I have been asked to isolate exactly where in the federal laws it says that elective deferrals in a qualified 401k plan are deductible. So far, I have cross-referenced IRC sections 401(k)(2)(A) and (B), 402(g)(3)(A), 402(g)(a)(8), and 415©(1) and (2). Although I did not expect the references to be very direct, I was hoping for something a little more useful. Are there any other areas in the laws that more clearly describe how deferrals are technically considered employer contributions and, therefore, deductible?

Plan Sponsor with both a 403(b) Plan with employer contributions and a Defined Benefit Plan. The DB Plan was frozen to new entrants a few years ago and new hires are given a 4% contribution in the 403(b) Plan instead. However, in testing the DB Plan for Coverage and Nondiscrimination, the 4% Employer Contribution can't be considered and both tests fail, absent correction. One solution would be to replace the 403(b) Plan with a 401(k) Plan, which would allow the employer contribution to be used and the PLan to satisfy both Coverage and Nondiscrimination. Another fix would be to remove all HCEs from the DB Plan, but this would accelerate the eventual failure of the Minimum Participation requirements of IRC Sec. 401(a)(26) from about 10 years down to 3 years, which is an undesirable result.

What other solutions are Plan Sponsors using in this situation?

Also, this has occurred for the 3 prior plan years (we were not involved with this until this year), so a retroactive fix for those year is needed. What have others done here?

If you need more background information to reply, please post and we will happily provide it.

Thanks in advance for any help or comments.

Can anyone refer me to some guidance or best practices regarding the limitations on frequency for trading employer stock in a plan with participant directed investments? The 404© regulations require (for purposes of 404© protection) that participants/beneficiaries be permitted to give investment instructions with a "frequency which is appropriate in light of the investment alternative's reasonably expected market volatility." What is appropriate with respect to an employer stock fund, which is generally considerably more volatile than a mutual fund? One month? Two months too long?

I am aware of the regulations under under the statutory diversification rules of Code 401(a)(35), but have not considered how relevant they are to my question.

Any thoughts are welcome!

Have a non-owner who is still working for the Co. (continuous employee since 1980). He took an RMD in 2010 but doesn't want to take one in 2011. Can a participant do that - stop and start? OR Once you start do you have to continue? Tried looking it up and couldn't find anything

Thanks in advance!

The 2006 regulations regarding "disproportionate contributions" (applicable to "targeted" or "bottom-up" or fixed-dollar QNECs) can be separately applied to excludable and non-excludable employees (considered separate "plans" under the regs), can't they? It seems they could be, but I haven't been able to find any direct reference to it. I understand that the plan document would have to allow for this. Otherwise, fixed percentage allocations would also be subject to the restrictions, and allocations would be made to NHCEs not included in the failing test.

Can the employer and pension fund agree to extend the deadline for the employer to commence arbitration? I recall that PBGC Regulation 4221.36(b) used to allow for this provided that the fund had already made the assessment. Thanks.

I'll probably be embarrassed when I learn how obvious it is, but I always end up finding this out third hand and late. When and where can I find out what the mileage reimbursement rates (Medical FSA) are for 2012?

Facts:

- Plan allows for two loans outstanding at a time (for any reason)

- Participant has $100,000 balance

- Participant takes $20,000 loan for 5 years (payments have not started)

- bi-weekly payment is $170

Participant wants to pay a lump sum payment (outside payroll) of $15,000, leaving a balance of $5,000. He would like to re-finance the loan based on the $5,000 balance. This would result in a much lower payroll deduction (down to approx $40 a pay). can this be done? Would the new loan still be taken for 5 years. Again no payments have started.

He also wanted to know if he could transfer $15-$20k from an IRA to the 401k plan and count that as a lump sum payment. I assumed that answer to be no.

For ASO plans, how do you know if you need a Schedule A or a Schedule C?

Last year, the carrier sent us information for a Schedule A and this year they are saying we only have to prepare a Schedule C. From what I can tell, the plan design hasn't changed. They are saying the requirements have changed.

Thank you for your help.

Spousal consent is required when money is leaving the ABC Plan (MMP), but the plan's installment form did not have a section for spousal consent. Being new to the relationship I inquired with the client if there was a reason why there was not a spousal consent section on the plan's installment form.

As a result the client told me that they do have participants provide a spousal consent wen a termination is requested which is generally when an installment would be elected. The client has asked if it was necessary to have a spousal consent provided again if a change is being made to the setup of installments which is usually why a participant would be sent/complete an installment form.

Question: Do we need to get spousal consent again if any kind of change is being made to an installment payment setup? Any guidance would be helpful?

A Participant terminated from the ABC Plan on 2/28/2011 and rolled their money out of the ABC Plan into an IRA ($25,384.49). The non-vested money was then forfeited. The participant realized that they had an excess deferral in the amount of $786.02 and asked for the excess deferral to be distributed out of the ABC Plan but the plan does not provide for the distribution of excess deferrals. The participant took a distribution of $786.02 from the IRA as an excess deferral.

The participant has subsequently been rehired in the ABC Plan and would like to have forfeiture reinstated. Typically, the entire amount withdrawn needs to be restored, even if the part has to make up that amount out-of pocket. Two questions arise:

Question: Should the $786.02 be included in what is paid back to the ABC Plan in order to have the nonvested money reinstated?

Hi,

We have a small money purchase pension. Two participants were missed for a number of plan years. We are going to correct under VCP. I have read EPCRS and want to make sure I handle this correctly.

We will be depositing missed employer contributions and missed earnings. Regarding the missed earnings, we have plan records and will be allocating the rate of return earned by the Plan for all years. In years that there is a loss, we will be allocating a loss. I don't see anything in EPCRS that prevents us from allocating loss earnings.

Regarding allocating a loss on the missed contributions - does everyone agree that this is allowable? Just want to make sure that I haven't missed anything which would prevent me from doing this.

Thanks so much.

Employer sponsors a profit sharing plan that has a PYE of 6/30. In February 2011 the owner took $100,000 (he's a participant) as an in-service distribution. The plan is valued annually and we saw the disbursement (which we finally rec'd confirmation of today) when we worked on the asset recon in early September. Owner was age 63 at the time of disbursement. Plan doc states that in-service W/D is allowed at NRA, which is 65.

I am going with the assumption that he can't pay it back (the question from the broker this morning was "what if he can't pay it back?" so.....). The plan year has closed, so we can't amend to change the age for in-service w/d for the PY in which the distribuiton was done.

So, what happens for the PYE 6/30/11 with this prohibited transaction? When reconcilng, log as a payable, even though it might not get paid back?

If we amend the plan in the current year, does that help (since it "stops" the prohibited part of the transaction in the current year)?

Ugh what a mess! Your thoughts are appreciated!

Spousal consent is required when money is leaving the ABC Plan (MMP), but the plan's installment form did not have a section for spousal consent. Being new to the relationship I inquired with the client if there was a reason why there was not a spousal consent section on the plan's installment form.

As a result the client told me that they do have participants provide a spousal consent wen a termination is requested which is generally when an installment would be elected. The client has asked if it was necessary to have a spousal consent provided again if a change is being made to the setup of installments which is usually why a participant would be sent/complete an installment form. I thought that we would want to get spousal consent if any kind of change is being made to an installment payment setup, but I wanted to see if anyone had any thoughts with respect to this matter.

Has the IRS decided whether an employee can use FSA to pay for a membership for an Air Evac?

Not the ambulance trip cost but the membership that discounts the cost?

An active participant died in 2007.

there was no designated benny other than his living trust.

plan provides that if no benny then the death benefit must be distributed by end of 5th caendar year following death.

so it seems that the distribution must go to his estate by 12/31/2012.

he would have reached 70 1/2 in 2010.

so if lump sum goes to estate in 2012:

does estate then pay required taxes?

does it have to go to a benny in will immediately?

other views?

perhaps this is all for the tax advisor to decipher.

thanks

Big plan, prior yr tested, discretionary match, off calendar yr plan. Employer always makes the match. Prior to EGTRRA restatement, match was 100% vested and doc allowed testing with deferrals under ADP Test. With EGTRRA restatement, 3 yr cliff vesting put on match for employees hired after a specific date.

Questions... (1) if I do not have any participants who fall under the new vesting schedule receiving a match, can I continue to test the match with the deferrals under the ADP test? (2) if I have participants who will now have match subject to vesting in the test, do I need to test my match under ACP? I think yes, but everyone or just the vested match? or even if I do not have any non-vested match participants, SHOULD I start testing match under ACP due to EGTRRA restatement?

AND (3) because it's prior yr testing, what would my prior year ACP be? 0%? I cannot use the assumed 3% because this is an ongoing plan who happened to change their match vesting. So the 3%, I feel, would not be able to be used.

ALSO ADP side, I have a participant who was NHCE in prior yr but is HCE for this current yr. I understand that I need to show him twice on the test, as NHCE with his prior yr deferral percentage and as HCE with his current yr deferral percentage. Is this correct? Wonder how I will get Relius to do that!

ANY help, reference material etc etc etc would be most appreciated! I'm going gray thinking about this! Thanks so much!

Would a plan year beginning 10/1/2011 be subject to the 2011 or 2012 limitations

I have a client who is getting multiple requests from Participants, both Active employees and deferred vesteds, about starting their benefit payments. The client requests a distribution package, send it out to the participant and then does not hear back until the package is outdated. The Plan is a defined benefit and each request requires that a complete set of calculations is performed. The client is getting tired of paying for multiple calculations on the same participant. I was wondering if anyone out there has a solution that has helped in this type of situation.

thanks,

Connie

At the end of the year I add the health insurance premium to box 1 of the W2 to the > than 2 percent shareholder of an S corporation.

Is the health insurance premium considered salary and is it pensionable?

Thank you.