During the IRS Phone Forum today Sep 21 2011, Andrew Zuckerman, Director of Employee Plans Rulings and Agreements, said the following (my transcript):

I think the small businesses of America, and plan service providers, owe attorney Alex Brucker a debt of gratitude, as I presume his well drafted 2008 letter to the IRS started the ball rolling on this. This was a glaring inequity against small businesses.

I wish Andy Zuckerman had provided more info, such as what years will be eligible and other details, but I guess we will have to wait.

all the db plans i work with generally have 10 or fewer participants.

And when the plans are terminated they generally all take lump sums.

i have a first now; a situation where a participant wants to continue receiving his annuity.

so they will have to purchase an annuity

with that said; any recommendations as to how to choose an insurance company for this?

not sure if the plan sponsor will want my firm to investigate which company or if they will want to do it.

comments from anyone with recent practical experience is appreciated.

thanks

Hi,

We have an ERISA 403(b) plan which uses 415 comp for calculating the employer contribution. The client would like to exclude Vacation pay, sick pay and back pay from the definition of compensation. Is this allowable if we test the compensation to ensure that it is not discriminatory?

I thought that you could not exclude compensation that was paid on a consistent basis and so all of the 3 mentioned above cannot be excluded. However, I'm having a hard time finding support for this.

Thank you!

A client received a 'random' audit letter. In the letter one of the items requested was a Form 56 and a 2848 for the trustee.

Form 56 for a qualified plan? First time for everything I guess. Auditor says that it is a new requirement for audits of plans. The IRS wants to make sure the trustee is 'qualified' and that the trust is a qualified trust.

Although we disagree based on IRC 6903 and 6036 that this applies to qualified plan trusts which are exempt under 501(a) of t he code, the auditor INSISTS on getting the form.

Anyone else run into this yet?

Employer with several DB and DC plans. The last coverage test was done and passed as of 12/31/08. Will need to do another one as of 12/31/11. Data is collected as of 12/31. There is concern that the 12/31/11 test won't pass coverage. If the ratio percentage test at 12/31/11 fails and the average benefits test at 12/31/11 fails as well, what corrective action could be taken, and when? I'm confused since we won't know the testing result until after the end of the plan year. Could an amendment be made after 12/31/11?

Thanks

Can a discretionary amendment be implemented before it is adopted? For example, can a plan that does not currently permit lump sum distributions be amended to allow them before the plan is amended, so long as the amendment is adopted by the end of the plan year and made retroactively effective? (Assume no 436 issues).

I'm working with a new 403(B) plan. Employees who work 1,000 or more hours per calendar year are eligible to join.

In addition to our regular staff, we have several hundred seasonal employees who work at our summer camps. They are paid in full and half day increments plus room and board. For the "normal" employees like archery instructors, cooks, etc, it's easy to convert the daily rate to hours. They don't come close to 1,000 hours. However, I'm not sure how to count the hours for the Unit Counselors. They sleep in the same cabins with the kids and are technically on call in case of emergency even when asleep (nightmares, wet beds, etc). Do I have to count that as 24 hours for each day worked? If so, they would hit 1,000 hours with about 7 weeks of work.

Plan is terminating effective 10/31/2011. Assets will not be distributed until after the end of the year. For testing purposes (compensation limitation, 415 limit, etc.) is this considered a short plan year. My thought is no becuase the 5500 will not be a short plan year.

a small law firm (3 partners) has a 401(k) plan with appx 20 participants. one of their partners will retire in a few years and they are looking to set aside about $250K over the next 3 years for this partner only. Would a non-qualified plan be a good option? The firm was wanting to write off/deduct any contributions it made to benefit this partner.

Hi all,

I'm trying to get an idea how other health plans handle Medicare Secondary Payer reimbursement demands. Do you / your clients generally pay all the demands upfront and then attempt to obtain a refund from CMS after actual coverage is determined? Or do you dispute the claims without paying anything (and thus accrue interest on any claims that are ultimately owed)?

Also, anyone else find themselves expending an enormously disproportionate amount of resources to responding to these MSP claims?

Thanks for your feedback.

I am doing a 401(a)(4) nondiscrimination test for a 401(k) profit sharing plan. The plan sponsor also has a cash balance plan. The cash balance plan was not aggregated with the profit sharing portion of my plan for coverage or nondiscrimination. Both the profit sharing portion of my plan and the cash balance plan satisfied coverage using the ratio percentage test, so I am only computing the average benefit percentage test for purposes of determining if a rate-group satisfies the 401(a)(4) testing requriements.

Since the plans were not aggregated, both satisfied the ratio percentage test and did not rely on the average benefit test, when I compute my average benefit percentage test for the 401(a)(4) nondiscrimination test on the profit sharing plan, can I rely on the rule that allows me to treat the profit sharing plan and the cash balance plan as seperate testing groups if I compute the test using allocation rates and not accrual rates?

We don't administer the cash balance plan so we don't have the accrual numbers for the defined benefit plan and don't want to request it if we can get by without it.

Two small companies have merged. The new merged company will offer group life insurance coverage, similar to the coverage one of the small companies had. But the other company had individual life insurance policies. The new merged company would like to grandfather those employees, allowing them to keep their individual policies if they would rather not switch to the group life coverage. Can they do that -- or is there a discrimination issue?

Are people aware that there was 5500 filing relief until 10/31 for 5500's? This is the ASPPA ASAP, if you have access to it. More of a public service announcement.

http://www.asppa.org/document-vault/pdfs/asaps/open/11-28.aspx

For a governmental DB pension plan which does not participate in Social Security, what are good options to track who is still alive and who is not? This plan has a high percentage of direct deposits.

It is my understanding that survivors, funeral directors, and doctors often report deaths to the Social Security Administration. However, we are concerned with both timeliness and completeness, especially since this public entity does not participate in Social Security. I am expecting that there are private sector providers who consolidate data from multiple sources to supplement the SSA database and provide updates on a monthly basis.

1. Company A spins off Company B. As part of the spin-off agreement, Company A agrees to keep Company B's employees on their health plan, so now Company A's health plan is covering non-employees. Five years later, Company A stops offering coverage to Company B's employees.

Does Company A have to offer COBRA? The qualifying event (termination of employment with Company A) that led to the loss of coverage happened five years ago, so outside the "maximum coverage period." On the other hand, no one was given COBRA notices five years ago, because there was no loss of coverage.

What say you? Outside of a MEWA, I don't see any guidance when a Company is insuring another Company's employees.

2. Simple question, but one I can't find the answer for.

Company A used to offer dependent coverage for spouses and children. For the new plan year, they drop dependent coverage and only offer insurance to employees. A qualifying event for COBRA is defined as "(5) A dependent child's ceasing to be a dependent child of a covered employee under the generally applicable requirements of the plan;" Is dropping dependent coverage a qualifying event? Under the strict language of this section, it appears that the dependent child is no longer a "dependent child . . . under the requirements of the plan." But I've only seen that section used if the dependent ages out (or stops being a student), not because the definition of "dependent child" changes in the plan. Also, there's no comparable language for a spouse. Do we have to offer coverage to a child who was formerly a "dependent child" under the plan requirements, but is no longer one because of a change in plan language?

Thanks.

A pension plan has several participants with cash value life policies in it. What are the participants options with regards to the plan termination? Can the policies be assigned to the participants? How would the participant be taxed on it? Current cash value? Could the participant roll the policy over to another plan assuming it allows for ins.?

Thanks

I have a client who has a solo 401(k) and has never filed a Form 5500-EZ even though the balance has been over the limit for years. We are going to prepare returns for the prior years. Can I use the 2010 form to complete these or should I use the form from the applicable year?

Has anyone done any preliminary calculations to see if any adjustments to limits will be made in 2012

How do you discontinue a SIMPLE IRA as of the end of a calendar year? Client is starting a 401k with us 1/1/2012.

oh this topic always stumps me...5500 for wrap benefits plan has always been filed as a single employer plan, but employer is a hr leasing company with many companies under the plan. looked up one of their competitors and they file as multi, but seems to me the definition of multiple is more apropros. now i dunno if this should be single, multi or multiple? i know theres info i need to make the determination, just not full on clear what it is.