A client recently discovered an error involving the calculation of an employee's benefit under its NQDC plan. For example, an employee was paid 30,000 in 2008 (full account balance), but recently it was discovered that the employee should have received 30,200. Has anyone tried to correct this type of administrative error? 2008-113 limits corrections to 2 years. What is the penalty? Would this type of adminstrative error cause the employee to owe the 20% 409A tax on the entire 30,200?

Participant was rehired as an employee in 2008 but with no 401K eligibility. He never became a participant again in the plan, so he is technically still a "terminated" participant that is above the age of 70.5. The money deposited to his account in 2009 represents earnings due to an error in 2007. So, my question is this money still subject to an RMD? (as both cost basis and earnings are subject to RMDs).

Please note, Per client ppt was rehired on 12/08/2008 as a special contract dentist with no 401k eligibility.

What is the Federal tax withholding percentage for a non-spouse beneficiary death benefit to an estate? I thought a non spouse beneficiary to an estate could elect a lower Federal Withholding percentage than 20% since it's death benefit to an estate distribution not a normal rollover?

Please note that the Non-Spousal Bene would like to take a distribution from the account that was transfered from the deceased's account. The non-spouse beneficiary is the executor of the estate.

The participant wants to know definitively if she can withold a smaller percentage of federal witholding at 10% versus 20%

I work for a very small company in Ohio. We only have 9 employees. We have a high deductible insurance plan with an HSA, and we have 401k.

The company pays 100% of premiums for single insurance, but deducts a portion of the premium from payroll for family coverage.

I recently had to add my son to my coverage, which means that for the first time since I started here I have a payroll deduction for insurance coverage.

My insurance deduction is being taken POST TAX. The person who does our payroll tells me that this is because our company does not have a cafeteria plan. She is not a payroll person per-se, she set it up based on instructions from our payroll company and our insurance broker and I fear that she has been given inaccurate information.

What I don't understand is how I can have 401k deferrals taken out pre-tax, and HSA contributions taken out pre-tax, but my insurance has to be post-tax. CAN we have 401k and HSA without having a cafeteria plan?

I'm a Payroll Manager with 10+ years Payroll experience (benefits are NOT my strong suit though). My company does administrative work for other companies. So, while I'm paying 3000+ people for our customer companies, I don't do the payroll for the nine of us. I've never heard of medical insurance being post-tax, but then again I've never done payroll for a company as small as we are so I could be entirely wrong.

Any advice or direction toward documentation would be greatly appreciated.

Terrie

I have received direction from a client that seems a bit strange...

Plan A: was acquried in 2009 the participants began participating in Plan B on 2/20/2010. Plan A uses prior year..Plan B uses current year.

Client wants to test HCES under Plan A with full year comp/contribution using the prior year method. Plan thinks need to test full comp/contrib because of HCE aggregation rules. Of course that plan fails. Then they want to test HCEs from plan A using full year comp/contribs in Plan B's test, but only include Plan A's NHCEs from 2/20/10 through 12/31/10. The plan sponsor thinks that can't run one full year test because of the different testing methods. BTW, all assets from plan A were completely merged in prior to 12/31/10.

Is there any reason they can't just run 1 test for all of plan A & B as of 12/31/10?

Any help would be greatly appreciated!

A participant's account in a 403(b) plan contains only Roth contributions and wants a plan-to-plan transfer to purchase service credits in a DB plan. I can't find anything in the regs. stating that this is not permitted.

Unless the distributing or accepting plan does not permit the transfer of the Roth portion of a participant's account balance, I assume this is okay.

If the DB plan provides that it will only accepts transfers of taxable money, I assume only the earnings from the Roth account can be transferred.

Has anyone had this scenario come up? Thanks!!

Recently on another forum I encountered the following:

However, the bigger disappointment was figuring out that everytime I exchanged out of my original TRP fund (in a Roth IRA) into a new fund, TRP established a completely new Roth IRA for the second account. The second account was given a whole new start date for the purposes of the five years you must hold a Roth IRA. Before I figured out what they were doing, I had five different Roth IRAs in existence with them (because I exchanged out of the original fund into four other funds and kept the original open too) with the five year periods of the IRAs ending from early 2012 to late 2016. At Vanguard and Dodge Cox, you can exchange into a new fund and the new fund falls under the original Roth IRA "envelope" with the same date for the end of the 5 year period.

This sounds strange to me. As I understand it, an IRA is merely a container for investments. As long as one follows the contribution limits and doesn't violate the distribution rules, it's my understanding that one can trade within an IRA as often as one wishes. Further, I've never read or heard anything saying that trading from one fund to another within an IRA, Roth or otherwise, restarts the IRA holding period.

What am I missing here?

Client has a calendar year safe harbor 401(k) Plan and was scheduled to sell their ownership in the company and terminate the 401(k) plan on June 30th. This would be a plan termination due to a Section 410(b)(6)© transaction. At the last minute the sale was postponed until July 31st. The client would still like to use the June 30th plan termination date. My concern is whether or not they can continue to rely on the safe harbor rules for this plan year if the plan termination is 31 days in advance of the stock sale.

The question comes down to how long in advance of a stock sale (or asset sale) can you terminate a safe harbor 401(k) Plan and still rely on the safe harbor rules? A day, a week, a month? Any thoughts on this would be appreciated.

A client has both an HSA and an AFLAC hospital protection plan. Does anyone know if this plan conflicts with the HSA? It pays benefits for inpatient hospitalization, surgery and diagnostic testing.

When is the deadline for changing the look back month for segment rates? For example, the plan year is from July 1, 2010 to June 30, 2011 (the valuation date is June 30, 2011). We are using the June funding segment rates (no look back).

What is the deadline for the Plan Sponsor to make the election if he wants to change it to the first, second, third or fourth look back month? I understand that since this is a plan year beginning in 2010 that there is automatic approval but I couldn't find when the election had to be signed.

1) Lump SUm Distributions

My understanding is that 411(a)(13)(A) and regs provide that a cash balance plan can pay a lump sum equal to account balance and satisfy 417e without being required to project account to NRA, convert to annuity and determine PVAB using 417e segment rates or do whipsaw calculation.

So if a new cash bal plan designed properly the lump sum can be the account balance.

Agreed?

2) Projected account to compute Accrued Benefit

Accrued Benefit is annuity at NRA.

In order to project account balance if plan uses actual return on assets and return for year is:

a) less than 0 (i.e. negative) it is acceptable to project balance using a negative annual return until NRA, but for backloading testing you can use a future rate of 0.

b) say 10% (i.e. some high rate) then future interest credits to project balance to NRA would use 10% per year? And could result in an employee's AB exceeding the 415 limits if they were already at or close to the limits.

Agreed?

Thank you.

I have run across this situation and cannot find a definitive answer. Can a profit sharing plan have employees who are "eligible" to participate in a profit sharing plan and receive an allocation for a nonelective (profit sharing) contribution, but then also be in a group under which the document provides that group with a 0% contribution.

For example, to be eligible for the PS plan and to receive an allocation, an employee must be 21 years old and complete 1 year of service. However, the plan provides that the profit sharing allocation will be as follows: Employees with 1-3 years of service 0% (of compensation). 4-10 Years - 3%, 11+ years of service - 4%.

Assume that due to the demographics of the company, nondiscrimination testing is not an issue.

An employee with 1 or 2 years of service is "eligible to participate" in the plan (and is a participant), but isn't getting a contribution/allocation (thus, technically not eligble to receive a contribution).

Is this permitted?

Since there are no owners in a non-profit organization, No one is forced to take an RMD after 70-1/2, as long as they are still working, correct? This would include the Executive Director who makes well over $150,000?

Thanks

Grandfathered plans don't need to cover a participant's "adult child" dependents if the child is eligible for coverage under another employer-sponsored plan. Is TRICARE another "employer-sponsored plan" for this purpose? In other words, if the child is in the military, does the parent's plan need to offer corverage?

Seems like TRICARE is an employer-sponsored plan, but I can't nail that down.

In a dependent care plan if the employee has elected to participate and makes deferrals every pay, are they entitled to reimbursement from the plan even if the employer hasn't actually made the deposit of their deferrals? We have a plan where the employer sits on the deferrals for months and will not reimburse the employees for dependent care expenses they have incurred.

an owner of a tpa firm comes to me and says that his client implemented a 1 participant db plan in the late 90s. the plan has not kept up with all the amendments and restatements and they have not filed 5500EZs since the year 2000.

The plan has about 800k.

The sponsor/participant would like to terminate plan and distibute assets. It is expected from owner of tpa firm that distribution will be well below 415 limit.

The tpa owner would like to perhaps just prepare a final return and perhaps include a statement explainng the situation, the corrective action taken. Essentially a self correction attempt. The tpa owner feels his firm is somewhat responsible for the missed filings and from a business perspective cannot charge client for VCP fees incurred by his firm and is concerned that it would not be cost effective to do so.

Any thoughts on that technique and its consequences?

Alternatively, I tend to think they would need to go straight into the VCP program.

thanks

For 2011 plan years, a plan with a Level Income option but no other benefits subject to a 436 restriction is considered to to have a benefit subject to 436 restriction, is that correct?

Can a governmental 457(b) plan include a provision requiring mandatory (pre-tax) deferrals?

Thanks.

If a traditional IRA converts to a ROTH in 2011, can they spread the taxes over 2 years or was that just for conversions in 2010?