I would appreciate any thoughts on the ability to use the transaction based compensation exemption ("TBCE") under the Section 409A regulations in the context of a limited liability company (or a partnership for that matter). The TBCE is written in terms of "stock" but I am wondering if, per Notice 2005-1, Q&A-7, we can in good faith read the exemption to apply in the context of a membership interest (or partnership interest) instead of stock.

The S-8 rules require that the 401(k) plan prospectus contain financial data (ie rate of return) for each investment option in the plan for each of the past three years in a table (or other meaninful presentation) for the each of the past three years.

Someone advised they incorporate this info into the prospectus from each fund prospectus . I think this won't satisfy the rule since it is not in a table or other meaningful presentation.

Agree?

An individual claiming to be a deceased participant's beneficiary is making a claim for a death benefit under a plan. For reasons I'd rather not get into, there is some question whether this individual is the rightful beneficiary. With that said, there is some evidence that they have a valid claim...enough where I think the plan administrator's decision to pay the benefit would be considered to be reasonable if this ever made its way to court.

Could the plan administrator require the beneficiary to execute an indemnification agreement where the individual agrees to reimburse the plan for the amount paid if another individual makes a claim for the same benefit and it is conclusively determined that the second claimant was the rightful beneficiary? We're talking about a relatively small payout, so interpleader is not a cost effective solution.

Are 403(b) plans subject to the same requirement to provide for QJSA and QPSA as 401(a) plans? Or is the exemption available to defined contribution plans under section 401(a)(11)(B) available to 403(b) plans as well?

My client with a 401k is purchased by company with a SIMPLE Plan.

Can the 401k continue for the year (and next, does that 410b exception apply here) or do the employees have to start participating in the SIMPLE (when)?

Thank you

Earl

In anything I can find regarding the dividend test not passing, the fix is shown as taking the needed shares from those released by the unallocated share dividend and allocating them with the shares released by the allocated share dividend. The issue here is what if using all shares released by the unallocated share dividend is not enough to pass? In this case it doesn't even work if all the shares released by contributions are allocated as dividend shares. I'm not even sure you can do that.

The dividend is a preferred dividend so the company is looking at it as mandatory and not subject to adjustment. Possible solutions:

1. If shares released by contributions can be used to pass the div test, contribute more.

2. Review the instrument requiring the dividend and see how mandatory it is and the implications of paying a smaller amount.

3. Keep things as is and the company only deducts what it can of the dividend. I'm sure there are other problems with this option.

4. Consult an ESOP attorney and come up with something else. (Of course the attorney should be consulted regardless of the solution.)

Thoughts would be appreciated.

One of my clients has a participant requesting to make source specific beneficiary designations. They would like thier pre-tax to go to one beneficiary and Roth to another. They have an advisor who recommended this as a strategy with a charity beneficiary. My Company (i.e. financial institution) does not accept source specific beneficiary designations. Is there legal or regulatory backing for requiring percentages on the whole account? Please advice as to the specific Code or Regulations. Thanks.

I have a client where the plan maxes out one participant every year. They insist that he can defer ONLY $5,500, treat this as catch up and bring his annual limit up to $54,5000 rather than $49,000. Is this possible? The extent of my knowledge on the subject is that a participant must reach his annual limit ($16,500) before treating any deferrals as catch up, unless it is re-characterized to pass ADP, which is not relevant.

I am new to the board, so please bear with me. We restated a 401(k) plan, filed it with the IRS for a FDL. The plan has a safe harbor match. It includes sections detailing the ADP and ACP nondiscrimination testing rules and procedures. It also contains two specific provisions that say the ADP etc requirements are not applicable for any years that the plan is safe harbor.

The reviewer is demanding that the ADP/ACP language be deleted. First reason cited was that reg. 1.401(k)-1(e)(7) precluded "defaulting" to ADP etc if the safe harbor contribution was not made.

We wrote back that the plan was not defaulting to the ADP etc, and that the plan stated in both ADP and ACP sections that the ADP/ACP provisions were not active unless and until the employer decided to not utilize the SH match in an upcoming year.

Agent wrote back that the language had to be deleted, citing the reg, and stating (this is a quote): "The benefits of the plan must be 'definitely determinable'. Permitting both Safe Harbor and ADP/ACP language in a Safe Harbor 401(K) plan would undermine this requirement."

We have submitted many plans with identical language and never gotten this response. EVER. Is the agent's position even marginally supportable? I used to have a circle on my wall that said "bang head here" and I am thinking I may need to put it back, especially in light of the "definitely determinable" reference. Any suggestions? I don't want to amend if it is unnecessary, and I don't want to push the problem up the food chain to a supervisor, but I am nervous that this agent could make my life miserable. Thanks in advance.

I have a client that currently offers an annual taxable opt-out payment to otherwise eligible employees that elect to waive coverage under the employer's health plan (let's assume that this current opt-out opportunity is made available under a cafeteria plan). The client wants to replace this annual opt-out with a larger cash payment to employees who elect to irrecovably waive coverage under the health plan for all future years, subject to some limited exceptions for employees who loss other coverage as a result of some "catastrophic" event, like the death or terminal illness of a spouse that results in the loss of other coverage.

I am told that this is not uncommon in the context of collectively-bargained health plans, but have not found anything on point in the relevant guidance.

Anyone see any reason that this can not be done under a cafeteria plan? In other words, can a cafeteria plan provide for an opt-out payment in single year in exchange for a wavier of health benefits in all future years?

I appreciate that such a waiver might raise excise tax implications under the PPACA employer mandate, if and when the mandate becomes applicable in 2014.

Thanks for any input you can provide.

The group has an anniversary date of 4/1, which is the date that PPACA becomes effective for them in regards to dependent being covered to age 26. If an employee does not cover the dependent on 4/1 but decides to cover them at a later point, say 6/1, does PPACA allow them to do this?

Thanks!

My client was self-employed (unincorportated) and stated the business in 2006. He incorporated in 2010 and wants to set up a SEP. In determining how he needs to determine eligibility, can the service prior to 2010 count and therefore use 3 years on the 5305-SEP?

We are in the middle of a DOL audit and we are getting ready for the site visit. Has anyone gone through this? What types of questions are asked?

After settlement of db pension obligations following a plan termination, the financial statements show a net asset. In the past, this was a pre-paid pension expense. Under FASB158 it is a combination of "liability for pension benefits" and AOCI.

What is the appropriate accounting treatment for eliminating this asset?

It was thought that 2 businesses were a controlled group for many years. Therefore, for plan purposes they were treated as a single employer and operated under a single employer plan. Upon closer examination it was determined that they were not a controlled group after all. They adopted a multiple employer plan last year and began treating themselves as separate businesses under that plan. However, someone has asked if being treated as a controlled group caused a problem during all those earlier years. The question specifically relates to the allocations to participants, since the allocations were handled differently when they were being treated as a controlled group because the employees working for the smaller company benefitted by the larger contribution the bigger company made. Your thoughts would be greatly appreciated.

Say A db deduction limit is 100k and the employer contributes 120k.

That is an excess of 20k.

Pre PPA if a plan contribution did not exceed the full funding limit there was no 10% excise tax.

It appears now that 4972©(7) essentially allows an employer to elect to not take into account contributions in excess of such full funding limit and thus as I understand it "not be subject to 10%" excise tax.

Is my understanding accurate?

And if so, does the employer/plan sponsor simply sign off on an election prior to deadline for filing tax return?

And finally, while the 2010 tax return is not due until 9/15/2011, what can sponsor do for an excess 2009 contribution where tax return was already due and filed?

thank you.

I do not work with non-qualified plans, but client has asked if the executives who receive deferred comp under their NQDC plan can make 401k deferrals when the deferred comp is paid to them?

Thanks!

When a remedial amendment period deadline is stated as the later of (1) the due date of the employer's tax return (including extensions) or (2) the plan year in which the provisions were first effective, what does "including extensions" mean? I have been interpreting this to mean that if your corporate tax return is due on March 15 then the due date of the employer's tax return including extensions is September 15 (including the automatic 6 month extension). Is that correct? Or do you actually have to apply for the extension? The requirement to apply makes little sense to me because the extension is automatic, and what difference does it make? Also, why would the IRS want to keep track of who filed for an extension and who didn't?

I am admittedly not very familiar with 457 plans design strategy, but am stumped on a basic issue.

I am trying to strategize a way for a 501©(3) tax-exempt orginization (not a governmental or church entity) to put away money for a retirement benefit for its executive director. Ideally, the organization would like the payout to be made in installments.

It seems to me that under 457(b), installments are permissible, but that the total amount that can be contributed in the next five years is limited.

Under 457(f), there is no limit on employer contributions, but all amounts would be taxable when payable, i.e. at retirement.

Is it possible that an employer can have a combination plan? i.e. the maximum amount is deferred under 457(b) and the rest goes under 457(f)? That way, some amounts could be paid as installments, but the rest would be taxable at retirment?

Or do aggregation rules under 457 make a combination plan impossible.

Thanks for your help!

If a plan has filed a Form 5500 in the past and has never been a large plan, then they may go up to 120 participants before they have to file as a large plan.

A 403(b) has filed Form 5500 in the past, but it was not required to file as either a large or a small plan and there was no Schedule I or Schedule H required.

In 2009, does the 403(b) plan still get to use the 80-120 rule?

Thank you.

Kate Smith