A defined benefit plan pays benefits to a surviving spouse in the form of a lump sum distribution only if the amount is under $5,000. There is no other form of benefit available to beneficiaries...this is mandatory. Can the lump sum form be eliminated under 411?

Death benefits are ancillary benefits, unless they are part of an optional form of benefit and I see no reason why this wouldn't be an optional form of benefit under the regulations. Any thoughts?

The 408(b)(2) regulations require service providers to disclose detailed information about plan fees and compensation to plan sponsors. In general, plan sponsors must evaluate the fee and compensation information received from the plan’s service providers and determine that the services and fees are necessary and reasonable. In a 403(b) plan that permits participants to make salary deferrals only to one of 7 approved vendors and the participant can direct in any investment option offered by the vendor, what is the sponsor’s obligation to monitor the fees and expenses of each vendor? What must be disclosed to the sponsor by each vendor? What should the participant fee and investment disclosure information look like?

Plan sponsor adopted plan in 2005. Did not report all employees to TPA, did not fully deposit all deferrals. Plan went top heavy in 2008, sponsor has not contributed TH minimums to date. TPA finally gets all the information, revises ADP tests, calculates VCP correction amounts, TH amounts, delinquent deferrals, with earnings, etc. Total tab to correct under VCP is about $100K. Sponsor refuses to make corrections and directs TPA to terminate the plan.

TPA chose to resign because:

1. it won't knowingly prepare an incorrect 5500, and without restoring plan assets, the 5500 cannot be zeroed out.

2. 1099-Rs and distribution paperwork that represents distributions to be eligible for rollover when the plan is known

to be out of compliance would be incorrect.

3 participants have a claim to benefits under the terms of the plan, TPA doesn't want to be associated with this.

Individual (who is an ERPA) who made the decision to resign is getting push back from various parties, but cannot see any way to help the client terminate the plan without some reasonable efforts made to correct known defects.

What, if anything, can a circular 230 practitioner do for this client to get the plan terminated?

Hi all,

We're being told by Datair that 2011 Interim Amendments are "highly recommended" for cash balance plans written on their document, and that they need to be adopted by 12/31/11. Does this ring true?

For those using Datair or other types of CB docs: Are you rolling out interim amendments to be signed by 12/31/11?

TIA.

Scott

An HCE's lump sum is restricted and the partiicpants ends up taking a rollover into an escrow IRA (i.e. an areement that if the plan terminates down the line without sifficient assets, they could dip into the IRA and take some money back). What if a year after the escrow IRA is set up the Plan passes the 110% test. Are all the restrictions lifted on the escrow IRA and it no longer has a potential liability to the plan?

I can't find anything written that states as of what date the allocation group classifications are made. The plan document simply names the groups. If the document has two allocation groups; Owners and All Others, and a participant is an owner part of the year but isn't at the end of the year, which allocation group is he in when it's time to allocate the contribution?

Does anyone have an opinion or legal authority related to the ability of a governmental DB plan to transition to a private DB plan? Apart from PPA funding issues, etc. A private plan was switched to a governmental plan for a variety of reasons, one of which was to avoid PPA funding; however, now the facts may change such that it will no longer qualify as a governmental plan under the IRS/DOL/PBGC tests for such. The goal is to avoid freezing or terminating the plan if possible. We know there are funding issues to address if the change can be made. Thank you in advance.

I'm familiar with the rules regarding excess aggregate contributions. However, if the match is not allocated until after the end of the plan year, is there some way in the regs that would allow the employer to only allocate an amount not to exceed the ACP test limit?

I understand following the terms of the plan, but it seems like a silly exercise to knowingly allocate the excess match to only have to prepare paperwork to immediately distribute the excess to the the HCE. Anyone have a creative way around this?

Thanks.

I have a client with a 401(k) Plan, that wants to terminate the plan at the end of 2011, to start a SIMPLE plan in 2012. The client has had late deferral deposits from 2008 thru 2011, that we will be self correcting and filing a VFCP application. There is 1 participant who has an outstanding loan, which it not scheduled to be paid back until 2015.

If we wait to prepare the termination amendments until after we receive a Determination Letter from the VFCP application, and the participant loan repayments would continue, would the employer be able to start a SIMPLE plan in 2012? All other deferral contributions would be stopped at the end of 2011.

Is this permissible with the understanding that when we prepare the amendment to terminate the plan, the loan balance would either be due in full or taxable to the participant?

Thanks for your help!

Is allowing automatic rollovers a good practice to have for FSA/DCAP? We are a TPA who administer 125 plans. I don't recommend automatic FSA/DCAP renewals, but that participants make new elections each year due to the many changes that can take place with medical and daycare expenses. I have a new broker that is 'selling' automatic rollover (to decrease the amount of paperwork for the group, I imagine). Could I get some feedback with regards to this? Thank you in advance.

In the news section today. PTIN is not required for enrollment. But, it is required if you work on any form not on the excluded list.

http://benefitslink.com/src/irs/notice2011-91.pdf

Do participant statements have to be mailed direct to participant address or can they be mailed to the plan sponsor or to the plan's advisor for distribution? We have a few sponsors and advisors who receive the participant statements for distribution but recently ran accross some information from a compliance answer team that states that the delivery must be direct to participant homes. Is this true?

Thank you!

MR B

Are parent corporations allowed to make matches conditional upon its subsidiaries satisfying certain conditions? For example, a parent corporation will make a match if subsidiary corp. meets a certain level of safety requirements, customer service, etc.? I have not found any guidance on point on this issue. Any comments appreciated!

Just wanted to verify if SSA is required to be filed for Cash Balance plans. I took over a plan where there are prior year terms with balances. Looking on past 5500's some were not reported on SSA.

Is the SSA required to be filed for ESOPs? Recently took over an ESOP plan. Looking at the census there are quite a few employees who terminated in prior years and still carry a balance (which would be expected in an ESOP). Some of these participants where reported on SSA but most were not, which made it confusing. Working on the 2009-2010 plan years not and want to make sure everyone is reported, if needed.

A plan terminated and was fully distributed. The plan sponsor went out of business. Years later, assets belonging to the plan were found. How can these assets be allocated and distributed to participants when the plan and the plan sponsor no longer exist?

Suppose you have a small DB plan that has existed for 5 years and has been top heavy all of those years. The plan is not frozen. Assume there are no former key employees. All non-keys have received top heavy minimums of 10% (2% x 5 years).

The benefit formula is amended to reduce the benefit for the one key employee. The key employee benefits are grandfathered of course. The key employee will not experience a benefit increase for years 6, 7, and 8 due to the reduced benefit formula. Is the plan required to provide top heavy minimum benefits for years 6,7 and 8?

Section 416©(1)(B)(i) indicates 2 percent multiplied by the number of years of service with the employer.

Section 416©(1)© defines years of service and 416©(1)©(iii) provides the following exception:

Exception for plan under which no key employee (or former key employee) benefits for the plan year. For purposes of determining an employee's years of service with the employer, any service with the employer shall be disregarded to the extent that such service occurs during a plan year when the plan benefits (within the meaning of 410(b)) no key employee or former key employee.

I thought the Form 5500 series for 2011 was already out, but I can't find any 2011 DOL Forms. Have they been released and if not, when's the expected release date?

John (who is under 50) worked for ABC Company from 1/1/09-2/28/09 and deferred $5,000. He was then hired by DEF Company on 4/1/09 and worked for them though 12/31/09. He deferred $15,000. He terminated with them on 1/2/10.

DEF did all their testing and closed filed their 5500 on time. John calls up DEF on 11/3/11 (over a year later) and tells them that he exceeded his 415 limit (according to his CPA). He still has a balance in the DEF Plan. What does DEF do? Would it be any different if we were speaking about the 2010 Plan Year? What about the 2008 Plan Year (as it would be over two years)?

Thank you.

I have a client with an individual who was actively participating in a safe harbor 401(k) plan. This person terminated and then was rehired several years later. From what I have researched it appears this former (and newly rehired) employee immediately gets back into the plan and can begin deferrals and receive the safe harbor match.

1. Is there agreement on that assessment?

2. The client is asking if there is an amount of time that must lapse before prior service is disregarded.

From what I am reading the break in service rules only apply to employer contributions. Is it true an 401(k) participant that is rehired is immediately eligible to participate regardless of how long ago they terminated? Is there anything I can provide the client with in writing that supports this?

Thanks