Employer maintains an account balance deferred compensation plan covering several employees that is subject to 409A. Plan cannot be amended by the employer in a fashion that would have an adverse effect on any participant's accrued benefits.

Employer would like to make a limited-time offer to some participating employees (in writing, although I don't think that matters) to cash them out of the plan early and terminate their participation in the plan. Only employees who accept this offer will be cashed out and cease to participate.

Questions:

1. Will the mere offer by the employer, prior to acceptance of the offer by any employee, violate the anti-acceleration rule? (Remember, the offer can't be considered a plan amendment because the employer can't amend the plan to cash-out people.)

2. Assuming the answer to #1 is "yes," what if the offer is made only to those employees whose cash-out amount will be $16,500 or less?

Preparing an investment policy statement is a fiduciary function, right?

A business owner sponsors a 401K plan for his employees in which he participates. He also has some income he receives as self-employed income. Could he make a SEP contribution from the self-employed income?

If so, are contributions allocated to him in the 401K plan aggregated with the SEP contributions in determining his maximum 415 annual additions limit?

Sponsor of large 401(k) plan remitted deferrals and loan payments monthly, although payroll is biweekly.

So at least half of pay periods, amounts were remitted after 3rd business day following payroll.

We have calculated lost earnings on deferrals and loan payments using DOL's VFCP calculator.

We will prepare 5330, and sponsor will deposit lost earnings and pay excise tax.

Question: will the fact that the loan payments were remitted late to the plan change the outstanding balances on the loans?

The amortization schedules are based on biweekly payments, not monthly payments.

Thanks.

When filing the Form 5500, Schedule I {Financial Information - Small Plan}, is it just the PSP's primary account held at the financial institution that is being reported on or should the reporting also include all sub-accounts which are individual participant accounts with investments directed by the participants and account statements from the financial institutions provided directly to the participant?

Apparently, the custodian does not offer tax qualified accounts because of the potential accounting regulations that might be imposed upon brokerages for custodying such accounts. The available option is a trust account but trusts have year end 1099 reporting. Can the existing tax qualified plan set up account at new custodian because there is a way to account for these circumstances? Any additional filings in conjunction with 5500?

One of my health plans has a provision in place clarifying that they will not cover undocumented or illegal workers. The administrator is interested in sending an I-9 form with the initial enrollment material. Is this permitted under federal law? Also, any what other steps do plans take to ensure all participants are legal?

We administer a DB plan that is terminating due to sale of the company and retirement of the sole prop owner. The plan has been frozen for the last several years - however when it was active it had a pretty robust formula, and a Joint and 100% Survivor normal form. There are only five individuals with accrued benefits. It's PBGC covered.

There is a former participant who, in the middle of the plan termination, just reached normal retirement age, and has selected the annuity form of payment over the lump sum. Now here is what gets a little strange and disturbing.

Under the terms of the plan, his $4,000 monthly benefit equates to a $561,000 lump sum (he's at 415(b) limit, so what's kicking in is 5.5% and life only form). However, when the sponsor goes to shop the immediate annuity, no insurer out there is going to assume 5.5%, and they have to price it based on the 100% J&S. Because of these two factors, the premium is MUCH higher than the $561,000 lump sum - like around $900,000.

Of course the plan is underfunded to begin with, and the owner was going to waive benefits in order to go through a standard termination with the PBGC. But with this additional outlay to buy the annuity, the owner's benefit will be completely wiped out, and then some.

It's like the "perfect storm" of plan terminations. Short of rescinding the plan termination, does anyone have any "outside-the-box" thoughts?

a plan sponsor/owner is terminating his plan.

it is pbgc covered and other than owner there are 3 employees.

if each chose a lumo sum the owner would get say 300k and forfeit rest of pension.

however, one participant in pay status has a lump sum payout value of close to 600k if he takes remaining distribution in lump sum.

excpet the participant wants to continue payment as annuity. (100% j&s mind you)

insurance annuity quotes have averaged about 900k. ouch!

i suppose to due low interest rates, fees, commissions and who knows what.

the owner is in his 70s and closed his company.

if they buy annuity owner gets $0 instead of 300k (per above).

what to do?????

they can beg participant to take lump sum

they can have owner maintain plan (thought MRCs will continue, etc., not desirable) sponsored by himself as sole prop.

or maybe go through a distress pbgc termination

i haven't spoken to owner but i believe he does not want to sacrifice entire pension.

thanks

Here's a new one, I think.

Employer A is on the verge of bankruptcy. Operations were being kept a afloat using funds obtained from a bank note. Bank decides to sell the note to a 3rd party, who is not related in any way to the company or bank. 3rd party calls note and via foreclosure, seizes all company assets. 3rd party then restarts operations as a new firm using assets of old firm. Even hires a few of the old firm's employees. The old employer still exits on paper, but for intents is gone.

Company maintained a 401(k) Plan, which has an outstanding value from a matching contribution. How does the preceding impact the Plan? Specifically, who is the sponsor and who owes the match and must pay cost of the Plan? I suspect that the preceding is an asset purchase making the old firm wholly responsible for the plan, with no liability for the 3rd party. Since Employer A has no money I also guess that the owners of Employer A could be liable for the match and costs of the plan. Is taking those monies from the accounts of the owner/participants feasible? As an in-service distribution? Can they forgo their match?

Seems to be a real mess.

An employee is enrolled in a regional HMO with a standard FSA. He is relocating and needs to select another health plan. We offer a national HDHP/HSA (in order to enroll in the HDHP you must qualify under the HSA rules) and he wants to enroll (note there is another health plan choice available to him). Is he prevented from enrolling in the HDHP/HSA since he has an FSA or can I let him enroll in this plan due to his relocation and the fact that he can change to a Limited FSA?

Hi everyone, i am new to the boards and just found this site today. I have been researching the issues below without luck. If anyone could help, that would be much appreciated.

Open Enrollment Starts June 1 2012

My Plan: HMO w/FSA @ $3k/Year

Switch to: HSA @ max $4k Deductible, will take max HSA Contribution @ $6250 (Family)

1. Can I contribute to my FSA until 5/30/2012, then start HSA June 1, 2012?

2. If #1 can be done, can I transfer my FSA funds to the HSA account?

3. If #1 & 2 are not possible, do I need to start my contributions starting 6/1/2012, ($6250 over 7 months?)

When a client overfunds a wire (contributions to much money to the Recordkeeper and Trustee) or participants are taken out of the payroll file and money is left over, is the client permitted to ask the Recordkeeper/Trustee to move the money to the forfeiture account? or must the Recordkeeper/Trustee return the money to the client?

Question - Is moving the money to the forfeiture account a violation of the exclusive benefit rule? Should the overfunded amounts be returned to the client? Please state the Code/Regulation? Please note, the excess money was never placed into the participants' accounts and is truly the client's money.

When a client overfunds a wire (contributions to much money to the Recordkeeper and Trustee) or participants are taken out of the payroll file and money is left over, is the client permitted to ask the Recordkeeper/Trustee to move the money to the forfeiture account? or must the Recordkeeper/Trustee return the money to the client?

Question - Is moving the money to the forfeiture account a violation of the exclusive benefit rule? Should the overfunded amounts be returned to the client? Please state the Code/Regulation? Please note, the excess money was never placed into the participants' accounts and is truly the client's money.

I have plan that I took over in 2010. The Schedule H was prepared on a cash basis. I typically prepare these schedules on an accrued basis to coincide with the IQPA schedules.

I don't see anything in the instructions that would would prevent me from continuining to use this method, even thought it's not my preferred way of doing things.

Can the form be switched from Cash to Accrued, of am I stuck on cash for eterniity with this plan?

Are people providing special tax notices for hardship distributions? I get that it's not an eligbile rollover distribution, but it seems like there should be some documentation warning them about the 10% penalty tax. Truth be told, we've been sending the same Special Tax Notice that we've been sending for termination distributions just to make sure they knew about the penalty taxes.

A plan I am working on has a service based match. 0-5 years 33 1/3% up to 6%, 5-10 75% up to 6%, 10+ years 116.67%.

The plan spun out of a much larger plan effective 1/1/11. Their projected ACP test is HCEs 6.11% vs 2.26%. So a pretty large ACP failure. Since it is a service based match, BRF is also going to be required. They will not pass the 70% ratio, but will pass using the "safe harbor ratios"...which I believe you then need to look at effective availability and facts and circumstances. I realize this portion is not mathematically....but any guidance on what would be reasonable? Does the fact that the ACP test fails need to be considered or when its corrected no longer a factor? The HCE population has 162 employees, all but 7 receive the top 2 tiers. In fact 137 receive the top tier. If they use the safe harbor ratios, can they still rely on testing every 3 years? It just seems to favor the HCEs.

Any thoughts/concerns would be greatly appreciated!

Does anyone know if the IRS will acccept a faxed/photocopied version of a 5500-EZ? Client is out of town, and I want him to be able to just sign and fax back to me.

A 50,000 participant DB plan has a 12/1-11/30 plan year. The plan year will change to the calendar year effective 1/1/2012 so that there will be a one-month short plan year 12/1/2011-12/31/2011. The Plan had a funding short-fall as of 12/1/2010 so quarterlies are due for the short plan year and the 2008 proposed regulations say use 1/12 of the 2010-11 MRC to determine the short plan year minimum quarterly contribution safe-harbor.

It is now 4/15/2012. We don't yet have the data and can only estimate if there is a funding short-fall 12/1/2011 and thus, do not know if quarterlies apply for the 2012 Plan Year. Worse, the 2008 proposed regulations stipulate that in the plan year following a short plan year, the minimum quarterly contribution is simply 90% of the current year MRC and the 100% last year safe-harbor does not apply.

Apart from just estimating a high contribution for the 4/15/2012 first quarterly installment for the 2012 plan year, does anyone know of any guidance to cover this situation?

At our company, employees become benefits eligible on the first of the month after hire and then have 30 days to make elections. To illustrate, an employee who started 9/25, would be eligible for benefits on 10/1 and have until 10/31 to make elections.

My question is regarding benefit start date....If an employee were to wait until 10/15 to make benefit elections, I believe that it is permissible to have the medical, dental, vision and even life insurance policies start retroactively on 10/1. However in regards to HSA and FSA, am I correct in saying that those policies by law cannot go into effect retroactively and only qualified expenses incurred after the employee made the election are eligible?

Thanks.