I am reviewing a frozen DB plan that I may be taking over and noticed code 4H (Long-Term Disability) on the 5500 under the welfare benefit code section. I reviewed the plan documents (prototype) and the plan's disability benefit was changed during the EGTRRA restatement from AE of retirement benefit to 1) if Class A Disability, AE of 110% of benefits earned to date, 2) if Class B, AE of 107.5% of benefits earned to date and 3) if Class C, AE of 105% of benefit earned to date.

I haven't gone back to the client yet with any follow up questions, but first, is it correct to use code 4H solely based on this definition of the plan's disability benefit?

Also, are there any other issues that I should be aware of? The plan is a small plan - only 4 participants, so I would think it would be okay to assume no preretirement disability in my valuation?

Company A and Company B are controlled. Company A Sponsors Plan A and Company B sponsors Plan B. Both are 401k plans. Participant is leaving Company A and going to work for Company B. Can she request a distribution? Can she roll over her funds from Plan A to Plan B? Note the plans will be merging into one plan in September.

Can anyone confirm that effective November 1, 2011, the new disclosure regulations will affect the blackout notice requirements?

I was informed that all eligible participants in a plan that is transferring are required to receive a blackout notice, & not only those that have account balances in the transferring plan.

Any insight would be appreciated!

I'm trying to get a handle on just how powerful the short term deferral rule is in allowing flexibility in 457(f) plans that would not otherwise be permitted under 409A. Does the inapplicability of 409A to 457(f) benefits that remain subject to a substantial risk of forfeiture mean that you work under the far more flexible "pre-409A" rules that govern 457(f) plans alone?

Let me give an example that I don't think pushes the envelope too hard: in 2009 tax-exempt employer promises its top executive that he/she will receive $25K each year for 10 years beginning January 2016 if he/she remains continuously employed through January 1, 2016. In 2012, parties instead want to revise the agreement to provide a lump sum payment of $250K on January 1, 2016 if executive is continuously employed through that date.

In this example, vesting and timing of benefit are the same before and after the change. If 409A applies, any change in the timing and manner of payments would necessarily push out the payment/vesting date by 5 years to 2021. If not subject to 409A because of the short term deferral rule, I'm supposing you can keep the January 1, 2016 date (in spite of the change in the timing and manner of payment) without fear of causing a 409A problem?

As noted, I don't think this example pushes the envelope that hard in terms of many of the more aggressive "pre-409A" 457(f) strategies.

I'd apprecaite your thoughts and ideas.

Client has acquired two physcian groups and former company will be dissolving, prior to that the pension plan will be liquidated. The former company has asked the participants to take action by April 15th or their pension assets will be automatically rolled into a IRA at the current recordkeeper.

One of the new physicans in the plan would like to transfer his assets directly into the plan but is age 74. Will this participant be required to take an RMD before he can roll the assets into the XYZ plan at the recordkeeper?

I would assume since its considered a distributable event and he is over 70.5 he would need to take an RMD if he rolled it over to the plan or IRA? He will continue to be active and working with the main company.

If this is a merger of plans is the RMD still required? If the RMD payment is not required, then why?

Please provide the Code/Regulations where it states if this is a merger of plans and RMD payment is not required.

In order to get a key employee (not a 416 key employee, just an important one!) to move back in-state from a division in another state, the company has agreed to pay off his out-of-state mortgage through a bonus. Can this be considered a "moving expense" which is excludable? We checked the box to exclude taxable fringe benefits, moving expenses, etc. etc.

As the title implies a terminated plan of a bankrupt employer is processing late refunds for the 2010 year, after 3/15 but before 12/31. This is not an automatic enrollment plan with the 6/30 deadline.

Who pays the excise tax and files the 5330 in this case when the Plan Sponsor is out of business, has gone through bankruptcy and now no longer exists?

I read somewhere that the refund due date for ACP failure of a 403(b) plan was the end of the next plan year rather than 2 1/2 months after the end of the year. Is that correct?

A plan sponsor has a DB and 401k Plan (both one person plans, it is a self-employed individual). Do the loan regulations allow a $50k loan in the 401k Plan AND the DB Plan? Or is the loan limit aggregated amongst all plans and if he has a $50k loan in the 401k Plan he would not be eligible for an additional loan in the DB?

Client has very old mandatory contribution accounts - tracing back to when the plan was a thrift plan. They would like to recharacterize the accounts as voluntary accounts to make the distribution options of voluntary accounts apply.

It seems that eons ago as mandatory accounts fell out of favor we amended plans to treat those accounts a voluntary accounts. Today, it seems no one remembers this happening.

Does anyone know of any prohibition from doing this? Note that this is not and was not ever a Money Purchase plan, nor were the accounts from a defined benefit plan.

Thanks in advance for any thoughts.

We are changing our investment fund line-up and to preserve 404© fiduciarly protection we are unsure whether to rely on the "qualified change in investment option" (QCIO) mapping rule under 404©(4) or the "qualified default investment alternative" (QDIA) rule under 404©(5). It seems safer to default everyone who fails to provide new investment instructions with respect to investment options that are being eliminated into our QDIA so that we don't have to worry about any amounts previously defaulted into the eliminated funds. This is besause 404©(4)©(iii) requires amounts invested prior to the change to be invested as "the product of the exercise" of the participant. In fact, becasue the QCIO rules are more complicated (and due to the lack of QCIO guidance from the IRS), it seems like it would always be a poor choice to rely on the QCIO mapping rules. Does anyone have other thoughts?

Is the in plan roth conversion treated as an in-service distribution subject to the 5 year look back rule for top-heavy purposes or is it treated as a transfer to a related rollover source and inculded in the balance on the determination date?

If an ERISA Title I-governed pension plan owns real estate, are laws/ordinances imposing real estate taxes preempted by ERISA? There is a New York State Court of Appeals case holding that a real estate transfer tax is preempted, but is the rationale of the decision in that case followed around the country in the context of real estate taxes? I have no experience with this issue, so I would like to know what happens in real life with ERISA plans that own real estate.

If a partner has negative earned income for 2010. Effectively $0 compensation for plan purposes, I understand that the employer contribution is $0, the deferral limit is $0 and the 415© limit is $0.

The question I have is, if the plan allows for Roth-401(k) contribution and catch-up contributions can the partner make a $5,500 ROTH catchup contribution under 414(v) for 2010 since it is excluded from 402(g) and 415?

I did a few searches and scrolled through several pages of threads and didn't find anything directly on point so if this has been covered before I apologize.

say a 401k profit sharing plan is top heavy.

the employer does not make any discretionary profit sharing contributions for 2010 and the plan though not safe harbor passes adp test by having hce's take back some of their deferrals.

since the employer contribution is $0 (only 401k deferrals made) are they required to make a top heavy contribution?

i didn't think so since the maximum employer contribution for a key employee is $0.

thanks

a plan has elig of 21 & 1.

after an employee is hired (HCE) they amend elig to two years.

Is this an acceptable amendment or an illegal cutback?

It seems since he was not yet a participant and has no accrued benefit then the amendment may be permissible.

Thanks

I got my first look at a 403(b) plan with around 90 participants. The plan has been in existence since 1998. It allows for 403(b) and non-elective/profit sharing contributions (match not allowed).

The asset report from the mutual fund company shows that the EE and ER money has been commingled. There is no separate accounting of how much of any given participant's account balance is EE and how much is ER.

The good news is that the PS contribution is 100% vested, so there should not be any distribution problems for terminees or retirees.

Regardless of the 100% vesting, the requirement is that the plan has to account for EE and ER contributions separately, even in 403(b) Plans, correct?

(1) Any suggestions on what the next steps should be? Do we need to go all the way back to 1998 and start the accounting process at that point?

(2) Is this something to resolve through VCP? What kind of penalties or fines do you think would be involved?

(3) If the records are not available back to 1998, do we just start with when the records are good and sort of grandfather the assets before that time as a EE/ER account, or something just to distinguish when the bad recordkeeping ended?

Thanks for any advice!

A participant takes a loan in December 2010 for $5,000. They pay back the loan the same month. In February of 2011 they take another loan for $15,000, and pay it back 2 days later. It is now March 2011 and they would like to take the maximum loan available. The regulations say that you subtract the highest outstanding loan balance in the last 12 months. This would be $15k, meaning a loan should be available for $50k minus $15k, or $35k. The plan's vendor is saying all outstanding loans are subtracted in the prior 12 months, meaning you subtract the $5k and $15k from the $50k max and her maximum available is $30k. What is your understanding of the regulations? And are there any examples in the regulations that would support the loan being $35k.

If a plan chooses to hand over the benefits of lost participants to the state escheat program, so that the plan can wind up and finish the termination of the trust, do you withhold 20% for federal tax withholding and report the whole amount as taxable income to the lost participant (i.e., a Form 1099-R with the lost participant's name, Soc Sec Number, and last known address)? Or do you simply hand 100% over the state, and not mention it to the IRS?

Also, how do you report those funds on the final Form 5500?

Plan cover only 4 participants. Husband and Wife and two other participants that used to be full time and are now part time due to economy. The two PT participants don't participate and don't have an account balance.

So we have the two owners. ONe of which bought an asset in his Self Directed Account that is not valued on a regular basis.

Do they still need a bond covering 100% of that asset?

Thanks

Pat