How to determine whether a phantom stock plan complies with or is exempt from 409A?

We are a TPA on Long Island (one of the areas covered under the Hurricane Irene extension). We have a client in Missouri, obviously not part of the Hurricane's affected area..

The extension page on the IRS site said the extension would apply if your business is in one of the affected counties, of if the records needed for the filing are in one of those counties.

Would that count here? Since we are preparing the 5500, could that be considered "where the records are kept"?

I need an answer to a Dependent care question. I was terminated by my employer on Sept 1st and received all relevant claims from my dependent care account until Sept 1st. My severance package includes continuance of pay until Dec 31,2011. However my employer will not deduct funds into the dependent care account effected Sept 1st. Here are my questions:

1. After logging into the account, I've seen that the employer is still depositing funds into the DCA (without coming off my paycheck). Why is this?

2. Can I claim those funds for Dependent Care although the deposits have not come from my paycheck?

3. Is this unlawful or just unethical?? Or both? Would IRS or Law get involved?

4. Is there repurcussions for putting in claims after a termination date although I'm still currently on payroll??

In general, whose money would I be claiming? The employer?

Help is appreciated..

I have an employer with an employee planning on terminating service so that he can default on his loan and potentially withdraw additional dollars from his 401(k) Plan. The company then plans on rehring the employee.

The employee is aware of the penalties and taxes associated with this type of withdrawal.

The company has an internal policy that states employees termed and rehired within 30 days are reinstated for all benefits and senority.

This just doesn't seem right. Any thoughts?

I appreciate any insight you may share!

The following provision (paraphrased) appears in a non-exempt severance plan adopted on March 1, 2011:

If I am not employed by June 1, 2012, I will notify former employer and will receive a payment of $5,000 per month until the earlier of June 1, 2013 or when I become employed.

It's not a short term deferral because payments can be made after the STD period. My question is whether the employee has apparent discretion over when payments begin. Obviously it's in his best interest to notify the ER as early as possible, so this doesn't seem offensive. Can we view the employee's giving of the notice to be the vesting event such that the payment schedule is valid?

If an employer pays a former key employee for the entire cost of health coverage under its self-funded ghp, is that taxable compensation to the employee that is potentially 409A income if such coverage is not available to non-key employees?

If so, how to comply wtih 409A? Simply include the factors in 1.409A-3(i)(1)(iv)?

Our TPA is switching from one prototype sponsor to another. With the prior sponsor, we have and EGTRRA D-letter and we timely adopted for 415, HEART, etc. The new prototype sponsor wants us to restate onto their document. I'm OK with using current date on the Adoption Agreement, but not on the 414, HEART and other amendments as it may appear that those amendments were adopted late. Is there any IRS guidance as to what date should appear on the re-amendments that are not incorporated into the Adoption Agreement?

I'm not sure if this is the correct forum but none of the others seems to be appropriate for this question, which may be an easy one:

Is a Medicare participant's Health Insurance Claim Number (HICN) the same as his or her social security number (SSN)?

Thanks.

New small plan client has finally sent in transactional accounting 'in time' for filing 5500. Here's what we've learned:

2009 delinquent contributions were deposited in 2010 with lost earnings of $65. No 5330 filed. No excise tax paid.

2010 delinquent contributions were deposited in 2010 and 2011 with lost earnings of $26 for 2010. No 5330 filed, no excise tax paid, no extension filed.

When calculating excise tax in 2010, does the 2009 portion applying 100% include the unpaid excise tax of 2009? ie 65*100%+65*.15*100% = 74.75?

I understand there is an option to pay excise tax to the trust and allocate to the participants affected. In this case, excise tax will be under $100 each year, and no contributions were deposited over 180 days late. Would this be sufficient, without filing a 5330 or VFCP? I also recall something about filling out 5330's for records, but not submitting.

Much appreciated!

Trying to get a feel for how other multiemployer plans determine whether a participant has terminated employment for purposes of mandatory cash-out distributions. Our work is seasonal, so if a participant doesn't apply for benefits, we really can't conclude that he/she has terminated employment until no contributions are received for several months.

To my knowledge, there is no guidance on this topic and multiemployer plans are free to devise their own procedures for making this determination. The "no contribution" range that I have seen is between six months and two years.

Any other methods to consider? Any guidance that you're aware of? Any thoughts on the appropriate "no contribution" range?

I have a client with a last day 1000 hour requirment.

He wants to prefund his PS - say $50,000

At year end we would allocate the $50,000

What about the earnings or loss on the $50,000

Who would that go to ?

Thanks

Pat

:angry: :angry:

Anyone else using Web Client this year? I am running into so many issues - timeouts, notifications not sending out, publishing/republishing delays...and the list goes on.

Came across the following situation:

A self-insured health plan provides $7000 in employer contributions towards the "premium" for NHCEs, and $10,000 (100%) for HCEs (officers). The NHCEs can elect to make a $3000 pre-tax contribution for the rest under a cafeteria plan.

In reading the 105 nondiscirmination rules, it says that pre-tax contributions under a 125 plan are treated as employer contributions..thus, for testing purposes it looks like the employer is providing $10,000 to all participants.

If this correct? On its face it looks like this plan is discriminatory.

Also, if the Cafeteria plan was found to be discriminatory, the HCEs pre-tax contributions would become after-tax. However, there are none in this situation, so there seems to be no penalty.

Has anyone ever looked at this type of situation before? Am I reading one of the rules incorrectly?

I have a plan with AFTAP < 60%. Benefits and lump sums fully frozen.

The plan has a disability provision that calls for 100% of the accrued benefit payable as of the date of disability. The plan uses Social Security as the ruling factor. As you may know Social Security often takes more than a year to rule on disabilities.

A participant just received a SS disability award retroactive to October 2010. Normally, the plan would retro disability payments back to October 2010. However, due to the AFTAP, is that permitted?

Seems to me that I can probably only retro back to 1/1/11 without violating the benefit restrictions. Agree?

If you agree, I guess the plan would just have a "payable" for the other 3 payments until the AFTAP is > 60%?

Comments?

I'm taking over a governmental 401(k) plan where the former TPA was a bank who also served as trustee. Now they need a new trustee, and they want the document to read that the "Board of Commissioners" is the trustee. Is that specific enough? Especially as it would related to information on the SPD an an SS-4 application (well, I know it's not specific enough for that!). Thx.

Participant misinterpreted the dependent care cap and pledged $5,000 instead of $2,500. What are the options for the participant - can she stop future payments without a qualifying event and recover the excess that is not eligible?

Client has a Simple 401(k) Plan and they have been making contributions into it this year. They would like to establish a DB plan this year. Is that possible? If so, what is the best mechanism?

Thanks in advance

I know this is a 5500 question and I asked it on that board, but need an answer quickly and haven't gotten it there.

Assuming all the other requirements are met, when determining whether or not a plan has to file a Form 5500EZ due to having assets under $250,000, is that number based on the actual assets at 12/31/2010 or does it include accrued contributions for the year.

Example, plan has $225,000 in assets at 12/31/2010 and contributes $30,000 during 2011 for the 2010 plan year. EOY cash basis assets = $225,000, EOY accrual basis assets = $255,000. Is this plan required to file?

Somoeone called and proposed this:

Have a SIMPLE IRA for two years. Because in a SIMPLE the match can be as low as 1% for two out of 5 years, they do 1% for two years, to take advantage of the "cheap" contributions (i.e. it's only a quarter of the SH Match, but ~75% of the contribution limit). After the two years, discontinue and do a SH 401k.

Is there a problem with this?

What do you do where you do not have enough information to file a Form 5500 by the filing deadline? Wait and submit under DFVCP, or file incomplete with a statement?