Hi all - Have a situation here. Organization A is going out of business and has terminated their 403b plan and distributed or rolled over plan assets. Org A no longer has custody of plan funds as they are fully distributed or rolled. A plan audit of subsequently determines there were at least two payroll periods where late remittances were made during the final plan year.

1) Is the organization still required to correct by paying lost earnings and interest as well as pay excise taxes related to these transactions even though the plan is terminated?

2) If so, how does the organization pay lost earnings and interest if it no longer has custody of the funds? Does it have to cut manual checks and mail them to ex-participants?

Thanks!

If an employer is not concerned about the deduction of the employer contribution, what is the deadline for deposit to the plan. I thought it was the last day of the plan year following the plan year for which the contribution is being made, but I cannot find any reference to that.

Thank you.

Kate Smith

Profit-sharing plan has cross tested allocation formula in which groups consist of:

HCE

NHCE with less than 5 years of service

NHCE with 5-14 years of service

NHCE with 15-24 years of service

NHCE with more than 24 years of service.

One participant with 20 years of service terminated employment, incurred a break in service and was reemployed.

Employer insists she be put in the allocation group of NHCE with less than 5 years of service.

Has anyone ever heard of ingnoring years of service for the purpose of putting an employee in an allocation group?

The plan defines years of service for eligibility, allocation of benefits and vesting but does not address this particular situation.

Thanks for any insights.

Is the ERISA 101(j) notice for a DB plan that is between 60% and 80% funded an annual notice requirement or is it just required for the first year that the plan becomes subject to the restrictions?

I have a situation where the owner/plan sponsor wants to by a life insurance policy (covering himself) that was purchased by his spouse, who has been making the premium payments. His wife no longer wants to pay the premiums. Any issues if f he buys the policy from her with plan assets at the current cash surrender value and than continues to pay the premiums form the plan?

I have read that life insirance policies may be purchased by the plan from a particpant or employer but this is a bit different.

Thanks!!!

To simplify, suppose you had a 2 participant DB plan that had a failure discovered on plan audit.

Suppose the plan had existed for 15 years and one of the participants had a PVAB of $1,000,000.

Suppose audit cap was offered and the correction was made. Let's say the sanction was 40% of the maximum payment amount. The maximum payment amount is the tax that would be paid had the plan been disqualified for all open years. Suppose $200,000 of the $1,000,000 had accrued during the open years. With respect to the amount taxable to the participant, is the maximum payment amount $200,000 x tax rate or $1,000,000 x tax rate?

Thanks

We are counseling a client to make a DFVC filing for Form 5500 filings going back a number of years for a severance pay plan. In this situation, Form 5500 should've been filed, so assume there is no wiggle room there. The client has asked whether making a DFVC filing might increase the likelihood of a DOL audit of the company.

I have done numerous DFVC filings over the years, and never had a client audited by the DOL thereafter. In fact, I think that you can make a good argument that a DFVC filing decreases the likelihood of audit, if anything (i.e., it's logical to think that a company making a DFVC filing will have looked for any other issues prior to filing, and this would be one major one off the table). However, has anyone else had a different experience or does anyone else hold a different opinion?

I heard (second hand) that in the IRS phone forum this week, the IRS would look unfavorably upon any participant loan interest rate that is less than Prime plus 2 percent, and that they also stated that a participant loan interest rate of "Prime" is totally out of the question.

Well, I thought this was a DOL matter anyway. Also, if I went to a lending institution and put my money in an account there and then asked them what interest rate they would charge me to loan my own account back to myself, wouldn't these firms just say "it's your own account, what rate do you want charge to yourself?" (after first thinking that I must be crazy). Please, tell me if there is a commercially available interest rate to compare against for that type of lending.

Did anyone hear this phone forum from earlier this week, and can you confirm/deny the statement above?

I've always waited until I have the schedule SB from the actuary before sending out a 5500-EZ for a client to sign. When I look at the instructions, it actually says:

"If the plan is a defined benefit plan, the enrolled actuary must complete and sign the 2010 Schedule SB...and forward it no later than the filing due date to the person responsible for filing the Form 5500-EZ..."

Does that mean you can go ahead and file the Form 5500-EZ early as long as you end up getting a copy of the Schedule SB by the filing due date (including extensions)?

The line item just asks if the plan is a DB subject to the minimum funding requirements. It doesn't actually ask if the minimum funding standard has been certified.

Thanks!

An employee wishes to put his spouse onto the plan because the spouse lost health insurance on June 1, 11. They just made this request today....3.5 months later.

It seems to late to add the dependent who lost coverage thru their employer, but in reading the regs, I do not see a "statute of limitations" anywhere in there. I imagine there must be one. Can anyone comment on this?

I am preparing a Form 8955-SSA with only 1 participant to report. This participant terminated in 2002 and was paid in 2009 so they will be a Code D. If the participant counts on line 6 are 0, do I need to answer question 8 regarding individual statements?

I've taken over a plan that has 3 key man policies. The policies are not part of the account balances of the participant for whom the life insurance was purchased. Are the premium payments considered to be a profit sharing source allocation to participants? The prior administrator did not consider these amounts as an allocable contribution.

Say an individual gets married at age 30 and gets divorced at age 40.

He terminates from a company just prior to marriage.

He leaves that company with:

a defined benefit pension of $500 per month payable at age 62.

Since this entire benefit was accrued prior to marriage it would seem that it would not be part of marital property.

At age 30 (marriage) the the pvab was say 10,000.

And at age 40 (divorce) the pvab is say 20,000.

So, in essence he earned 10k on his pension while married but it is not marital property.

Now, turning to his account balance.

He leaves the same company with a 401k account of 20k at time of marriage, which he rolled into an IRA account.

At time of divorce the account is worth 40k. No contributions were added to the account as it is all investment income.

Should the 20k of investment income (though based on the basis that was all pre marriage) be considered marital property?

And say now, a couple of years after divorce (but prior to any division of assets) the account is worth 30k. Should the loss of 10k be marital property?

In conclusion, is the analysis of the determination of marital property related to the account balance a subjective analysis or is there precise law on the account balance portion that is marital property?

thanks

After making monthly payments as required on his participant loan, Participant ceases to make loan repayments as of July 31, 2010.

The plan sponsor provides for a cure period through the last day of the calendar quarter following the calendar quarter in which the required installment payment was due.

The cure period for Participant therefore ends on December 31, 2010. Participant does not make any loan repayments by December 31, 2010.

Question: Since the cure period ended December 31, 2010, and Participant did not make a payment by December 31, 2010, is the defaulted loan balance deemed distributed as of December 31, 2010, the last day of the cure period? Or is it deemed distributed as of January 1, 2011, the first day after the cure period expired, since Participant had through the end of December 31, 2010, to make a payment?

Is it permissible to 100% vest participants who are losing their jobs because the division in which they work is being dissolved?

This is not a partial plan termination (not 20%).

Could vesting only the few participants affected be justified as "event-based vesting", when other participants in the plan, who are not in the terminated division, would not have their vesting accelerated?

Thank you

Is there an actuarial difference, or a sacrifice of flexibility, if someone starts collecting a pension early, when it's still up in the air whether the marriage will last and whether there will be a QDRO, vs. waiting to start the pension only after knowing for sure whether or not there will be a divorce and QDRO?

If there is an actuarial difference or sacrifice in flexibility, would that equally affect the participant and the potential alternate payee? Or would the difference tend to favor one party over the other?

Thanks in advance for any insight.

Prior to sale transaction, seller has QBs on COBRA. Upon closing, Seller ceases to provide health insurance and the Buyer takes the QBs onto its plan.

What type of election period does the Buyer have to provide these QBs? Must they provide them with a new 60 day election period or some other (shorter) period to elect?

Ok, here we are again with more questions than answers for amending 5500s because of an erroneous plan number. Thanks to all who have posted on a different thread. We are amending the 5500s at issue and we are sending a note to the IRS that we have amended the 5500s. Question came up today about the 2008 5500 Sch. C. The 2008 schedule listed payments to two service providers. Should those amounts be reported as direct compensation on the new and not necessarily improved Sch C that will have to be uploaded? Does it matter? Thanks in advance!

A company has 401(k) plan with a safe harbor nonelective contribution. Only NHCEs are eligible. Their CEO is leaving. In the course of putting together documents for his departure, we realized that he has been participating in the safe harbor contribution since the beginning of his employment in 2006.

My initial thought would be self-correction by plan amendment, given that it's permissible to have HCEs participate in safe harbor nonelective contributions (the company simply chose not to in initially structuring its plan). However, this obviously could result in having to make additional contributions for other HCEs who were not included in the safe harbor contributions. Any thoughts regarding the plan amendment correction and/or any other potential corrections?

I'm establishing a 403(b)(9) retirement income account Plan for the church association for which I am the Executive Director and I see language in the plan document that provides for Deemed IRA's and Roth IRA's. Since the Trustee is the Association, must the Trustee apply to the IRS for approval to act as Trustee for those accounts? This will be a Texas Trust.