferral amts. now be returned to the participants along with corrected W-2 tax forms for that tax year?

Q2. If the answer to Q1 is "yes," should the client deposit (read as "fund") those unposted EE amounts into their QNEC source along with the associated earnings?

Q3. If the answer to Q1 is "no," how should those EE deferral monies be posted to the participants' accounts without impacting prior year testing/tax related issues?

We have a new 401(k) plan just joined(as of 07/01/2011) the exciting control group that was permissively aggregated in 2010. They are all prior year testing method plans and aggregated % are 3.05(ADP)/2.06(ACP). Since a new plan is using prior year testng method, we use"deemed 3%" for their first plan year. I think that the new plan's "deemed 3%" will NOT effect 2011 weighted-average aggregated % since # of NHCE from prior year is 0(new plan as of 07/01/2011). Do we need to calculate weighted-average aggregated % for 2011 because of the new plan?

After an annuity commences to an alternate payee, does anyone know how the PBGC limits apply if the plan is terminated in a distress termination? Is the alternate payee's benefit combined with the particpant's benefit in determining the limit or do the limits apply separately?

If a cycle A defined benefit plan is on an individually designed document for EGTRRA compliance but expects to use a volume submitter when they restate for PPA, can Form 8905 (dated April 2006) be used to extend the deadline for the PPA restatement? If so, what date should be used as the submission date under Line 4 of the form? (Or should it be left blank?)

Thanks

Therese

Hello,

Does anyone email the PDF copy of Form 8955 for client's signature? Or any other tax forms that has bar code on them, and must be submitted in hard copy?

My normal procedure is - when a form has a bar code on them, I always print out, and mail the forms for client's signature. Because I thought that PDFing the form may cause some issues with the bar code, and it could be rejected by the IRS.

But now the dealline of the Form 8955 is approaching, I would like to know if anyone emails the forms as their normal procedure.

Can anyone help?

Thank you.

ML

Does everyone agree that I should use a 2010 form with the short 2011 plan year entered to file the SSA data? i.e., similar to the treatment of the 5500 reporting?

Hello

I am hoping you folks can help me.

I made an idiot mistake signing up for my FSA in Dec. I calculated my needs based on my Spouse and I - BUT, my spouse is same-sex and therefore not eligible. I will now be very over-extended in the contribution.

OOPS

I would like to call/write our HR Dept and admin of the FSA explaining the mistake and asking for amount to be reduced. I would claim mistaken information. The online enrollment had a drop down on coverage labeled "Spouse/Domestic Partner" which I used ot order my partner a Debit card. They sent the card. Evidently they think my partner is covered too!!

Can I get any help? Are there any rulings I can point to to support my claim? It is very early in the year - we haven't even been paid yet or had a deduction.

Thanks in advance for any help!!!

We are administering a very small plan with two related owners and a few contributing participants. The plan holds privately-held company stock which is in the accounts of the two owners. When they get a fidelity bond, are they required to get a bond to cover the stock even though it is in the owners accounts and let's assume would never be offered to the other participants? Or is a bond covering the other assets of the plan sufficient?

If an active participant is annuitized (frozen plan), is not an owner, never started to collect a pension, and continues to work, is he/she required to take minimum distributions following annuitization?

Is the answer different if the plan is being terminated versus not terminated?