Our client is part of a group of employees residing in various US states who'd like a 401(k) setup. There is no central office per se, just folks working from their homes.

Their employer does not have a US tax number and is headquartered in Montreal, Canada. It also has employees in Hong Kong, Canada, etc. This company is part of a holding company which owns a few other global companies as well.

We're just trying to figure out if a qualified plan can be setup, does it simply exclude non-US employees, is a tax ID needed, are there treaty considerations that make for expensive administration, etc?

Any clues would be greately appreciated! Thanks!!

This seems to be coming up a lot with the current credit debacle. A loan is being requested for the acquisition of a principal residence (term > 5 years). This principal residence will in fact be the participant's primary residence, but the ownership will be in someone else's name (a sibling in my current instance).

Do you think it still qualifies as a principal residence loan? Is there a requirement that the borrower is intended to hold title to the property? The sales contract to be submitted as supporting documentation will not mention the participant at all.

I know this is the "ESOP" board, but this seemed to be the most appropriate place for this question.

The regulations under 1.423 state that an ESPP must provide that options can be granted to employees of the corporation or to employees of a related corporation. This seems to suggest that offerings to employees of related corporations is optional, but it is not perfectly clear to me. Can you exclude the employees of related corporations, and if so, where can I find that authority?

It appears the DOL is not yet accepting filings for the 2011 plan year. Looks like I would have to put a short plan year (terminated plan) on extension?

Hi there.

So if you do rollover your loan from a prior plan to a new plan. Old plan allows transfer out and new plan will accept the loan note coming in.

How can you “catch-up” interest that you technically owed to the prior plan during the period where you couldn't make a payment to the old loan because you were terminated and they don't accept payments?

If there are three months that lapse between payments, and you are still within the original term cure period, wouldn’t you only be able to rollover your outstanding principal balance?

Example: 06/01/11 – Balance is $15,000. Interest rate is 1% monthly (for ease, $150).

Transfer to new company and set-up new loan

Principal balance as of 09/01 is $15,000 still. There has been missed interest for June, July and August.

You establish your loan and reamortize into new company 401(k) for a payment in September. Can the new company accept payments for missed interest that you owed to the prior plan? Or can they only establish $15,000 and charge 1% monthly going forward not to exceed original loan term length?

So technically, you missed $150 in interest to the prior company for June, July and August because you weren’t able to pay the prior company since you were terminated. Can that missed interest get incorporated into the new company payments? Or would they only be able to establish the $15,000 in principal as of 06/01/11 (the balance as of the last payment you made).

That 3 months of missed interest is a taxable distribution to you, you owed it to the prior company, but had no way to pay it to them because they won’t accept after termination partial loan repayments, only all or nothing payments were accepted there and the new company should only establish the principal?

Anyone know IRS regulations that talk about this? I have looked at Publication 575 and that doesn’t quite do it for me.

Thanks!

I have a plan that is considering using the QSLOB rule. However, I am struggling with the gateway test which requires coverage testing on an employer wide basis. With this test being necessary, how will QSLOB testing help my plan pass coverage, if I still have to pass this gateway? My plan fails ratio % and average benefits test - both parts.

Thanks!

Have a defined benefit plan (owner and wife) with excess assets. The owner is still working and beyond NRD. This is what we propose to do to use up some of the excess assets:

- amend plan to allow for distribution at or beyond NRD and allow for Retroactive Annuity Starting Date (RASD);

- owner will make election to receive RASD (only 12 months so do not effect 415 benefit);

- terminate plan (and file with the IRS)

- owner and wife elect to roll over benefit to IRA

- any remaining excess asset will have 50% excise tax or may be transferred to existing 401(k) plan (qualified replacement plan) and reduce the excise tax to 20%.

Question: what would be the RASD? If the owner was making his election today is the RASD 9/1/2010? Then the calculation date for the optional forms of benefit would also be 9/1/2010?

Anyone see any problems?

Okay - I just found out one of our ER's was purchased by another company.

It's a Safe-Harbor nonelective

Top Heavy

What options do they have?

Thanks

Pat

Does a plan that is being involuntary terminated by PBGC (PBGC is in the process of terminating) have to provide the 2010 annual funding notice? Assume that it is a calendar year plan and that the PBGC is imposing a retroactive termination date of February, 2011.

Hello everyone!

I've posted this same message in another section, but maybe it's appropriate here as well. We have a client that merged with another entity. It used the wrong valuation date when valuing that entity's plan assets, and the plan itself took losses. Certain excess distributions were made to some employees but not others as a result. The DOL told us that for purposes of calculating the reduction in plan assets attributable to the excess distribution and earnings reduction, the DOL interest rate had to be used.

The plan intends to distribute to each participant their share of the earnings in the form of a supplemental distribution, IN THE SAME MANNER AS THEIR INITIAL DISTRIBUTION. So, if they took a lump sum before, the supplemental would also be lump sum, a rollover would also be a rollover, etc.

I'm just looking to see if this is ok to do. Does anything in the Regulations prohibit it? Thanks so much for the help

Hello everyone!

I've posted this same message in the Mergers section, but maybe it's appropriate here as well. We have a client that merged with another entity. It used the wrong valuation date when valuing that entity's plan assets, and the plan itself took losses. Certain excess distributions were made to some employees but not others as a result. The DOL told us that for purposes of calculating the reduction in plan assets attributable to the excess distribution and earnings reduction, the DOL interest rate had to be used.

The plan intends to distribute to each participant their share of the earnings in the form of a supplemental distribution, IN THE SAME MANNER AS THEIR INITIAL DISTRIBUTION. So, if they took a lump sum before, the supplemental would also be lump sum, a rollover would also be a rollover, etc.

I'm just looking to see if this is ok. Does anything in the Regulations prohibit it? Thanks so much for the help!

After being top heavy for over a decade, we're back to non top-heavy status.

Does the benefit accrued through the end of the top heavy period serve as a minimum benefit against all benefit accruals (a la' extended wearaway- - them's fightin words) or is it the A+B approach?

The plan document and SPD are silent.

Please copy actuarylaw@yahoo.com on your response to the bulletin board. thanks!

Gary

Are there any issues with being more restrictive regarding status changes and/or annual enrollment for a particular category or class of participants in a group health plan (self-funded with stop loss)?

Health plan has a variety of participants -- active employees, retired employees, COBRA participants, etc. Say that active employees and COBRA participants are permitted to make annual enrollment changes and to add new dependents based on qualified status changes/events (birth, marriage, etc.).

Are there any issues with being more restrictive with respect to the retired employees (e.g., providing retiree medical coverage to the retired employee and any eligible dependents (determined as of the date of retirement), but excluding coverage for a new spouse or other person who becomes a dependent after retirement)?

What if the employer provides certain former employees with an extension of medical coverage prior to COBRA (e.g., one year of continued coverage for every year of service). Can the employer provide that those "extended coverage" participants are not permitted to make status changes or annual enrollment changes, until they eventually start their COBRA coverage (at which point they would be permitted to add new dependents, make annual enrollment changes, etc.)?

Thanks in advance for any thoughts.

I am working on a 401(k) plan in which the only ER contribution is a discretionary match. The match formula is the same for all participants and there are no requirements to get the match. The plan requires a 414(s) test due to the exclusion of bonuses. When I run the 414(s) test in Relius, it generates two reports: Report #1: 414(s) compensation for 410(b)-5 average benefit percentage test. Report #2: 414(s) compensation for nondiscrimination test under 401(a)(4). The only difference between the two is report #2 excludes terminees with less than 500 hours. Do I need report #2 since I don't have a profit sharing contribution?

Trustees of 2 separate plans, each of which the trustee is also the only participant.

They want to buy real estate and flip it. They want to do these as a joint venture of the 2 plans.

Can they set up an entity where each plan owns 50% of the entity and each plan invests in that entity and shares the profits? None of the purchases would be debt financed

Facts

- Plans can be amended to permit HCE's to contribute $0 deferral. Anything over that would be immediately re-classified as catchup (for those over 50). ADP test would be zero.

- If a HCE does not contribute to a 401k plan (or contribute $0), they could potentially contribute to an IRA (assuming other requirements met)

- If a HCE does contribute to a 401k plan (or contributes greater than $0) they cannot contribute to an IRA

- If a plan has poor NHCE participation and low NHCE adp %, HCE's may be better off contributing to an IRA

Question

- In a plan where HCE's are limited to $0 (anything over is catchup up to 5500), can a HCE contribute 5,500 and also to an IRA? The 5,500 is classified as catchup and therefore not really counted towards ADP, 415limit, etc. If they can do both you would be looking at a 11k plus contribute (IRA plus catchup)...even more if spouse can do an IRA...

The employer's definition of compensation excludes bonuses, so a 414(s) test is required. The only employer contribution is a discretionary match. The ADP/ACP tests are on the prior year testing method. The compensation ratio test is satisfied when I compare the current year HCE's to current year NHCE's. Do I also need to run a compensation ratio test to compare the current year HCE's with the prior year NHCE's to be consistent with the prior year testing method?

if a company restates their db plan for egtrra and it is a pre approved volume submitter plan with favorable opinion letter (of course) and essentially makes no changes to pre approved document provisions is there much reason to apply for det letter?

I'm working with a 12/31/2010 plan yr-end with a SH Matching contribution that is quite large. The ER is asking what the latest date is they can fund the contribution (without penalties/interest/fines, etc).

I know for deductiblity purposes, it has to be funded by the 404(6) extended due date 9/15/2011 - however, I believe they have until 12/31/2011 (12 months after) to make the contribution for 2010. They would deduct it in 2011 but what is the consequence if they don't actually make it by 12/31/2011 . Obviously I've explained to them the mandatory/required nature of a SH contribution but they are really strapped for the cash at this point - VCP may be an option but that would just cause a bigger cash flow issue with further fees/penalities and lost earnings to make up.

I think the latest date is 12/31/2011 but I'm wanting someone to weigh in on that date.

"The Filing Information Returns Electronically (FIRE) system will be down December 16, 2011 through January 2, 2012, for programming updates. It is not operational during this time for submissions."

just two weeks before the extended deadline... Bravo, IRS. Bravo. Can't wait one more month to do your updates? You can wait 2years to release a form DUE A YEAR AGO, but can';t wait one more month for this currently operational system to be updated. Classic...

From the IRS new article, with updated FAQ's on 8955-SSA's

http://www.irs.gov/pub/irs-tege/epn_2011_6.pdf