Hi,

I'm reviewing a plan for possible Benefits Rights and Features testing with respect to vesting. For the general population, per amendment effective 1/1/07, vesting is a 3 year cliff (0 after 2 years and 100% after 3). Prior to that, vesting was at a 5 year cliff. In addition, the plan had transferred balances for certain populations as of 12/31/2006 which remianed on the old vesting schedules, i.e., 5 year cliff and 6 year graded vesting schedules. Does anyone know if Benefits Rights and Features testing would be applicable for the differences in pre/post 1/1/07 vesting schedules vs. the current vesting schedule (3 year cliff)? I am assuming that since the regs treat the 6 year graded as equivilant to the 3 year cliff, there would not be a BRF test required for that scenario. However, for the 5 year cliff, I am not so confident. Any thoughts, documentation that would assist in my research?

For those participant populations mentioned above that went from a 6 year graded to a 3 year cliff, they went to a 3 year cliff where after 2 years they were 20% vested and after 3 years they were 100% vested. I am assuming that this vesting schedule is equivilant to a 3 year cliff where particpants are 0% vested after 2 years and 100% vested after 3 years for purposes of determining whether the pre 1/1/07 vesting, i.e., 6 year graded, is equivilant to the current vesting schedule, i.e., 3 year cliff.

Also, since there are currently different vesting schedules for certain populations for active employer contributions, i.e., (0% after 2 years and 100% after 3 years), 20% after 2 years and 100% after 3 years), (20% after 1 year, 40% after 2 Years and 100% after 3 years), and (25% after 1 year, 50% after 2 years, and 100% after 3 Years), it appears that BRF testing would be required unless these deferrent vesting schedules are considered equivilant. However, I have yet to confirm. Does anyone know the answere or can anyone lead me to documentation that can help me with my research?

Thanks

I have a 457 account and would likde to take a distribution and pay the taxes on the the money. The plan administrator said he needs to withold 20% for taxes. Isn't it better to pay the taxes with outside after tax money? How can I do this?

My understanding is that hardship Distributions from deferrals are not eligible for rollover and are subject to voluntary withholding. What do you all think of an administrative policy (not in 401(k) documents) that mandates 20% withholding because it is " so much easier to explain and process". There have been some long conversations with an employee about how much should she have withheld. What do you all think?

Didn't we have a day that was 22/7 last year, too? Something about pizza as I recall.

I was glad to see Brian Graff's statement in response to the Gang of Six Plan for deficit reduction. Wish we had a way of backing him up!

Would love to hear other's comments.

http://www.asppanews.org/2011/07/21/gang-o...-on-fuzzy-math/

Historically when I am working on a plan term for a one participant plan that has excess assets I amend the plan to increase the formula enough to absorb the excess assets and avoid the surplus. This of course is assuming they are not at the 415 limits.

Another service provider takes the approach for a one participant plan that if the assets exceed the value of plan benefits, but the assets are less than the 415 lump sum benefit, they just ditribute all plan assets as a plan distribution since it is not greater than 415 benefit limit.

Is there any prescribed reg or code section that allows for such a distribution without a plan formula increase amendment or does the plan formula need to be amended?

I personally am not aware of authority to distribute the excess assets as a plan distribution without explicitly amending the plan formula.

thanks

An employer incorrectly calculated participants' safe harbor match contributions for 2 1/2 years, contributing too much to the plan. When the employer takes the money out of the plan, besides amending 5500s, what reporting will have to be done? Any taxation?

Any other suggestions you have for dealing with this?

Thanks!

Does anyone know what the IRS Notice 87-20 is? We are possibly taking over a DB plan and the current actuary speaks of this notice. We cannot find any information as to what this notice is or where we can find it. Thanks

When adjusting the 415 $ limit for benefits commencing before age 62, do you use the 417(e) mortality table and 5% or do you use the plan's actuarial equivalence assumptions and the limit is the lesser of the two? 1.415(b)-1(d)(1)(i) states in part "However, if the plan has an immediately commencing straight life annuity payable both at age 62 and the age of benefit commencement, . . ." What does that mean and does it affect the 415 calculation?

One of our clients discovered a completed employee deferral election for an employee that was filled out way back in 2002. Somehow this was over looked by both the plan sponsor and employee and money has never been withheld from the employee's paycheck. I understand the calculation of the QNEC in order to fix this error, but my question is does anyone know whether this can this be fixed via self correction (SCP) or must they file through the VCP since this dates back more than 2 years? Thank you for any insight!

Small closely held S-Corp has an ESOP plan. Common stock of plan sponsor is not publically traded.

What is the tax consequence of answering “NO” to question #12 on Schedule R-Form 5500, “Does ESOP hold stock not readily tradable on established securities market?”

Thank you.

DPSRich

I have a participant who worked here in the US for a US company and has a balance in the 401(k) plan. He has terminated employment, is moving to Puerto Rico, and would like to roll the funds over to an IRA there. Does the plan have to withhold the mandatory 20% in federal taxes before rolling his money over to a Puerto Rican IRA?

Any info/references/or experiences you can share about this topic would be greatly appreciated, thanks!!

Any thoughts on whether a participating employer is legally required to continue contributions to a multiemployer health fund during a strike or a lockout. It appears to me that it will depend on the terms of the CBA. In a single employer plan, I believe an employer could cut benefits that have not accrued prior to the strike, assuming there is no contrary provision in the cba.

Any thoughts? Any relevant case citations?

The instructions say to give someone an Entry Code of "D" if they have been paid out or if their balances have been transferred to another plan.

Also, it says to "d"elete someone if they have begun to receive benefits from the plan. I have two questions:

1. Would this include someone who is taking RMDs from a 401(k) plan?

2. Would this include someone who had a $50,000 balance and merely took a $15,000 partial distribution from a 401(k) plan?

On a side note: I also see that you are supposed to put the person's name on the form "exactly as it appears on the participant's social security card." How are we to know? I have plenty of participants with the name of Timmy O'Brien or Peggy Swanson. Is that really a big deal?

I have gotten this for aobut 4 clients. It says that the plan administrator's [and plan sponsor's in a seperate error code I-104SF] userid and pin are missing or invalid. The filing must contain this valid information.

In 2 instances of mine, the client/trustee did not have the same email address that I used to send them the published link, etc in their filing credentials. In the other 2 instances they did, and we can't figure out why the transmission was stopped. Of course, not being there with the client actually does the e-signing to know whether they are doing it correctly can be a hinderance. But they must be doing something correctly, as they e-sing it and I receive notification that is it signed and ready to be transmitted.

Anyone else have these frustrating problems? thoughts on this !@#$% issue?

Bipartisan support is building for a deficit reduction plan created by a group of six Senators ("Gang of Six"). President Obama supports it. Some key Senators also support it. In order to address the debt ceiling and the deficit, the Gang of Six want to ""Reform, not eliminate, tax expenditures for health, charitable giving, homeownership, and retirement."

According to some reports, 401k plan contribution limit may be lowered to bring in more revenue. Has anyone else heard about this? Are lower limits on the table for 401k plans?

My company has a cash balance plan--actually it's a hybrid plan but lets just go with CB for simplicty.

The plan provides participants with the usual benefit options: Single Life, 50%, 75% and 100% J&S Annuities. The Plan also offers each of these benefits with a post retirement death benefit feature which, in the case of a single life annuity, provides a lump sum benefit to the participant's named beneficiary in the event that the participant passes away prior to receiving the full distribution of his/her account (and of course the payments continue to the participant even when the account balance at retirement is "exhausted"). If the participant elected a J&S w/ PRD, his/her benefit would be payable to the joint annuitant and, if there were a balance left at the time the JA passed away, the remaning balance would be paid to the named beneficiary of the PRD benefit.

So, with that little bit of information: An unmarried participant who has commenced benefit payments recently contacted us about changing the named beneficiary for his post-retirement death (PRD) benefit. He elected a the Single Life Annuity w/PRD. There is a reduction to the benefit if you elect a PRD option (example: Single Life annuity factor at age 63 is 10.02, Single Life Annuity w/PRD factor at age 63 is 97% of the Single Life Benefit)....don't really know why you would further reduce a benefit that is already actuarialy adjusted to pay out your entire accrued benefit based on your life expectancy but that's just me (meaning that if the annuity factor is 10.02 that should be calculated to reflect that your life expectancy is 12 x 10.02=10 years 2 months which should payout your entire benefit but that's neither here nor there). The Single Life w/PRD factor is not based on the participant's and named beneficiaries age, it's just based on the participant's age with a reduction for electing the PRD option.

Our plan is silent on changing the named beneficiary for the PRD benefit and I can't find ERISA guidance on the subject. Again, because the benefit is not based on the beneficiary's age (unlike a JA benefit...which is of course irrevocable), I don't see any reason why a participant couldn't change the named beneficiary of the benefit but I'm unsure. Any thoughts?

A client decided to be proactive and pay out terminated employees from a defined benefit plan. No one really knows exactly where the values that were paid out came from, but they sent out 10 checks to 10 vested terminees with no distribution paperwork in December 2010. It appears that all of the distributions made were far below the actual amounts that were due each participant. Now, I am trying to distribute the remaining amounts. None of the benefits approach 415 limits.

Is this the correct method to determine the remaining distributions:

Determine the equivalent monthly benefit of the lump sum distribution based on both plan rates and 417e rates. Take the lower of the 2 monthly benefits, subtract that from the total accrued monthly normal retirement benefit to deterimine the portion of AB not yet distributed and use that to determine the value of the optional forms of benefit yet to be paid.

Obviously there are issues with not obtaining spousal consent or providing the option to make a rollover and those are currently being addressed as well.

I have a plan that failed their 2010 ADP test but did not process their refunds until shortly after March 15th. I know they need to file a form 5330. On the 5330 is it line schedule H where I put in the dollar amount of the excess? Also do I include the earnings that were applied too or just the excess contributions? Thanks in advance.

I have a 403b plan that has adopted an amendment to the accrual requirements. It used to say 1,000 hours required but they were funding pay to pay. I pointed out that was a conflict. Their attorney amended the plan so that "for the contribution for any pay period the Participant has an official work schedule of at least 20 hours a week for that pay period."

Disregarding the fact that it became an individually designed plan, how would this be tested?

There were about 4 (of 150 participants) whose schedule changed mid-year. So they stopped getting a contribution at that point (saving the ER about $0.75, but I digress). So for 410b they are in the numerator and denominator and coverage is 100%. Can't be that easy.

The contribution is a hard wired 7.5% of pay.

Would it become non-uniform allocation rates and must be 401(a)(4) tested for non-discrimination? Or maybe it is a Benefit/Right/Feature so I would NDC test it?

Thanks!